On January 12, 2017, the Department of Health and Human Services Office of Inspector General (“OIG”) published a final rule which provides guidance on its new and expanded bases for permissive exclusion from federal health care programs. The final rule had an original effective date of February 13, 2017, but was delayed by the new administration’s 60-day freeze on new regulations. The revised effective date for the new rule is March 21, 2017. The highlights of the final rule include:

  • 10-Year Statute of Limitations. In the proposed rule, the OIG sought to avoid any limitations period to exclusion proceedings, even though all other OIG administrative remedies are subject to a six year limitations period and often, exclusion is based on violation of a statute with a limitations period. In response to strong opposition, the OIG relented and the final rule provides that exclusions will only apply to misconduct that has occurred within the past ten (10) years.
  • Expanded Permissive Exclusions. The final rule expands the OIGs authority to exclude individuals or entities from participating in federal health care programs based on: (i) convictions relating to obstruction of an investigation or audit; (ii) failure to provide payment information, including by individuals who “order, refer for furnishing, or certify the need for” items or services paid for by Medicare or state health care programs; and (iii) making false statements or misrepresenting material facts in applications to participate as a provider or supplier under federal health care programs.
  • Modified Definitions. The Final Rule modifies certain definitions to reflect new payment methodologies under federal health care programs. For example, the final rule clarifies that a provider has “furnished” an item or service not only when they “submit a claim” to a federal health care program but also when they “request or receive payment” by any other means.
  • Exclusion of Individuals with Ownership Interests in Excluded Entities. The final rule permits the OIG to exclude individuals who maintain a direct or indirect ownership or control interest in excluded entities for the same time period as that of the sanctioned entity.
  • Changes to Aggravating and Mitigating Factors. The final rule amends the aggravating factors that the OIG considers when determining how long exclusions should last. Specifically, the final rule increases the amount of financial loss required to trigger an aggravating factor from $15,000 in the proposed rule to $50,000 in the final rule. Additionally, the OIG has removed a mitigating factor that served to reduce the length of exclusions if patient access to care would be significantly harmed by exclusion.
  • Early Reinstatement Process Created. The final rule establishes new procedures to permit early reinstatement for providers that were excluded after losing their health care license for reasons related to professional competence, professional performance, or financial integrity. These providers may apply for early reinstatement if they obtain, or are permitted to retain, a health care license in another state, or retain a different health care license in the same state, or if they are able to demonstrate that they no longer pose a threat to federal health care programs and beneficiaries.

The Final Rule will affect all entities and individuals that transact with Federal health care programs so it is critical to assess its implications.