HHS OIG: Medicare and State Healthcare Programs: Fraud and Abuse–OIG Proposes Revisions to Exclusion Authorities and “Early Reinstatement” for Certain Healthcare Providers

The Department of Health and Human Services Office of Inspector General (OIG) proposed a new rule which would expand OIG’s exclusion authority. The proposal, published in the Federal Register May 9th, allows OIG to exclude physicians from participating in federal healthcare programs for “obstruction of an audit” and for making false statements in “any application, agreement, bid or contract” related to federal health programs.

OIG exercising its exclusion authority is referred to by many as a “kiss of death” or “death sentence” due to the fact that Medicare and Medicaid are often vital revenue sources for providers. Excluded physicians may not bill for treating Medicare and Medicaid patients, nor may their services be billed indirectly through an employer or a group practice. Exclusion can ruin a doctor’s career as it would likely prevent them from gaining any form of employment by an entity that receives reimbursements, directly or indirectly, from any federal healthcare program.

Currently, OIG must exclude individuals and organizations who violate one of four offenses, and may also exclude individuals and organizations for violating one of 16 permissive exclusions.

Mandatory exclusions are for a period of at least 5 years. OIG is required by law to exclude from participation in all federal healthcare programs individuals and entities convicted of the following types of criminal offenses:

(1) Medicare or Medicaid fraud, as well as any other offenses related to the delivery of items or services under Medicare, Medicaid, SCHIP, or other State health care programs;

(2) Patient abuse or neglect;

(3) Felony convictions for other health care-related fraud, theft, or other financial misconduct; and

(4) Felony convictions relating to unlawful manufacture, distribution, prescription, or dispensing of controlled substances.

Permissive exclusions: OIG may exclude individuals or entities under 16 different authorities, such as losing a state license to practice, failing to repay student loans, conviction of certain healthcare related misdemeanors, engaging in unlawful kickback arrangements, failing to provide quality care, or controlling a sanctioned entity as an owner, officer, or managing employee. In regards to the last point, to avoid liability, health care entities must routinely check the searchable list of excluded individuals or entities to ensure that new hires and current employees are not on the excluded list.

OIG’s proposed rule, provides that additional exclusion may be imposed for:

• Conviction of an offense in connection with Obstruction of an audit;
• Failure to supply payment information (ACA expanded this provision to apply to individuals who ”order, refer for furnishing, or certify the need for” items or services for which payment may be made under Medicare or any State health care program); and
• Making, or causing to be made, any false statement, omission, or misrepresentation of a material fact in applications to participate as a provider of services or supplier under a Federal health care program.

With regards to the new audit provision, OIG notes:

“Prior to ACA, section 1128(b)(2) of the Act permitted the Secretary to exclude any individual or entity that had been convicted of an offense in connection with the obstruction of an investigation into any criminal offense described under any of the mandatory exclusion authorities or under the permissive exclusion authority related to health care fraud or fraud in a governmental program. However, if an individual or entity was convicted of an offense in connection with the obstruction of an audit, the Secretary did not have a basis to exclude the individual or entity under section 1128(b)(2) of the Act.”

The ACA “expanded the authority by allowing the Secretary to exclude an individual or entity that has been convicted of an offense in connection with the obstruction of an investigation or audit related to any criminal offense under the mandatory provisions of the exclusion statute; under the permissive provision related to health care fraud or fraud in a governmental program; or in cases when the investigation or audit related to the use of Federal health care program funds received, directly or indirectly.”

Aggravating Factors

OIG looks at how much money was at stake when figuring out the length of a doctor’s exclusion. The current regulations set $1,500 and $5,000 as “aggravating factor” thresholds, with longer exclusions coming for providers that have caused financial losses to the government above these thresholds. The new rule proposes updating the aggravating factor to $15,000. The last update came in 2002.

Early Reinstatement

OIG is also considering instituting a process for early reinstatement for exclusions pursuant to loss of a healthcare license.

As the list of mandatory and permissive exclusions shows, only certain criminal convictions get doctors banned automatically. These are limited to healthcare fraud felonies or patient abuse. The OIG has discretion to exclude doctors who are guilty of less serious offenses, for example doctors who have had licenses revoked or suspended “for reasons bearing on professional competence, professional performance, or financial integrity.” Under the current law, a doctor, nurse, or other licensed healthcare provider excluded for a revoked license would need to recover their original license to get reinstated into Medicare.

Bloomberg Businessweek provided an example: “Consider a nurse who has lost her license because of a substance-abuse problem and been excluded from Medicare. If, years later, she has reformed and becomes a licensed physical therapist, she will remain ineligible to bill Medicare unless she gets her original nursing license back.”

OIG states in its proposal: “We regularly are contacted by individuals who have changed professions and never intend to regain their original licenses but for whom the exclusion is a permanent obstacle to practicing a new health-care related profession.”

OIG notes a strange discrepancy in how mandatory exclusions play out verses permissive exclusions: “Absent any aggravating factors, exclusions under the mandatory provisions of the Act require only a 5-year period of exclusion.” However, many permissive exclusions under “result in permanent exclusions, even though the individuals were never charged with or convicted of criminal offenses.”

“To serve the remedial purpose and intent of the statute,” OIG states, “we are considering an alternative reinstatement process.

Where OIG imposes a permissive exclusion on the basis of a licensing board action and subsequently determines that the individual poses little or no threat to patients or the programs and when license reinstatement by the original licensing board is extremely unlikely, OIG is considering a process for “early reinstatement.” OIG proposes to amend the regulations to allow for early reinstatement, and to include a list of factors OIG will consider in determining whether early reinstatement is appropriate.

The proposed rule would first “allow an excluded individual to request early reinstatement if, after fully and accurately disclosing the circumstances surrounding the original license action that formed the basis for the exclusion, the individual obtained a health care license, was allowed to retain a health care license in another State, or retained a different health care license in the same State.” The second part would “allow an excluded individual to request early reinstatement if he or she did not have a valid health care license of any kind provided that the individual could demonstrate that he or she would no longer pose a threat to Federal health care programs and their beneficiaries.”

OIG would consider a number of factors in making the determination for early reinstatement, incuding whether the individual has demonstrated that he or she has resolved the underlying problem that caused or contributed to the basis for the initial licensing action as well as weighing the benefits and risks to the federal healthcare program and program beneficiaries of early reinstatement. 

Furthermore, OIG is proposing that the excluded individual would be eligible to apply for reinstatement after 3 years, or when the individual regains his or her healthcare license, whichever comes first. “We solicit comments on whether this approach would appropriately protect Federal health care programs and their beneficiaries.”

OIG is soliciting comments based on both expanding their exclusion authority and guidance on how to implement early reinstatement. Comments are due no later than 5 p.m. Eastern Standard Time on July 8, 2014.

ADDRESSES: In commenting, please reference file code OIG–403–P2.

1. Electronically. You may submit electronically through the Federal eRulemaking Portal at http://www.regulations.gov. (Attachments should be in Microsoft Word, if possible.)

2. By regular, express, or overnight mail. You may mail your printed or written submissions to the following address:

Patrice Drew, Office of Inspector General,

Department of Health and Human Services, Attention: OIG– 403–P2, Cohen Building, 330, Independence Avenue SW., Room 5541C, Washington, DC 20201.