New regulations have been released in the form of a Final Rule (announced at 82 Fed. Reg. 4100) (the “Final Rule”), revising and expanding the authority of the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) to exclude entities and individuals from participation in federal health care programs. The Final Rule adds to the OIG’s longstanding statutory authority to issue exclusions, which was most recently expanded by Congress in the 2010 Affordable Care Act.

The Final Rule was announced on January 12, 2017, and was intended to go into effect on February 13, 2017. The new administration’s temporary freeze on pending regulations delays that effective date until March 21, 2017.

10 Year Limitation Period. The statutory provision authorizing exclusion (Section 1128 of the Social Security Act) does not impose any statute of limitations, but OIG has self-imposed a 10-year period in which to exclude an entity or individual. This limit mirrors the 10-year statute of limitations on actions brought under the False Claims Act (FCA). OIG has recognized it may find itself running out the limitation period while awaiting for the outcome of FCA cases, since a relator or the U.S. Department of Justice has 10 years in which to simply start an action, with no requirement to resolve it in that time. OIG explained that it had considered trying to stop the clock on an exclusion proceeding while FCA litigation is ongoing against a program participant, but rejected it as unmanageable to monitor the large volume of ongoing FCA cases.

Permissive Exclusion Authority. While a few events trigger a mandatory exclusion (convictions for health care fraud, program-related crimes, controlled substances offenses, or patient abuse/neglect), OIG has statutory authority to issue an exclusion in its discretion under a wider range of circumstances. The Final Rule implements new statutory authority in several cases:

The conviction of an offense in connection with obstructing an audit relating to a federal healthcare program. Previously, OIG’s only had exclusion authority if a program participant was convicted of obstructing a targeted “investigation,” not a routine audit. OIG’s release describes audits as “integral to fraud prevention and detection.” The Final Rule does not define “audit” but the release makes clear that OIG understands “audit” to include the work of contractors “verifying compliance with Government program standards” like Recovery Auditor Contractors (RACs).

Failure to provide payment information to HHS. Any individual or entity that “furnishes, order[s], refer[s] for furnishing, or certifies] the need for” expenses paid by federal healthcare programs must now promptly provide payment information upon request. Previously, OIG could only exclude those who actually “furnished” the items or services.

False statements when applying to participate in federal healthcare programs. OIG can exclude a provider for knowingly making or causing a false statement, material omission or material misrepresentation in an application, agreement, bid, or contract.

New Language to Reflect Modern Payment Methodologies. Until the Final Rule, OIG regulations referred only to persons who “submit claims” to federal healthcare programs. This wording had not been adapted to reflect various healthcare payment models, such as performance-based payments, shared savings payments, and capitations. The new rules expand to cover any persons who “request or receive payment,” creating flexibility for future payment models as well.

Early Reinstatement Process. A revised process allowing for early reinstatement is now available, although OIG retains discretion to refuse reinstatement. Excluded individuals who do not have health care licenses (like owners and administrators) can seek early reinstatement after a 3-year period. The same 3-year limit period is available to formerly-licensed health care practitioners, unless the exclusion was based on a longer period of license suspension, in which case the longer suspension period applies. Practitioners can also seek early reinstatement if they obtain or retain at least one health care license from another licensing authority (in the same or another state), provided they disclose the circumstances of their exclusion to that authority. Practitioners whose licenses were revoked or suspended relating to patient abuse or neglect are completely ineligible for early reinstatement.

Increased Aggravating Condition Thresholds for Financial Losses. If the exclusion results from conduct causing a financial loss for the government, losses greater than a threshold amount will justify an extended exclusion period. The new rule raises the thresholds from $15,000 for making excessive claims or furnishing unnecessary or substandard services or items, and to $50,000 for health care fraud.

Exclusion of Owners of Excluded Entities. Individuals with direct or indirect ownership or control in an excluded entity may also be subject to exclusion, if they were an officer or manager, or knew or should have known about the conduct that forms the basis for the entity’s exclusion. The individual exclusion period will be for the same period as the entity’s exclusion. OIG’s release clarifies that a current owner cannot curtail their exclusion by divesting their ownership interest, but that a former owner who divested before any exclusion was imposed will not be subject to individual exclusion on this ground.

Subpoena Power to Investigate Exclusion. The Final Rule enables OIG to issue subpoenas commanding testimony when it considers an exclusion. Until the ACA authorized this expansion, OIG could only issue testimonial subpoenas when it was seeking to impose civil monetary penalties.