[Federal Register Volume 62, Number 173 (Monday, September 8, 1997)]
[Proposed Rules]
[Pages 47182-47195]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-23379]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Inspector General

42 CFR Parts 1000, 1001, 1002 and 1005

RIN 0991-AA87


Health Care Programs: Fraud and Abuse; Revised OIG Exclusion 
Authorities Resulting From Public Law 104-191

AGENCY: Office of Inspector General (OIG), HHS.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: This rulemaking addresses proposed revisions to the OIG's 
sanction authorities in conjunction with sections 211, 212 and 213 of 
the Health Insurance Portability and Accountability Act of 1996, along 
with other technical and conforming changes to the OIG exclusion 
authorities set forth in 42 CFR parts 1000, 1001, 1002 and 1005. These 
proposed revisions are specifically designed to expand the protection 
of certain basic fraud authorities, and revise and strengthen the 
current legal authorities pertaining to exclusions from the Medicare 
and State health care programs.

DATES: To assure consideration, public comments must be delivered to 
the address provided below by no later than 5 p.m. on November 7, 1997.

ADDRESSES: Please mail or deliver your written comments to the 
following address: Office of Inspector General, Department of Health 
and Human Services, Attention: OIG-20-P, Room 5246, Cohen Building, 330 
Independence Avenue, S.W., Washington, D.C. 20201. Because of staffing 
and resource limitations, we cannot accept comments by facsimile (FAX) 
transmission. In commenting, please refer to file code OIG-20-P.

FOR FURTHER INFORMATION CONTACT:
Joel Schaer, (202) 619-0089, OIG Regulations Officer.

SUPPLEMENTARY INFORMATION: Comments will be available for public 
inspection September 22, 1997 in Room 5550 of the Office of Inspector 
General at 330 Independence Avenue, S.W., Washington, D.C., on Monday 
through Friday of each week from 8:00 a.m. to 4:30 p.m., (202) 619-
0089.

I. Background

A. Overview of OIG Exclusion Authorities

    All exclusions imposed by the Office of Inspector General (OIG) are 
based on the authorities set forth in sections 1128, 1156 and 1892 of 
the Social Security Act (Act). In imposing these exclusions, the 
Secretary's primary objective and obligation is to protect the health 
and safety of patients receiving care under the Medicare and State 
health care programs, and to safeguard the integrity of these programs. 
The authorities contained in these sections of the Act were designed to 
protect the programs and their beneficiaries from unfit health care 
providers, individuals and businesses whose behavior has demonstrated 
that they pose a risk to program beneficiaries or to the integrity of 
the Medicare and State health care programs.
    In 1987, the OIG's civil administrative sanction authorities were 
significantly revised and expanded by the Medicare and Medicaid Patient 
and Program Protection Act (MMPPPA), Public Law 100-93. Congress 
enacted MMPPPA ``to improve the ability of the [Department] to protect 
the Medicare and Medicaid programs for fraud and abuse, and to protect 
the beneficiaries of these programs from incompetent practioners and 
from inappropriate and inadequate care.'' MMPPPA authorized both 
mandatory and discretionary program exclusions intended to protect the 
integrity of the Medicare and State health care programs, as well as 
beneficiaries.
    Manadatory exclusions. Section 1128(a) of the Act specifically sets 
forth the exclusion authorities with mandated enforcement provisions. 
This section of the Act requires the OIG to exclude from program 
participation any individuals or entities convicted of a program-
related crime or patient abuse or neglect. These mandatory exclusions 
must be imposed for a minimum 5-year period.
    Permissive exclusions. In addition, section 1128(b) sets forth a 
variety of sanction authorities all of which are permissive authorities 
that do not

[[Page 47183]]

necessarily mandate an action by the Department. Prior to recent 
statutory changes discussed below, a conviction relating to the 
delivery of a health care item or service that was not program-related, 
whether a felony or a misdemeanor, served as grounds for a permissive 
exclusion only. A number of these authorities are ``derivative'' 
exclusions, based on actions previously taken by a court, or other law 
enforcement or regulatory agencies. For example, these exclusions have 
been based on convictions for fraud, theft, financial misconduct and 
controlled substance violations, as well as license suspensions and 
revocations, and sanctions by other health agencies. Other permissive 
exclusions are ``non-derivative'' exclusions, that is, they are based 
on OIG-initiated determinations of misconduct that relate to such 
matters as quality of care and access of information. There were no 
specified minimum periods of exclusion under these permissive exclusion 
authorities, with the exception of the exclusion for failure to grant 
``immediate access'' under section 1128(b)(12) of the Act.
    These authorities have provided for the imposition of an exclusion 
from the Medicare (title 18), Medicaid (title 19), Maternal and Child 
Health Service Block Grant (title 5) and Block Grants to States for 
Social Services (title 20) programs, and are codified in 42 CFR parts 
1001 and 1002 of the OIG regulations.

B. The Health Insurance Portability and Accountability Act of 1996

    In the first significant amendments to the OIG's exclusion 
authorities since MMPPA, the Health Insurance Portability and 
Accountability Act (HIPAA) of 1996, Public Law 104-191, contains many 
important improvements to the laws that are intended as major steps 
towards the elimination of health care fraud and abuse. Among other 
things, HIPAA revises and strengthens the OIG's current sanction 
authorities pertaining to exclusions from Medicare and the State health 
care programs. Specifically, HIPAA broadens the OIG's mandatory 
exclusion; and establishes a new permissive exclusion applicable to 
individuals with ownership or control interest in sanctioned entities.
    The revisions to the OIG's sanction authorities regarding our 
mandatory exclusion authority and the permissive exclusion authorities 
related to fraud under section 1128(b)(1) of the Act are effective upon 
enactment; the amendments regarding the minimum exclusion period and 
the permissive exclusion of individuals with ownership or control 
interest are effective on January 1, 1997. The provisions do allow, 
however, the Department some policy discretion in their implementation. 
As a result, we are developing this proposed rulemaking to address 
these new statutory provisions, along with other technical revisions to 
the OIG's exclusion authorities codified in 42 CFR parts 1000, 1001, 
1002 and 1005.

II. Provisions of the Proposed Rule

A. Mandatory OIG Exclusion From Participation in the Medicare and State 
Health Care Programs

    Section 211 of HIPAA has expanded the minimum 5-year mandatory 
exclusion authority of the OIG to cover any felony conviction under 
Federal, State or local law relating to health care fraud, even if 
governmental programs were not involved. Felony convictions relating to 
controlled substances are also the basis for a mandatory exclusion. The 
expanded mandatory exclusion provisions serve to recognize the 
seriousness of such felony convictions and ensure that beneficiaries of 
the Medicare and State health care programs are well protected from 
dealing with such individuals and entities. Section 211 still provides 
the Secretary with discretionary authority to exclude those individuals 
and entities from Medicare and State health care programs who have been 
convicted of a misdemeanor criminal health care fraud offense or who 
have been convicted of a criminal offense relating to fraud, theft, 
embezzlement, breach of fiduciary responsibility or other financial 
misconduct in programs (other than health care programs) funded by any 
Federal, State or local agency.
    In accordance with section 211 of HIPAA, we would revise 
Sec. 1001.101 of our regulations by adding new paragraphs (c) and (d) 
to address the mandatory provisions set forth in sections 1128a(3) and 
1128a(4) of the Act. In terms of the scope of this provision, in order 
to appropriately restrict the imposition of these mandatory exclusions 
to only individuals and entities who might reasonably be expected to 
have future contact with Medicare, the State health care programs or 
other health care programs or systems, we are also proposing in 
Secs. 1001.101(d) and 1001.401(a) to limit the applicability of this 
provision to any individual or entity that: (1) Is or has ever been a 
health care practitioner, provider or supplier; (2) holds or has held a 
direct or indirect ownership or control interest, as defined in section 
1124(a)(3) of the Act, in an entity that is a health care provider or 
supplier; or (3) is or has ever been an officer, director, agent or 
managing employee, as defined in section 1126(b) of the Act, of such an 
entity, or is or has ever been employed in any capacity in the health 
care industry. A conforming change to our regulations at 
Sec. 1001.102(b)(1), consistent with the sections 1128(a)(3) 1128(a)(4) 
of the statute, would also be made to reference any fraudulent acts--
including theft, breach of fiduciary responsibility or other financial 
misconduct--committee in other governmental programs as a basis for an 
exclusion by the OIG from Medicare and the State health care programs.
    The section heading for Sec. 1001.201 would be revised to read as 
``Conviction relating to fraud'' to indicate that this authority is not 
just relating to program and health care fraud. The section heading for 
Sec. 1001.401 would be revised to read as ``Misdemeanor conviction 
relating to controlled substances.''

B. Establishment of Minimum Periods of Exclusion for Certain Permissive 
Exclusions

    The absence of a statutorily required minimum exclusion period for 
permissive exclusions has resulted in an exceptional amount of 
administrative litigation over the issue of the length of exclusion in 
these cases. Since the reasonableness of the length of exclusions 
imposed is the single most litigated issue, this has required 
significant agency resources in each instance to defend the exclusion 
period imposed by the OIG. Section 212 has established minimum periods 
of exclusion from 1 to 3 years for permissive exclusions from the 
Medicare and State health care programs.
    For (1) convictions of misdemeanor criminal health care fraud 
offenses, (2) criminal offenses relating to fraud in non-health care 
Federal or State programs, (3) convictions relating to obstruction of 
an investigation of health care fraud and (4) convictions of 
misdemeanor offenses relating to controlled substances, section 212 of 
HIPAA has established a minimum period of exclusion of 3 years, unless 
the Secretary determines that a longer or shorter period is appropriate 
due to aggravating or mitigating circumstances.
    For permissive exclusions from Medicare and the State health care 
programs as a result of revocation, surrender or suspension of an 
individual's or entity's health care license, section 212 establishes a 
minimum exclusion period that would be not less than the period during 
which the individual's or entity's license was

[[Page 47184]]

revoked or suspended. Likewise, for permissive exclusions due to a 
suspension or exclusion from other Federal health care programs (such 
as CHAMPUS or the Veterans' Administration) or other State health care 
programs for reasons bearing on an individual's or entity's 
professional competence, professional performance or financial 
integrity, section 212 of HIPAA also establishes a minimum period of 
exclusion of not less than the period the individual or entity is 
excluded or suspended from that Federal or State health care program. 
As indicated above, this statutory provision is effective for any 
exclusion imposed or proposed by the OIG on or after January 1, 1997.
    In addition, section 212 establishes a minimum of a 1-year period 
of exclusion for (1) individuals or entities who are found to have 
submitted (or caused to be submitted) claims for excessive charges, or 
who furnished (or caused to be furnished) unnecessary items or 
services; or (2) health maintenance organizations (as defined by 
section 1903(m) of the Act), or entity under a waiver established by 
section 1915(b)(1) of the Act, that are found to have failed to provide 
medically necessary items and services. The establishment of these 
minimum exclusion periods will aid to conserve governmental resources 
by reducing the amount of litigation and will foster more consistency.
    Consistent with these statutory amendments, we would revise 
Secs. 1001.701(d)(1) and 1001.801(c)(1) to add that with regard to the 
length of exclusion under these authorities, in no case may the period 
be shorter than one year. Furthermore, we would also revise 
Sec. Sec. 1001.501 and 1001.601 to state that the length of exclusion 
under this authority will never be for a period of time less than the 
period during which the individual or entity is excluded from that 
Federal or State health care program.

C. Permissive Exclusions of Individuals With Ownership or Control 
Interest in Sanctioned Entities

    Prior to HIPAA, section 1128(b)(8) of the Act permitted the 
Secretary to exclude an entity when a convicted individual had an 
ownership, control or agency relationship with such entity. However, if 
an entity, rather than an individual, was convicted of Medicare or 
State health care program fraud, the OIG did not have the authority to 
exclude the individuals(s) who owned or controlled the entity and who 
may, in fact, have been responsible for the fraud. This created an 
obvious loophole whereby an individual who was indicted for fraud along 
with a business entity owned or controlled by that individual could 
avoid program exclusion by agreeing to have the business entity plead 
guilty and pay the fines. Having avoided conviction, the individual was 
then free to form a new corporation and continue to participate in the 
health care programs.
    Section 213 of HIPAA has now expanded the statute by adding a new 
permissive exclusion authority (section 1128(b)(15) of the Act) 
applicable to individuals who have an ownership interest in, or have 
significant control over the operations of, an entity that has been 
convicted of a program-related offense. Specifically, under this 
provision, an individual who has a direct or indirect ownership or 
control interest in a sanctioned entity and who knows, or should know, 
of the action constituting the basis for the conviction or exclusion, 
may also be excluded from participation in Medicare and the State 
health care programs if the entity has been convicted of an offense 
under sections 1128(a) or 1128 (b)(1) through (b)(3) of the Act, or 
otherwise excluded from program participation. Under this authority, 
the culpable individual is also subject to program exclusion even if 
not initially convicted or excluded.
    Accordingly, we would add a new Sec. 1001.1051, Exclusion of 
individuals with ownership or control interest in sanctioned entities, 
to reflect the new statutory authority. Consistent with the statute, 
under this regulatory authority the OIG would need to demonstrate that, 
in the case of an investor, the individual acted in deliberate 
ignorance of the offense constituting the sanctionable action. In the 
case of an officer or managing employee of the business entity, the OIG 
will not need to demonstrate such knowledge. Under proposed 
Sec. 1001.1051, when the entity has been excluded, the length of the 
individual's exclusion would be for the same period as that of the 
sanctioned entity with which the individual has had the prohibited 
relationship. Consistent with statutory intent, we are defining the 
term ``sanctioned entity'' under this section to mean an entity that 
has been convicted of any offense under Secs. 1001.101 through 1001.104 
of these regulations, or that has been terminated or excluded from 
participation in Medicare or a State health care program. Thus, under 
this authority, when an entity is no longer reimbursed under Medicare 
or the State health care programs as a result of a termination or 
exclusion by the Department, the owners of the entity will be subject 
to an exclusion as well.
    In a conforming change, we also propose to revise Sec. 1001.3002 by 
adding a new paragraph to clarify that if the specified criteria of 
this section are met, an individual excluded in accordance with the new 
proposed Sec. 1001.1051 would be reinstated only upon an OIG 
determination that the excluded entity upon which the individual's 
exclusion was based has been reinstated in accordance with 
Secs. 1001.3002(a) or 1001.3005.

D. Technical and Conforming Regulatory Revisions

    In addition to the changes to the OIG regulations at 42 CFR parts 
1001 and 1002 to comply with the revised sanction provisions set forth 
in HIPAA, we are proposing a number of technical and conforming 
regulatory changes in accordance with the HIPAA. Specifically, under 
the new statute, the OIG has been delegated authority for 3 new 
authorities referenced in Public Law 104-191--sections 1128 (a)(3) and 
(a)(4) and 1128 (b)(15) of the Act. As a result, technical and 
conforming changes to the OIG regulations are necessary. In addition, 
several minor conforming changes are also being proposed to correct 
omissions from previous regulatory issuances, and to clarify and expand 
the applicability of the existing regulations. A limited number of 
policy decisions are being proposed that relate to the clarification of 
(1) The definition of the term ``furnished;'' (2) the OIG's exclusion 
authority under section 1128(a)(2) of the Act concerning patient 
neglect and abuse convictions; (3) time limits on payments to suppliers 
for services by excluded providers; (4) when a reinstatement request 
will be received in accordance with an OIG exclusion taken under 
section 1128(b)(5) of the Act; and (5) terms ``incarceration'' and 
``patient.''
    Section 1000.10, General definitions: We would clarify the current 
definition of the term ``furnished'' to indicate that exclusions will 
apply to any individual or entity that provides or supplies items or 
services, directly or indirectly. When an individual or entity is 
excluded from Medicare and the State health care programs, the effect 
of the exclusion is that the programs may not pay for items and 
services furnished by that excluded individual or entity. The OIG has 
the authority--and sometimes the obligation when a mandatory exclusion 
is appropriate--to impose an exclusion on individuals or entities when 
the statutory requirements of section 1128 of the Act are met, 
regardless of whether (1) The individual or entity is paid by the 
programs directly or (2) the items or

[[Page 47185]]

services provided by the individual or entity are reimbursed by the 
programs indirectly through the submission of claims by a third party 
who is a direct provider, supplier or practitioner. In the past, we 
have elected not to exercise this authority in the case of 
manufacturers or distributors that do not submit claims for the items 
they provide because of concern that it would be difficult to 
administer exclusions against such entities are not reimbursed directly 
by the Department. At this time, the OIG is proposing to change this 
approach by exercising the authority given to us and clarifying the 
existing definition for ``furnished.''
    Notwithstanding the difficulty in monitoring and administering 
exclusion against so-called ``indirect'' providers--such as 
manufacturers and distributors of drugs, medical devices and other 
items of durable medical equipment reimbursable under Medicare and the 
State health care programs--the OIG has determined that an exception 
for indirect providers and suppliers is not appropriate as a matter of 
policy. As a result, in clarifying the definition for the term 
``furnished,'' we would make clear that exclusions of indirect 
providers will be imposed when appropriate, and that the effect of such 
exclusions will be that no payment may be made to any direct provider, 
practitioner or supplier for items or services manufactured, 
distributed or otherwise provided by any excluded individual or entity.
    Section 1001.2, Definitions: Throughout part 1001, the current 
regulations list various aggravating factors to be considered as a 
basis for lengthening a period of exclusion. One aggravating factor in 
all instances when the exclusion is based on a conviction is whether 
the sentence imposed by the court included incarceration. Because many 
white collar criminals are not actually placed in jails, there has been 
some uncertainty over what incarceration entails. Consistent with 
Federal sentencing guidelines, we are proposing to add a definition in 
Sec. 1002 for the term ``incarceration'' to include imprisonment or any 
type of confinement with or without supervised release. This would 
include, but would not be limited to, a correctional facility or other 
community confinement (such as a work release center), as well as house 
arrest and home detention.
    We are proposing a new definition for the term ``patient'' to 
include any individual who is receiving health care items or services, 
including any item or service provided to meet his or her physical, 
mental or emotional needs, whether or not the item or service is 
reimbursed under Medicare or a State health care program and regardless 
of the location in which it is provided. We are concerned that the term 
``patient'' has been narrowly defined in some instances to restrict its 
meaning to only an individual in a traditional medical care setting or 
within a traditional physician/patient relationship. We believe that 
the statute intended to prohibit neglect and abuse of all individuals 
receiving health care items and services regardless of the caretaker or 
the location within which the items or services are provided.
    We are also proposing two changes to the existing definition of the 
term ``exclusion.'' To conform to the statutory language set forth in 
MMPPPA, Public Law 100-93, we are adding the words ``ordered or 
prescribed'' to indicate that items and services will not be reimbursed 
under Medicare and the State health care programs when furnished, 
ordered or prescribed by a specified individual or entity (underlining 
added). Under this definition, we are also codifying current OIG policy 
to indicate that even after an exclusion has expired, the individual or 
entity will not be eligible for program reimbursement until they are 
formally reinstated by the OIG.
    A revision to the term ``sole source of essential specialized 
services in the community'' is also being proposed to indicate that it 
is a health professional shortage area (formally known as a health man 
power shortage area); and that this designation is now made by the 
Health Resources Services Administration, and not the Public Health 
Service. A proposed change under the term ``professionally recognized 
standards of health care'' would remove the specific references to the 
``Food and Drug Administration,'' the ``Health Care Financing 
Administration'' (HCFA) and the ``Public Health Service,'' and 
substitute ``the Department'' as the entity in general who may declare 
a particular treatment modality as not being safe and effective.
    Section 1001.101, Basis for liability: We are proposing to revise 
paragraph (b) to clarify the scope of the term ``neglect or patient 
abuse'' to indicate that it covers both the individual's custodial as 
well as medical treatment. In recent years, we have been seeing more 
cases arise from abuse and neglect in residential settings where the 
abused or neglected individual is not referred to as a ``patient.'' 
Further, the individual may not be receiving strictly medical care 
treatment, but rather may be provided with custodial care, such as 
ensuring that medicines are taken and meals are prepared. In 
implementing the OIG's exclusion authorities, administrative law judges 
(ALJs) have varied in their interpretation of the statute and have not 
developed a consistent standard for defining a patient and patient 
abuse. In order to provide consistent protection for all individuals 
similarly situated, notwithstanding the variations of State law, we are 
proposing to revise the regulations to indicate that the delivery of a 
health care service includes the provision of any items or services to 
an individual designed to meet their physical, mental or emotional 
needs or well-being, whether or not reimbursed under Medicare or a 
State health care program.
    Section 1001.102, Length of exclusion: We are proposing to add a 
new factor that may be considered aggravating and therefore a basis for 
lengthening the exclusion period. In order to help distinguish between 
more egregious and less egregious cases involving patient abuse, we 
propose to include a new Sec. 1001.102(b)(4) to provide that in the 
case of any conviction involving patient abuse or neglect, we will 
consider whether the action that resulted in the conviction (1) was 
premeditated, (2) was part of a continuing pattern of behavior, or (3) 
consisted of non-consensual sexual acts.
    In addition, we are proposing an additional aggravating factor for 
consideration in Sec. 1001.102 and elsewhere throughout part 1001 (see 
Secs. 1001.201(b)(2)(vi), 1001.301(b)(2)(vi), 1001.401(c)(2)(v), 
1001.501(b)(2)(iv), 1001.601(b)(2)(iii), 1001.701(d)(2)(v), 
1001.801(c)(2)(v), 1001.901(b)(4), and 1001.951(b)(1)(iv). The proposed 
factor specifically relates to any other adverse action taken by any 
other Federal, State or local government agency or board based on the 
same set of circumstances that is serving as the basis for imposition 
of the exclusion. This additional factor is consistent with ALJ 
decisions regarding aggravating factors and the length of exclusion.
    Further, Sec. 1001.102(b) and the other sections referenced above, 
as currently written, do not allow the OIG to increase the length of 
exclusion if an individual or entity was convicted of other offenses at 
the same time as he or she was convicted of the offense that served as 
the basis for the exclusion. For example, this aggravating factor 
permits the OIG to increase the length of exclusion when the individual 
convicted of Medicare fraud has a prior drug conviction or income tax 
evasion conviction. However, if the individual is simultaneously 
convicted of Medicare fraud and any other offense, such as drug 
distribution or income tax evasion, there is currently no aggravating 
factor

[[Page 47186]]

that permits the OIG to consider the additional conviction or 
convictions. We believe it is not sensible to factor in conduct or 
wrongdoing that occurred in the past to demonstrate that an individual 
or entity lacks trustworthiness, but not to give as much weight to more 
recent conduct. To address this problem and allow greater flexibility 
to the OIG, we are proposed to amend Sec. 1001.102(b) to indicate that 
in determining the length of exclusion, the OIG will consider whether 
the individual or entity (1) was convicted of other offenses besides 
those which formed the basis for the exclusion, or (2) has a documented 
history of criminal, civil or administrative wrongdoing. This would 
permit the OIG to consider any conviction prior to, concurrent with or 
subsequent to the conviction upon which the exclusion is based. 
(Parallel changes would be made, as applicable, throughout part 1001 in 
Secs. 1001.201(b)(2), 1001.301(b)(2), 1001.401(c)(2), 1001.501(b)(2), 
1001.601(b)(2), 1001.701(d)(2), 1001.801(c)(2), 1001.901(b), 
1001.951(b)(1), 1001.1101(b), 1001.1201.(b), 1001.1301(b)(2), 
1001.1401(b), 1001.1601(b)(1) and 1001,1701(c)(1).)
    In addition to these aggravating factors, we are also proposing to 
include in Sec. 1001.102(c)(3) (as well as in 
Secs. 1001.201(b)(3)(iii), 1001.301.(b)(3)(ii), 101.401(c)(3)(i), 
1001.501(b)(3)(i) and 1001.601(b)(3)(ii)) a new mitigating factor that 
would take into account whether the cooperation of an individual or 
entity resulted in additional cases being investigated, or reports 
being issued, by the appropriate law enforcement agency identifying 
program vulnerabilities or weaknesses. This new mitigating factor would 
only be taken into consideration in those situations where the law 
enforcement agency validated the person's information by opening up a 
case or by writing a report where, for example, a system vulnerability 
to HCFA or other program agency is identified and a solution 
recommended. We believe that the inclusion of this additional 
mitigating factor would (1) encourage greater cooperation by 
individuals and entities, and (2) afford the OIG greater flexibility in 
identifying and addressing issues related to program waste, fraud and 
abuse.
    Section 1001.501, License revocation or suspension: Consistent with 
and to conform to the new statutory authority, we would delete 
paragraph (c) of Sec. 1001.501, currently setting forth exceptions 
related to the length of exclusion for license revocation or 
suspension.
    Section 1001.601, Exclusion or suspension under a Federal or State 
health care program: Prior to HIPAA, Sec. 1001.601 set forth both 
mitigating and aggravating factors that are to be considered in 
determining the length of exclusion under this authority. To conform 
with the statute, we would revise paragraph (b)(3) of this section to 
indicate that with the establishment of a base exclusion period under 
this authority, mitigating factors may only be considered if 
aggravating factors exist that would justify a longer exclusion beyond 
the base period.
    We are also proposing to clarify OIG policy and correct an 
inadvertent inconsistency that exists in the language set forth in 
Sec. 1001.601(b)(4). The current paragraph states that ``[t]he OIG will 
normally not consider a request for reinstatement * * * until the 
period of exclusion imposed by the OIG expires.'' This language has 
created a problem for these OIG exclusions which are based entirely on 
State-imposed exclusions, and which must continue until the State 
exclusion ends. Since the law requires the Medicaid program to exclude 
for the same period as Medicare, this has resulted in a loop that makes 
it technically impossible for either the OIG of the State to end the 
exclusion except by an arrangement to do so simultaneously. 
Specifically, in many instances, a State is prepared to reinstate an 
individual or entity but is unable to do so because of the existing 
Medicare exclusion that the OIG has imposed in as a result of the 
original State Action. To solve this problem, we are proposing to 
revise paragraph (b)(4) of this section to state that if an individual 
or entity is eligible to apply for reinstatement, and the sole reason 
that the State has denied reinstatement is that the existing exclusion 
under Medicare imposed by the OIG is still in effect, the OIG will 
consider a request for reinstatement.
    Section 1001.701, Excessive claims or furnishing of unnecessary or 
substandard items or services: In an effort to more clearly define the 
scope of an action under section 1128(b)(6) of the act, we are 
proposing to revise paragraph (a)(1) of this section to further clarify 
to whom an individual's or entity's excess charges or costs apply. The 
revised language would indicate that the OIG may exclude an individual 
or entity that has submitted, or caused to be submitted, bills or 
requests for Medicare or State health care program payments that 
contain charges or costs that are substantially in excess of their 
usual charges or costs for items or services furnished to any of their 
customers, clients or patients. We specifically welcome comments on 
this OIG policy clarification.
    Section 1001.953, OIG report on compliance with investment interest 
safe harbor: We would delete this section since the time frame being 
reflected in this section is no longer operative. The current language 
stipulates that an OIG report to the Secretary be prepared within 180 
days of the effective date addressing the investment interest safe 
harbor provisions. Those provisions were published as part of a final 
rulemaking (56 FR 35952, July 29, 1991) became effective upon the date 
of its publication. The report was not prepared for several reasons. 
The overriding reason for not issuing this report within the stipulated 
time frame was that it was not practical to effectively study this 
subject area until health care businesses had the opportunity to alter 
their practices to take advantage of this safe harbor. By the time a 
study might appropriately have been undertaken, this subject was 
superseded to a large degree by the enactment of section 1877 of the 
Act.
    Section 1001.1001; Exclusion of entities owned or controlled by a 
sanctioned person: Questions have been raised regarding the legitimacy 
of the transfer of health care entities from excluded individuals to 
their spouses, and the circumstances under which such a transfer should 
constitute divestment of ownership and control of the entity by the 
excluded individual, and should thus preclude exclusion of the entity 
under Sec. 1001.1001. In an effort to reiterate and emphasize existing 
OIG policy on this matter, we are proposing to revise the definition 
set forth in Sec. 1001.1001(a)(2) for the term ``agent.'' This policy 
was clearly enunciated in the preamble of the final regulations 
implementing amendments to the OIG's exclusion authorities resulting 
from Public Law 100-93 (57 FR 3309, January 29, 1992), and we are now 
proposing to codify it in regulations.
    Section 1001.1901, Scope and effect of exclusion: Some individuals 
and entities have mistakenly believed that merely obtaining a program 
provider number would automatically result in their reinstatement back 
into the programs. This has never been the case; an individual or 
entity must formally be reinstated by the OIG in order to again 
participate in the Medicare and State health care programs. We would 
revise paragraph (b)(1) of this section, regarding the effect of an 
exclusion on excluded individuals and entities, to specifically clarify 
existing OIG policy that an excluded individual or entity

[[Page 47187]]

continues to be excluded until officially reinstated by the OIG, 
regardless of whether he, she or it has obtained a program number--
either as an individual or as a member of a group--prior to their being 
reinstated for program participation. (A similar clarification would be 
made in Secs. 1001.3001(a)(1) and 1001.3002(a) to indicate that the 
obtaining of a program provider number does not in and of itself 
reinstate eligibility for an entity or an individual, either as a 
single person or as a member of a group.) The word ``person'' appearing 
in the first sentence of paragraph (b)(1) would be revised to read as 
``individual or entity.''
    In addition, we would revise paragraph (b)(3) of this section to 
clearly indicate that submitting claims, or causing claims to be 
submitted or payment to be made by the programs for items or services 
that were furnished, ordered or prescribed by the excluded individual 
or entity--including any administrative and management services or 
salaries--may serve as the basis for denying the individual's or 
entity's reinstatement back into the programs. The addition of this 
language would serve to more clearly define what an excluded individual 
or entity can do, and would codify and re-enforce existing OIG policy 
that is currently contained in the exclusion notice letters sent to 
individuals and entities.
    We are also proposing to add a new Sec. 1001.1901(c)(4) that serves 
to codify the current HCFA policy with regard to payment to suppliers 
for claims after notice of an excluded provider's exclusion. 
Specifically, we would reiterate that HCFA will not pay for any claims 
submitted by, or for items or services ordered or prescribed by, an 
excluded provider for dates of service 5 days or more after the date 
that notice of the provider's exclusion was mailed by the contractor to 
the supplier.
    Section 1001.2001, Notice of intent to exclude: We propose to 
delete existing paragraph (b) of Sec. 1001.2001. The language currently 
states that if the OIG proposes to exclude an individual or entity in 
accordance with Sec. 1001.701 or 1001.801, the individual or entity may 
submit a written request to present evidence or argument orally to the 
OIG. In eliminating the in-person hearing on these cases, the 
individual or entity would still have the opportunity to submit 
additional material for review to the OIG. The vast majority of cases 
for proposed exclusion are medical in nature, and while the OIG 
contracts for the review of medical records and related material, we do 
not retain an in-house medical review officer that would be readily 
accessible to hear and review such submitted material. We believe this 
existing provision does not represent an effective use of time and 
current OIG resources, and are therefore proposing to delete this 
language. This change would not diminish due process since the 
individual or entity retains the ability to challenge the OIG's 
proposed exclusion.
    Section 1001.2002, Notice of exclusion: We are proposing to amend 
this section by adding a new paragraph (e) indicating, consistent with 
existing OIG policy, that the notice letter to the affected individual 
or entity could be amended should any additional information come to 
our attention or wrongdoing occur subsequent to the issuance of the 
initial notice letter. We are also proposing to make a similar 
clarifying change in Sec. 1005.15 by revising paragraph (f) to 
explicitly state that, with certain exceptions, additional items or 
information--including any aggravating and mitigating circumstances 
that arose or became known subsequent to the issue of the notice 
letter--may be introduced by either party.
    Section 1001.2003, Notice of proposal to exclude: A discrepancy 
currently existing between the language in Sec. 1001.2003(a)--
indicating that an exclusion is effective 60 days after the date of 
notice, unless an individual or entity files a written request for a 
hearing--and the language set forth in Sec. 1005.2(c)--that a request 
for a hearing is to be filed 60 days after the notice letter is 
received by the respondent, which is presumed to be 5 days after the 
date of the notice unless there is a reasonable showing to the 
contrary. To be consistent in our language and intent, we would revised 
Sec. 1001.2003(a) to reference the language and procedure set forth in 
Sec. 1005.(c). i.e., that a request for a hearing be made 60 days after 
service of the notice letter.
    Section 1001.2005, Notice to State licensing agencies: We propose 
deleting paragraph (b) of this section. While the regulations would 
still indicate that the Department will notify the appropriate State or 
local agencies or authorities responsible for licensing or 
certification of the circumstances leading to an individual's or 
entity's exclusion, we do not want to be locked into a specific 
notification process if alternative methods can be considered for 
notifying provider licensing and certification boards.
    Section 1001.2006, Notice to others regarding exclusion: Section 
221 of HIPAA established a new national health care fraud and abuse 
data collection program for the reporting of final adverse actions 
against health care providers, suppliers and practitioners. As a 
result, we would revise Sec. 1001.2006(a) to indicate that, in addition 
to the general public and program beneficiaries, the Department will 
not also provide notice of the exclusion and its effective date to the 
new Adverse Action Data Bank.
    Section 1001.3001, Timing and method of request for reinstatement: 
Because there has been some misunderstanding as to when an exclusion 
period ends, in addition to clarifying that the act of obtaining a 
provider number does not reinstate program eligibility (see discussion 
of Sec. 1001.1901 above), we would also revise paragraphs (1) (a) and 
(b) to indicate that an excluded individual or entity (other than those 
excluded in accordance with Secs. 1001.1001, 1001.1051 and 1001.1101) 
may submit a request for reinstatement to the OIG only after the 
minimum period of exclusion specified in the notice of exclusion has 
expired. A conforming change would also be made in 
Sec. 1001.3002(a)(1).
    Section 1001.3002, Basis for reinstatement: Section 214(b) of HIPAA 
has amended the statute by indicating that in making a determination on 
whether to sanction a practitioner or other person--based on a 
recommendation from a Peer Review Organization (PRO)--for failing to 
comply with statutory obligations relating to quality and medical 
necessity of health care services, the Department will no longer to be 
required to prove that the practitioner or other person was either 
unwilling or unable to comply with such obligations. While this 
statutory change is being addressed through separate rulemaking 
addressing the PRO sanctions process and changes to part 1004 of our 
regulations, we would make a conforming change to paragraph (b) of 
Sec. 1001.3002 to delete the ``unwillingness and inability'' factor as 
a basis for consideration by the OIG in making a reinstatement 
determination.
    Section 1002.3, Disclosure by providers; information on persons 
convicted of crimes: Under part 1002, which addresses State-initiated 
exclusions from the Medicaid program, we would revise Sec. 1002.3(b) to 
codify in regulations as new paragraph (b)(3) concerning Medicaid State 
agency requirements for notification to the OIG. Specifically, the new 
paragraph would clearly state that the Medicaid agency is required to 
promptly notify the OIG of any and all actions it takes to limit the 
individual's or entity's ability to participate in its program. Th is 
would include, but would not be limited to: (1)

[[Page 47188]]

Suspension actions, (2) settlement agreements and (3) situations where 
the individual or entity may have voluntarily agreed to withdraw from 
the program in order to avoid a formal sanction action.

III. Regulatory Impact Statement

Executive Order 12866 and Regulatory Flexibility Act

    The Office of Management and Budget (OMB) has reviewed this 
proposed rule in accordance with the provisions of Executive Order 
12866 and the Regulatory Flexibility Act (5 U.S.C. 601-612), and has 
determined that it does not meet the criteria for a significant 
regulatory action. Executive Order 12866 directs agencies to assess all 
costs and benefits of available regulatory alternatives and, when 
rulemaking is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health, safety distributive and equity effects). In addition, under the 
Regulatory Flexibility Act, if a rule has a significant economic effect 
on a number of small businesses the Secretary must specifically 
consider the economic effect of a rule on small business entities and 
analyze regulatory options that could lessen the impact of the rule.
    The provisions set forth in this proposed rulemaking, for the most 
part, implement statutory requirements, and are designed to lengthen 
and broaden the scope of the OIG's authority to include individuals and 
entities from the Medicare and the State health care programs. As 
indicated above, these provisions would implement the new statutory 
requirements regarding the period of exclusion for some individuals and 
entities by: (1) Broadening the minimum 5-year mandatory exclusion 
authority to cover felony convictions under Federal, State or local law 
relating to health care fraud, and (2) establishing minimum periods of 
exclusion for certain permissive exclusions. We believe that the number 
of individuals and entities effected by this lengthening of exclusions 
would be minimal.
    Further, while the provisions in this rule serve to clarify the 
OIG's sanction authorities by (1) Establishing a new permissive 
exclusion applicable to individuals having majoring ownership interest 
in (or significant control over the operations of) an entity convicted 
of a program-related offenses; (2) clarifying what would constitute 
patient abuse or neglect for purposes of exclusion; and (3) setting 
forth a definition for ``furnished'' that would apply to individuals 
and entities that provide or supply items or services directly or 
indirectly, we likewise believe the increase in the number of exclusion 
cases will be small. Specifically, while the statutory requirement to 
impose exclusions in cases of certain types of convictions has been 
broadened in sections 1128 (a)(3) and (a)(4) of the Act, the process 
for excluding individuals and entities who are convicted in accordance 
with the new requirements remains essentially the same. Cases to be 
processed under the new mandatory provisions set forth in sections 1128 
(a)(3) and (a)(4) for the minimum mandatory 5-year exclusion were 
previously processed under the permissive authority provisions in 
sections 1128 (b)(1) and (b)(3) of the Act, with a benchmark of 3 
years. As a result, while there may be minor increases in the number of 
mandatory exclusions imposed, we see no significant increase or 
decrease in the number of these cases. Similarly, the clarification of 
what constitutes patient neglect or abuse should not result in a 
significant increase in the number of cases under section 1128(a)(2) of 
the Act, but merely support prior findings of abuse and neglect while 
delivering health care services.
    In addition, we do not anticipate a significant workload resulting 
from the implementation of section 1128(b)(15) of the Act, and proposed 
Sec. 1001.1051 of these regulations, as the requirements for 
effectuating this authority are rather stringent at the present time, 
and will limit the number of exclusions to be implemented under this 
authority.
    Since the vast majority of individuals, organizations and entities 
addressed by these regulations do not engage in such prohibited 
activities and practices, we believe that any aggregate economic effect 
of these revised exclusion regulations will be minimal, affecting only 
those limited few who engage in prohibited behavior in violation of the 
statute. As such, this proposed rule should have no significant 
economic impact. Similarly, while some sanctions may have an impact on 
small entities, it is the nature of the violation and not the size of 
the entity that will result in an action by the OIG. We believe that 
the aggregate economic impact of this rulemaking should be minimal, 
affecting only those limited few who have chosen to engage in 
prohibited arrangements, schemes or practices in violation of statutory 
intent. Therefore, we have concluded, and the Secretary certifies, that 
this proposed rule would not have a significant economic impact on a 
number of small business entities, and that a regulatory flexibility 
analysis is not required for this rulemaking.

Paperwork Reduction Act

    Section 1002.3 of this rulemaking contains information collection 
requirements that require approval by OMB. We are required to solicit 
public comments under section 3506(c)(2)(A) of the Paperwork Reduction 
Act of 1995. Specifically, we are inviting comments on (1) whether the 
collection of information is necessary for the proper performance of 
the functions of the agency, including whether the information will 
have practical utility; (2) the accuracy of the estimate of the burden 
of the collection of information; (3) ways to enhance the quality, 
utility and clarity of the information collected; and (4) ways to 
minimize the burden of the collection of information on practitioners 
and other persons, including through the use of automated collection 
techniques or other forms of information technology.
    Title: Information on persons convicted of crimes.
    Summary of the collection of information: In order to effectuate 
the requirements of section 1128(b)(5) of the Social Security Act, 
authorizing the OIG to exclude individuals and entities that are 
sanctioned by a Federal or State agency (including State Medicaid 
agencies), a State Medicaid agency must promptly notify the OIG of any 
action it takes to limit an individual's or entity's participation in 
Medicaid. To implement this statutory authority, we are clarifying in 
Sec. 1002.3 of the regulations the scope of conduct constituting a 
basis for State Medicaid notice of denials of participation or 
imposition of a sanction. Specifically, under section 1902(a) (39) and 
(41) of the Social Security Act, State agencies are required to notify 
the Secretary when a provider has been denied participation status in 
Medicaid, or has been terminated, suspended or ``otherwise sanctioned'' 
under the Medicaid program. We are clarifying what actions fall within 
the ambit of these provisions. The reporting obligation set forth in 
Sec. 1002.3 is consistent with the requirements of the statute.
    Respondents: The ``respondents'' for the collection of information 
described in Sec. 1002.3 are the individual State Medicaid agencies.
    Estimated number of respondents: The OIG annually receives 
approximately 500 notifications from State Medicaid agencies regarding 
actions taken against an individual or entity. While we are 
specifically clarifying that these actions are to

[[Page 47189]]

include any suspension actions, settlement agreements and situations 
where an individual or entity voluntarily withdraws from the program to 
avoid a formal sanction, we believe that the number of actions reported 
by the State agencies to the Secretary will remain low.
    Estimated number of responses per respondent: 1.
    Estimated total annual burden on respondents: We believe that the 
burden on the State Medicaid agencies in preparing the notification to 
the OIG will be minimal. We estimate that the average burden for each 
submitted notification to the OIG will be less than one-half hour. The 
total burden for this information collection activity is estimated not 
to exceed 250 hours annually.
    Comments on these information collection activities should be sent 
to both:

Cynthia Agens Bauer, OS Reports Clearance Officer, ASMB Budget Office, 
Room 503-H, Humphrey Building, 200 Independence Avenue, S.W., 
Washington, D.C. 20201, FAX: (202) 690-6352
Allison Herron Eydt, OIG Desk Officer, Office of Management and Budget, 
Room 10235, New Executive Office Building, 715 17th Street, N.W., 
Washington, D.C. 20053, FAX: (202) 395-6974

    Comments on these paperwork reduction requirements should be 
submitted to the above individuals within 60 days following the Federal 
Register publication of this proposed rule.

List of Subjects

42 CFR Part 1001

    Administrative practice and procedure, Fraud, Health facilities, 
Health professions, Medicaid, Medicare.

42 CFR Part 1002

    Fraud, Grant programs--health, Health facilities, Health 
professions, Medicaid, Reporting and recordkeeping.

42 CFR Part 1005

    Administrative practice and procedure, Fraud, Penalties.

    Accordingly, 42 CFR Parts 1000, 1001, 1002 and 1005 would be 
amended as set forth below:
    A. Part 1000 would be amended as follows:

PART 1000--[AMENDED]

    1. The authority citation for part 1000 would continue to read as 
follows:

    Authority: 42 U.S.C. 1320 and 1395hh.

    2. Section 1000.10 would be amended by republishing the 
introductory paragraph and by revising the definition for the term 
Furnished to read as follows:


Sec. 1000.10  General definitions.

    In this chapter, unless the context indicates otherwise--
* * * * *
    Furnished refers to items or services provided or supplied, 
directly or indirectly, by any individual or entity. This includes 
items and services manufactured, distributed or otherwise provided by 
individuals or entities that do not directly submit claims to Medicare 
or State health care programs, but that supply items or services to 
providers, practitioners or suppliers who submit claims to these 
programs for such items or services.
* * * * *
    B. Part 1001 would be amended as follows:

PART 1001--[AMENDED]

    1. The authority citation for part 1001 would be revised to read as 
follows:

    Authority: 42 U.S.C. 1302, 1320a-7, 1320a-7b, 1395u(j), 
1359u(k), 1395y(d), 1395y(e), 1395cc(b)(2) (D), (E) and (F), and 
1395hh; and sec. 2455, Pub. L. 103-355, 108 Stat. 3327 (31 U.S.C. 
6101 note).

    (2) Section 1001.2 would be amended by revising the definitions for 
the terms Exclusion, Professionally recognized standards of health 
care, and Sole source of essential specialized services in the 
community; and by adding definitions for the terms Incarceration and 
Patient to read as follows:


Sec. 1001.2  Definitions.

* * * * *
    Exclusion means that items and services furnished, ordered or 
prescribed by a specified individual or entity will not be reimbursed 
under Medicare or the State health care programs until the individual 
or entity is reinstated by the OIG.
* * * * *
    Incarceration means imprisonment or any type of confinement with or 
without supervised release, including, but not limited to, community 
confinement, house arrest and home detention.
* * * * *
    Patient means any individual who is receiving health care items or 
services, including any item or service provided to meet his or her 
physical, mental or emotional needs or well-being, whether or not 
reimbursed under Medicare or a State health care program and regardless 
of the location in which such item or service is provided.
 * * * * *
    Professionally recognized standards of health care are Statewide or 
national standards of care, whether in writing or not, that 
professional peers of the individual or entity whose provision of care 
is an issue, recognized as applying to those peers practicing or 
providing care within a State. When the Department has declared a 
treatment modality not to be safe and effective, practitioners who 
employ such a treatment modality will be deemed not to meet 
professionally recognized standards of health care. This definition 
shall not be construed to mean that all other treatments meet 
professionally recognized standards.
* * * * *
    Sole source of essential specialized services in the community 
means that an individual or entity--
    (a) Is the only practitioner, supplier or provider furnishing 
specialized services in an area designated by the Health Resources 
Services Administration as a health professional shortage area for that 
medical specialty, as listed in 42 CFR part 5, appendices B-F;
    (b) Is a sole community hospital, as defined in Sec. 412.92 of this 
title; or
    (c) Is the only source of specialized services in a reasonably 
defined service area where services by a non-specialist could not be 
substituted for the source without jeopardizing the health or safety of 
beneficiaries.
* * * * *
    3. Section 1001.101 would be revised to read as follows:


Sec. 1001.101 Basis for liability.

    The OIG will exclude any individual or entity that--
    (a) Has been convicted of a criminal offense related to the 
delivery of an item or service under Medicare or a State health care 
program, including the performance of management or administrative 
services relating to the delivery of items or services under any such 
program;
    (b) Has been convicted, under Federal or State law, of a criminal 
offense related to the neglect or abuse of a patient, in connection 
with the delivery of a health care item or service, including any 
offense that the OIG concludes entailed, or resulted in, neglect or 
abuse of patients (the delivery of a health care item or service 
includes the provision of any item or service to an individual to meet 
his or her physical, mental or emotional needs or well-being, whether 
or not reimbursed under Medicare or a State health care program);
    (c) Has been convicted, under Federal or State law, of a felony 
that occurred

[[Page 47190]]

after August 21, 1996 relating to fraud, theft, embezzlement, breach of 
fiduciary responsibility, or other misconduct--
    (1) In connection with the delivery of a health care item or 
service, including the performance of management or administrative 
services relating to the delivery of such items or services, or
    (2) With respect to any act or omission in a health care program 
(other than Medicare or the State health care programs) operated by, or 
financed in whole or in part, by any Federal, State or local government 
agency; or
    (d) Has been convicted, under Federal or State law, of a felony 
that occurred after August 21, 1996 relating to the unlawful 
manufacture, distribution, prescription or dispensing of a controlled 
substance, as defined under Federal or State law. This applies to any 
individual or entity that--
    (1) Is, or has ever been, a health care practitioner, provider or 
supplier;
    (2) Holds, or has held, a direct or indirect ownership or control 
interest (as defined in section 1124(a)(3) of the Act) in an entity 
that is a health care provider or supplier, or is, or has ever been, an 
officer, director, agent or managing employee (as defined in section 
1126(b) of the Act) of such an entity; or
    (3) Is, or has ever been, employed in any capacity in the health 
care industry.
    4. Section 1001.102 would be amended by revising paragraph (b); 
republishing the introductory text of paragraph (c); and revising 
paragraph (c)(3) to read as follows:


Sec. 1001.102  Length of exclusion.

* * * * *
    (b) Any of the following factors may be considered to be 
aggravating and a basis for lengthening the period of exclusion--
    (1) The acts resulting in the conviction, or similar acts, resulted 
in financial loss to a government program or to one or more entities of 
$1,500 or more. (The entire amount of financial loss to such programs 
or entities, including any amounts resulting from similar acts not 
adjudicated, will be considered regardless of whether full or partial 
restitution has been made);
    (2) The acts that resulted from in the conviction, or similar acts, 
were committed over a period of one year or more;
    (3) The acts that resulted in the conviction, or similar acts, had 
a significant adverse physical, mental or financial impact on one or 
more program beneficiaries or other individuals;
    (4) In convictions involving patient abuse or neglect, the action 
that resulted in the conviction was premeditated, was part of a 
continuing pattern or behavior, or consisted of non-consensual sexual 
acts;
    (5) The sentence imposed by the court included incarceration;
    (6) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing;
    (7) The individual or entity has at any time been overpaid a total 
of $1,500 or more by Medicare or State health care programs, or other 
third-party payers, as a result of improper billings; or
    (8) Whether the individual or entity was convicted of other 
offenses besides those which formed the basis for the exclusion, or has 
been the subject of any other adverse action by any Federal, State or 
local government agency or board, even if the adverse action is based 
on the same set of circumstances that serves as the basis for 
imposition of the exclusion.
    (c) Only if any of the aggravating factors set forth in paragraph 
(b) of this section justifies an exclusion longer than 5 years, may 
mitigating factors be considered as the basis for reducing the period 
of exclusion to no less than 5 years. Only the following factors may be 
considered mitigating--
 * * * * *
    (3) The individual's or entity's cooperation with Federal or State 
officials resulted in--
    (i) Others being convicted or excluded from Medicare or any of the 
State health care programs,
    (ii) Additional cases being investigated or reports being issued by 
the appropriate law enforcement agency identifying program 
vulnerabilities or weaknesses, or
    (iii) The imposition against anyone of a civil money penalty or 
assessment under part 1003 of this chapter.
    5. Section 1001.201 would be amended by revising the section 
heading; revising paragraph (a); republishing the introductory text of 
paragraph (b)(2), revising paragraphs (b)(2) (iv) and (v), and adding a 
new paragraph (b)(2)(vi); and by republishing the introductory text of 
paragraph (b)(3) and revising paragraphs (b)(3)(i) and (b)(3)(iii) to 
read as follows:


Sec. 1001.201  Conviction relating to fraud.

    (a) Circumstance for exclusion. The OIG may exclude an individual 
or entity convicted under Federal or State law of--
    (1) A misdemeanor relating to fraud, theft, embezzlement, breach of 
fiduciary responsibility, or other financial misconduct--
    (i) In connection with the delivery of any health care item or 
service, including the performance of management or administrative 
services relating to the delivery of such items or services, or
    (ii) With respect to any act or omission in a health care program, 
other than Medicare or a State health care program, operated by, or 
financed in whole or in part by, any Federal, State or local government 
agency; or
    (2) Fraud, theft, embezzlement, breach or fiduciary responsibility, 
or other financial misconduct with respect to any act or omission in a 
program, other than a health care program, operated by or financed in 
whole or in part by any Federal, State or local government agency.
    (b) Length of exclusion. * * *
    (2) Any of the following factors may be considered to be 
aggravating and a basis for lengthening the period of exclusion--
* * * * *
    (iv) The sentence imposed by the court included incarceration;
    (v) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing; or
    (vi) Whether the individual or entity was convicted of other 
offenses besides those which formed the basis for the exclusion, or has 
been the subject of any other adverse action by any Federal, State or 
local government agency or board, even if the adverse action is based 
on the same set of circumstances that serves as the basis for the 
imposition of the exclusion.
    (3) Only the following factors may be considered as mitigating and 
a basis for reducing the period of exclusion--
    (i) The individual or entity was convicted of 3 or fewer offenses, 
and the entire amount of financial loss to a government program or to 
other individuals or entities due to the acts that resulted in the 
conviction and similar acts is less than $1,500;
* * * * *
    (iii) The individual's or entity's cooperation with Federal or 
State officials resulted in--
    (A) Others being convicted or excluded from Medicare or any of the 
State health care programs,
    (B) Additional cases being investigated or reports being used by 
the appropriate law enforcement agency identifying program 
vulnerabilities or weaknesses, or
    (C) The imposition of a civil money penalty against others; or
* * * * *
    6. Section 1001.301 would be amended by republishing the

[[Page 47191]]

introductory text of paragraph (b)(2); revising paragraphs (b)(2) (iv) 
and (v); by adding a new paragraph (b)(2)(vi); by republishing the 
introductory text of paragraph (b)(3); and by revising paragraph 
(b)(3)(ii) to read as follows:


Sec. 1001.301  Conviction relating to obstruction of an investigation.

* * * * *
    (b) Length of exclusion. * * *
    (2) Any of the following factors may be considered to be 
aggravating and a basis for lengthening the period of exclusion--
* * * * *
    (iv) The sentence imposed by the court included incarceration;
    (v) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing; or
    (vi) Whether the individual or entity was convicted of other 
offenses besides those which formed the basis for the exclusion, or has 
been the subject of any other adverse action by any Federal, State or 
local government agency or board, even if the adverse action is based 
on the same set of circumstances that serves as the basis for the 
imposition of the exclusion.
    (3) Only the following factors may be considered as mitigating and 
a basis for reducing the period of exclusion--
* * * * *
    (ii) The individual's or entity's cooperation with Federal or State 
officials resulted in--
    (A) Others being convicted or excluded from Medicare or any of the 
State health care programs,
    (B) Additional cases being investigated or reports being issued by 
the appropriate law enforcement agency identifying program 
vulnerabilities or weaknesses, or
    (C) The imposition of a civil money penalty against others; or
* * * * *
    7. Section 1001.401 would be amended by revising the section 
heading; revising paragraph (a); by republishing the introductory text 
of paragraph (c)(2); by revising paragraphs (c)(2) (iii) and (iv); by 
adding a new paragraph (c)(2)(v); by republishing introductory 
paragraph (c)(3); and by revising paragraph (c)(3)(i) to read as 
follows:


Sec. 1001.401  Misdemeanor conviction relating to controlled 
substances.

    (a) Circumstance for exclusion. The OIG may exclude an individual 
or entity convicted under Federal or State law of a misdemeanor 
relating to the unlawful manufacture, distribution, prescription or 
dispensing of a controlled substance, as defined under Federal or State 
law. This section applies to any individual or entity that--
    (1) Is, or has ever been, a health care practitioner, provider or 
supplier;
    (2) Holds or has held a direct or indirect ownership or control 
interest, as defined in section 1124(a)(3) of the Act, in an entity 
that is a health care provider or supplier, or is or has been an 
officer, director, agent or managing employee, as defined in section 
1126(b) of the Act, of such an entity; or
    (3) Is, or has ever been, employed in any capacity in the health 
care industry.
* * * * *
    (c) Length of exclusion. * * *
    (2) Any of the following factors may be considered to be 
aggravating and a basis for lengthening the period of exclusion--
* * * * *
    (iii) The sentence imposed by the court included incarceration;
    (iv) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing; or
    (v) Whether the individual or entity was convicted of other 
offenses besides those which formed the basis for the exclusion, or has 
been the subject of any other adverse action by any other Federal, 
State or local government agency or board, even if the adverse action 
is based on the same set of circumstances that serves as the basis for 
the imposition of the exclusion.
    (3) Only the following factors may be considered as mitigating and 
a basis for shortening the period of exclusion--
    (i) The individual's or entity's cooperation with Federal or State 
officials resulted in--
    (A) Others being convicted or excluded from Medicare or any of the 
State health care programs,
    (B) Additional cases being investigated or reports being issued by 
the appropriate law enforcement agency identifying program 
vulnerabilities or weaknesses, or
    (C) The imposition of a civil money penalty against others; or
* * * * *
    8. Section 1001.501 would be amended by revising paragraph (b)(1); 
republishing the introductory text of paragraph (b)(2), revising 
paragraphs (b)(2) (ii) and (iii), and adding a new paragraph 
(b)(2)(iv); by republishing the introductory text of paragraph (b)(3) 
and revising paragraph (b)(3)(i); and by deleting paragraph (c) to read 
as follows:


Sec. 1001.501  License revocation or suspension.

* * * * *
    (b) Length of exclusion. (1) An exclusion imposed in accordance 
with this section will not be for a period of time less than the period 
during which an individual's or entity's license is revoked, suspended 
or otherwise not in effect as a result of, or in connection with, a 
State licensing agency action.
    (2) Any of the following factors may be considered aggravating and 
a basis for lengthening the period for exclusion--
* * * * *
    (ii) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing;
    (iii) The acts, or similar acts, had or could have had a 
significant adverse impact on the financial integrity of the programs; 
or
    (iv) The individual or entity has been the subject of any other 
adverse action by any other Federal, State or local government agency 
or board, even if the adverse action is based on the same set of 
circumstances that serves as the basis for the imposition of the 
exclusion.
    (3) Only if any of the aggravating factors listed in paragraph 
(b)(2) of this section justifies a longer exclusion may mitigating 
factors be considered as a basis for reducing the period of exclusion 
to a period not less than that set forth in paragraph (b)(1) of this 
section. Only the following factors may be considered mitigating--
    (i) The individual's or entity's cooperation with a State licensing 
authority resulted in--
    (A) The sanctioning of other individuals or entities, or
    (B) Additional cases being investigated or reports being issued by 
the appropriate law enforcement agency identifying program 
vulnerabilities or weaknesses; or
* * * * *
    9. Section 1001.601 would be amended by revising paragraph (b) to 
read as follows:


Sec. 1001.601  Exclusion or suspension under a Federal or State health 
care program.

* * * * *
    (b) Length of exclusion. (1) An exclusion imposed in accordance 
with this section will not be for a period of time less than the period 
during which the individual or entity license is excluded or suspended 
from a Federal or State health care program.
    (2) Any of the following factors may be considered aggravating and 
a basis for lengthening the period of exclusion--
    (i) The acts that resulted in the exclusion, suspension or other 
sanction under the Federal or State healthy care program had, or could 
have had, a significant adverse impact on Federal or State health care 
programs or the

[[Page 47192]]

beneficiaries of those programs or other individuals;
    (ii) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing; or
    (iii) The individual or entity has been the subject of any other 
adverse action by any Federal, State or local government agency or 
board, even if the adverse action is based on the same set of 
circumstances that serves as the basis for the imposition of the 
exclusion.
    (3) Only if any of the aggravating factors set forth in paragraph 
(b)(2) of this section justifies a longer exclusion may mitigating 
factors be considered as a basis for reducing the period of exclusion 
to a period not less than that set forth in paragraph (b)(1) of this 
section. Only the following factors may be considered mitigating--
    (i) The individual or entity's cooperation with Federal or State 
officials resulted in--
    (A) The sanctioning of other individuals or entities, or
    (B) Additional cases being investigated or reports being issued by 
the appropriate law enforcement agency identifying program 
vulnerabilities or weaknesses; or
    (ii) Alternative sources of the types of health care items or 
services furnished by the individual or entity are not available.
    (4) If the individual or entity is eligible to apply for 
reinstatement in accordance with Sec. 1001.3001 of this part, and the 
sole reason for the State denying reinstatement is the existing 
Medicare exclusion imposed by the OIG as a result of the original State 
action, the OIG will consider a request for reinstatement.
    10. Section 1001.701 would be amended by republishing introductory 
paragraph (a) and revising paragraph (a)(1); revising paragraph (d)(1); 
and by republishing introductory paragraph (d)(2), revising paragraphs 
(d)(2) (iii) and (iv), and adding paragraph (d)(2)(v) to read as 
follows:


Sec. 1001.701  Excessive claims or furnishing of unnecessary or 
substandard items or services.

    (a) Circumstance for exclusion. The OIG may exclude an individual 
or entity that has--
    (1) Submitted, or caused to be submitted, bills or requests for 
payments under Medicare or any of the State health care programs 
containing charges or costs for items or services furnished that are 
substantially in excess of such individual's or entity's usual charges 
or costs for such items or services to any of their customers, clients 
or patients; or
* * * * *
    (d) Length of exclusion. (1) An exclusion imposed in accordance 
with this section will be for a period of 3 years, unless aggravating 
or mitigating factors set forth in paragraphs (d)(2) and (d)(3) of this 
section form a basis for lengthening or shortening the period. In no 
case may the period be shorter than 1 year.
    (2) Any of the following factors may be considered aggravating and 
a basis for lengthening the period of exclusion--
* * * * *
    (iii) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing;
    (iv) The violation resulted in financial loss to Medicare or the 
State health care programs of $1,500 or more; or
    (iv) The individual or entity has been the subject of any other 
adverse action by any Federal, State or local government agency or 
board, even if the adverse action is based on the same set of 
circumstances that serves as the basis for the imposition of the 
exclusion.
* * * * *
    11. Section 1001.801 would be amended by revising paragraph (c)(1); 
and by republishing introductory paragraph (c)(2), revising paragraphs 
(c)(2) (iii) and (iv), and adding a new paragraph (c)(2)(v) to read as 
follows:


Sec. 1001.801  Failure of HMOs and CMPs to furnish medically necessary 
items and services.

* * * * *
    (c) Length of exclusion. (1) An exclusion imposed in accordance 
with this section will be for a period of 3 years, unless aggravating 
or mitigating factors set forth in paragraphs (c)(2) and (c)(3) of this 
section form a basis of lengthening or shortening the period. In no 
case may the period be shorter than 1 year.
    (2) Any of the following factors may be considered aggravating and 
a basis for lengthening the period of exclusion--
* * * * *
    (iii) The entity's failure to provide a necessary item or service 
that had or could have had a serious adverse effect;
    (iv) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing; or
    (v) The individual or entity has been the subject of any other 
adverse action by any Federal, State or local government agency or 
board, even if the adverse action is based on the same set of 
circumstances that serves as the basis for the imposition of the 
exclusion.
* * * * *
    12. Section 1001.901 would be amended by republishing introductory 
paragraph (b), revising paragraph (b)(3), redesignating existing 
paragraph (b)(4) as (b)(5), and adding a new paragraph (b)(4) to read 
as follows:


Sec. 1001.901  False or improper claims.

* * * * *
    (b) Length of exclusion. In determining the length of exclusion 
imposed in accordance with this section, the OIG will consider the 
following factors--
* * * * *
    (3) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing (The lack of any prior is 
to be considered neutral);
    (4) The individual or entity has been the subject of any other 
adverse action by any Federal, State or local government agency or 
board, even if the adverse action is based on the same set of 
circumstances that serves as the basis for the imposition of the 
exclusion; or
    (5) Other matters as justice may require.
    13. Section 1001.951 would be amended by republishing introductory 
paragraph (b)(1), revising paragraph (b)(1)(iii), redesignating 
existing paragraph (b)(1)(iv) as (b)(1)(v), and adding a new paragraph 
(b)(1)(iv) to read as follows:


Sec. 1001.951  Fraud and kickbacks and other prohibited activities.

* * * * *
    (b) Length of exclusion. (1) The following factors will be 
considered in determining the length of exclusion in accordance with 
this section--
* * * * *
    (iii) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing (The lack of any prior 
record is to be considered neutral);
    (iv) The individual or entity has been the subject of any other 
adverse action by any Federal, State or local government agency or 
board, even if the adverse action is based on the same set of 
circumstances that serves as the basis for the imposition of the 
exclusion; or
* * * * *


Sec. 1001.953  [Removed]

    14. Section 1001.953 would be removed.
    15. Section 1001.1001 would be amended by republishing the heading 
for paragraph (a) and introductory paragraph (a)(2); and by revising 
the

[[Page 47193]]

definition for the term agent set forth in paragraph (a)(2) to read as 
follows:


Sec. 1001.1001  Exclusion of entities owned or controlled by a 
sanctioned person.

    (a) Circumstances for exclusion. * * *
    (2) For purposes of this section, the term:
    Agent means any person who has express or implied authority to 
obligate or act on behalf of an entity. The excluded individual may be 
considered an agent even if he or she has transferred ownership or 
control interest to his or her spouse or children. For example, if the 
excluded individual transfers control of an entity to his or her 
spouse, but still acts on behalf of the entity or exercises some 
control over the entity, the excluded individual would be an agent 
since he or she would have the implied authority to act on behalf of 
that entity.
* * * * *
    16. A new Sec. 1001.1051 would be added to read as follows:


Sec. 1001.1051  Exclusion of individuals with ownership or control 
interest in sanctioned entities.

    (a) Circumstance for exclusion. The OIG may exclude any individual 
who--
    (1) Has a direct or indirect ownership or control interest in a 
sanctioned entity, and who knows or should know (as defined in section 
1128A(i)(6) of the Act) of the action constituting the basis for the 
conviction or exclusion set forth in paragraph (b) of this section; or
    (2) Is an officer or managing employee (as defined in section 
1126(b) of the Act) of such an entity.
    (b) For purposes of paragraph (a) of this section, the term 
sanctioned entity means an entity that--
    (1) Has been convicted of any offense described in Secs. 1001.101 
through 1001.401 of this part; or
    (2) Has been terminated or excluded from participation in Medicare 
or a State health care program.
    (c) Length of exclusion. (1) If the entity has been excluded, the 
length of the individual's exclusion will be for the same period as 
that of the sanctioned entity with which the individual has the 
prohibited relationship.
    (2) If the entity was not excluded, the length of the individual's 
exclusion will be determined by considering the factors that would have 
been considered if the entity had been excluded.
    (3) An individual excluded under this section may apply for 
reinstatement at any time in accordance with the procedures set forth 
in Sec. 1001.3001.
    17. Section 1001.1101 would be amended by revising paragraph (b)(3) 
to read as follows:


Sec. 1001.1101  Failed to disclose certain information.

* * * * *
    (b) Length of exclusion. The following factors will be considered 
in determining the length of an exclusion under this section--
* * * * *
    (3) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing (The lack of any prior 
record is to be considered neutral);
* * * * *
    18. Section 1001.1201 would be amended by revising paragraph (b)(4) 
to read as follows:


Sec. 1001.1201  Failure to provide payment information.

* * * * *
    (b) * * *
    (4) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing (The lack of any prior 
record is to be considered neutral); and
* * * * *
    19. Section 1001.1301 would be amended by revising paragraph 
(b)(2)(iv) to read as follows:


Sec. 1001.1301  Failure to grant immediate access.

* * * * *
    (b) * * *
    (2) * * *
* * * * *
    (iv) Whether the entity has a documented history of criminal, civil 
or administrative wrongdoing (The lack of any prior record is to be 
considered neutral).
* * * * *
    20. Section 1001.1401 would be amended by revising paragraph (b)(5) 
to read as follows:


Sec. 1001.1401  Violations of PPS corrective action.

* * * * *
    (b) Length of exclusion. * * *
* * * * *
    (5) Whether the individual or entity has a documented history of 
criminal, civil or administrative wrongdoing (The lack of any prior 
record is to be considered neutral).
    21. Section 1001.1601 would be amended by revising paragraph 
(b)(1)(iv) to read as follows:


Sec. 1001.1601  Violations of the limitations on physician charges.

* * * * *
    (b) Length of exclusion. (1) * * *
    (iv) Whether the physicians has a documented history of criminal, 
civil or administrative wrongdoing (The lack of any prior record is to 
be considered neutral); and
* * * * *
    22. Section 1001.1701 would be amended by revising paragraph 
(c)(1)(v) to read as follows:


Sec. 1001.1701  Billing for services of assistant at surgery during 
cataract operations.

* * * * *
    (c) Length of exclusion. * * *
    (v) Whether the physician has a documented history of criminal, 
civil or administrative wrongdoing (The lack of any prior record is to 
be considered neutral); and
    23. Section 1001.1901 would be amended by revising paragraphs 
(b)(1) and (b)(3); revising existing paragraph (c)(4) and redesignating 
is as (c)(5); and by adding a new paragraph (c)(4) to read as follows:


Sec. 1001.1901  Scope and effect of exclusion.

* * * * *
    (b) Effect of exclusion on excluded individuals and entities. (1) 
Unless and until an individual or entity is reinstated into the 
Medicare program in accordance with subpart F of this part, no payment 
will be made by Medicare or any of the State health care programs for 
any item or service furnished, on or after the effective date specified 
in the notice period, by an excluded individual or entity, or at the 
medical direction or on the prescription of a physician or other 
authorized individual who is excluded when the individual or entity 
furnishing such item or service knew, or had reason to know, of the 
exclusion. This section applies regardless of whether an individual or 
entity has obtained a program provider number, either as an individual 
or as a member of a group, prior to being reinstated.
* * * * *
    (3) An excluded individual or entity that submits, or causes to be 
submitted, claims for items or services furnished during the exclusion 
period is subject to civil money penalty liability under section 
1128A(a)(1)(D) of the Act, and criminal liability under section 
1128B(a)(3) of the Act and other provisions. In addition, submitting 
claims, or causing claims to be submitted or payments to be made for 
items or services furnished, ordered or prescribed, including 
administrative and management services or salary, may serve as the 
basis for denying reinstatement to the programs.

[[Page 47194]]

    (c) Exceptions to paragraph (b)(1) of this section.
* * * * *
    (4) HCFA will not pay any claims submitted by, or for items or 
services ordered or prescribed by, an excluded provider for dates of 
service 5 days or more after that notice of the provider's exclusion 
was mailed by the contractor to the supplier.
    (5) * * *
    (ii) Notwithstanding paragraph (c)(5)(i) of this section, no claim 
for emergency items or services will be payable if such items or 
services were provided by an excluded individual who, through an 
employment, contractual or any other arrangement, routinely provides 
emergency health care items or services.
    24. Section 1001.2001 would be revised to read as follows:


Sec. 1001.2001  Notice of intent to exclude.

    (a) Except as provided in paragraph (b) of this section, if the OIG 
proposes to exclude an individual or entity in accordance with subpart 
C of this part, or in accordance with subpart B of this part where the 
exclusion is for a period exceeding 5 years, it will send written 
notice of its intent, the basis for the proposed exclusion the 
potential effect of an exclusion. Within 30 days of receipt of notice, 
which will be deemed to be 5 days after the date on the notice, the 
individual or entity may submit documentary evidence and written 
argument concerning whether the exclusion is warranted and any related 
issues.
    (b) Exception. If the OIG proposes to exclude an individual or 
entity under the provisions of Secs. 1001.1301, 1001.1401 or 1001.1501 
of this part, paragraph (a) of this section will not apply.
    (c) If an entity has a provider agreement under section 1866 of the 
Act, and the OIG proposes to terminate that agreement in accordance 
with section 1866(b)(2)(C) of the Act, the notice provided for in 
paragraph (a) of this section will so state.
    25. Section 1001.2002 would be amended by adding a new paragraph 
(e) to read as follows:


Sec. 1001.2002  Notice of exclusion.

* * * * *
    (e) No later than 15 days prior to the final exhibit exchanges 
required under Sec. 1005.8 of this chapter, the OIG may amend its 
notice letter if information comes to light that justifies the 
imposition of a different period of exclusion other than the one 
proposed in the original notice letter.
    26. Section 1001.2003 would be amended by revising introductory 
paragraph (a) to read as follows:


Sec. 1001.2003  Notice of proposal to exclude.

    (a) Except as provided in paragraph (c) of this section, if the OIG 
proposes to exclude an individual or entity in accordance with 
Secs. 1001.901, 1001.951, 1001.1601 or 1001.1701, it will send written 
notice of this decision to the affected individual or entity. The 
written notice will provide the same information set forth in 
Sec. 1001.2002(c). If an entity has a provider agreement under section 
1866 of the Act, and the OIG also proposes to terminate that agreement 
in accordance with section 1866(b)(2)(C) of the Act, the notice will so 
indicate. The exclusion will be effective 60 days after the receipt of 
the notice (as defined in Sec. 1005.2 of this chapter) unless, within 
that period, the individual or entity files a written request for a 
hearing in accordance with part 1005 of this chapter. Such request must 
set forth--
* * * * *
    27. Section 1001.2005 would be revised to read as follows:


Sec. 1001.2005  Notice to state licensing agencies.

    HHS will promptly notify the appropriate State(s) or local agencies 
or authorities having responsibility for the licensing or certification 
of an individual or entity excluded (or directed to be excluded) from 
participation of the facts and circumstances of the exclusion.
    28. Section 1001.2006 would be amended by republishing introductory 
paragraph (a); revising paragraphs (a)(1) and (a)(7); redesignating 
existing paragraph (a)(8) as (a)(9); and by adding a new paragraph 
(a)(8) to read as follows:


Sec. 1001.2006  Notice to others regarding exclusion.

    (a) HHS will give notice of the exclusion and the effective date to 
the public, to beneficiaries (in accordance with Sec. 1001.1901(c)), 
and, as appropriate, to--
    (1) Any entity in which the excluded individual is known to be 
serving as an employee, administrator, operator, or in which the 
individual is serving in any other capacity and is receiving payment 
for providing services (The lack of this notice will not affect HCFA's 
ability to deny payment for services);
* * * * *
    (7) The State and Area Agencies on Aging established under title 
III of the Older Americans Act;
    (8) The Adverse Action Data Bank; and
* * * * *
    29. Section 1001.3001 would be amended by revising paragraphs 
(a)(1) and (a)(2) to read as follows:


Sec. 1001.3001  Timing and method of request for reinstatement.

    (a)(1) Except as provided in paragraphs (a)(2) and (a)(3) of this 
section or in Sec. 1001.501(b)(4) of this part, an excluded individual 
or entity (other than those excluded in accordance with 
Secs. 1001.1001, 1001.1051 and 1001.1501) may submit a written request 
for reinstatement to the OIG only after the minimum period of exclusion 
specified in the notice of exclusion has expired. Obtaining a program 
provider number does not reinstate eligibility.
    (2) An entity excluded under Sec. 1001.1001 of this part may apply 
for reinstatement prior to the minimum period of exclusion specified in 
the notice of exclusion by submitting a written request for 
reinstatement that includes documentation demonstrating that the 
standards set forth in Sec. 1001.3002(c) have been met.
* * * * *
    30. Section 1001.3002 would be amended by revising paragraph (a); 
republishing introductory paragraph (b), revising paragraphs (b) (3) 
and (4) and removing paragraph (b)(5); revising introductory paragraph 
(c); revising existing paragraph (d) and redesignating paragraphs (d), 
(e), and (f) as paragraphs (e), (f) and (g) respectively; and by adding 
a new paragraph (d) to read as follows:


Sec. 1001.3002  Basis for reinstatement.

    (a)(1) The OIG will authorize reinstatement if it determines that--
    (i) The minimum period of exclusion has expired;
    (ii) There are reasonable assurances that the types of actions that 
formed the basis for the original exclusion have not recurred and will 
not recur; and
    (iii) There is no additional basis under sections 1128 (a) or (b) 
or 1128A of the Act for continuation of the exclusion.
    (2) Submitting claims or causing claims to be submitted or payments 
to be made by the programs for items or services furnished, ordered or 
prescribed, including administrative and management services or salary, 
may serve as the basis for denying reinstatement. This section applies 
regardless of whether an individual or entity has obtained a program 
provider number, either as an individual or as a member of a group, 
prior to being reinstated.

[[Page 47195]]

    (b) In making the reinstatement determination, the OIG will 
consider--
* * * * *
    (3) Whether all fines, and all debts due and owing (including 
overpayments) to any Federal, State or local government that relate to 
Medicare or any of the State health care programs, have been paid or 
satisfactory arrangements have been made to fulfill these obligations; 
and
    (4) Whether HCFA has determined that the individual or entity 
complies with, or has made satisfactory arrangements to fulfill, all of 
the applicable conditions of participation or supplier conditions for 
coverage under the statutes and regulations.
    (c) If the OIG determines that the criteria in paragraphs (a)(1) 
(ii) and (iii) of this section have been met, an entity excluded in 
accordance with Sec. 1001.1001 will be reinstated upon a determination 
by the OIG that the individual whose conviction, exclusion or civil 
money penalty was the basis for the entity's exclusion--
* * * * *
    (d) If the OIG determines that the criteria in paragraphs (a)(1) 
(ii) and (iii) of this section have been met, an individual excluded in 
accordance with Sec. 1001.1051 will be reinstated upon a determination 
with paragraph (a) of this section of Sec. 1001.3005.
    (e) Reinstatement will not be effective until the OIG grants the 
request and provides notice under Sec. 1001.3003(a) of this part. 
Reinstatement will be effective as provided in the notice.
    (f) A determination with respect to reinstatement is not appealable 
or reviewable except as provided in Sec. 1001.3004.
    (g) An ALJ may not require reinstatement of an individual or entity 
in accordance with this chapter.
    C. Part 1002 would be amended as follows:

PART 1002--[AMENDED]

    1. The authority citation for part 1002 would continue to read as 
follows:

    Authority: 42 U.S.C. 1302, 1320a-3, 1320a-5, 1320a-7, 
1396(a)(4)(A), 1396(p)(1), 1396a(30), 1396a(39) 1396b(a)(6), 
1396b(b)(3), 1396b(i)(2) and 1396b(q).

    2. Section 1002.3 would be amended by revising paragraph (b)(2) and 
by adding a new paragraph (b)(3) to read as follows:


Sec. 1002.3  Disclosure by providers; information on persons convicted 
of crimes.

* * * * *
    (b) Notification to Inspector General.  * * *
    (2) The agency must promptly notify the Inspector General of any 
action it takes on the provider's application for participation in the 
program.
    (3) The agency must also promptly notify the Inspector General of 
any action it takes to limit the ability of an individual or entity to 
participate in its program, regardless of what such an action is 
called. This includes, but is not limited to, suspension actions, 
settlement agreements and situations where an individual or entity 
voluntarily withdraws from the program to avoid a formal sanction.
* * * * *
    3. Section 1002.203 would be amended by revising paragraph (a) to 
read as follows:


Sec. 1002.203  Mandatory exclusion.

    (a) The State agency, in order to receive Federal financial 
participation (FFP), must provide that it will exclude from 
participation any HMO, or entity furnishing services under a waiver 
approved under section 1915(b)(1) of the Act, if such organization or 
entity--
    (1) Could be excluded under Secs. 1001.1001 or 1001.1051 of this 
chapter, or
    (2) Has, directly or indirectly, a substantial contractual 
relationship with an individual or entity that could be excluded under 
Secs. 1001.1001 or 1001.1051 of this chapter.
* * * * *
    4. Section 1002.211 would be amended by revising paragraph (a) to 
read as follows:


Sec. 1002.211  Effect of exclusion.

    (a) Denial of payment. Except as provided for in Sec. 1001.1901 
(c)(3), (c)(4) and (c)(5)(i) of this chapter, no payment may be made by 
the State agency for any item or service furnished on or after the 
effective date specified in the notice by an excluded individual or 
entity, or at the medical direction or on the prescription of a 
physician who is excluded when a person furnishing such item or service 
knew, or had reason to know, of the exclusion.

PART 1005--[AMENDED]

    D. Part 1005 would be amended as follows:
    1. The authority citation for part 1005 would continue to read as 
follows:

    Authority: 42 U.S.C. 405(a), 405(b), 1302, 1320a-7, 1320a-7a and 
1320c-5.

    2. Section 1005.15 would be amended by revising introductory 
paragraph (f)(1) to read as follows:


Sec. 1005.15  The hearing and burden of proof.

* * * * *
    (f)(1) A hearing under this part is not limited to specific items 
and information set forth in the notice letter to the petitioner or 
respondent. Subject to the 15-day requirement under Sec. 1005.8, 
additional items and information, including aggravating or mitigating 
circumstances that arose or became known subsequent to the issuance of 
the notice letter, may be introduced by either party during its case-
in-chief unless such information or items are--
* * * * *
    Dated: March 13, 1997.
June Gibbs Brown,
Inspector General, Department of Health and Human Services.
    Approved: June 18, 1997.
Donna E. Shalala,
Secretary.
[FR Doc. 97-23379 Filed 9-5-97; 8:45 am]
BILLING CODE 4150-04-M