[Federal Register Volume 63, Number 170 (Wednesday, September 2, 1998)]
[Proposed Rules]
[Pages 46736-46744]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23463]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Inspector General

42 CFR Parts 1001, 1002, and 1003

RIN 0991-AA95


Health Care Programs: Fraud and Abuse; Revised OIG Sanction 
Authorities Resulting From Public Law 105-33

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

ACTION: Notice of proposed rulemaking.

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SUMMARY: This rulemaking proposes revisions to the OIG's exclusion and 
civil money penalty authorities set forth in 42 CFR parts 1001, 1002 
and 1003, resulting from the Balanced Budget Act of 1997, Public Law 
105-33. These proposed revisions are intended to protect and strengthen 
Medicare and State health care programs by increasing the OIG's anti-
fraud and abuse authority through new or revised exclusion and civil 
money penalty provisions.

DATES: To assure consideration, public comments must be delivered to 
the address provided below by no later than 5 p.m. on November 2, 1998.

ADDRESSES: Please mail or deliver your written comments to the 
following address: Office of Inspector General, Department of Health 
and Human Services, Attention: OIG-30-P, Room 5246, Cohen Building 330

[[Page 46737]]

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-30-P.

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

SUPPLEMENTARY INFORMATION:

I. Background

A. The Health Insurance Portability and Accountability Act

    The Health Insurance Portability and Accountability Act (HIPAA) of 
1996, Public Law 104-191, was enacted on August 21, 1996 and set forth 
a number of significant amendments to the OIG's exclusion and civil 
money penalty (CMP) authorities. Among the various provisions related 
to program exclusion authority, HIPAA: (1) expanded the OIG's minimum 
5-year mandatory exclusion authority to cover any felony conviction 
under Federal, State or local law relating to health care fraud, even 
if governmental programs were not involved; (2) established minimum 
periods of exclusion from 1 to 3 years for certain permissive 
exclusions from Medicare and the State health care programs; and (3) 
established a new permissive exclusion authority applicable to 
individuals who have a majority ownership in, or have significant 
control over the operations of, an entity that has been convicted of a 
program-related offense. Proposed regulations addressing these revised 
or expanded OIG exclusion authorities were published in the Federal 
Register on September 8, 1997 (62 FR 47182).
    In addition, HIPAA revised and strengthened the OIG's existing CMP 
authorities, and extended the application of the CMP provisions beyond 
those programs funded by the Department to include all Federal health 
care programs. The revised or expanded CMP provisions resulting from 
HIPAA are being addressed in a separate OIG proposed rulemaking.

B. The Balanced Budget Act of 1997

    In conjunction with many of the HIPAA fraud and abuse authorities, 
the Balanced Budget Act (BBA) of 1997, enacted on August 5, 1997, 
contained a number of provisions designed to further preserve and 
protect the integrity of Medicare, Medicaid and all other Federal 
health care programs for current and future beneficiaries, and combat 
fraudulent and abusive program activities. Specifically, the fraud and 
abuse provisions of BBA serve to strengthen the OIG's exclusion and CMP 
authorities with respect to Federal health care programs.
    The new exclusion and CMP authorities under BBA are effective for 
violations occurring on or after August 5, 1997. As the new statutory 
provisions allow the Department some policy discretion in their 
implementation, we are developing this proposed rulemaking and 
soliciting public comments. The proposed regulation text changes 
reflected in this rule are designed to address statutory revisions 
resulting from BBA. As indicated above, revisions to 42 CFR chapter V 
resulting from the HIPAA fraud and abuse provisions are being published 
and addressed through separate proposed rulemakings. All final 
regulation text changes resulting from the HIPAA and BBA fraud and 
abuse proposed rules will be coordinated and collectively addressed in 
a final rulemaking document that will amend OIG's exclusion and CMP 
authorities.

II. Provisions of the Proposed Rule

A. Revised Exclusion Authorities Resulting from BBA

1. OIG Authority to Direct Exclusions From State Health Care Programs, 
and to Extend the Application of OIG Exclusions to all Federal Health 
Care Programs
    Prior to the enactment of BBA, a program exclusion imposed by the 
OIG was applicable to Medicare and State health care programs, as 
defined in section 1128(h) of the Social Security Act (the Act). As 
part of the fraud and abuse provisions set forth in HIPAA, section 231 
of Public Law 104-191 amended the criminal and CMP provisions in 
sections 1128A and 1128B of the Act to encompass acts occurring with 
respect to a ``Federal health care program,'' as defined in section 
1128B(f) of the Act.1 With the enactment of HIPAA, however, 
this extension of coverage was not replicated with respect to the 
Secretary's program exclusion authority as set forth in section 1128 of 
the Act. In addition, prior to BBA, the OIG was authorized to impose 
exclusions from participation in Medicare, but only to direct State 
health care programs to impose parallel exclusions from State health 
care programs such as Medicaid. The practical result of this bifurcated 
exclusion implementation process was that States frequently failed to 
implement exclusions in a timely or otherwise appropriate manner.
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    \1\ Section 1128B(f) of the Act defines the term ``Federal 
health care program'' to encompass any plan or program providing 
health care benefits, whether directly through insurance or 
otherwise, which is funded directly, in whole or in part, by the 
United States Government (other than the Federal Employees Health 
Benefits Program).
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    To ensure that the OIG's program exclusion authority is consistent 
with other sanction authorities set forth in sections 1128A and 1128B, 
section 4331(c) of BBA specifically amended sections 1128(a) and (b) of 
the Act to provide that the scope of an OIG exclusion extends beyond 
Medicare and the State health care programs to all Federal health care 
programs, as defined in section 1128B(f) of the Act, and to enable the 
OIG to impose exclusions from all Federal health care programs 
directly. As a result, we propose to add a definition for the term 
``Federal health care program'' in Sec. 1001.2, and make conforming 
revisions in Secs. 1001.1(a), 1001.1901, 1001.3003, 1001.3005 and 
1002.2(a).
    Section 1001.1901, Scope and effect of exclusion, would be amended 
by revising paragraph (a) to reflect the revised scope of exclusions 
under title XI of the Act. As indicated above, under section 4331(c) of 
BBA, exclusions imposed by the OIG under title XI of the Act are now 
directly to indicate the Secretary, through the OIG, would have the 
authority to direct the imposition of exclusions from all Federal 
health care programs. Section 1001.1901 would be amended to indicate 
that the Secretary, through the OIG, now has the direct authority to 
impose exclusions from all Federal health care programs. The reference 
in this section to an exclusion's effect with respect to other Federal 
agency procurement and nonprocurement programs and activities is being 
deleted. The effect of an exclusion on such programs (other than 
Federal health care programs) is specifically addressed in the Federal 
Acquisition Regulation at 48 CFR 9.405 and the HHS Common Rule at 45 
CFR part 76.
    With regard to program agency notification, since all affected 
agencies within the Department, as well as all Federal health care 
programs outside of the Department, must now effectuate an OIG decision 
to exclude an individual or entity, we intend to provide notice to 
these program agencies regarding any action taken by the OIG. Since we 
believe that it would not be practical to send program agencies an 
individual notice on every case, we are proposing to inform all 
affected agencies through the OIG's web site (http://www.dhhs.gov/
progorg/oig) every month. The OIG web site will also advise the public 
of all individuals and entities excluded from program participation. We 
are advising program

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agencies to check the web site and to take action, as appropriate, to 
exclude individuals and entities from their programs.
    Broadening factors for the circumstances and length of exclusion--
We are also proposing to amend the mitigating and aggravating factors 
for length of exclusion in Secs. 1001.201(b)(3)(iii)(A), 
1001.301(b)(2)(ii) and (b)(3)(ii)(A), 1001.401(c)(2)(ii) and 
(c)(3)(i)(A), 1001.1301(b)(2)(iii), 1001.1401(b)(1) and (b)(4), and 
1001.1501(a)(3) to incorporate consideration of all Federal health care 
programs, not just Medicare and the State health care programs, in 
determining an appropriate period of exclusion. We believe that since 
the OIG's authority to exclude individuals and entities has been 
broadened under section 4331(c) of BBA to encompass all Federal health 
care programs, it is reasonable for the OIG to consider the impact of 
exclusion with respect to all of these health care programs.
    Effect of exclusion on employment and the reimbursement of items 
and services in the Federal health care programs--The effect of an 
exclusion as a result of this authority remains the same as it had been 
prior to the BBA expansion, i.e., with limited exceptions, no payment 
may be made for any health care item or service furnished, ordered or 
prescribed by an excluded individual. There is one significant 
difference, however, that results from broadening the scope of an 
exclusion to encompass all Federal health care programs. An individual 
who was excluded from Medicare and the State health care programs prior 
to BBA could be employed by another agency which funded a Federal 
health care program, such as the Department of Defense (which funds the 
CHAMPUS health care program). In addition, while other Federal agencies 
were instructed to give government-wide affect to the OIG exclusion, 
each agency retained some discretion as to whether it would debar that 
individual or entity from its programs. Such Federal agencies no longer 
have the discretion to permit excluded individuals and entities to 
remain in their programs. With the expanded scope of the OIG's 
exclusion authority, no agency which funds a Federal health care 
program may reimburse excluded individuals for items and services they 
provide, nor may any such agency pay the salaries or expenses of such 
persons using Federal dollars. As a result, an agency which funds a 
Federal health care program may only employ an excluded individual in 
limited situations, where the program is able to pay the individual 
with private grant funds or other non-Federal funding sources. In most 
instances, the effect of an OIG exclusion will preclude the employment 
of an excluded individual in any capacity by a Federal or State agency, 
or other entity, where reimbursement is made by any Federal health care 
program.
2. Permanent Exclusions for Individuals Convicted of 3 or More Health 
Care Related Crimes, and 10 Year Exclusions for Individuals Convicted 
of 2 Health Care Related Crimes
    Prior to the enactment of BBA, section 1128(a) of the Act directed 
the Secretary to impose mandatory exclusions of individuals and 
entities from participation in the Medicare and State health care 
programs upon conviction of certain criminal offenses, including 
Medicare and Medicaid program-related crimes, patient abuse crimes, 
health care fraud felonies and felonies relating to controlled 
substances. While such mandatory exclusions were, in most cases, for a 
minimum period of 5 years, no established mechanism was in place to 
require a fixed exclusion period for repeat offenders.
    As a result of the ability of some health care providers to re-
enter participation in the Federal and State health care programs after 
a minimum exclusion period, section 4301 of BBA imposes a mandatory 
exclusion of not less than 10-years on individuals who have been twice 
convicted of mandatory exclusion offenses (including program-related 
crimes, patient abuse, health care fraud and convictions relating to 
controlled substances) under section 1128(a) of the Act. In addition, a 
mandatory permanent program exclusion would also be imposed against 
those individuals who have been convicted on 3 or more occasions for 
conduct relating to a Federal health care program under section 1128(a) 
of the Act. Accordingly, we propose to amend Sec. 1001.102 by adding a 
new paragraph (d) to reflect these new mandatory lengths of exclusion. 
An exclusion of not less than 10 years, in the case of a second 
conviction, or a permanent exclusion, in the case of three or more 
convictions, will be mandatory where the final conviction has occurred 
on or after August 5, 1997--the date of enactment of BBA. We are also 
proposing to add a new paragraph (b)(7) to Sec. 1001.102, the provision 
governing the length of mandatory exclusions, to include as a new 
aggravating factor consideration of whether prior criminal offenses 
involved same or similar circumstances.
3. Exclusion of Entities Controlled by Family or Household Members of 
Sanctioned Individuals
    Under section 1128(b)(8) of Act, the OIG may exclude entities that 
are owned at least 5 percent, or controlled, by an individual who has 
been convicted of a health care related offense, or who has been 
sanctioned by the OIG. This authority enables OIG to enforce its 
exclusions by ensuring that health care companies operated by excluded 
individuals, in addition to the individuals themselves, do not continue 
doing business and receiving reimbursement from Government health care 
programs. Some excluded health care providers, however, have been able 
to circumvent the impact of a sanction by expediting transfers on paper 
of their ownership and control interests in health care entities to a 
family or household member. These individuals have thus been able to 
retain silent control of health care businesses that participate in 
Medicare, Medicaid and all other Federal health care programs despite 
their exclusion from these same programs. To address this concern of 
``paper transfers'' of ownership or control interest by excluded 
individuals who still retain control of the health care business, 
section 4303 of BBA amended section 1128(b)(8) of the Act by expanding 
existing exclusion authority to include entities owned or controlled by 
the family or household members of excluded individuals when the 
transfer of ownership or control interest was made in anticipation of, 
or following a conviction, assessment of a CMP, or exclusion.
    We propose to amend Sec. 1001.1001(a)(1)(ii) to reflect this new 
statutory authority. With regard to an individual excluded under 
section 1128(b)(8) of the Act, and consistent with the statute, 
Sec. 1001.1001(a)(2) would also be amended by adding definitions for 
the terms ``Immediate family member'' and ``Member of household.''

B. Revised Civil Money Penalty Authorities Resulting from BBA

1. CMPs Against Institutional Health Care Providers That Employ or 
Enter in Contracts for Medical Services With Excluded Individuals
    The OIG has been made aware of situations where individuals who 
have been excluded from Medicare or State health care program 
participation have, nonetheless, been able to obtain (or retain) 
employment, staff privileges or other affiliation with various health 
care entities, and to render services that are ultimately paid for by 
the programs.

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Providers, such as hospitals, that hire excluded practitioners have 
often failed to investigate or query available sources such as the 
National Practitioner Data Bank (NPDB) or the OIG's cumulative Sanction 
Report on the internet (as discussed in section II.A.1. of this 
preamble), that would have informed them of an individual's exclusion 
status 2. While CMP authority has existed for health 
maintenance organizations that employ or contract with excluded 
individuals, there was no parallel CMP authority in situations where a 
group medical practice, hospital, nursing home, home health agency, 
hospice or other provider continues to bill the programs for services 
rendered by excluded individuals.
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    \2\ Under the Health Care Quality Improvement Act of 1986, 
hospitals are required to query the National Practitioner Data Bank 
when hiring or granting clinical privileges to a practitioner, and 
must perform follow-up checks on all such practitioners every two 
years.
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    Section 4304(a) of BBA, amending section 1128A(a) of the Act, added 
a new provision authorizing the imposition of a CMP against any 
provider that submits, or causes to be submitted, claims for health 
care items or services rendered by employees or other individuals under 
contract, whom they know or should know have been excluded from 
participation in the Federal health care programs. Accordingly, 
paragraph (a)(2) of Sec. 1003.102 and paragraph (a) of Sec. 1003.103 of 
the OIG regulations would be revised to implement this new CMP of up to 
$10,000 against any entity that submits, or causes to be submitted, 
claims for health care services rendered by employees or other 
individuals under contract whom they know, or should know, have been 
excluded from participation in the Federal health care programs.
    In determining the appropriate amount of the penalty for each 
violation, we propose to amend Sec. 1003.106(a)(1) to include the 
following five criteria: (1) The degree of culpability of the 
contracting provider; (2) whether the contracting provider knew or 
should have known of the exclusion; (3) the harm to patients or any 
Federal health care program which resulted or could have resulted from 
the provision of care by a person or entity with which the contracting 
provider is expressly prohibited from contracting under section 
1128A(a)(6) of the Act; (4) the history of prior offenses by the 
contracting provider or principals of the contracting provider, 
including whether at any time prior to the determination of the current 
violation(s) the contracting provider or any of its principals were 
convicted of a criminal charge or were held liable for civil or 
administrative sanctions in connection with a Federal, State or private 
health care program; and (5) such other matters as justice may require.
2. New CMP for Failure to Report Information to the Healthcare 
Integrity and Protection Data Bank
    Section 1128E of the Act, as added by section 221 of HIPAA, 
established a national health care fraud and abuse data collection 
program, the Healthcare Integrity and Protection Data Bank (HIPDB), for 
the reporting of final adverse actions against health care providers, 
suppliers and practitioners. This authority mandated that private 
health plans 3, as well as certain State and Federal 
entities such as medical licensing boards, report information to the 
national fraud and abuse data collection program concerning certain 
final adverse actions taken against a health care provider, supplier or 
practitioner. However, while the Health Care Quality Improvement Act of 
1986, which established the NPDB, provided sanction authority against 
those who do not report required information to the NPDB, the HIPAA 
authority for the HIPDB set forth no parallel provision to induce 
health care plans' compliance with the reporting requirements.
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    \3\ Section 1128E of the Act defines the term ``health plan'' 
consistent with the definition set forth in section 1128C(c) of the 
Act; that is, a plan or program that provides health benefits 
whether directly, through insurance, or otherwise, and includes (1) 
a policy of health insurance; (2) a contract of a service benefit 
organization; and (3) a membership agreement with a health 
maintenance organization or other prepaid health plan.
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    Section 4331(d) of BBA added a provision to the health care fraud 
and abuse data collection program to provide for the imposition of a 
CMP against any health plan that fails to report information on an 
adverse action required to be reported under this program. In 
accordance with section 1128E(b)(6) of the Act, Sec. 1003.102(b)(5) 
would be amended to add a new subparagraph addressing violations by any 
health plan that fails to report information on an adverse action 
required to be reported under this authority. In addition, a new 
Sec. 1003.103(g) would be added to impose a CMP of not more than 
$25,000 for each such adverse action not reported. In determining the 
penalty amount for each occurrence, we are proposing five criteria for 
consideration that would be set forth in an amended 
Sec. 1003.106(a)(2): (1) the nature and circumstances of the failure to 
report any adverse actions taken against a health care provider; (2) 
the degree of culpability of the health plan in failing to provide 
timely and complete data; (3) the materiality or significance of 
omission of the information to be reported to the Data Bank; (4) any 
prior history of the individual or plan with respect to these 
occurrences; and (5) in general, other matters required by justice.
3. CMPs for Health Care Providers who Violate the Anti-Kickback Statute
    Prior to the enactment of BBA, the only remedies available to the 
Federal Government to combat kickback violations involving the Federal 
health care programs were criminal penalties (section 1128B(b) of the 
Act), and exclusion from participation in Medicare and the State health 
care programs (section 1128(b)(7) of the Act) against individuals and 
entities that offer or receive improper remuneration in return for the 
referral of business paid for by Federal health care programs. 
Enforcement in the kickback area has been constrained since the two 
existing remedies were quite severe.
    To create an alternative intermediate remedy, section 4304 of BBA 
amended section 1128A(a) of the Act, specifically authorizing a CMP of 
up to $50,000 and an assessment of up to three times the total amount 
of the kickback for any violations of the anti-kickback statute. A new 
Sec. 1003.102(b)(11) would be added to codify this new CMP authority. 
Additionally, a new Sec. 1003.103(h) is being proposed in accordance 
with section 4304 of BBA, setting forth $50,000 as the amount of 
penalty to be imposed for each kickback violation under section 
1128B(b) of the Act, and an assessment (reflected in a new paragraph 
(b) in revised Sec. 1003.104) of up to 3 times the total amount of 
remuneration offered, paid, solicited or received without regard to 
whether a portion of such remuneration was offered, paid, solicited or 
received for a lawful purpose.
4. Notification, Effectuation and Appeal Procedures
    With respect to all 3 new proposed CMPs, violators of these 
provisions would be subject to the same notification, effectuation and 
appeal procedures as other CMP violations under section 1128A(a) of the 
Act and 42 CFR part 1003 of the OIG regulations.

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C. Additional Technical and Other Revisions to 42 CFR Parts 1001 and 
1003

1. Technical Revisions
    A number of proposed technical revisions consistent with the policy 
provisions resulting from BBA and these regulatory amendments are also 
being set forth. Specifically, we propose to amend the authority 
citation cites for parts 1001 and 1003, Secs. 1001.302 (Basis for 
reinstatement), 1003.100 (Basis and purpose), and 1003.114 (Collateral 
estoppel) to reflect the above-cited revisions being proposed in 
accordance with revised OIG exclusion and CMP authorities.
    In addition, we are revising Sec. 1003.109(a)(3) by deleting the 
phrase ``the amount of the proposed penalty, assessment and the period 
of proposed exclusion (where applicable).'' This language appears in 
paragraph (a)(4) of this section, and appears inadvertently in 
paragraph (a)(3).
2. Proposed Revision to OIG Exclusion Reinstatement Considerations
    We are proposing to add two new elements to Sec. 1001.3002(b) that 
would pertain to the OIG's review of an individual's or entity's 
request for reinstatement in the Federal health care programs after the 
individual's or entity's exclusion period. The first new proposed 
element would address the OIG's expectation that excluded parties 
adequately and promptly inform all their clients or patients of the 
exclusion so that the clients or patients will have a clear 
understanding that items and services provided by that individual or 
entity will not be paid for under any Federal health care program. 
Section 1001.1901(b) of the regulations authorizes Medicare 
reimbursement to a beneficiary for the first claim submitted for an 
item or service provided by the excluded party, at which time the 
beneficiary is notified that future claims will be denied due to the 
provider's excluded status. We do not believe that notification only 
after the submission of a claim provides adequate protection for 
program beneficiaries. By stating in regulations that the OIG, in 
making its reinstatement decisions, will consider whether a provider 
has adequately and promptly informed clients or patients of an 
exclusion, we hope to offer an incentive for providers to give the 
earliest possible notification to beneficiaries of any exclusion.
    A second proposed reinstatement element would codify existing OIG 
policy which, in making reinstatement decisions, considers whether the 
individual or entity has, during the period of exclusion, submitted 
claims or caused claims to be submitted, or payments to be made by any 
Federal health care program for items or services the excluded party 
furnished, ordered or prescribed, including health care administrative 
services. Such conduct is impermissible and is a basis for a CMP under 
section 1128A(a)(1)(D) of the Act. By setting forth this regulatory 
clarification, we hope to make clear that the submission of claims for 
payment to any Federal health care program during a provider's period 
of exclusion will jeopardize the provider's chances for reinstatement 
into the programs.

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 substantial number of small entities the Secretary must 
specifically consider the economic effect of a rule on small entities 
and analyze regulatory options that could lessen the impact of the 
rule.
    As indicated above, the provisions set forth in this proposed 
rulemaking implement new or revised OIG statutory requirements set 
forth in Public Law 105-33. These provisions are designed both to 
broaden the scope of the OIG's authority to exclude individuals and 
entities from Medicare, Medicaid and all other Federal health care 
programs, and strengthen current legal authorities pertaining to the 
imposition of CMPs against individuals and entities engaged in 
prohibited actions and activities. The proposed regulations would 
implement the new statutory requirements by (1) expanding the 
application of the OIG's exclusions to all Federal health care 
programs; (2) implementing permanent exclusions for individuals 
convicted of 3 or more offenses for which an exclusion can be imposed 
under section 1128(a) of the Act, and 10 year exclusions for 
individuals convicted of two or more such offenses; (3) allowing for 
the exclusion of entities controlled by family or household members of 
sanctioned individuals; and (4) establishing new CMPs in three specific 
areas.
    With regard to the OIG's new exclusion authorities, the process for 
excluding individuals and entities who are convicted in accordance with 
these new provisions remains essentially the same, even though the 
types of convictions requiring mandatory exclusions have been 
broadened. While there may be a resulting increase in the number of 
mandatory and permissive exclusions imposed as a result of the expanded 
scope of the OIG's exclusion authority, we do not believe these 
increases will be significant. The clarification of exclusion authority 
in Sec. 1001.1001 regarding a sanctioned individual's transfer of 
ownership or control interest to a family or household member, for 
example, should not result in a significant increase in exclusion 
actions in accordance with section 1128(b)(8) of the Act since the 
provision is likely to act as an effective deterrent against the 
occurrence of such transfer arrangements. In addition, we do not 
foresee significant increases resulting from the implementation of 
section 4301 of BBA, and proposed regulations at Sec. 1001.102, 
regarding the permanent exclusion of individuals convicted of 3 or more 
health care related crimes. The authority for promulgating this 
exclusion is clear cut, and should limit the total number of repeat 
exclusions effectuated by the OIG against such fraudulent providers.
    The proposed regulations addressing the new OIG CMPs also remain 
consistent with the congressional intent of BBA and with the OIG's 
existing CMP authority which allows for imposition of civil money 
penalties against individuals and entities who commit fraud. These CMPs 
are targeted to a limited group of individuals and entities; that is, 
those institutional health care providers that employ or enter into 
medical service contracts with excluded individuals, health care plans 
that fail to report information to the Healthcare Integrity and 
Protection Data Bank, and health care providers who violate the anti-
kickback statute.
    As indicated, these proposed regulations are narrow in scope and 
effect, comport with congressional and statutory intent, and strengthen 
the Department's legal authorities against those who defraud or 
otherwise act improperly against the Federal and State health care 
programs. Since the vast majority of individuals, organizations and 
entities involved in delivering health care do not engage in the

[[Page 46741]]

prohibited activities and practices described in this rulemaking, we 
believe that the aggregate economic impact of these regulations will 
not be economically significant. Since there is minimal economic effect 
on the industry as a whole, there would be little likelihood of effect 
on Federal or State expenditures to implement these regulations.
    With regard to the effect of these proposed regulations on a 
substantial number of small entities, the provisions are targeted 
specifically to those individuals and entities who would defraud or 
abuse the health care programs, rather than to the health care industry 
as a whole. While some of the perpetrators of fraud effected by this 
rule may be small entities, it is the nature of the violation and not 
the size of the entity that will induce action on the part of the OIG.
    In summary, we have concluded, and the Secretary certifies, that 
since this proposed rule should not have a significant economic impact 
on Federal, State or local economies and expenditures, nor have a 
significant economic impact on a substantial number of small entities, 
a regulatory flexibility analysis would not be required.

Paperwork Reduction Act

    The provisions of these proposed regulations impose no new 
reporting or recordkeeping requirements necessitating clearance by OMB.

IV. Public Inspection of Comments

    Comments will be available for public inspection September 16, 1998 
in Room 5518 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.

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 1003

    Administrative practice and procedure, Fraud, Grant programs--
health, Health facilities, Health professions, Maternal and child 
health, Medicaid, Medicare, Penalties.
    Accordingly, 42 Parts 1001, 1002 and 1003 would be amended as set 
forth below:

PART 1001--[AMENDED]

    A. Part 1001 would be amended as follows:
    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(h), 
1395u(j), 1395u(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 1001.1 would be amended by revising paragraph (a) to 
read as follows:


Sec. 1001.1  Scope and purpose.

    (a) The regulations in this part specify certain bases upon which 
individuals and entities may, or in some cases must, be excluded from 
participation in Medicare, Medicaid and all other Federal health care 
programs. They also state the effect of exclusion, the factors that 
will be considered in determining the length of any exclusion, the 
provisions governing notices of exclusions, and the process by which an 
excluded individual or entity may seek reinstatement into the programs.
* * * * *
    3. Section 1001.2 would be amended by revising the definition for 
the term Exclusion; and by adding a definition for the term Federal 
health care program to read as follows:


Sec. 1001.2  Definitions.

* * * * *
    Exclusion means that items and services furnished by a specified 
individual or entity will not be reimbursed under Medicare, Medicaid 
and all other Federal health care programs.
    Federal health care program means any plan or program providing 
health care benefits, whether directly through insurance or otherwise, 
that is funded directly, in whole or part, by the United States 
Government (other than the Federal Employees Health Benefits Program), 
or any State health care program as defined in this section.
* * * * *
    4. Section 1001.102 would be amended by revising paragraphs (b)(5) 
and (b)(6); and by adding new paragraphs (b)(7) and (d) to read as 
follows:


Sec. 1001.102  Length of exclusion.

* * * * *
    (b) * * *
    (5) The convicted individual or entity has a prior criminal, civil 
or administrative sanction record;
    (6) The individual or entity has at any time been overpaid a total 
of $1,500 or more by Medicare, Medicaid or any other Federal health 
care programs as a result of improper billings; or
    (7) The individual or entity has previously been convicted of a 
criminal offense involving the same or similar circumstances.
* * * * *
    (d) In the case of an exclusion under this subpart, based on a 
conviction occurring on or after August 5, 1997, an exclusion will be--
    (1) For not less than 10 years if the individual has been convicted 
on one other occasion of one or more offenses for which an exclusion 
may be effected under section 1128(a) of the Act (The aggravating and 
mitigating factors in paragraphs (b) and (c) of this section can be 
used to impose a period of time in excess of the 10-year mandatory 
exclusion); or
    (2) Permanent if the individual has been convicted on two or more 
other occasions of one or more offenses for which an exclusion may be 
effected under section 1128(a) of the Act.
    5. Section 1001.201 would be amended by revising paragraph 
(b)(3)(iii)(A) to read as follows:


Sec. 1001.201  Conviction relating to program or health care fraud.

* * * * *
    (b) Length of exclusion. * * *
    (3) * * *
    (iii) * * *
    (A) Others being convicted or excluded from Medicare, Medicaid or 
any of the other Federal health care programs, or
* * * * *
    6. Section 1001.301 would be amended by revising paragraphs 
(b)(2)(ii) and (b)(3)(ii)(A) to read as follows:


Sec. 1001.301  Conviction relating to obstruction of an investigation.

* * * * *
    (b) Length of exclusion. * * *
    (2) * * *
    (ii) The interference or obstruction had a significant adverse 
mental, physical or financial impact on program beneficiaries or other 
individuals or on the Medicare, Medicaid or other Federal health care 
programs;
* * * * *
    (3) * * *
    (ii) * * *
    (A) Others being convicted or excluded from Medicare, Medicaid or 
any of the other Federal health care programs, or
* * * * *
    7. Section 1001.401 would be amended by revising paragraphs 
(c)(2)(ii) and (c)(3)(i)(A) to read as follows:

[[Page 46742]]

Sec. 1001.401  Conviction relating to controlled substances.

* * * * *
    (c) Length of exclusion. * * *
    (2) * * *
    (ii) The acts that resulted in the conviction or similar acts had a 
significant adverse mental, physical or financial impact on program 
beneficiaries or other individuals or the Medicare, Medicaid or other 
Federal health care programs;
* * * * *
    (3) * * *
    (i) * * *
    (A) Others being convicted or excluded from Medicare, Medicaid or 
any of the other Federal health care programs, or
* * * * *
    8. Section 1001.1001 would be amended by revising paragraph 
(a)(1)(ii); and by amending paragraph (a)(2) by adding definitions for 
the terms Immediate family member and Member of household to read as 
follows:


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

    (a) Circumstances for exclusion. * * *
    (1) * * *
    (ii) Such a person----
    (A)(i) Has a direct or indirect ownership interest (or any 
combination thereof) of 5 percent or more in the entity;
    (ii) Is the owner of a whole or part interest in any mortgage, deed 
of trust, note or other obligation secured (in whole or in part) by the 
entity or any of the property assets thereof, in which whole or part 
interest is equal to or exceeds 5 percent of the total property and 
assets of the entity;
    (iii) Is an officer or director of the entity, if the entity is 
organized as a corporation;
    (iv) Is partner in the entity, if the entity is organized as a 
partnership;
    (v) Is an agent of the entity; or
    (vi) Is a managing employee, that is, an individual (including a 
general manager, business manager, administrator or director) who 
exercises operational or managerial control over the entity or part 
thereof, or directly or indirectly conducts the day-to-day operations 
of the entity or part thereof, or
    (B) Was formerly described in paragraph (a)(1)(ii)(A) of this 
section, but is no longer so described because of a transfer of 
ownership or control interest to an immediate family member or a member 
of the person's household as defined in paragraph (a)(2) of this 
section, in anticipation of or following a conviction, assessment of a 
CMP, or imposition of an exclusion.
    (2) * * *
    Immediate family member means, a person's husband or wife; natural 
or adoptive parent; child or sibling; stepparent, stepchild, 
stepbrother or stepsister; father-, mother-, daughter-, son-, brother- 
or sister-in-law; grandparent or grandchild; or spouse of a grandparent 
or grandchild. * * *
    Member of household means, with respect to a person, any individual 
with whom they are sharing a common abode as part of a single family 
unit, including domestic employees and others who live together as a 
family unit. A roomer or boarder is not considered a member of 
household.
* * * * *
    9. Section 1001.1301 would be amended by revising paragraph 
(b)(2)(iii) to read as follows:


Sec. 1001.1301  Failure to grant immediate access.

* * * * *
    (b) Length of exclusion. * * *
    (2) * * *
    (iii) The impact of the exclusion on Medicare, Medicaid or any of 
the other Federal health care programs, beneficiaries or the public; 
and
* * * * *
    10. Section 1001.1401 would be amended by revising paragraphs 
(b)(1) and (b)(4) to read as follows:


Sec. 1001.1401  Violations of PPS corrective action.

* * * * *
    (b) Length of exclusion. * * *
    (1) The impact of the hospital's failure to comply on Medicare, 
Medicaid or any of the other Federal health care programs, program 
beneficiaries or other individuals;
* * * * *
    (4) The impact of the exclusion on Medicare, Medicaid or any of the 
other Federal health care programs, beneficiaries or the public; and
* * * * *
    11. Section 1001.1501 would be amended by revising paragraph (a)(3) 
to read as follows:


Sec. 1001.1501  Default of health education loan or scholarship 
obligations.

    (a) Circumstance for exclusion. * * *
    (3) The OIG will take into account access of beneficiaries to 
physicians' services for which payment may be made under Medicare, 
Medicaid or other Federal health care programs in determining whether 
to impose an exclusion.
* * * * *
    12. Section 1001.1901 would be amended by revising paragraphs (a), 
(b)(1), introductory paragraph (c)(3) and (c)(4)(i) to read as follows:


Sec. 1001.1901  Scope and effect of exclusion.

    (a) Scope of exclusion. Exclusions of individuals and entities 
under this title will be from Medicare, Medicaid and any of the other 
Federal health care programs, as defined in Sec. 1001.2 of this part.
    (b) Effect of exclusion on excluded individuals and entities. (1) 
Unless and until an individual or entity is reinstated into the 
Medicare, Medicaid and other Federal health care programs in accordance 
with subpart F of this part, no payment will be made by Medicare, 
Medicaid or any of the other Federal 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 person furnishing such item or 
service knew or had reason to know of the exclusion.
* * * * *
    (c) Exceptions to paragraph (b)(1) of this section. * * *
    (3) Unless the Secretary determines that the health and safety of 
beneficiaries receiving services under Medicare, Medicaid or any of the 
other Federal health care programs warrants the exclusion taking effect 
earlier, payment may be made under such program for up to 30 days after 
the effective date of the exclusion for--
* * * * *
    (4)(i) Notwithstanding the other provisions of this section, 
payment may be made under Medicare, Medicaid or other Federal health 
care programs for certain emergency items or services furnished by an 
excluded individual or entity, or at the medical direction or on the 
prescription of an excluded physician or other authorized individual 
during the period of exclusion. To be payable, a claim for such 
emergency items or services must be accompanied by a sworn statement of 
the person furnishing the items or services specifying the nature of 
the emergency and why the items or services could not have been 
furnished by an individual or entity eligible to furnish or order such 
items or services.
* * * * *
    13. Section 1001.3002 would be amended by republishing introductory 
paragraph (b), removing existing paragraph (b)(5) and adding new 
paragraphs (b)(5) and (b)(6); and by revising paragraph (c)(1) to read 
as follows:

[[Page 46743]]

Sec. 1001.3002  Basis for reinstatement.

* * * * *
    (b) In making the reinstatement determination, the OIG will 
consider--
* * * * *
    (5) Whether the individual or entity, during the period of 
exclusion, has adequately and promptly informed its clients or patients 
that any items or services provided will not be reimbursable under any 
Federal health care program; and
    (6) Whether the individual or entity has, during the period of 
exclusion, submitted claims, or caused claims to be submitted or 
payment to be made by any Federal health care program, for items or 
services the excluded party furnished, ordered or prescribed, including 
health care administrative services.
    (c) * * *
    (1) Has properly reduced his or her ownership or control interest 
in the entity below 5 percent;
* * * * *
    14. Section 1001.3003 would be revised to read as follows:


Sec. 1001.3003  Approval of request for reinstatement.

    (a) If the OIG grants a request for reinstatement, the OIG will--
    (1) Give written notice to the excluded individual or entity 
specifying the date of reinstatement;
    (2) Notify HCFA of the date of the individual's or entity's 
reinstatement;
    (3) Notify appropriate Federal and State agencies that administer 
health care programs that the individual or entity has been reinstated 
into all Federal health care programs; and
    (4) To the extent applicable, give notice to others that were 
originally notified of the exclusion.
    (b) A determination by the OIG to reinstate an individual or entity 
has no effect if a Federal health care program has imposed a longer 
period of exclusion under its own authorities.
    15. Section 1001.3005 would be amended by revising paragraphs (a) 
introductory text, (b) and (d) to read as follows:


Sec. 1001.3005  Reversed or vacated decisions.

    (a) An individual or entity will be reinstated into Medicare, 
Medicaid and other Federal health care programs retroactive to the 
effective date of the exclusion when such exclusion is based on--
* * * * *
    (b) If an individual or entity is reinstated in accordance with 
paragraph (a) of this section, HCFA and other Federal health care 
programs will make payment for services covered under such program that 
were furnished or performed during the period of exclusion.
* * * * *
    (d) An action taken by the OIG under this section will not require 
any other Federal health care program to reinstate the individual or 
entity if such program has imposed an exclusion under its own 
authority.

PART 1002--[AMENDED]

    B. Part 1002 would be amended as follows:
    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 1002.2 would be amended by revising paragraph (a) to 
read as follows:


Sec. 1002.2  General authority.

    (a) In addition to any other authority it may have, a State may 
exclude an individual or entity from participation in the Medicaid 
program for any reason for which the Secretary could exclude that 
individual or entity from participation in the Medicare, Medicaid and 
other Federal health care programs under sections 1128, 1128A or 
1866(b)(2) of the Social Security Act.
* * * * *

PART 1003--[AMENDED]

    C. Part 1003 would be amended as follows:
    1. The authority citation for part 1003 would be revised to read as 
follows:

    Authority: 42 U.S.C. 1302, 1320-7, 1320a-7a, 1320a-7e, 1320b-10, 
1395dd(d)(1), 1395mm, 1395nn(g), 1395ss(d), 1396b(m), 11131(c) and 
11137(b)(2).

    2. Section 1003.100 would be amended by revising paragraphs (a) and 
(b)(1)(iv), (viii), (x), (xi) and by adding (b)(1)(xii) to read as 
follows:


Sec. 1003.100  Basis and purpose.

    (a) Basis. This part implements sections 1128(c), 1128A, 1128E, 
1140, 1876(i)(6), 1877(g), 1882(d) and 1903(m)(5) of the Social 
Security Act, and sections 421(c) and 427(b)(2) of Pub. L. 99-660 (42 
U.S.C. 1320a-7, 1320a-7a, 1320a-7e, 1320a-7(c), 1320b(10), 1395mm, 
1395ss(d), 1396(m), 11131(c) and 11137(b)(2)).
    (b) Purpose. This part--
    (1) * * *
    (iv)(A) Fail to report information concerning medical malpractice 
payments or who improperly disclose, use or permit access to 
information reported under part B of title IV of Public Law 99-660, and 
regulations specified in 45 CFR part 60, or
    (B) Are health plans and fail to report information concerning 
sanctions or other adverse actions imposed on providers as required to 
be reported to the Healthcare Integrity and Protection Data Bank 
(HIPDB) in accordance with section 1128E of the Act;
* * * * *
    (viii) Have submitted, or caused to be submitted, certain 
prohibited claims, including claims for services rendered by excluded 
individuals employed by or otherwise under contract with such person, 
under one or more Federal health care programs;
* * * * *
    (x) Have collected amounts that they know or should know were 
billed in violation of Sec. 411.353 of this title and have not refunded 
the amounts collected on a timely basis;
    (xi) Are physicians or entities that enter into an arrangement or 
scheme that they know or should know has as a principal purpose the 
assuring of referrals by the physician to a particular entity which, if 
made directly, would violate the provisions of Sec. 411.353 of this 
title; or
    (xii) Violate the Federal health care programs' anti-kickback 
statute as set forth in section 1128B of the Act.
* * * * *
    3. Section 1003.102 would be amended by revising paragraphs (a)(2) 
and (b)(5); and by adding a new paragraph (b)(11) to read as follows:


Sec. 1003.102  Basis for civil money penalties and assessments.

    (a) * * *
    (2) An item or service for which the person knew, or should have 
known, that the claim was false or fraudulent, including a claim for 
any item or service furnished by an excluded individual employed by or 
otherwise under contract with that person;
* * * * *
    (b) * * *
    (5) Fails to report information concerning--
    (i) A payment made under an insurance policy, self-insurance or 
otherwise, for the benefit of a physician, dentist or other health care 
practitioner in settlement of, or in satisfaction in whole or in part 
of, a medical malpractice claim or action or a judgment against such a 
physician, dentist or other practitioner in accordance with section 421 
of Pub. L. 99-660 (42 U.S.C. 11131) and as required by regulations at 
45 CFR part 60; or

[[Page 46744]]

    (ii) An adverse action required to be reported to the Healthcare 
Integrity and Protection Data Bank as established by section 221 of 
Public Law 104-191 and set forth in section 1128E of the Act.
* * * * *
    (11) Has violated section 1128B of the Act by unlawfully offering, 
paying, soliciting or receiving remuneration in return for the referral 
of business paid for by Medicare, Medicaid or other Federal health care 
programs.
* * * * *
    4. Section 1003.103 would be amended by revising paragraph (a); and 
by adding new paragraphs (g) and (h) to read as follows:


Sec. 1003.103  Amount of penalty.

    (a) Except as provided in paragraphs (b) and (d) through (h) of 
this section, the OIG may impose a penalty of not more than $10,000 for 
each item or service that is subject to a determination under 
Sec. 1003.102.
* * * * *
    (g) The OIG may impose a penalty of not more than $25,000 against a 
health plan for failing to report information on an adverse action 
required to be reported to the Healthcare Integrity and Protection Data 
Bank in accordance with section 1128E of the Act and 
Sec. 1003.102(b)(5)(ii) of this part.
    (h) For each violation of Sec. 1003.102(b)(11) of this part, the 
OIG may impose--
    (1) A penalty of $50,000, and
    (2) An assessment of up to 3 times the total amount of remuneration 
offered, paid, solicited or received, as specified in Sec. 1003.104(b) 
of this section.
    5. Section 1003.104 would be revised to read as follows:


Sec. 1003.104  Amount of assessment.

    (a) The OIG may impose an assessment, where authorized, in 
accordance with Sec. 1003.102 (except for Sec. 1003.102(b)(11)), of not 
more than three times the amount claimed for each item or service which 
was a basis for the penalty. The assessment is in lieu of damages 
sustained by the Department or a State because of that claim.
    (b) In accordance with Sec. 1003.102(b)(11), the OIG may impose an 
assessment of not more than three times the total amount of 
remuneration offered, paid, solicited or received, without regard to 
whether a portion of such remuneration was offered, paid, solicited or 
received for a lawful purpose.
    6. Section 1003.105 would be amended by revising the section 
heading, introductory paragraph (a)(1) and paragraph (b)(1) to read as 
follows:


Sec. 1003.105  Exclusion from participation in Medicare, Medicaid and 
other Federal health care programs.

    (a)(1) Except as set forth in paragraph (b) of this section, in 
lieu of or in addition to any penalty or assessment, the OIG may 
exclude from participation in Medicare, Medicaid and other Federal 
health care programs the following persons for a period of time 
determined under Sec. 1003.107--
* * * * *
    (b)(1) (i) With respect to determinations under Sec. 1003.102(b)(2) 
or (b)(3), a physician may not be excluded if the OIG determines that 
he or she is the sole community physician or the sole source of 
essential specialized services in a community.
    (ii) With respect to determinations under Sec. 1003.102(b)(5)(ii) 
of this part, no exclusion shall be imposed.
* * * * *
    7. Section 1003.106 would be amended by redesignating existing 
paragraph (a)(1)(vi) to read as new paragraph (a)(1)(ix); by adding new 
paragraphs (a)(1)(vi), (a)(1)(vii) and (a)(1)(viii); and by revising 
paragraphs (a)(1)(ii), (a)(1)(iii), (a)(1)(ix), (a)(2)(i), (a)(2)(ii) 
and (a)(2)(iii) to read as follows:


Sec. 1003.106  Determinations regarding the amount of the penalty and 
assessment.

    (a) Amount of penalty.
    (1) * * *
    (ii) The degree of culpability of the contracting provider, or the 
person submitting the claim or request for payment, or giving the 
information;
    (iii) The history of prior offenses of the contracting provider (or 
principals of the contracting provider), or the person submitting the 
claim or request for payment, or giving the information;
* * * * *
    (vi) The amount of financial interest involved with respect to 
Sec. 1003.102(b)(10);
    (vii) Whether the contracting provider knew of the exclusion when 
employing or otherwise contracting with an excluded individual or 
entity in accordance with Sec. 1003.102(a)(2) of this part;
    (viii) The harm to patients or any Federal or State health care 
program which resulted or could have resulted from the provision of 
care by a person or entity with which the contracting provider is 
expressly prohibited from contracting under section 1128A(a)(6) of the 
Act; and
    (ix) Such other matters as justice may require.
    (2) * * *
    (i) The nature and circumstances of the failure to properly report 
information, or the improper disclosure of information, as required;
    (ii) The degree of culpability of the person in failing to provide 
timely and complete data or in improperly disclosing, using or 
permitting access to information, as appropriate;
    (iii) The materiality, or significance of omission, of the 
information to be reported, or the materiality of the improper 
disclosure of, or use of, or access to information, as appropriate;
* * * * *
    8. Section 1003.109 would be amended by revising introductory 
paragraph (a) and paragraph (a)(3) to read as follows:


Sec. 1003.109  Notice of proposed determination.

    (a) If the Inspector General proposes a penalty and, when 
applicable, an assessment, or proposes to exclude a respondent from 
participation in Medicare, Medicaid and any other Federal health care 
program, as applicable, in accordance with this part, he or she must 
deliver or send by certified mail, return receipt requested, to the 
respondent, written notice of his or her intent to impose a penalty, 
assessment and exclusion, as applicable. The notice includes--
* * * * *
    (3) The reason why such claims, requests for payments or incidents 
subject the respondent to a penalty, assessment and exclusion;
* * * * *
    9. Section 1003.114 would be amended by revising paragraph (a) to 
read as follows:


Sec. 1003.114  Collateral estoppel.

    (a) Where a final determination pertaining to the respondent's 
liability under Sec. 1003.102 has been rendered in any proceeding in 
which the respondent was a party and had an opportunity to be heard, 
the respondent shall be bound by such determination in any proceeding 
under this part.
* * * * *
    Dated: February 6, 1998.
June Gibbs Brown,
Inspector General, Department of Health and Human Services.

    Approved: April 6, 1998.
Donna E. Shalala,
Secretary.
[FR Doc. 98-23463 Filed 8-28-98; 4:23 pm]
BILLING CODE 4150-04-P