Medicare Exclusion Risks: Employing Excluded Individuals Can Result in Significant Administrative, Civil and / or Criminal Liabilities

/ Medicare, Medicaid & Private Payor Updates / By
The OIG is responsible for pursuing Medicare exclusion actions

(May 8, 2023): One of the most severe administrative sanctions available under the Social Security Act stems from the authority of the Office of the Inspector General (OIG) of the Department of Health and Human Services (HHS)[1] to “exclude” individuals and entities from participating in Federal health care programs.[2] While the Centers for Medicare and Medicaid Services (CMS) can revoke a provider's billing privileges, it has no authority to impose or decline to impose an exclusion action. A Medicare exclusion action[3] imposed by the OIG is essentially the nuclear bomb of administrative sanctions. Individuals and entities subjected to Medicare Exclusion are barred from all participation in Federal health care benefit programs,[4] and providers that employ or contract with excluded entities risk the imposition of civil money penalties, and significant overpayment liability. States also have the administrative authority to bar providers from participating in their State Medical Assistance Programs (primarily Medicaid and CHIP).[5] Medicaid exclusion actions[6] are similar to OIG exclusions in many respects, but there are also important differences. This article examines the potential consequences that may result if a Medicare provider improperly employs an excluded individual OR enters into a contract with an excluded entity.[7]

I. Overview of the OIG Medicare Exclusion Program:

Simply put, OIG Medicare exclusion actions are administrative proceedings pursued by the OIG to protect the health and safety of patients and to safeguard the financial integrity of Federal health care programs.[8] The effect of a Medicare exclusion action is extremely broad and intended to prohibit excluded parties from participating in, and generating payments associated with Federal health care programs.[9] The “payment prohibition” associated with an exclusion action extends to all items or services that are furnished, either directly or indirectly, by an excluded individual or entity, OR at the medical direction, OR on the prescription of an excluded person.[10]

  • Types of OIG Medicare Exclusion.

    OIG exclusion actions fall into two categories – Mandatory and Permissive. Mandatory exclusions are covered in Sections 1128(a)(1) – 1128(a)(4) of the Social Security Act (SSA),[11] and are required by law to be imposed if the conduct of an individual or entity falls within one of the mandatory exclusion categories. In contrast, permissive exclusion actions are discretionary, and may be imposed at the option of the OIG. Permissive exclusion actions are covered in §1128(b)(1)–§1128(b)(16) and §1156 of the Social Security Act.

  • Mandatory Medicare Exclusion Actions.

    Most mandatory exclusion actions must be imposed a minimum of five years and are often imposed for much longer periods if warranted by the underlying facts and circumstances. There is a requirement of a “conviction” under most mandatory exclusion provisions.[12] In fact, it has been held that a deferred prosecution agreement in a local State court for misdemeanor theft was a sufficient basis for the imposition of a mandatory exclusion.[13] It should also be noted that State agencies are required to notify the OIG of any criminal convictions in State or local courts if they involve an entity that receives Medicaid reimbursements and are related to the delivery of health care items or services under the program.[14]

  • Permissive Medicare Exclusion Actions.

    Permissive Medicare exclusion actions can be imposed at the option of the OIG. Most permissive exclusion actions are taken in response to disciplinary actions taken by a State professional licensing board. The vast majority of permission exclusion actions taken are against nurses. In 2016, the OIG issued updated criteria that the agency used to evaluate whether to exercise its permissive exclusion authority.[15]

II. Sanctions that Result from the Wrongful Employment of an Excluded Individual:

A Medicare exclusion action is one of the most serious administrative adverse events that can be taken against an individual or entity. Any payment made by a Federal health care program for an item or service furnished, ordered, or prescribed by an excluded party is a potential overpayment. Moreover, the OIG may impose Civil Monetary Penalties (CMPs) against providers that employ or contract with excluded individuals or entities. The payment prohibition, and the resulting employment embargo on excluded entities, is enforced simply by requiring providers to know the exclusion status of everyone they employ or do business with. A lack of knowledge is no defense as the OIG posts (and updates on a monthly basis) a searchable list of all excluded entities on its website. This database is known as the “List of Excluded Individuals and Entities” (LEIE).[16] The only way to ensure you are meeting your obligations to maintain an exclusion-free-workforce is to screen all employees, vendors and contractors upon hire and monthly thereafter. Employing an excluded individual can result in significant penalties for providers participating in Federal health care benefit programs. These include:

  • 1. Civil Monetary Penalties (CMP): Congress enacted the CMP law (outlined under Section 1128A of the Social Security Act) as one of several administrative remedies to combat Medicare and Medicaid fraud and abuse. The authority to assess CMPs has been delegated to the OIG. Currently, CMPs of up to a maximum adjusted amount of $22,427 may be assessed for each item or service furnished by the excluded person for which Federal payment is sought, as well as impose assessments of up to three times the amount claimed for such items or services under 42 CFR §§ 1001.1901(b)(3) and 1003.102(a)(2)-(3).[17] Recent cases where civil monetary penalties were assessed by the OIG include:
    • Improper Employment of Excluded Home Health Aide. This home health agency paid more than $146,000 to resolve allegations that they employed an individual (a home health aide) who was excluded from participation in Federal health care programs.
    • Improper Employment of Excluded Nursing Assistant. In this case, a home care organization (providing personal care, palliative care and dementia care) agreed to pay more than $158,000 to resolve allegations that the company employed a certified nursing assistant who was excluded from participation in Federal health care programs.
    • Improper Employment of Excluded Personal Care Assistant. This home health agency paid more than $38,000 to resolve allegations that it improperly employed a personal care assistant who was excluded from participation.
    • Improper Employment of Excluded Physician. The OIG recently announced that it had entered into a settlement agreement with a healthcare provider for $1.5 million to resolve allegations that the provider knowingly allowed an excluded individual to bill Medicare for services. The excluded individual was a physician who had previously been convicted of health care fraud in 2017.
    • Improper Employment of an Excluded Nurse. The OIG announced that it had entered into a settlement agreement with a healthcare provider for $2 million to resolve allegations that the provider knowingly allowed an excluded individual to bill Medicaid for services. The excluded individual was a nurse who had been previously convicted of health care fraud in 2019.
  • 2. False Claims Act Violations: Exclusion violations can also give rise to potential False Claims Act (FCA) liability under the Fraud Enforcement Recovery Act of 2009 (FERA) and the Affordable Care Act of 2010 (ACA). FERA expands the scope of “reverse false claims” liability under the FCA by making the retention of an obligation to the government a false claim, and the ACA specifically states that retained overpayments are legal obligations under FERA. Exclusion cases where the government pursued False Claims Act liability include:
    • Improper Employment of an Excluded Practice Administrator. This case involved the improper employment of an excluded individual (previously convicted of health care fraud) who served as the practice administrator for an ophthalmology practice. Despite the fact that the excluded individual was not a billing provider, the government pursued the case as a violation of the False Claims Act. To resolve the allegations, the practice agreed to pay more than $192,000.
    • Billing for Services Performed by an Excluded Physician. In this case, a physician (previously convicted of health care fraud) was hired to serve as clinical director at an adult psychiatry practice. While employed, the excluded physician billed for services rendered to Federal beneficiaries. As a result, the practice agreed to pay more than $310,000 to settle claims that it violated the False Claims Act when it billed Federal health care benefit programs for services provided by an excluded individual.
    • Improper Employment of Two Excluded Individuals by Rehabilitation Therapy Company. In this case, a holding company and two related rehabilitation therapy companies agreed to pay more than $15 million to settle allegations that they wrongfully billed for certain claims to Medicare and the Federal Employee Health Benefits Program (FEHBP), resulting in various violations of the False Claims Act. A portion of this settlement was related to the company’s improper employment of two individuals who had been excluded from participation in Federal health care benefit programs.
  • 3. Criminal Prosecutions Related to the Improper Employment of Excluded Individuals. In some cases, the DOJ may pursue criminal charges against healthcare providers who knowingly employ excluded individuals. Criminal penalties can include fines, imprisonment, and exclusion from participation in Federal health care benefit programs. Criminal prosecutions of conduct related to the wrongful employment (or ownership interest) of an excluded individual are relatively infrequent and are only typically taken when the facts presented reflect egregious conduct. As the example below reflects, the government aggressively prosecuted the excluded individuals who hid their ownership of a home health agency that participated in Medicare and Medicaid.
    • Falsification of Documentation to Hide Ownership of Agency by Excluded Individuals. In this case, two individuals previously excluded from participation in Federal health care benefit programs owned and operated a home health agency in Texas. The agency’s administrator concealed the fact that the company was owned by excluded individuals and indicated that a non-excluded individual was the owner of the home health agency. Ultimately, a Federal jury found the two excluded owners and two agency employees guilty of conspiracy to commit health care fraud. One of the owners and the agency administrator were also found guilty of two false statement counts in connection with a health care benefit program.

III. Who Should You Screen?

Typical categories of individuals and entities to be screened include:

  1. Employees. This includes services that are billed directly, such as those provided by physicians and other billing providers, or indirectly, such as those services performed by nurses, administrative staff members, IT personnel, etc.
  2. Vendors and Contractors. This includes a wide variety of vendors providing services or supplies to the provider’s practice. It also includes staffing agencies.
  3. Volunteers. It is worth noting that even a volunteer’s work is prohibited if it contributes to the overall basket of services provided to a Medicare or Medicaid beneficiary.

The LEIE and state Medicaid databases contain information about individuals and entities who have been excluded from participating in Federal health care programs, including Medicaid. Exclusions can be imposed for a variety of reasons, including fraud, abuse, and conviction of certain crimes. If an individual or entity is excluded from participating in Medicaid, his or her services cannot be billed, either directly or indirectly to Federal health care benefit programs. When screening, it is important to screen individuals and entities against the LEIE and state Medicaid databases to ensure that they are not excluded from participating in the Medicare and Medicaid programs.

Here are some tips for screening individuals and entities against the LEIE and state Medicaid databases:

  • Use a reliable screening service. There are a number of companies that offer screening services for the LEIE and state Medicaid databases. When choosing a screening service, be sure to select one that is reputable and that uses up-to-date data. We like www.exclusionscreening.com (It is worth noting that this screening company was established by two Liles Parker partners, Robert Liles and Paul Weidenfeld).
  • Screen all staff involved in the provision of patient care services, either directly or indirectly. Screen all individuals and entities who will be providing services to Medicaid beneficiaries, billing Medicaid for services, receiving payments from Medicaid, or involved in the administration of Medicaid.
  • Screen individuals and entities on a regular basis. The LEIE and state Medicaid databases are updated regularly, so it is important to screen individuals and entities on a regular basis to ensure that they are not excluded from participating in Medicaid.
  • Document the screening process. It is important to document the screening process, including the names of the individuals and entities who were screened, the date of the screening, and the results of the screening. This documentation can be helpful in the event of an audit or investigation.

IV. Reducing Your Level of Risk:

Healthcare providers should implement robust compliance programs and screening procedures to minimize the risk of hiring an excluded individual. Failure to do so can result in severe penalties and damage a provider's business reputation. A list of Provider Recommendations can be found at our article titled: “OIG Exclusion Actions – Mandatory and Permissive Exclusion Authorities.”[18] By taking these steps, healthcare providers can significantly reduce the risk of hiring excluded individuals and protect themselves from the potential financial and reputational consequences of noncompliance.

Have you received notice that the OIG or a State Medicaid agency is proposing to exclude you from participation? Give us a call. We can represent you in the appeals process and may be able to reduce your period of exclusion.

Has your period of exclusion expired, and you are now seeking reinstatement? There are a number of landmines to be considered when applying for reinstatement and removal from the OIG exclusion list? Give us a call to discuss your options.

Christin Thompson represents health care providers in Medicare exclusion enforcement actions

Christin Thompson, Esq. is an experienced health lawyer at the health law firm, Liles Parker PLLC. With offices in Washington, DC, Houston, TX, and Baton Rouge, LA, our attorneys represent health care providers and suppliers around the country in connection with health care regulatory audits, investigations and enforcement actions (including, but not limited to Medicare exclusion actions). Should you have any questions, please call us for a free consultation. Christin can be reached at: 1 (800) 475-1906.

  • [1] The authority to exclude was granted to the Secretary of the Department of Health and Human services in the Civil Money Penalties Law (Public Law 97-35, 1981 (as codified at section 1128A of the SSA). The Secretary delegated it to its Office of Inspector General in 1988 (53 Fed. Reg. 12,993 (April 20, 1988)).
  • [2] For an overview of the legislative history of the OIG’s exclusion authority, see our article titled “The OIG Exclusion List of Individuals and Entities is Growing. What Steps are You Taking to Avoid Hiring or Contracting with an Excluded Individual or Entity?“
  • [3] The term “OIG Exclusion” is used as shorthand for an exclusion imposed by the Office of Inspector General pursuant to §1128(a)(1)-(4), (b)(1)-(b)(16) or §1156 of the Social Security Act (SSA). And since Medicare is the largest Federal health care program, the terms “OIG Exclusion” and “Medicare Exclusion” are sometimes used interchangeably.
  • [4] The term “Federal health care programs” is defined under Section 1128B(f) of the Social Security Act as:
    • (1) any plan or program that provides health benefits, whether directly, through insurance or otherwise, which is funded directly, in whole or in part, by the United States Government (other than the health insurance program under chapter 89 of title 5, United States Code); or
    • (2) any State health care program, as defined in section 1128(h). 42 U.S.C. § 1320a-7b(f) (2012).
  • [5] 42 C.F.R. §455.416. (such as exclusions, terminations, debarment and revocations).
  • [6] The statute speaks in terms of “terminations,” but states refer to such actions under various names including exclusions, terminations, debarment and revocations among others. For the sake of consistency and simplicity, such actions initiated by States will be referred to as “Medicaid Exclusions.”
  • [7] Medicaid screening requirements imposed by a State will be covered in a subsequent article.
  • [8] Inspector General June Gibbs Brown, in the press release for the 1999 Special Advisory.
  • [9] The OIG has twice published guidance of the effect of an OIG Exclusion. A Special Advisory Bulletin on the “Effects of Exclusion from Federal Health Care Programs” was issued September 2, 1999 and an “Updated Special Advisory Bulletin on the Effect of Exclusions from Participation in Federal Health Care Programs” was issued May 8, 2013.
  • [10] 42 C.F.R. §1001.1901(b), 42 C.F.R. §1001.10.
  • [11] 42 U.S.C. § 1320a-7(a)(1)-(4).
  • [12] It is important to keep in mind that under § 1128(a)(1), a “conviction” is broadly defined and includes nolo contendre pleas, deferred adjudications and dispositions under first offender programs in any “State, Federal or Local Court.”
  • [13] Department of Health and Human Service, Departmental Appeals Board Civil Remedies Division, Okwilagwe v. The Inspector General, Docket No. C-13-322, Decision No. CR2920, September 6, 2013.
  • [14] 42 C.F.R. § 1002.230.
  • [15] See the OIG’s publication titled, Criteria for Implementing 1128(b)(7) Exclusion Authority (Apr. 18, 2016).
  • [16] Which can be found at https://oig.hhs.gov/exclusions/exclusions_list.asp
  • [17] 42 C.F.R. § 1001.1901(b)(4).
  • [18] Liles Parker article titled “OIG Exclusion Actions – Mandatory and Permissive Exclusion Authorities” can be found at the following link,