[Federal Register Volume 64, Number 189 (Thursday, September 30, 1999)]
[Notices]
[Pages 52791-52794]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-25427]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Inspector General


Publication of the OIG Special Advisory Bulletin on the Effect of 
Exclusion From Participation in Federal Health Care Programs

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

ACTION: Notice.

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SUMMARY: In its role of identifying and eliminating fraud, waste and 
abuse in the Department's health care programs, the OIG periodically 
develops and

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issues guidance, including Special Fraud Alerts and Advisory Bulletins, 
to alert and inform health care providers and program beneficiaries 
about potential problems or areas of special interest. This Federal 
Register notice sets forth the recently-issued OIG Special Advisory 
Bulletin addressing the effect of an OIG exclusion on an individual's 
or entity's participation in the Federal health care programs.

FOR FURTHER INFORMATION CONTACT: Robin Schneider, Office of Counsel to 
the Inspector General, (202) 619-1306.

SUPPLEMENTARY INFORMATION:

I. Background

    This Special Advisory Bulletin is designed to help all affected 
parties better understand the scope of payment prohibitions that apply 
to items and services provided to Federal program beneficiaries, and to 
provide guidance to individuals and entities that have been excluded 
from the Federal health care programs and to those who employ or 
contract with an excluded individual or entity to provide such items or 
services.

II. Special Advisory Bulletin: Gainsharing Arrangements and CMPs 
for Hospital Payments to Physicians To Reduce or Limit Services to 
Beneficiaries

A. Introduction

    The Office of Inspector General (OIG) was established in the U.S. 
Department of Health and Human Services to identify and eliminate 
fraud, waste, and abuse in the Department's programs and to promote 
efficiency and economy in Departmental operations. The OIG carries out 
this mission through a nationwide program of audits, inspections, and 
investigations. In addition, the OIG has been given the authority to 
exclude from participation in Medicare, Medicaid and other Federal 
health care programs \1\ individuals and entities who have engaged in 
fraud or abuse, and to impose civil money penalties (CMPs) for certain 
misconduct related to Federal health care programs (sections 1128 and 
1128A of the Social Security Act (the Act)).
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    \1\ A Federal health care program is defined as any plan or 
program that provides health benefits, whether directly, through 
insurance, or otherwise, which is funded directly, in whole or in 
part, by the United States Government or a State health care program 
(with the exception of the Federal Employees Health Benefits 
Program) (section 1128B(f) of the Act). The most significant Federal 
health care programs are Medicare, Medicaid, Tricare and the 
Veterans programs.
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    Recent statutory enactments have strengthened and expanded the 
OIG's authority to exclude individuals and entities from the Federal 
health care programs. These laws also expanded the OIG's authority to 
assess CMPs against individuals and entities that violate the law. With 
this expanded authority, the OIG believes that it is important to 
explain the effect of program exclusions under the current statutory 
and regulatory provisions.
    The Health Insurance Portability and Accountability Act (HIPAA) of 
1996, Public Law 104-191, authorized the OIG to provide guidance to the 
health care industry to prevent fraud and abuse, and to promote high 
levels of ethical and lawful conduct. To further these goals, the OIG 
issues Special Advisory Bulletins about industry practices or 
arrangements that potentially implicate the fraud and abuse authorities 
subject to enforcement by the OIG.
    In order to assist all affected parties in understanding the 
breadth of the payment prohibitions that apply to items and services 
provided to Federal program beneficiaries,\2\ this Special Advisory 
Bulletin provides guidance to individuals and entities that have been 
excluded from Federal health care programs, as well as to those who 
might employ or contract with an excluded individual or entity to 
provide items or services reimbursed by a Federal health care program.
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    \2\ A Federal program beneficiary is an individual that receives 
health care benefits that are funded, in whole or in part, by a 
Federal health care program.
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B. Statutory Background

    In 1977, in the Medicare-Medicaid Anti-Fraud and Abuse Amendments, 
Public Law 95-142, Congress first mandated the exclusion of physicians 
and other practitioners convicted of program-related crimes from 
participation in Medicare and Medicaid (now codified at section 1128 of 
the Act). This was followed in 1981 with Congressional enactment of the 
Civil Monetary Penalties Law (CMPL), Public Law 97-35, to further 
address health care fraud and abuse (section 1128A of the Act). The 
CMPL authorizes the Department and the OIG to impose CMPs, assessments 
and program exclusions against individuals and entities who submit 
false or fraudulent, or otherwise improper claims for Medicare or 
Medicaid payment. ``Improper claims'' include claims submitted by an 
excluded individual or entity for items or services furnished during a 
period of program exclusion.
    To enhance the OIG's ability to protect the Medicare and Medicaid 
programs and beneficiaries, the Medicare and Medicaid Patient and 
Program Protection Act of 1987, Public Law 100-93, expanded and revised 
the OIG's administrative sanction authorities by, among other things, 
establishing certain mandatory and discretionary exclusions for various 
types of misconduct.
    The enactment of HIPAA in 1996 and the Balanced Budget Act (BBA) of 
1997, Public Law 105-33, further expanded the OIG's sanction 
authorities. These statutes extended the application and scope of the 
current CMP and exclusion authorities beyond programs funded by the 
Department to all ``Federal health care programs.'' BBA also authorized 
a new CMP authority to be imposed against health care providers or 
entities that employ or enter into contracts with excluded individuals 
for the provision of services or items to Federal program 
beneficiaries.
    In the discussion that follows, it should be understood that the 
prohibitions being described apply to items and services provided, 
directly or indirectly, to Federal program beneficiaries. The ability 
of an excluded individual or entity to render items and services to 
others is not affected by an OIG exclusion.

C. Exclusion From Federal Health Care Programs

    The effect of an OIG exclusion from Federal health care programs is 
that no Federal health care program payment may be made for any items 
or services (1) furnished by an excluded individual or entity, or (2) 
directed or prescribed by an excluded physician (42 CFR 1001.1901). 
This payment ban applies to all methods of Federal program 
reimbursement, whether payment results from itemized claims, cost 
reports, fee schedules or a prospective payment system (PPS). Any items 
and services furnished by an excluded individual or entity are not 
reimbursable under Federal health care programs. In addition, any items 
and services furnished at the medical direction or prescription of an 
excluded physician are not reimbursable when the individual or entity 
furnishing the services either knows or should know of the exclusion. 
This prohibition applies even when the Federal payment itself is made 
to another provider, practitioner or supplier that is not excluded.
    The prohibition against Federal program payment for items or 
services furnished by excluded individuals or entities also extends to 
payment for administrative and management services not directly related 
to patient care, but that are a necessary component of providing items 
and services to

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Federal program beneficiaries. This prohibition continues to apply to 
an individual even if he or she changes from one health care profession 
to another while excluded.\3\ In addition, no Federal program payment 
may be made to cover an excluded individual's salary, expenses or 
fringe benefits, regardless of whether they provide direct patient 
care.
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    \3\ For example, the prohibition against Federal program payment 
for items and services would continue to apply in the situation 
where an excluded pharmacist completes his or her medical degree and 
becomes a licensed physician.
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    Set forth below is a listing of some of the types of items or 
services that are reimbursed by Federal health care programs which, 
when provided by excluded parties, violate an OIG exclusion. These 
examples also demonstrate the kinds of items and services that excluded 
parties may be furnishing which will subject their employer or 
contractor to possible CMP liability.
     Services performed by excluded nurses, technicians or 
other excluded individuals who work for a hospital, nursing home, home 
health agency or physician practice, where such services are related to 
administrative duties, preparation of surgical trays or review of 
treatment plans if such services are reimbursed directly or indirectly 
(such as through a PPS or a bundled payment) by a Federal health care 
program, even if the individuals do not furnish direct care to Federal 
program beneficiaries;
     Services performed by excluded pharmacists or other 
excluded individuals who input prescription information for pharmacy 
billing or who are involved in any way in filling prescriptions for 
drugs reimbursed, directly or indirectly, by any Federal health care 
program;
     Services performed by excluded ambulance drivers, 
dispatchers and other employees involved in providing transportation 
reimbursed by a Federal health care program, to hospital patients or 
nursing home residents;
     Services performed for program beneficiaries by excluded 
individuals who sell, deliver or refill orders for medical devices or 
equipment being reimbursed by a Federal health care program;
     Services performed by excluded social workers who are 
employed by health care entities to provide services to Federal program 
beneficiaries, and whose services are reimbursed, directly or 
indirectly, by a Federal health care program;
     Administrative services, including the processing of 
claims for payment, performed for a Medicare intermediary or carrier, 
or a Medicaid fiscal agent, by an excluded individual;
     Services performed by an excluded administrator, billing 
agent, accountant, claims processor or utilization reviewer that are 
related to and reimbursed, directly or indirectly, by a Federal health 
care program;
     Items or services provided to a program beneficiary by an 
excluded individual who works for an entity that has a contractual 
agreement with, and is paid by, a Federal health care program; and
     Items or equipment sold by an excluded manufacturer or 
supplier, used in the care or treatment of beneficiaries and 
reimbursed, directly or indirectly, by a Federal health care program.

D. Violation of an OIG Exclusion by an Excluded Individual or Entity

    An excluded party is in violation of its exclusion if it furnishes 
to Federal program beneficiaries items or services for which Federal 
health care program payment is sought. An excluded individual or entity 
that submits a claim for reimbursement to a Federal health care 
program, or causes such a claim to be submitted, may be subject to a 
CMP of $10,000 for each item or service furnished during the period 
that the person or entity was excluded (section 1128A(a)(1)(D) of the 
Act). The individual or entity may also be subject to treble damages 
for the amount claimed for each item or service. In addition, since 
reinstatement into the programs is not automatic, the excluded 
individual may jeopardize future reinstatement into Federal health care 
programs (42 CFR 1001.3002).

E. Employing an Excluded Individual or Entity

    As indicated above, BBA authorizes the imposition of CMPs against 
health care providers and entities that employ or enter into contracts 
with excluded individuals or entities to provide items or services to 
Federal program beneficiaries (section 1128A(a)(6) of the Act; 42 CFR 
1003.102(a)(2)). This authority parallels the CMP for health 
maintenance organizations that employ or contract with excluded 
individuals (section 1857(g)(1)(G) of the Act). Under the CMP 
authority, providers such as hospitals, nursing homes, hospices and 
group medical practices may face CMP exposure if they submit claims to 
a Federal health care program for health care items or services 
provided, directly or indirectly, by excluded individuals or entities.
    Thus, a provider or entity that receives Federal health care 
funding may only employ an excluded individual in limited situations. 
Those situations would include instances where the provider is both 
able to pay the individual exclusively with private funds or from other 
non-federal funding sources, and where the services furnished by the 
excluded individual relate solely to non-federal program patients.
    In many instances, the practical effect of an OIG exclusion is to 
preclude employment of an excluded individual in any capacity by a 
health care provider that receives reimbursement, indirectly or 
directly, from any Federal health care program.

F. CMP Liability for Employing or Contracting With an Excluded 
Individual or Entity

    If a health care provider arranges or contracts (by employment or 
otherwise) with an individual or entity who is excluded by the OIG from 
program participation for the provision of items or services 
reimbursable under such a Federal program, the provider may be subject 
to CMP liability if they render services reimbursed, directly or 
indirectly, by such a program. CMPs of up to $10,000 for each item or 
service furnished by the excluded individual or entity and listed on a 
claim submitted for Federal program reimbursement, as well as an 
assessment of up to three times the amount claimed and program 
exclusion may be imposed. For liability to be imposed, the statute 
requires that the provider submitting the claims for health care items 
or services furnished by an excluded individual or entity ``knows or 
should know'' that the person was excluded from participation in the 
Federal health care programs (section 1128A(a)(6) of the Act; 42 CFR 
1003.102(a)(2)). Providers and contracting entities have an affirmative 
duty to check the program exclusion status of individuals and entities 
prior to entering into employment or contractual relationships, or run 
the risk of CMP liability if they fail to do so.

G. How to Determine If an Individual or Entity is Excluded

    In order to avoid potential CMP liability, the OIG urges health 
care providers and entities to check the OIG List of Excluded 
Individuals/Entities on the OIG web site (www.hhs.gov/oig) prior to 
hiring or contracting with individuals or entities. In addition, if 
they have not already done so, health care providers should 
periodically check the OIG web site for determining the participation/
exclusion status of current employees and contractors. The web site 
contains OIG program

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exclusion information and is updated in both on-line searchable and 
downloadable formats. This information is updated on a regular basis. 
The OIG web site sorts the exclusion of individuals and entities by: 
(1) The legal basis for the exclusion, (2) the types of individuals and 
entities that have been excluded, and (3) the State where the excluded 
individual resided at the time they were excluded or the State where 
the entity was doing business. In addition, the entire exclusion file 
may be downloaded for persons who wish to set up their own database. 
Monthly updates are posted to the downloadable information on the web 
site.

H. Conclusion

    In accordance with the expanded sanction authority provided in 
HIPAA and BBA, and with limited exceptions,\4\ an exclusion from 
Federal health care programs effectively precludes an excluded 
individual or entity from being employed by, or under contract with, 
any practitioner, provider or supplier to provide any items and 
services reimbursed by a Federal health care program. This broad 
prohibition applies whether the Federal reimbursement is based on 
itemized claims, cost reports, fee schedules or PPS. Furthermore, it 
should be recognized that an exclusion remains in effect until the 
individual or entity has been reinstated to participate in Federal 
health care programs in accordance with the procedures set forth at 42 
CFR 1001.3001 through 1001.3005. Reinstatement does not occur 
automatically at the end of a term of exclusion, but rather, an 
excluded party must apply for reinstatement.
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    \4\ In certain instances, a State health care program may 
request a waiver of an exclusion if an individual or entity is the 
sole community physician or the sole source of essential specialized 
services in a community (42 CFR 1001.1801(b)).
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    If you are an excluded individual or entity, or are considering 
hiring or contracting with an excluded individual or entity, and 
question whether or not the employment arrangement may violate the law, 
the OIG Advisory Opinion process is available to offer formal binding 
guidance on whether an employment or contractual arrangement may be in 
violation of the OIG's exclusion and CMP authorities. The process and 
procedure for submitting an advisory opinion request can be found at 42 
CFR 1008, or on the OIG web site at www.hhs.gov/oig.

    Dated: September 21, 1999.
June Gibbs Brown,
Inspector General.
[FR Doc. 99-25427 Filed 9-29-99; 8:45 am]
BILLING CODE 4150-04-P