In a rulemaking hat trick, the US Department of Health and Human Services (HHS) Office of Inspector General (OIG) published a final rule revising regulations relating to its exclusion authorities on January 12, 2017. The two prior rules regarding the civil monetary penalties law (CMPL) authoritiesanti-kickback safe harbors and beneficiary inducement law were published on December 7, 2016, and have gone into effect. However, in light of the Trump administration’s freeze on the effective date of regulations that had not yet gone into effect as of January 20, 2017, the exclusion rule’s effective date was delayed until March 21, 2017 (absent other developments).

This rule implemented changes to the exclusion statute from the Affordable Care Act (ACA) and the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Final Rule). These statutory changes expanded OIG’s authority to exclude certain individuals and entities from participating in federal health care programs under section 1128 of the Social Security Act.

Modifies the Definition of “Directly,” “Furnished” and “Indirectly”

As proposed, the Final Rule defines “furnished” as “refer[ring] to items or services provided or supplied, directly or indirectly, by any individual or entity.” Further, “directly” and “indirectly” are defined as applying to (1) individuals or entities that provide items or services, then request or receive payment from Medicare, Medicaid or other federal health care programs, and (2) individuals or entities that provide items or services to providers, practitioners or suppliers who then request or receive payment from federal health care programs for those items or services, respectively. This clarifies that the effect of exclusion is expansive and not limited to the direct submission of claims for items and services furnished by an excluded person.

Establishes a 10-Year Limitations Period on Affirmative Exclusions

The Final Rule establishes a 10-year limitations period for exclusions initiated under section 1128(b)(7) of the Social Security Act. The OIG makes the policy argument that the limitations period parallels that of the False Claims Act (FCA), providing a longer limitations period for the OIG to make exclusion decisions because of how long FCA cases can take to resolve and to “better protect[] the programs and individuals from untrustworthy persons identified in FCA cases or otherwise.”

Interestingly, OIG did not attempt to address in either the proposed or final rule the statutory interpretation in Hammer v. The Inspector General, HHS Departmental Appeals Board (DAB) Decision No. 1693 (June 7, 1999). In Hammer, the DAB decided that section 1128(b)(7) provides the OIG with an “alternative [exclusion-only] procedure” from the CMPL, which has a six-year statute of limitations. The DAB noted, “[n]othing in the statutory or regulatory history suggests that section 1128(b)(7) was intended to authorize exclusion under circumstances where no CMP could be imposed, ” concluding that conduct outside the CMPL statute of limitations could not be pursued under section 1128(b)(7). Omitting discussion of the Hammer holding raises a question about whether OIG articulated a sufficient rationale to essentially reverse HHS’s interpretation of a statutory restriction on section 1128(b)(7)’s statute of limitations. Unfortunately, the forum to make this argument is at the federal court level after a person has lost at the administrative appeal level, because administrative law judges and the DAB are required to follow HHS regulations.

Increases Financial Loss Aggravating Factors and Mitigating Factors Related to Misdemeanor Offenses and Loss to Government Programs

The Final Rule increases the financial loss aggravating factor amount to $50,000, except for exclusions under section 1128(b)(6), because those exclusions concern unnecessary or substandard care. OIG also increased the mitigating factor relating to misdemeanor offenses and loss to government programs to $5,000.

Expands the OIG’s Permissive Exclusion Authority

  • The ACA’s expansions to the OIG’s permissive exclusion authority. The Final Rule codifies the ACA’s expansions to OIG’s permissive exclusion authority by granting OIG the authority to exclude individuals or entities that (1) obstruct audits that investigate fraud or abuse related to federal health care program funds, as well as audits conducted to evaluate routine compliance with the law; (2) furnish items or services, as well as individuals or entities that refer for furnishing or certify the need for services, who fail to provide requested payment information; and (3) submit false statements or misrepresent material facts in enrollment or applications to participate in the federal health care programs.
  • Defaults on health education loans or scholarship obligations. The Final Rule expands OIG’s authority to exclude health professionals who have not fulfilled their service obligations under health education loan repayment plans. These plans typically require a certain number of years of service after graduation on an underserved area. This exclusion authority was previously limited to defaulting on scholarship or loan obligations.
  • Individuals with ownership or control interest in sanctioned entities. The Final Rule clarifies that if an entity has been excluded, the individual with ownership or control interest in that sanctioned entity could be excluded for the same period of time as the entity’s exclusion, even if that individual terminates his or her connection to the excluded entity.
  • Testimonial subpoena authority in section 1128 cases. The Final Rule implements the ACA change to permit the OIG to issue testimonial subpoenas in its investigations being conducted under its exclusion authorities. Previously, the testimonial subpoena authority was limited to CMPL investigations.

Changes the Presumption Against Early Reinstatement

The Final Rule creates a new path to early reinstatement for certain individuals who were excluded because of a licensure action. The excluded party either obtains a license from the state that revoked the license, or the excluded party meets one of two conditions for early reinstatement: (1) the excluded party obtains a license from a state other than the state that revoked its license after disclosing the circumstances surrounding the revocation, or (2) the excluded party does not have a valid health care license from any state. Each pathway marks the starting point for the OIG’s consideration of whether the excluded party should be reinstated.