The Office of Inspector General (OIG) issued a notice last week listing factors it will consider in exercising its discretion to exclude owners, officers, or managing employees of entities that have been excluded from participation in Federal health care programs or convicted of certain offenses. See Social Security Act § 1128(b)(15).

The statute allows the OIG to exclude an individual from participation in Federal health care programs simply for being an officer or managing employee of a sanctioned entity. The OIG may also exclude an owner of such an entity if he or she knew or should have known about the misconduct leading to the sanctions. In effect, the statute allows for exclusions based on guilt by association, which the OIG interprets as an attempt to “positively influence individuals’ future behavior and compliance . . . by holding individuals accountable for misconduct within entities in which they are in positions of responsibility.” The OIG’s exercise of its discretion to exclude these individuals is not subject to administrative or judicial review.

As stated above, for an owner to be excluded, the statute requires evidence that the owner knew or should have known of the conduct that formed the basis for the entity’s sanctions. The OIG stated that “if the evidence supports” such a finding, the “OIG will operate with a presumption in favor of exclusion.” In those cases, the presumption for exclusion will only be overcome if the OIG finds that “significant factors weigh against exclusion.” It is worth noting again that the OIG’s determinations on these issues are unreviewable.

For officers or managing employees to be excluded, there is no requirement that they know or should have known of the misconduct that lead to the entity's sanction so that, as the OIG states in its guidance, the “OIG has the authority to exclude every officer and managing employee of a sanctioned entity.” Although the OIG clarified that it “does not intend to exclude all officers and managing employees” of a sanctioned entity, if “there is evidence that an officer or a managing employee knew or should have known of the conduct,” the OIG “will operate with a presumption in favor of exclusion.”

The OIG guidance goes on to list the specific factors the OIG will consider in determining whether to exercise its discretion to exclude individuals, and divided the factors into four broad categories. First, the OIG will consider the circumstances of the misconduct and seriousness of the offense, including whether “the misconduct resulted in . . . actual or potential harm to beneficiaries or . . . financial harm to any Federal health care program or any other entity.” Second, the OIG will consider the individual’s position in the sanctioned entity, for example, considering what degree of managerial control or authority the individual had at the time of the offense. Third, the OIG will consider the individual’s actions in response to the misconduct, including whether the individual took steps to stop or mitigate the misconduct and whether the individual “disclose[d] the misconduct to the appropriate Federal or State authorities.” On this point, the OIG stated that it will only consider it a mitigating factor if the “individual . . . can demonstrate either that preventing the misconduct was impossible or that the individual exercised extraordinary care but still could not prevent the conduct.” And fourth, the OIG will consider general facts about the sanctioned entity’s structure and history such as whether “the sanctioned entity or a related entity previously been convicted of a crime or otherwise found liable for an offense.”

The OIG emphasized that this guidance is “nonbinding” and that the “presence or absence of any or all of these factors does not constitute the sole grounds for determining whether OIG will pursue exclusion.” The full set of OIG considerations are provided in the OIG guidance available by clicking here.