[Federal Register Volume 81, Number 235 (Wednesday, December 7, 2016)]
[Rules and Regulations]
[Pages 88334-88365]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28293]



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Vol. 81

Wednesday,

No. 235

December 7, 2016

Part II





Department of Health and Human Services





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Office of Inspector General





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42 CFR Parts 1003 and 1005





 Medicare and State Health Care Programs: Fraud and Abuse; Revisions to 
the Office of Inspector General's Civil Monetary Penalty Rules; Final 
Rule

  Federal Register / Vol. 81 , No. 235 / Wednesday, December 7, 2016 / 
Rules and Regulations  

[[Page 88334]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Inspector General

42 CFR Parts 1003 and 1005

RIN 0936-AA04


Medicare and State Health Care Programs: Fraud and Abuse; 
Revisions to the Office of Inspector General's Civil Monetary Penalty 
Rules

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

ACTION: Final rule.

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SUMMARY: This final rule amends the civil monetary penalty (CMP or 
penalty) rules of the Office of Inspector General to incorporate new 
CMP authorities, clarify existing authorities, and reorganize 
regulations on civil money penalties, assessments, and exclusions to 
improve readability and clarity.

DATES: These regulations are effective on January 6, 2017.

FOR FURTHER INFORMATION CONTACT: Katie Arnholt or Geoff Hymans at (202) 
619-0335, Office of Counsel to the Inspector General.

SUPPLEMENTARY INFORMATION: 

I. Executive Summary

A. Purpose of the Regulatory Action

    The Affordable Care Act of 2010 (Patient Protection and Affordable 
Care Act, Pub. L. 111-148, 124 Stat. 119 (2010), as amended by the 
Health Care and Education Reconciliation Act of 2010, Pub. L. 111-152, 
124 Stat. 1029 (2010), hereafter the ACA) significantly expanded OIG's 
authority to protect Federal health care programs from fraud and abuse. 
The OIG proposed to update its regulations to codify the changes made 
by the ACA in the regulations. At the same time, OIG proposed updates 
pursuant to the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 and other statutory authorities, as well as 
technical changes to clarify and update the regulations.

B. Legal Authority

    The legal authority, laid out later in the preamble, for this 
regulatory action is found in the Social Security Act (the Act), as 
amended by the ACA. The legal authority for the changes is listed by 
the parts of Title 42 of the Code of Federal Regulations that we 
proposed to modify:
    1003: 42 U.S.C. 1320a-7(c), 1320a-7a, 1320b-10, 1395w-27(g), 1395w-
112(b)(3)(E), 1395w-141(i)(3), 1395y(b)(3)(B), 1395dd(d)(1), 1395mm, 
1395nn(g), 1395ss(d), 1396b(m), 1396r-8(b)(3)(B), 1396r-8(b)(3)(C), 
1396t(i)(3), 11131(c), 11137(b)(2), and 262a.
    1005: 42 U.S.C. 405(a), 405(b), 1302, 1320a-7, 1320a-7a, and 1320c-
5.

C. Summary of Major Provisions

    We proposed changes to the Civil Monetary Penalties (CMP) 
regulations at 42 CFR part 1003 to implement or codify authorities 
under the ACA and other statutes. The ACA provides for CMPs, 
assessments, and exclusion for:
     Failure to grant OIG timely access to records;
     ordering or prescribing while excluded;
     making false statements, omissions, or misrepresentations 
in an enrollment application;
     failure to report and return an overpayment; and
     making or using a false record or statement that is 
material to a false or fraudulent claim.

These statutory changes are reflected in the proposed regulations.
    We also proposed a reorganization of 42 CFR part 1003 to make the 
regulations more accessible to the public and to add clarity to the 
regulatory scheme. We proposed an alternate methodology for calculating 
penalties and assessments for employing excluded individuals in 
positions in which the individuals do not directly bill Federal health 
care programs for furnishing items or services. We also clarified the 
liability guidelines under OIG authorities, including the Civil 
Monetary Penalties Law (CMPL); the Emergency Medical Treatment and 
Labor Act (EMTALA); section 1140 of the Act for conduct involving 
electronic mail, Internet, and telemarketing solicitations; and section 
1927 of the Act for late or incomplete reporting of drug-pricing 
information.

D. Costs and Benefits

    There are no significant costs associated with the regulatory 
revisions that would impose any mandates on State, local, or tribal 
governments or the private sector. The OIG anticipates that CMP 
collections may increase in the future in light of the new CMP 
authorities and other changes proposed in this rule. However, it is 
difficult to accurately predict the extent of any increase because of a 
variety of factors, such as budget and staff resources, the number and 
quality of CMP referrals or other potential cases, and the time needed 
to investigate and litigate a case. In calendar years 2004-2015, OIG 
collected annual amounts ranging between $10.2 million and $107.3 
million in CMP resolutions for a total of over $309.2 million.

I. Discussion

A. Summary of Revisions and Response to Comments

    In response to the notice of proposed rulemaking, 79 FR 27,080 (May 
12, 2014), OIG received 27 public comments from various health care 
providers and organizations, professional medical societies and 
associations, and other interested parties. We also received a comment 
that was filed one day late, which we included in our responses. The 
comments included both concerns regarding the general factors and more 
detailed comments on specific CMP provisions.
    Set forth below is a discussion of the proposed changes to the 
regulations at the 42 CFR part 1003, a synopsis of the various comments 
and recommendations received in response to the proposed rule, our 
response to those comments and recommendations, and a summary of the 
specific revisions and clarifications being made to the regulations as 
a result of the public comments.

B. Background

    For over 27 years, OIG has exercised the authority to impose CMPs, 
assessments, and exclusions in furtherance of its mission to protect 
Federal health care programs and their beneficiaries from fraud, waste, 
and abuse. As those programs have changed over the last two decades, 
OIG has received new fraud-fighting CMP authorities, including new 
authorities under the ACA. With the addition of new authorities over 
time, part 1003 has become cumbersome. While adding new authorities, we 
are also reorganizing part 1003 to improve its readability and clarity 
and addressing several substantive issues in our existing authorities.
    In 1981, Congress enacted the CMPL, section 1128A of the Act (42 
U.S.C. 1320a-7a), as one of several administrative remedies to combat 
fraud and abuse in Medicare and Medicaid. The CMPL authorized the 
Secretary to impose penalties and assessments on a person, as defined 
in 42 CFR part 1003, who defrauded Medicare or Medicaid or engaged in 
certain other wrongful conduct. The CMPL also authorized the Secretary 
to exclude persons from Medicare and all State health care programs 
(including Medicaid). Congress later expanded the CMPL and the scope of 
exclusion to apply to all Federal health care programs. The Secretary 
delegated the CMPL's authorities to OIG. 53 FR 12,993 (April 20, 1988). 
Since 1981, Congress has

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created various other CMP authorities covering numerous types of fraud 
and abuse. These new authorities were also delegated by the Secretary 
to OIG and were added to part 1003.
    The ACA is the most recent expansion of the CMP provisions and 
OIG's ability to protect Federal health care programs from fraud and 
abuse. Sections 6402(d)(2)(A)(iii) and 6408(a) of ACA amended the CMPL 
by adding new conduct that subjects a person to penalties, assessments, 
and/or exclusion from participation in Federal health care programs. 
The new covered conduct includes: (1) Failure to grant OIG timely 
access to records, upon reasonable request; (2) ordering or prescribing 
while excluded when the excluded person knows or should know that the 
item or service may be paid for by a Federal health care program; (3) 
making false statements, omissions, or misrepresentations in an 
enrollment or similar bid or application to participate in a Federal 
health care program; (4) failure to report and return an overpayment; 
and (5) making or using a false record or statement that is material to 
a false or fraudulent claim. See the Act, section 1128A(a)(8)-(12). We 
are codifying these new authorities and remedies at 42 CFR 
1003.200(b)(6)-(10), 1003.210(a)(6)-(9), and 1003.210(b)(3).
    Section 6408(b)(2) of the ACA amended section 1857(g)(1) of the Act 
(42 U.S.C. 1395w-27(g)(1)), which relates to Medicare Advantage and 
Part D contracting organizations. See the Act, section 1860D-
12(b)(3)(E) (42 U.S.C. 1395w-112) (incorporating 1857(g) by reference). 
Through this amendment to the Act, the ACA made several changes to 
these authorities. First, section 6408(b)(2) of the ACA clarifies that 
penalties, and, where applicable, assessments, may be imposed against a 
Medicare Advantage or Part D contracting organization when its 
employees or agents, or any provider or supplier who contracts with it, 
engages in the conduct described in the CMP authorities in section 
1857(g) of the Act. This statutory change broadens the general 
liability of principals for the actions of their agents under our 
existing regulations at Sec.  1003.102(d)(5) (proposed Sec.  
1003.120(c)) to include contracting providers and suppliers who may not 
qualify as agents of the contracting organization. The ACA also 
provides for penalties and assessments against a Medicare Advantage or 
Part D contracting organization that: (1) Enrolls an individual without 
his or her prior consent; (2) transfers an enrollee from one plan to 
another without his or her prior consent; (3) transfers an enrollee 
solely for the purpose of earning a commission; (4) fails to comply 
with marketing restrictions described in sections 1851(h) or (j) of the 
Act (42 U.S.C. 1395w-21(h) or (j)) or applicable implementing 
regulations or guidance; or (5) employs or contracts with any person 
who engages in the conduct described in section 1857(g)(1) of the Act.
    We have codified these new authorities in the proposed regulations 
at Sec.  1003.400(c) and their corresponding penalties and assessments 
at Sec.  1003.410. The Centers for Medicare & Medicaid Services (CMS) 
may also impose sanctions under its authorities related to Medicare 
Advantage or Part D contracting organizations. Those authorities are at 
42 CFR parts 422 and 423.

C. Reorganization of Part 1003

    We proposed reorganizing part 1003 to make the regulations more 
accessible to the public and to add clarity to the regulatory scheme. 
Except for general and procedural subparts, the reorganized part 1003 
groups CMP authorities into subparts by subject matter. This revised 
structure also clarifies the differences between the various CMP 
authorities and their respective statutory remedies. For certain CMP 
authorities, penalties, assessments, and exclusion are authorized. For 
other CMP authorities, only penalties, or penalties and assessments, 
are authorized. Each subpart is intended to be self-contained, with all 
the relevant provisions concerning a particular violation included in 
the same subpart.
    We received no comments on the reorganization and finalize it as 
proposed.

D. Technical Changes and Clarifications

    Because we intended each subpart to be self-contained, we proposed 
incorporating the exclusion sections, which were found at Sec. Sec.  
1003.105 and 1003.107, into the subparts in which exclusion is 
available: False Claims; Anti-kickback and Physician Self-Referral; 
EMTALA; and Beneficiary Inducement. This proposed revision more clearly 
reflects the statutory scheme, which permits both monetary and 
exclusion remedies for these violations.
    The proposed changes clarify in each subject matter subpart that we 
may impose a penalty for each individual violation of the applicable 
provision. As we explained in the notice of proposed rulemaking, and 
below, the statutory authorities are clear that each act that 
constitutes a violation is subject to penalties. The proposed revisions 
to the regulatory language better reflect this statutory framework.
    Throughout part 1003, we proposed replacing references to Medicare 
and State health care programs with ``Federal health care programs'' 
when the provision concerns exclusion to more completely reflect the 
full scope of exclusion. The proposed changes also remove all 
references to the penalties and assessments available before 1997 
because any conduct prior to 1997 falls outside the CMPL's statute of 
limitations.
    The proposed changes clarify that a principal's liability for the 
acts of its agents does not limit liability only to the principal. 
Agents are still liable for their misconduct. In our enforcement 
litigation, we have encountered the argument that agents are not liable 
for their misconduct where the principal is liable for the same 
misconduct. We believed the law provides that the agent remains liable 
for his or her conduct and may not use the principal as a liability 
shield. The proposed revision clarifies this point. In addition, we 
proposed to consolidate Sec.  1003.102(d)(1)-(4), which addressed 
situations in which multiple parties may have liability for separate 
CMP provisions. This proposed revision clarifies that each party may be 
held liable for any applicable penalties and that the parties may be 
held jointly and severally liable for the assessment.
    We received no comments on these topics and finalize the regulation 
as proposed.
    Under the Federal Civil Penalties Inflation Adjustment Act 
Improvements Act of 2015 (sec. 701 of Pub. L. 114-74, 129 Stat. 599), 
which amended the Federal Civil Penalties Inflation Adjustment Act of 
1990 (Pub. L. 101-410, 104 Stat. 890), Federal agencies must make 
annual adjustments to their CMPs, including the CMPs in the Social 
Security Act. The Department of Health and Human Services (HHS or the 
Department) will publish all of the Department's adjusted CMP amounts 
at 45 CFR part 102. That section will include CMPs that have been 
delegated to OIG. To ensure transparency, we have added footnotes to 
subparts B through M stating that the penalty amounts are adjusted for 
inflation and citing to 45 CFR part 102.

E. Civil Monetary Penalty Authorities

Subpart A--General Provisions
    Subpart A contains the general provisions that apply to part 1003. 
The proposed changes revised the ``Basis and Purpose'' section to state 
more succinctly part 1003's purpose and to

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include a complete listing of CMPs. We also proposed updates to 
statutory authority citations at proposed Sec.  1003.100(a)-(b).
    We received no comments on these changes and finalize the 
regulations as proposed.
1003.110 Definitions
    The proposed rule included several changes to the ``Definitions'' 
section for clarity and readability. First, we proposed to redesignate 
Sec.  1003.101 as Sec.  1003.110. We proposed to remove terms from this 
part that duplicate definitions in part 1000 or are no longer used in 
this part. We also proposed the following changes and additions to the 
specific definitions.
Claim
    We proposed to revise the definition of ``claim'' by changing the 
word ``to'' to ``under.'' This change more closely aligns the 
regulations to the CMPL's definition of ``claim'' to avoid any 
misinterpretation that a claim is limited to an application for payment 
for an item or service made directly to a Federal health care program 
(e.g., a claim also includes applications for payment to contractors).
Contracting Organization
    We proposed to update the definition of ``contracting 
organization'' to include all entities covered by sections 1857, 1860D-
12, 1876(b) (42 U.S.C. 1395mm(b)), or 1903(m) of the Act.
Item or Service
    We proposed revisions to the definition of the term ``item or 
service.'' Section 1128A of the Act provides that the term ``item or 
service'' ``includes'' various items, devices, supplies, and services. 
By using the word ``includes'' in section 1128A of the Act, Congress 
created an illustrative statutory definition that is broad enough to 
capture all the uses of the term in section 1128A of the Act. The term 
is used in section 1128A of the Act in two different contexts: one, in 
reference to submitting claims for items and services reimbursed by a 
Federal health care program, and two, in the definition of 
``remuneration'' to beneficiaries in reference to section 1128A(a)(5) 
of the Act. We proposed clarifying the definition to ensure that it 
reflects the broad meaning of ``item or service'' in both contexts.
Knowingly
    We proposed clarifying the definition of ``knowingly,'' found in 
the existing regulation at Sec.  1003.102(e), to cover acts as opposed 
to information. We also proposed removing the reference to the False 
Claims Act (FCA) from the definition of ``knowingly'' because it is 
unnecessary. As used in part 1003, the term ``knowingly'' applies only 
to acts, such as the act of presenting a claim. When a person's 
awareness or knowledge of information is at issue, the CMPL and other 
statutes use either a ``knows or should know'' or a ``knew or should 
have known'' construction. For example, section 1128A(a)(2) of the Act 
subjects a person to liability when the person knowingly presents, or 
causes to be presented, a claim that the person knew or should have 
known is false or fraudulent. Here, the act is presenting the claim or 
causing the claim to be presented. The information is that the claim 
was false or fraudulent.
Material
    We proposed a definition of ``material'' that mirrors the FCA 
definition as ``having a tendency to influence, or be capable of 
influencing, the payment or receipt of money or property.''
Overpayment
    We proposed a definition of ``overpayment'' that is taken from 
section 1128J(d)(4) of the Act (42 U.S.C. 1320a-7k(d)(4)), as amended 
by section 6402(a) of the ACA.
Reasonable Request
    We proposed a definition of ``reasonable request'' as part of 
implementing the new ACA CMP authority for failure to grant OIG timely 
access to records, as discussed below under Sec.  1003.200, subpart B.
Responsible Official
    We proposed a definition of ``Responsible Official'' as this term 
relates to the select agent and toxin CMP authority. We proposed to 
amend the definition of ``select agent and toxin'' as the term relates 
to the select agent and toxin CMP authority (42 U.S.C. 262a(i); Act, 
section 1128A(j)(2)).
Responsible Physician
    We also proposed revising the definition of ``responsible 
physician'' to more closely conform to statutory intent, as discussed 
below under Sec.  1003.500, subpart E.
Separately Billable Item or Service and Non-Separately-Billable Item or 
Service
    We also proposed definitions of ``separately billable item or 
service'' and ``non-separately-billable item or service'' to create an 
alternate method for calculating penalties and assessments for 
violations of section 1128A(a)(6) of the Act.
    We did not receive comments on the proposed definitions of 
``claim,'' ``contracting organization,'' ``item or service,'' 
``Responsible Official,'' ``non-separately-billable item or service,'' 
or ``separately billable item or service'' and are finalizing the 
definition as proposed. We received comments on the definition of 
``knowingly,'' ``should know, or should have known,'' ``material,'' and 
``timely basis,'' which are discussed below. We also received comments 
on the definitions of ``overpayment,'' ``reasonable request,'' and 
``responsible physician,'' which we will address in the discussion of 
the overpayment, timely access, and EMTALA CMPs respectively.
    Comment: One commenter recommended that the definitions of 
``knowingly'' and ``should know, or should have known'' not include 
that ``no proof of specific intent to defraud is required.'' Another 
commenter recommended that, when applied to Sec.  1003.200(b)(7) for 
false statements, omissions, or misrepresentations, ``knowingly'' 
should include a specific intent to defraud. Both commenters argued 
that, where there was no specific intent to defraud, a maximum penalty 
of $50,000 for a violation of Sec.  1003.200(b)(7) would be unduly 
harsh.
    Response: The definition of ``should know'' in section 1128A(i)(7) 
of the Act states that ``no proof of specific intent to defraud is 
required.'' Similarly, the existing regulatory definitions of 
``knowingly'' and ``should know, or should have known'' both state that 
``no proof of specific intent is required.'' We proposed no changes to 
that language in either definition. As discussed above, our proposal 
clarified that the use of the term ``knowingly'' referred to acts, such 
as submitting a claim, and ``should know or should have known'' 
referred to information, such as the claim was false or fraudulent. 
Further, OIG does not believe it would be unduly harsh to apply up to a 
$50,000 penalty where a person acted with reckless disregard when 
making a material omission on an application, bid, or contract to 
participate or enroll as a provider or supplier. We are finalizing 
these terms, as proposed.
    Comment: Some commenters disagreed with the proposed definition of 
``material'' and recommended we adopt a definition of ``having an 
actual influence on the payment or receipt of money or property.''
    Response: We respectfully disagree with the commenters and finalize 
the definition, as proposed. The proposed language mirrors the 
definition of

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material in the FCA, 31 U.S.C. 3729(b)(4). In the ACA, Congress added a 
new CMP cause of action against persons who knowingly make, use, or 
cause to be made or used, a false record or statement material to a 
false or fraudulent claim for payment for items and services furnished 
under a Federal health care program. This cause of action mirrors a 
cause of action under the FCA at 31 U.S.C. 3729(a)(1)(B). We believe 
that the same definition should apply in the CMPL given the 
similarities with the FCA. In addition, we believe this definition is 
appropriate for the other CMP causes of action in this part that use 
the term ``material'' because those authorities also involve the use of 
false statements--Sec. Sec.  1003.200(a)(4)(ii), 1003.200(a)(7), 
1003.200(d), and 1003.1100(a).
    Comment: One commenter argued that we should change the definition 
of ``timely basis'' to the 60-day period from the time the individual 
or entity knows that the amounts collected violated the Physician Self-
Referral Law. The commenter states that it is unreasonable to expect 
individuals and entities consistently to know, within 60 days of 
collection, that an amount was collected in violation of the Stark Law, 
and that it would be unfair to impose penalties, assessments, and 
exclusions on individuals and entities for failure to return payments 
that they did not know were collected in violation of the Stark Law.
    Response: Because we did not propose changing the language of the 
definition, only the internal citation, this suggestion is outside the 
scope of this rulemaking. We are finalizing the definition, as 
proposed.
    Comment: We also received a comment asking that OIG clarify that 
the provisions of part 1003 applying to Federal health care programs do 
not apply to Qualified Health Plan Issuers or State-based or Federally 
facilitated exchanges.
    Response: ``Federal health care program'' is defined in section 
1128B(f) of the Act. part 1003 does not include a definition of 
``Federal health care program'' and none was included in our proposed 
changes to that part. Therefore, this comment is beyond the scope of 
the rulemaking. That said, the Department stated in an October 30, 2013 
letter from the Secretary to Representative Jim McDermott that it does 
not consider Qualified Health Plans (QHPs) or other programs related to 
the Federally facilitated marketplace to be federal health care 
programs, for the purposes of 1128B(f) of the Act.
1003.140 Determinations Regarding the Amount of Penalties and 
Assessments and the Period of Exclusion
    We proposed modifying the provisions relating to the factors 
considered in determining exclusion periods and the amount of penalties 
and assessments for violations. The existing structure separately 
listed factors for certain CMP violations in Sec.  1003.106(a) and 
provided additional detail on these factors for certain CMP violations 
in Sec.  1003.106(b) and (d). This structure was cumbersome and 
potentially confusing for the reader.
    To add clarity and improve transparency in OIG's decision-making, 
we identified the most common issues among the factors listed and 
created a single, primary list of factors in the proposed Sec.  
1003.140. The primary factors are: (1) The nature and circumstances of 
the violation, (2) the degree of culpability of the person, (3) the 
history of prior offenses, (4) other wrongful conduct, and (5) other 
matters as justice may require. As the fifth factor demonstrates, these 
are illustrative factors rather than a comprehensive list. These 
factors would apply to all CMP violations, except as otherwise provided 
in the subpart relating to a specific subject matter, which may contain 
additional detail or explanation regarding a factor's applicability to 
a specific violation. For example, the aggravating factors listed in 
Sec.  1003.106(b)(1) related to the nature and circumstances of a 
violation. Because these factors relate most directly to billing 
issues, the proposed regulations include them in Sec. Sec.  1003.220, 
1003.320, and 1003.420. We proposed updating the claims-mitigating 
factor by increasing the maximum dollar amount considered as mitigation 
from $1,000 to $5,000. We believed this updated amount is an 
appropriate threshold that is consistent with rationale behind the 
original amount. A dollar threshold as a mitigating factor for CMP 
purposes differentiates between conduct that could be considered less 
serious and more serious. Conduct resulting in more than $5,000 in 
Federal health care program loss is an indication of more serious 
conduct. Given the changes in the costs of health care since this 
regulation was last updated in 2002, we believed the $1,000 threshold 
was lower than appropriate. We also proposed revising the claims-
aggravating factor that was at 1003.106(b)(1)(iii) by replacing 
``substantial'' with ``$15,000 or more.'' We believe that replacing 
``substantial'' with a specific dollar threshold increases transparency 
and gives providers better guidance on OIG's evaluation of this factor. 
In assigning a dollar value to the aggravating factor, we considered 
our practices in evaluating conduct for pursuing CMPs and proposed that 
a loss greater than $15,000 is an indication of serious misconduct. As 
discussed in response to comments, we are finalizing the aggravating 
factor as a loss greater than $50,000.
    The OIG will, however, continue to review the facts and 
circumstances of a violation on a case-by-case basis. For instance, 
when considering the nature and circumstances of any case, OIG will 
consider, among other things and to the extent they are relevant, the 
period over which the conduct occurred, whether a pattern of misconduct 
is indicated, the magnitude of the violation, the materiality or 
significance of a false statement or omission, the number of people 
involved, the number of victims, and whether patients were or could 
have been harmed.
    The proposed changes also clarify that these factors apply to 
exclusion determinations made under part 1003 as well as penalty and 
assessment amount determinations. We are removing Sec.  1003.107(c) in 
light of this reorganization. The existing regulations stated, at Sec.  
1003.107(c), that the guidelines regarding exclusion determinations are 
not binding. This language was used to emphasize that only the 
reasonableness of a period of exclusion is reviewable on appeal as 
opposed to OIG's decision to impose an exclusion. While OIG's 
discretion to exercise its exclusion authority remains unreviewable, 
the Sec.  1003.107(c) language is no longer necessary under the 
proposed reorganization. The revisions at Sec.  1003.140 more clearly 
state that the general guidelines relate to the length of exclusion as 
opposed to the decision whether to exclude a person.
    At Sec.  1003.106(b)(2), the regulations discussed a person's 
degree of culpability and listed several aggravating circumstances 
concerning whether a person had knowledge of the violation. We believed 
the language was out-of-date in light of all the CMP authorities that 
have been added to part 1003 over the years. We proposed to consider as 
an aggravating factor a person's having a level of intent to commit the 
violation that is greater than the minimum intent required to establish 
liability.
    Various CMP authorities have different intent or scienter 
requirements. Some authorities have a ``knows or should know'' standard 
consistent with

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the FCA standard that includes actual knowledge, deliberate ignorance, 
or reckless disregard. Some authorities require only negligence and 
some have no intent requirement. In CMP cases in which the scienter 
standard required to prove a violation is lower than actual knowledge, 
having actual knowledge is more egregious. Our existing regulations 
provide that actual knowledge is an aggravating factor when a 
respondent knew an item or service was not provided as claimed or if 
the respondent knew that a claim was false or fraudulent. We intend the 
general ``degree of culpability'' factor to encompass this approach and 
to extend to all CMP authorities that have a scienter standard that is 
lower than actual knowledge. In response to comments, as summarized 
below, we are finalizing the rule to provide that it shall be 
considered an aggravating factor when a person has actual knowledge and 
the level of intent required to establish liability is less than actual 
knowledge.
    Possessing the lowest level intent to commit a violation is not a 
defense against liability, a mitigating factor, or a justification for 
a less serious remedy. Individuals and entities are expected to know 
the law and Federal health care program rules. While the degree of 
culpability is relevant in our determination to impose a monetary or 
exclusion remedy, other factors, such as the nature and circumstances 
of the violation, may justify a maximum monetary remedy or exclusion to 
protect Federal health care programs and beneficiaries from fraud, 
waste, and abuse.
    In addition, we proposed to add a mitigating circumstance to the 
degree-of-culpability factor for taking ``appropriate and timely 
corrective action in response to the violation.'' The proposed 
regulation required that a person, to qualify as taking corrective 
action, disclose the violation to OIG through the Self-Disclosure 
Protocol (the Protocol) and fully cooperate with OIG's review and 
resolution of the violation. We have long emphasized the importance of 
compliance programs that result in appropriate action when Federal 
health care program compliance issues are identified. We continue to 
believe that appropriate action for potential violations of OIG's CMP 
authorities must include self-disclosure and cooperation in the inquiry 
and resolution of the matter. For most OIG CMP authorities, the person 
should not qualify for mitigation of the potential monetary or 
exclusion remedies without self-disclosure through the Protocol 
(available at--http://oig.hhs.gov/compliance/self-disclosure-info/protocol.asp). In response to comments, which are summarized below, we 
are finalizing the rule to include self-disclosure to CMS's Self-
Referral Disclosure Protocol for Stark violations. As further discussed 
in subpart E, we are also including disclosure to CMS for EMTALA 
violations.
    The proposed changes clarified that when we are determining the 
appropriate remedy against an entity, aggravating circumstances include 
the prior offenses or other wrongful conduct of: (1) The entity itself; 
(2) any individual who had a direct or indirect ownership or control 
interest (as defined in section 1124(a)(3) of the Act (42 U.S.C. 1320a-
3)) in the entity at the time the violation occurred and who knew, or 
should have known, of the violation; or (3) any individual who was an 
officer or a managing employee (as defined in section 1126(b) of the 
Act (42 U.S.C. 1320a-5)) of the entity at the time the violation 
occurred. For ``prior offenses,'' we also proposed to change ``any 
other public or private program for reimbursement for medical 
services'' to ``in connection with the delivery of a health care item 
or service.'' This proposed change is consistent with the aggravating 
circumstance ``other wrongful conduct.''
    Finally, the proposed rule clarified when OIG considers the 
financial condition of a person in determining penalty or assessment 
amounts. The regulations discussed financial condition in various 
sections with varying degrees of specificity: Sec.  1003.106(a)(1)(iv); 
(a)(3)(i)(F); (a)(4)(iv); (b)(5); and (d)(4). We proposed a more 
uniform and specific standard to apply after OIG evaluates the facts 
and circumstances of the conduct and weighs the aggravating and 
mitigating factors to determine an appropriate penalty and assessment 
amount. Once OIG proposes this penalty and assessment amount, the 
person may request that OIG consider its ability to pay the proposed 
amount. To permit OIG to evaluate a person's ability to pay, the person 
must submit sufficient documentation that OIG deems necessary to 
conduct its review, including, but not limited to, audited financial 
statements, tax returns, and financial disclosure statements. This 
ability-to-pay review may also consider the ability of the person to 
reduce expenses or obtain financing to pay the proposed penalty and 
assessment. If a person requested a hearing in accordance with 42 CFR 
1005.2, the only financial documentation subject to review would be 
that which the person submitted to OIG, unless the Administrative Law 
Judge (ALJ) finds that extraordinary circumstances prevented the person 
from providing the financial documentation to OIG in the time and 
manner requested by OIG prior to the hearing request.
    We received the following comments on these proposals. To the 
extent the comments do not address aspects of these changes, we are 
finalizing this section of the rule, as proposed.
    Comment: Some commenters disagreed with our proposal to include a 
person's level of intent as an aggravating factor for several reasons. 
Some commenters viewed proving, and distinguishing between, different 
degrees of mental states, such as ``actual knowledge,'' ``deliberate 
ignorance,'' and ``reckless disregard,'' as subjective. Commenters 
argued that the proposed rule's rationale for using degrees of scienter 
to determine the existence of aggravating circumstances is not 
sufficient to overcome concerns regarding the subjectivity involved in 
distinguishing between and proving these highly nuanced mental states. 
Aside from the statement that ``actual knowledge is considered more 
egregious than a lower level of intent,'' commenters expressed concern 
that the proposed rule does not explain which different scienter 
requirements carry respectively greater, or lesser, culpability. For 
example, commenters argued that the proposed rule does not provide if 
or how scienter requirements, such as ``reckless disregard'' and 
``deliberate ignorance,'' relate to one another with respect to 
potential culpability. Commenters were also concerned that the proposed 
rule does not set forth the evidentiary standards required to prove, 
and distinguish between, degrees of scienter, (e.g., where a person can 
be held liable: (1) For knowingly presenting an inaccurate claim; or 
(2) where the person knew, or should have known, that the claim was not 
accurate). Given that legal expertise is typically required to fully 
interpret and understand these terms, commenters stated that physicians 
and health care providers may not fully comprehend the changes proposed 
by the rule and may be disadvantaged when trying to respond to OIG's 
determination that an aggravating circumstance is present on the basis 
of alleged degrees of culpability.
    Finally, while commenters acknowledged OIG's experience in CMP 
enforcement as the main support for its degree-of-culpability proposal, 
commenters noted that this rule expands OIG's authority to new types of 
conduct under the five new ACA liability bases to its enforcement

[[Page 88339]]

authority. These additional bases for CMPs require physicians to 
understand new authorities and also expands OIG scienter determinations 
to new areas of the law. Given this expanded scope, commenters urged 
OIG to reconsider use of this new aggravating factor, especially 
without providing more detailed guidance distinguishing different 
mental standards and their applicability to CMPs, assessments, and 
exclusions.
    Response: We have altered the final rule so that in cases in which 
the scienter standard required to prove a violation is lower than 
actual knowledge, having actual knowledge will be an aggravating 
factor. We will continue evaluating each case to determine the 
appropriate penalties and assessments and whether exclusion is 
appropriate. In any case in which the scienter standard required to 
prove a violation is lower than actual knowledge, actual knowledge is 
more egregious. The OIG's existing regulations provide that actual 
knowledge is an aggravating factor where a respondent knew an item or 
service was not provided as claimed or if the respondent knew that a 
claim was false or fraudulent. In the final rule, OIG is simply 
extending actual knowledge as an aggravating factor to all cases in 
which the scienter standard to prove a violation is lower than actual 
knowledge.
    Comment: One commenter expressed concern about OIG's proposed 
provision that any single aggravating circumstance may justify imposing 
a penalty and assessment at or close to the maximum even when one or 
more mitigating factors are present. The commenter argued that this 
proposed change would tilt the balance in favor of the aggravating 
factors without due consideration to all of the circumstances in each 
case and could lead to uneven enforcement. The commenter also stated 
that this concern was compounded by OIG's other proposal to move away 
from separately listed aggravating factors to a more general, 
illustrative list of factors that the commenter argues could be applied 
more broadly. Finally, the commenter also stated that this proposal 
could discourage mitigating actions (e.g., participating in the Self-
Disclosure Protocol).
    Response: We believe that the proposed rule accurately reflects the 
case-by-case analysis that OIG has historically done and that is 
conducted in the ALJ hearing process. Aggravating and mitigating 
circumstances require qualitative weighing of facts and circumstances 
and are, by their nature, dependent on the facts and circumstances 
present in the individual case. In this weighing process, it is 
possible to conclude that one aggravating circumstance should overweigh 
several mitigating circumstances because of the nature and 
circumstances of the case. As such, our proposal that any one 
aggravating circumstance may justify a high penalty or assessment 
simply reflects this qualitative, fact-driven analysis. The converse is 
also true, that one mitigating factor could justify a lower penalty. 
Our proposal is not intended to change OIG's longstanding and 
repeatedly stated position that appropriate self-disclosure is a 
critical indication that the provider or supplier has an effective 
compliance program. We will continue to follow the process outlined in 
the Self-Disclosure Protocol in resolving Protocol submissions.
    Comment: One commenter stated that proposed Sec.  1003.140(d), 
which provides that OIG should exclude where there are aggravating 
circumstances, is superfluous because OIG already has the authority to 
exclude where aggravating circumstances exist. The commenter expressed 
concern that, if read so as not to be superfluous, the provision would 
suggest that exclusion is mandated by the rule.
    Response: We agree with the commenter that the provision is 
superfluous. The OIG makes determinations regarding penalties, 
assessments, and exclusion based on a case-by-case analysis, and for 
any particular case the presence of aggravating circumstances may 
support exclusion. Therefore, we are finalizing the rule without this 
proposed provision.
    Comment: A few commenters suggested that a lower level of intent be 
considered as a mitigating factor. Commenters argued that if a higher 
level of intent may be viewed as a potential aggravating factor, OIG 
should consider a lower level of intent as a mitigating factor.
    Response: Possessing a lower level intent to commit a violation is 
not a defense against liability or a justification for a less serious 
remedy. Individuals and entities are expected to know the law and 
Federal health care program rules. While the degree of culpability is 
relevant in our determination to impose a monetary or exclusion remedy, 
other factors, such as the nature and circumstances of the violation, 
may justify a maximum monetary remedy or exclusion to protect the 
Federal health care programs and beneficiaries. Moreover, if the facts 
show that the person did not possess the requisite level of intent to 
violate a particular statutory or regulatory provision, no monetary 
penalty or exclusion would apply.
    Comment: Several commenters suggested that OIG expand the 
corrective action that would be considered as a mitigating factor to 
include more than submissions to the Self-Disclosure Protocol. 
Commenters argued that limiting the mitigating factor to use of the 
Self-Disclosure Protocol is overly limited and suggested that the 
following actions be considered mitigating: Disclosure to the CMS Self-
Referral Disclosure Protocol, returning payments to Medicare 
contractors, internal investigation, and staff retraining. Commenters 
argued that retaining existing regulatory language, which more 
generally references corrective steps taken promptly after a problem 
was discovered, would allow providers and suppliers the flexibility to 
take the corrective action best fitted to their particular practice 
settings and is more likely to encourage providers and suppliers to 
actively take appropriate corrective action.
    Response: We have decided to amend our proposal to include use of 
the CMS Self-Referral Disclosure Protocol (SRDP) as meeting the 
corrective action requirement for the mitigating factor. We decided to 
make this change to clarify that appropriately using the SRDP satisfies 
OIG's goals of encouraging disclosure and recognizes the specific 
protocol that CMS has created to handle physician self-referral law 
(Stark Law) compliance issues. Because conduct that implicates only the 
Stark Law is not eligible for OIG's Self-Disclosure Protocol, we wanted 
to clarify that using the SRDP for this conduct is appropriate. We do 
not believe the other actions described above are appropriate for this 
mitigating factor. Returning overpayments to the appropriate contractor 
is important. However, this action does not address or eliminate CMP 
liability if it exists. Put another way, if the conduct involves only 
overpayments and no CMP liability, there is no penalty at issue to 
mitigate. Similarly, taking actions such as internal investigations and 
retraining employees can be important compliance program activities. 
However, in the absence of a self-disclosure, these actions also do not 
affect CMP liability.
    We are also amending subpart E (EMTALA) to include in this 
mitigating factor disclosure of the violation to CMS prior to CMS 
receiving a complaint regarding the violation from another source or 
otherwise learning of the violation.
    Comment: Some commenters stated that, as a practical matter, this 
proposal

[[Page 88340]]

``mandates'' disclosure to the Protocol, which would, for many 
providers and suppliers, limit the availability of this mitigating 
circumstance. Some commenters viewed participation in the Protocol as 
time and labor intensive and often necessitating the assistance of an 
experienced attorney, which may be expensive for smaller providers and 
suppliers.
    Response: This mitigating factor becomes relevant only if the 
provider or supplier has CMP liability for the conduct at issue. If 
that is the case, we expect the provider or supplier to appropriately 
disclose and resolve the conduct in the Protocol. Attorney 
representation is not necessary to use the Protocol.
    Comment: Some commenters posed questions concerning the 
relationship between the Self-Disclosure Protocol and the proposed 
rule. For example, the Self-Disclosure Protocol states that ``OIG's 
general practice is to require a minimum multiplier of 1.5 times the 
single damages'' while the proposed rule contains no discussion 
concerning the nexus between Protocol settlements and the imposition of 
monetary penalties, assessments, and exclusion. Commenters asked 
whether the 1.5 multiplier will be available to those using the Self-
Disclosure Protocol if an aggravating factor exists under the proposed 
rule. Commenters also asked whether OIG would suspend the statutory 
obligation to report and return an overpayment within 60 days if the 
provider has appropriately made a disclosure under the Self-Disclosure 
Protocol and is actively seeking a resolution.
    Response: The OIG will continue to follow the process and 
principles outlined in the Self-Disclosure Protocol in resolving 
Protocol submissions. Even where aggravating circumstances exist, we 
will generally apply a 1.5 multiplier in Protocol resolutions, as 
explained in the Protocol. Regarding the 60-day rule referenced by 
commenters, CMS has rulemaking authority concerning section 1128J(d) of 
the Act and published a final rule on February 12, 2016. 81 FR 7654 
(February 12, 2016). The regulation adopted by that final rule states: 
``The deadline for returning overpayments will be suspended when the 
following occurs: (i) The OIG acknowledges receipt of a submission to 
the OIG Self-Disclosure Protocol and will remain suspended until such 
time as a settlement agreement is entered, the person withdraws from 
the OIG Self-Disclosure Protocol, or the person is removed from the OIG 
Self-Disclosure Protocol.'' 42 CFR 401.305(b)(2)(i).
    Comment: Some commenters expressed concerns about the proposed 
rule's expansion of the ``history of prior offenses'' and ``other 
wrongful conduct'' aggravating factors. Specifically, these commenters 
argued that it would be unjust to consider prior offenses or other 
wrongful conduct of officers or managing employees unless the officer 
or managing employee knew or should have known of the violation. 
Accordingly, they urged OIG to, as with individuals with ownership or 
control interests, limit consideration of prior offenses and other 
wrongful conduct of officers and managing employees to situations in 
which the officer or managing employee knew or should have known of the 
violation.
    Response: We are finalizing the rule, as proposed. Officers and 
managing employees have significant responsibility for an entity's day-
to-day operations. Owners, on the other hand, may be active or passive. 
Passive owners may have less involvement in daily operations, and 
consequently may have less culpability in the entity's conduct that 
creates CMP liability. As such, the rule specifies that individuals who 
have a direct or indirect ownership or control interest are considered 
in these factors only if they knew or should have known of the 
violation. Moreover, this factor was structured to reflect the 
exclusion authority under section 1128(b)(15) of the Act. Under section 
1128(b)(15)(A)(ii) of the Act, an individual who is an officer or 
managing employee of an excluded entity can be excluded regardless of 
whether the officer or managing employee knew or should of known of the 
action that constituted the basis for the exclusion. In contrast, under 
section 1128(b)(15)(A)(i) of the Act, an owner of the excluded entity 
can be excluded only if he or she knew or should have known of the 
action constituting the basis for the exclusion. We believe that 
Congress intended this different treatment to account for the greater 
responsibility of officers or managing employees in the entity's day-
to-day operations.
    Comment: One commenter argued that ``administrative sanctions'' in 
the ``history of prior offenses'' aggravating factor should not include 
actions taken by purely private actors, such as health insurers, 
because, in such private actions, health care providers may not be 
given due process protections comparable to those available when a 
governmental entity is seeking administrative sanctions.
    Response: We agree with the commenter that the history of prior 
offenses aggravating factor encompasses only situations in which the 
provider or supplier was held liable for criminal, civil, or 
administrative sanctions by a governmental entity, such as a Federal or 
State agency or one of its contractors.
    Comment: One commenter expressed concerns with the proposed rule's 
increased consideration of wrongful conduct related to the commercial 
market. The commenter recommended that OIG consider only fraud 
sanctions in the private market to ensure that the wrongful conduct 
directly relates to the conduct being addressed by OIG.
    Response: We are finalizing the language, as proposed. We do not 
believe the other wrongful conduct needs, in all cases, to be related 
to fraud generally or to the CMP authority at issue to be relevant. 
This factor is intended to provide some guidance on the trustworthiness 
of the individual or entity in question. The OIG will continue to 
perform an analysis of whether the other wrongful conduct should be 
considered an aggravating circumstance in any given case.
1003.150 Delegation of Authority
    The proposed rule also adds an express delegation of authority from 
the Secretary to OIG to impose penalties, assessments, and exclusions 
against persons who violate any of the provisions of part 1003. Several 
Federal Register notices and delegation letters, spanning more than 20 
years, delegate various authorities to OIG. Some of these older notices 
and letters are no longer easily accessible by the public, such as 53 
FR 12,993 (April 20, 1988). This provision, at proposed Sec.  1003.150, 
reiterates OIG's authority to pursue these matters.
    We received no comments on this provision and finalize, as 
proposed.
1003.160 Waiver of Exclusion
    We also proposed changes to part 1003's exclusion-waiver provisions 
to clarify the criteria for a waiver request from a State agency. The 
existing regulations stated that OIG will consider an exclusion waiver 
request from a State agency for exclusions imposed pursuant to 42 CFR 
1003.102(a), (b)(1), and (b)(4) and 1003.105(a)(1)(ii) under certain 
circumstances. We proposed updating the regulations to permit an 
administrator of a Federal health care program to request a waiver, 
similar to the waiver in part 1001. Also, we proposed removing the 
limitations concerning when a waiver may be requested by such an 
administrator.
    We received no comments on this provision and finalize, as 
proposed.

[[Page 88341]]

Subpart B--CMPs, Assessments, and Exclusions for False or Fraudulent 
Claims and Other Similar Misconduct
    Subpart B contains most of the provisions that were found in the 
existing regulations at Sec.  1003.102(a) and several of the provisions 
that were found in Sec.  1003.102(b). The text of the proposed 
provisions remains largely unchanged, except for a separate provision 
we created to address section 1128A(a)(6) of the Act. Section 
1128A(a)(6) of the Act subjects persons to liability for arranging or 
contracting with (by employment or otherwise) a person who the employer 
or contractor knows or should know is excluded from participation in a 
Federal health care program for the provision of items or services for 
which payment may be made under that program. This authority was 
included in the regulations describing false or fraudulent claims at 
Sec.  1003.102(a)(2). Because of our desire to improve the clarity of 
the regulations generally and because of the proposed penalty and 
assessment provisions discussed below, the proposed regulation 
addressed section 1128A(a)(6) of the Act in a separate subsection at 
Sec.  1003.200(b)(4).
    On the basis of our experience enforcing section 1128A(a)(6) of the 
Act, we proposed an alternate methodology for calculating penalties and 
assessments. This alternate methodology recognizes the variety of ways 
in which items and services are reimbursed by Federal health care 
programs and the numerous types of health care professionals and other 
individuals and entities that contribute to the provision of those 
items and services.
    The proposed regulations addressed how penalties and assessments 
would be imposed for two distinct types of violations: (1) Instances in 
which items or services provided by the excluded person may be 
separately billed to the Federal health care programs and (2) instances 
in which the items or services provided by the excluded person are not 
separately billable to the Federal health care programs, but are 
reimbursed by the Federal health care programs in some manner.
    To achieve this distinction, we proposed to define two new terms: 
``separately billable item or service'' and ``non-separately-billable 
item or service.'' A ``separately billable item or service'' is defined 
as ``an item or service for which an identifiable payment may be made 
under a Federal health care program.'' This type of item or service 
exists when a person provides, furnishes, orders, or prescribes an 
identifiable item or service for which a claim for reimbursement may be 
submitted to a Federal health care program by either the person or 
another person. Examples include physician office visits and prescribed 
pharmaceuticals.
    A ``non-separately-billable item or service'' is defined as ``an 
item or service that is a component of, or otherwise contributes to the 
provision of, an item or service, but is not itself a separately 
billable item or service.'' Non-separately-billable items or services 
are reimbursed as part of the claim submitted under the applicable 
payment methodology, e.g., nursing or clerical services associated with 
a physician office visit, care covered by the skilled nursing facility 
per diem payment, nursing care covered by a hospital diagnosis-related 
group (DRG) payment, or radiology technician services associated with a 
specific procedure.
    In instances in which the item or service provided by the excluded 
person is separately billable, the employing or contracting person 
would continue to be subject to penalties and assessments based on the 
number and value of those separately billable items and services. For 
instances in which the item or service provided by the excluded person 
is non-separately-billable, we proposed an alternate methodology to 
calculate penalties and assessments. We proposed that penalties would 
be based on the number of days the excluded person was employed, was 
contracted with, or otherwise arranged to provide non-separately-
billable items or services. We proposed that assessments would be based 
on the total costs to the employer or contractor of employing or 
contracting with the excluded person during the exclusion, including 
salary, benefits, and other money or items of value. We believe this 
cost-based assessment achieves the purposes of section 1128A(a)(6) of 
the Act by capturing the value of the excluded person to the employing 
or contracting person. As discussed below in our response to comments, 
we are finalizing the assessments, as proposed, but are finalizing the 
penalties based on each item or service provided by the excluded 
person.
    As discussed above, the ACA added five new violations and 
corresponding penalties to the CMPL. These new violations and the 
corresponding penalties are at proposed Sec. Sec.  1003.200(b)(6)-(10), 
1003.210(a)(6)-(9), and 1003.210(b)(3). In general, the proposed 
regulatory text closely mirrors the statutory text. However, we 
supplement the statutory text where appropriate. Section 6402(d)(2)(A) 
of the ACA amends the CMPL by adding a violation for knowingly making 
or causing to be made ``any false statement, omission, or 
misrepresentation of a material fact in any application, bid, or 
contract to participate or enroll as a provider of services or a 
supplier under a Federal health care program.'' (Emphasis added.) ACA 
does not, however, include the word ``omission'' in its description of 
the penalty and assessment for this violation. To give full effect to 
the amendment adding ``omission'' to the CMPL, we have added the word 
``omission'' in the penalty and assessment sections.
    Also, we proposed clarifying the penalty under the CMPL, as amended 
by section 6402(d)(2) of the ACA, for failure to report and return 
overpayments. Under the amended section 1128J(d) of the Act, 
overpayments must be reported and returned by the later of 60 days 
after the date the overpayment was identified or the date any 
corresponding cost report is due, if applicable. The new CMPL authority 
under section 1128A(a)(10) of the Act does not contain a specific 
penalty amount, but instead uses the default penalty amount in the 
CMPL, which is up to $10,000 for each item or service. In this context, 
we proposed regulatory text interpreting the CMPL's default penalty as 
up to $10,000 for each day a person fails to report and return an 
overpayment by the deadline in section 1128J(d) of the Act. Because the 
failure to report and return overpayments within 60 days of 
identification is based on the 60-day period passing, we believed that 
the penalty could be interpreted to attach to each following day that 
the overpayment is retained. However, as we noted in the proposed rule, 
Congress specified a per day penalty in sections 1128A(a)(4) and (12) 
of the Act and did not do so for section 1128A(a)(10) of the Act. Thus, 
we solicited comments on whether to interpret the default penalty of up 
to $10,000 for each item or service as pertaining to each claim for 
which the provider or supplier identified an overpayment. As discussed 
below in our response to comments, we are finalizing the rule using the 
default penalty amount in the CMPL, which is up to $10,000 for each 
item or service.
    Section 6408(a)(2) of the ACA amended the CMPL by adding a 
violation for failure to grant timely access, upon reasonable request, 
to OIG for the purpose of audits, investigations, evaluations, or other 
statutory functions. Section 1128(b)(12) of the Act and 42 CFR 
1001.1301 authorize exclusion based on similar, but not identical, 
conduct -- failure to grant immediate

[[Page 88342]]

access. We believe Congress expanded OIG's authority to exclude, and 
created an authority to impose a penalty, in a broader set of 
circumstances than covered by section 1128(b)(12) of the Act by using 
the phrase ``timely access'' in section 6408(a)(2) of the ACA. Thus, we 
believe conduct that implicates section 1128(b)(12) of the Act is a 
subset of the conduct implicated by the new CMPL authority created by 
section 6408(a)(2) of the ACA. In these situations, OIG has the 
discretion to choose whether to pursue exclusion under section 
1128(b)(12) of the Act or penalties and/or exclusion under section 
6408(a)(2) of the ACA. In drafting regulations pursuant to section 
6408(a)(2) of the ACA, we evaluated the conduct covered by section 
1128(b)(12) of the Act to ensure that this proposed rule is consistent 
with Sec.  1001.1301.
    The proposed definitions of ``failure to grant timely access'' and 
``reasonable request'' give OIG flexibility to determine the period in 
which a person must respond to a specific request for access, depending 
on the circumstances. Given the different purposes for which OIG may 
request access to material, such as audits, evaluations, 
investigations, and enforcement actions, we believe the best approach 
is for OIG to specify the date for production or access to the material 
in OIG's written request. In making this decision, OIG will consider 
the circumstances of the request, including the volume of material, 
size and capabilities of the party subject to the request, and OIG's 
need for the material in a timely way to fulfill its responsibilities. 
The exception to this approach is a case in which OIG has reason to 
believe that the requested material is about to be altered or 
destroyed. Under those circumstances, timely access means access at the 
time the request is made. This exception is the same as provided in 
Sec.  1001.1301.
    Finally, we proposed revisions to the regulation's aggravating 
factors for CMPL violations. The aggravating factors listed in proposed 
Sec.  1003.220 are based on those that apply to the violations in the 
existing regulations. We proposed moving the aggravating factors to one 
section and consolidating similar factors into one factor. For 
instance, the first aggravating factor, i.e., the violations were of 
several types or occurred over a lengthy period, was found at Sec.  
1003.106(b)(1)(i). We interpret the phrase ``several types'' to 
include, but not be limited to, billing for services that are covered 
by different billing codes. The final aggravating factor relates to the 
amount or type of financial, ownership, or control interest, or the 
degree of responsibility a person has in an entity with respect to 
actions brought under Sec.  1003.200(b)(3). While we will consider 
whether a person is a CEO or a manager, job titles alone will not guide 
our consideration of this factor; we will look at the degree of 
responsibility and influence that a person has in an entity.
    We received the following comments on this subpart. To the extent 
provisions of the proposed rule are not addressed in the comments 
below, we are finalizing this section of the rule, as proposed.
    Comment: We received many comments supporting the creation of the 
alternate methodology for calculating assessments for employing or 
contracting with an excluded individual in violation of section 
1128A(a)(6) of the Act. Some commenters argued against a per-day 
penalty. First, commenters argued that the assessment adequately 
addresses the misconduct and a per-day penalty seems duplicative. 
Second, commenters argued that liability should be related to the cost 
of the items and services and may not be rationally related to the 
number of days an individual was employed by, or contracted with, the 
entity. Third, commenters argued that a per-day penalty is contrary to 
the plain language of the Act because Congress created other per-day 
penalties in the CMPL but did not create one in section 1128A(a)(6) of 
the Act. Finally, commenters maintained that the proposed method of 
calculating the assessment for contracting with or employing an 
excluded individual whose services are not separately billable to 
Federal health care programs already adequately takes into 
consideration the length of time of the prohibited relationship. A 
longer period of the prohibited relationship would result in more 
salary and benefits paid to the person, and thus would increase the 
value of the assessment.
    Response: After considering the comments, we are withdrawing the 
proposed per-day penalty for section 1128A(a)(6) of the Act. Instead, 
we are finalizing a penalty of up to $10,000 for each item or service 
provided by the excluded person by removing proposed Sec.  
1003.210(a)(4)(ii) and adding ``non-separately billable'' items or 
services to proposed Sec.  1003.210(a)(4)(i). This penalty more closely 
tracks the Act's language.
    Comment: Many commenters urged OIG to take into account the Federal 
health care program payor mix, or percentage of Federal health care 
program business, when determining the assessment for employing or 
contracting with an excluded individual. Commenters argued that using a 
pro-rata share of the compensation would more fairly capture the 
portion of time the excluded person likely spent providing items or 
services to Federal health care program beneficiaries in violation of 
their exclusion. These commenters noted that OIG outlined this practice 
in the 2013 Updated Provider Self-Disclosure Protocol.
    Response: We are finalizing the rule, as proposed. We continue to 
believe that the Federal health care program payor mix is appropriate 
to consider in the context of a self-disclosure, and OIG will continue 
to consider it in settlements, as appropriate. Nevertheless, we have 
decided not to require the consideration of payor mix in the 
regulations. The appropriate way to measure payor mix is not always 
clear for the many types of providers, suppliers, items, and services 
at issue in various cases. Further, there may be cases for which a 
reduction of the assessment based on payor mix is not appropriate. We 
view our approach to this CMP as analogous to the CMP for violations of 
the anti-kickback statute. Under Sec.  1003.310(b)(2), OIG may seek 
damages of up to three times the amount of remuneration regardless of 
whether some of the remuneration was for a lawful purpose. 
Nevertheless, in self-disclosures and other settlements, we often 
collect a multiplier based only on the portion of the remuneration that 
we determine was for an unlawful purpose. We anticipate continuing a 
similar approach under this CMP authority.
    Comment: Several commenters objected to our proposed reading of the 
penalty and assessment sections applicable to violations of section 
1128A(a)(9) of the Act, as established by section 6402(d)(A) of the 
ACA, to include ``omissions.'' Those commenters argued that our reading 
went beyond the authority of the ACA because Congress did not include 
the term ``omissions'' in the penalty language.
    Response: We respectfully disagree with the commenters. Adopting 
the commenters' suggested reading would lead to the conclusion that 
Congress intended to restrict OIG to pursuing an exclusion action only 
against those who omitted a material fact and intended to permit OIG to 
choose between pursuing penalties, assessments, and exclusions against 
those who made a false statement or misrepresentation of a material 
fact. This reading leads to an absurd result. Instead, we are 
interpreting this provision consistent with the purpose and intent of 
the statute.

[[Page 88343]]

    Comment: Some commenters requested that OIG clarify that liability 
for omission of a material fact under Section 1128A(a)(9) of the Act 
apply only to willful omissions so that the regulations not capture 
clerical errors or omissions where there was no intention to deceive. 
Specifically, commenters encouraged us to delete the reference to 
``omissions'' or at a minimum use the term ``willful omissions'' until 
a greater degree of standardization among Medicare contractors and 
their processes and interpretations is achieved. Commenters argued that 
the proposed definitions of ``knowingly'' and ``should know, or should 
have known'' where ``no proof of specific intent to defraud is 
required'' may result in a violation based on an error or oversight.
    Response: We do not believe the commenters' suggestion conforms to 
the statute. To violate section 1128A(a)(9) of the Act, a person must 
knowingly make a false statement, omission, or misrepresentation of 
material fact. We believe the commenters' concerns are addressed by the 
evidentiary standard OIG must meet to bring such a case. In addition, 
OIG will continue to evaluate the nature and circumstances of the 
conduct and exercise discretion in deciding whether to pursue a case. 
The OIG will not pursue cases under this section based on inadvertent 
(non-reckless) errors and minor oversights.
    Comment: Some commenters urged OIG to further specify the standards 
it will use to determine penalties, assessments, or exclusion imposed 
under section 1128A(a)(9) of the Act. Commenters stated that 
clarification is needed to understand whether this new authority could 
apply to simple documentation errors. Commenters believed that such 
mistakes would not be done ``knowingly.'' According to commenters, 
documentation errors are common--not because of deliberate physician 
misrepresentation, but because of frequent changes in the requirements 
for applications, contracts, and other agreements that may lead to 
confusion and miscommunications.
    Response: We do not believe further guidance is appropriate in this 
context. We are unable to anticipate all potential factual scenarios in 
this rulemaking. We believe our traditional evaluation of the nature 
and circumstances of the conduct and exercise of discretion will inform 
whether to pursue an individual enforcement action. As previously 
stated, it is not OIG's intention to pursue cases under this section 
for inadvertent (non-reckless) errors or minor oversights.
    Comment: One commenter stated that the $50,000 penalty amount set 
forth in Sec.  1003.210(a)(6) for knowingly making a false statement, 
omission, or misrepresentation of a material fact seemed excessive, and 
should be reconsidered by OIG and that, if levying a heavy penalty is 
authorized, the application should be as narrow and temperate as 
possible.
    Response: The penalty amount is statutory. We will continue to 
engage in our traditional evaluation of the nature and circumstances of 
the conduct and exercise of discretion in deciding to pursue cases and 
determine appropriate penalty amounts.
    Comment: Many commenters disagreed with our proposed per-day 
penalty for failure to report and return an overpayment in violation of 
section 1128A(a)(10) of the Act. Commenters noted that Congress has 
created per-day penalties for two different sections of section 1128A 
of the Act and did not do so here. One of these two sections, failure 
to grant timely access to OIG, was enacted as part of the ACA, in which 
the overpayment authority was also enacted. The commenters argued that 
if Congress had intended to create a per-day penalty for section 
1128A(a)(10) of the Act, it would have expressly done so in the ACA. In 
addition, some commenters stated that a per-day approach could lead to 
large penalties that may not be commensurate with the value of the 
underlying overpayment. Most commenters asserted that the penalty for 
overpayments should be the CMPL's default penalty of up to $10,000 for 
each item or service. Some commenters recommended a per-claim penalty 
calculation, rather than a per-day or per item or service calculation. 
Other commenters argued OIG should consider the lateness and size of 
overpayment in determining the penalty amount.
    Response: After careful consideration, we are finalizing the 
penalty for section 1128A(a)(10) of the Act as up to $10,000 for each 
item or service. This penalty methodology is the statutory default. 
Where a person fails to return the overpayment for a lengthy period, 
the general aggravating factor under Sec.  1003.220(b)(1) could be 
triggered.
    Comment: Some commenters encouraged OIG to adopt a penalty scale 
for violations of section 1128A(a)(10) of the Act that would penalize 
providers more gravely for more serious violations. Commenters suggest 
that such a scale could be based on the length of delay, overpayment 
amount, and the number of claims.
    Response: The factors set forth in Sec.  1003.140 and Sec.  
1003.220 provide a framework to identify more egregious conduct and 
determine appropriate penalty amounts. The general factor of nature and 
circumstances would naturally take into account such factors as the 
length of time the provider or supplier knew it had received an 
overpayment and Sec.  1003.220 states that an overpayment in an amount 
over $50,000 may be considered as an aggravating circumstance.
    Comment: Commenters from pharmacy organizations expressed concerns 
with the proposed penalty under section 1128A(a)(10) of the Act of 
$10,000 per day for each ``claim.'' Commenters argued that the proposed 
rule would affect pharmacies more than other providers because 
pharmacies dispense billions of low-cost medications each year and, 
therefore, any potential penalty would be disproportional to the injury 
caused. Instead of a $10,000 penalty on each prescription, the 
commenters suggested that OIG examine other alternatives for 
calculating a penalty for pharmacies and other entities that submit 
many small ``claims.'' Examples of potential solutions include 
calculating the penalty at $10,000 per day regardless of the number of 
individual prescription claims involved, or assessing a penalty in 
proportion to the overall dollar amount of the overpayment.
    Response: Based on our evaluation of all the comments on this 
issue, we are finalizing the penalty as up to $10,000 for each item or 
service. In the case of pharmacies, each prescription would be 
considered an item, and thus pharmacies have exposure of up to $10,000 
for each prescription for which the pharmacy received an overpayment. 
This is the result compelled by the statute. We will evaluate the facts 
and circumstances in each case to determine the appropriate penalty 
amount.
    Comment: Some commenters from Part D plan sponsors expressed 
concerns about the use of per-day, per-claim, or per-item or service 
penalties in the context of Part D prescription drug claims. Given the 
huge volume of daily prescription drug events (PDEs), which are not 
equivalent to final medical claims, commenters believed that the 
application of CMPs in Part D should focus on the ``annual cost 
report'' and not on individual PDEs. According to commenters, Part D 
drug claims are not final until both the annual reconciliation and the 
final reopening are completed. Commenters recommended that OIG clarify 
that, in the context of Part D, determination of the penalty amount 
should be based on

[[Page 88344]]

the ``annual cost report'' submitted by Part D sponsors and not on 
individual PDEs. Further, commenters argued that OIG should clarify 
that a PDE is not a claim until it has gone through reconciliation and 
the final reopening has been completed.
    Response: We are finalizing the penalty for section 1128A(a)(10) of 
the Act, using the CMPL default of up to $10,000 for each item or 
service. This penalty is consistent with the final rule adopted by CMS 
regarding Part D overpayments. See 79 FR 29,844. In adopting that rule, 
CMS declined to make the deadline for reporting and returning 
identified overpayments the ``date any corresponding cost report is 
due'' because ``Part D sponsors are paid based on their bids, and not 
based on their actual incurred costs.'' 79 FR at 29,920. In determining 
an overpayment, CMS focuses on the submission of erroneous PDE data, 
and those data constitute claims for items or services under the CMPL.
    Comment: Some commenters suggested that OIG does not recognize 
CMS's role in overseeing section 1128J of the Act, as applicable to 
Part C plans or Part D plan sponsors, pursuant to 42 CFR 422.326 and 
423.360. One commenter suggested that OIG defer to CMS on overpayment 
issues and reserve its authority for instances of egregious behavior.
    Response: While CMS oversees Part C plans and Part D plan sponsors 
under its regulations, OIG has been delegated the authority for 
enforcement of section 1128A of the Act. Thus, we decline to adopt the 
commenter's suggestion.
    Comment: Several commenters suggested that for Part C plans and 
Part D plan sponsors, compliance with CMS's final rule, 79 FR 29,844 
(May 23, 2014), should be deemed compliance with section 1128A(a)(10) 
of the Act. Specifically, commenters recited the language of that final 
rule and stated that a Medicare Advantage organization has identified 
an overpayment when that organization has determined, or should have 
determined through the exercise of reasonable diligence, that it has 
received an overpayment. Commenters stated that the phrase ``or should 
have determined through the exercise of reasonable diligence'' has 
caused great concern among health plans because there is no guidance 
for plans to follow and plans are exposed to potential FCA liability if 
they do not comply. According to commenters, this lack of clarity means 
that plans can act in good faith but still be subject to liability if 
their actions are later found to not meet the ``reasonable diligence'' 
test. In light of these uncertainties regarding compliance with the 
Part C and Part D rule, commenters requested that OIG's rule clarify 
that compliance with such rule will be deemed compliance with OIG 
requirements.
    Response: This suggestion is outside the scope of our rulemaking, 
which did not propose to interpret the CMS final rule concerning Part C 
plans and Part D plan sponsors. In the context of section 1128A(a)(10) 
of the Act, a plan or plan sponsor may be liable if it knows of an 
overpayment and did not report and return it in accordance with section 
1128J of the Act.
    Comment: Several commenters asked that OIG clarify the definition 
of ``overpayment.'' One commenter suggested that OIG should use CMS's 
definition of ``funds'' in the Part C and D final rule, 79 FR 29,844 
(May 23, 2014). One commenter also asked that we clarify the 
application of section 1128A(a)(10) of the Act in situations in which 
the plan is not at fault for the overpayment, such as when CMS makes a 
retroactive change to a member's low-income status that triggers 
changes in the low-income subsidy payments for cost sharing and 
premiums or affects the coverage gap discount program.
    Response: We are finalizing the definition, as proposed. The 
proposed regulatory text simply mirrors the statute. In the context of 
Parts C and D, CMS has interpreted the meaning of ``overpayment,'' and 
we are required to apply the same meaning in an enforcement action 
against a Part C plan or Part D plan sponsor under section 1128A(a)(10) 
of the Act. This regulation also applies to Medicare Parts A and B and 
to Medicaid, so we believe the overpayment definition in our 
regulations should be broad enough to cover all of the programs. 
Commenters' other suggestions are outside the scope of this rulemaking. 
Plans should refer to CMS's May 2014 final rule, 79 FR 29,844 (May 23, 
2014), in self-assessing their compliance with reporting and returning 
overpayments.
    Comment: Several commenters requested clarification as to when the 
60-day period begins. Commenters also requested clarification of the 
term ``identify.'' Some commenters suggested that OIG not impose CMPs 
for overpayments, or alternatively, defer issuance of this final rule, 
until CMS finalizes its Part A/B overpayment proposed rule, 77 FR 9179 
(February 16, 2012), which, among other things, defines when an 
overpayment has been identified. A few commenters suggested that OIG 
use the term ``confirmed'' rather than ``identify'' because some 
providers and suppliers have complex billing processes that require 
coordination with other providers and suppliers. For example, for air 
ambulances, additional information and documentation are needed from 
other providers to determine the correct amount of an overpayment. 
Commenters encouraged OIG to include in the final rule a clear standard 
as to when the 60-day period begins and to exercise discretion in 
enforcing this authority so that providers and suppliers are not 
harshly penalized when good faith efforts to meet the 60-day rule are 
made but delays occur because of the action or inaction of entities 
beyond the providers' or suppliers' control.
    Response: We will continue to evaluate the nature and circumstances 
of the conduct and the exercise of discretion when deciding whether to 
pursue a case. The obligations of section 1128J(d) of the Act became 
effective upon enactment, without a final rule from CMS. However, CMS 
published its final rule on February 12, 2016. 81 FR 7654 (February 12, 
2016). The comments asking OIG to defer issuance of its final rule are 
therefore moot. We do not in this regulation provide definitions for or 
clarify the meaning of ``identify'' or clarify when the 60-day period 
begins. These topics are within CMS's purview and are included in its 
final rule. 81 FR at 7683.
    Comment: Some commenters stated that providers should not be 
penalized under section 1128A(a)(10) of the Act in cases in which good 
faith efforts to return overpayments could not be completed because of 
the inability of government contractors and their payment systems to 
receive the overpayment. The commenters complained that Medicare, 
Medicaid, and Medicaid managed care organizations (Medicaid MCOs) have 
payment process systems that can both cause overpayments and that can 
prevent providers from promptly returning overpayments. The commenters 
contended that when a provider discovers an overpayment and attempts to 
return it to a Medicaid MCO, if the Medicaid MCO has not yet corrected 
the system error that led to the overpayment, the Medicaid MCO may be 
unable accept the returned overpayment. The commenters argue that this 
leaves the provider with no avenue for the prompt return on the 
overpayment.
    Response: As stated above, CMS is responsible for issuing 
regulations concerning section 1128J(d) of the Act and, thus, these 
comments are outside the scope of this rulemaking. As they relate to 
OIG's enforcement of section 1128A(a)(10) of the Act, we will consider 
the nature and circumstances

[[Page 88345]]

of each alleged violation in determining whether to bring an 
enforcement action and at what amount to set the penalty and 
assessment. In situations in which a person attempts to return an 
overpayment but a Medicare contractor, Medicaid, or a Medicaid MCO 
rejects the returned overpayment at no fault of the person, it is 
unlikely that OIG would pursue an action.
    Comment: One commenter suggested that, when OIG begins imposing 
CMPs under section 1128A(a)(10) of the Act, OIG should impose CMPs of 
not more than $5,000 until OIG has more experience analyzing violations 
of that section.
    Response: We respectfully disagree with the commenter's suggestion. 
The obligations under section 1128J(d) have been in effect since the 
statute was enacted in March 2010. As with all other cases, OIG will 
determine the amount of the penalty and assessment pursuant to the 
criteria set forth in Sec.  1003.140 and Sec.  1003.220.
    Comment: Several commenters suggested that OIG exercise its 
authority under section 1128A(a)(10) of the Act in coordination with 
CMS to ensure that: (1) Providers' obligations are uniform across these 
agencies; and (2) actions by OIG and CMS are undertaken 
contemporaneously to ensure that the associated administrative burden 
on providers is minimized.
    Response: The OIG coordinates regularly with CMS on various program 
integrity efforts, including, as appropriate, on OIG administrative 
enforcement actions. As with many Medicare and Medicaid subject areas, 
CMS issues regulations on the 60-day repayment rule in section 1128J(d) 
and OIG is authorized to pursue administrative sanctions against those 
that violate the rule. However, as set forth in Sec.  1003.150, we have 
been delegated the enforcement responsibility for section 1128A(a)(10) 
of the Act.
    Comment: Two commenters requested that we clarify that penalties 
for violation of section 1128A(a)(10) of the Act set forth in the rule 
are the maximum allowed, leaving discretion to OIG to levy smaller 
penalties, or no penalties, in cases in which providers are acting in 
good faith or the delays in repayment are beyond the control of the 
provider.
    Response: We believe that the proposed rule's language, which we 
are finalizing, is clear on this point. All penalties in the proposed 
rule are described as ``not more than'' the applicable penalty amount.
    Comment: Several commenters requested that OIG clarify that the CMP 
at Sec.  1003.200(b)(6), regarding excluded persons who order or 
prescribe an item or service that will be paid for by a Federal health 
care program, applies only to the excluded person and not to the person 
who provides the service. Some of these commenters mentioned the 
example of an air ambulance provider who, as an emergency responder, 
responds only at the request of physicians to transport a patient to a 
different facility, or when called to an accident scene by the 
Emergency Medical System or other qualified dispatcher. In such an 
emergent situation, commenters stated it is nearly impossible for 
transport providers to know the exclusion status of those who ordered 
or prescribed the transport. One commenter acknowledged that the 
service itself will likely be considered non-covered, which would 
result in the provider having received an overpayment, but argued that 
the imposition of a CMP in addition to the overpayment would be unduly 
harsh.
    Response: We agree that, based on a plain reading of the statutory 
language, the CMP authority at Sec.  1003.200(b)(6) would be imposed 
against the excluded person who ordered or prescribed the item or 
service, not against the person who provided or supplied the items or 
services that were ordered or prescribed. With regard to emergency 
services, section 1862 of the Act and Sec.  1001.1901(c)(5) allow 
payment for emergency items or services not provided in an emergency 
room of a hospital in certain circumstances. Also, under section 1862 
of the Act and Sec.  1001.1901, items and services ordered or 
prescribed by an excluded person are not payable only if the person 
furnishing such item or service knew or had reason to know of the 
exclusion.
    Comment: Some emergency transport providers requested clarification 
that an emergency transport provider would not violate section 
1128A(a)(1)(B) of the Act or Sec.  1003.200(a)(2) for presenting a 
false or fraudulent claim when it relies upon a facially valid order to 
provide services. According to commenters, because of the emergency 
situation, there is little time to check the exclusion status of the 
ordering physician and no ability to refuse to provide the emergency 
services. Commenters recommended adding specific language to the 
regulations stating that, in the case of emergency services or 
transport, the provider or supplier would not be held liable for 
knowingly presenting such a claim if the ordering or prescribing 
physician was excluded.
    Response: We decline to adopt the commenters' recommendation. If 
the provider or supplier knew or had reason to know that the ordering 
physician was excluded, the provider or supplier also knew or should 
have known that the claim for those emergency services is not payable. 
Submitting that claim could subject the provider or supplier to 
liability under Sec.  1003.200(a)(2). In our experience, we have not 
seen a case in which an air ambulance provider submitted claims for 
emergency transportation ordered by an excluded individual and we 
believe such circumstances would be rare. We will continue to evaluate 
cases individually and use our discretion in determining which cases to 
pursue.
    Comment: Several commenters expressed concern about the aggravating 
factor at Sec.  1003.220(b)(3) relating to the amount of program loss. 
Specifically, the commenters suggested that OIG continue to use the 
``substantial loss'' threshold in applying this aggravating factor 
instead of the proposed ``$15,000 or more'' threshold. The commenters 
viewed $15,000 as relatively low and argued that it would unfairly 
apply more often to providers who bill for expensive items or services. 
The commenters asserted that a specific overpayment threshold may have 
no correlation to the number of claims in error or the significance of 
the issue giving rise to the overpayment, and argued that it should not 
automatically be considered an aggravating factor in determining the 
amount of penalties and assessments levied against the provider. 
Therefore, these commenters suggested that OIG maintain the flexibility 
to determine, on a case-by-case basis, what is a ``substantial loss.'' 
Other commenters agreed with the proposal to change ``substantial 
loss'' to ``$15,000 or more'' because it provided transparency and 
better guidance to the provider community.
    Response: We believe that a specific dollar threshold gives clearer 
guidance to the provider and supplier community and still permits the 
traditional case-by-case analysis of the facts and circumstances as 
discussed above. We agree, however, with those commenters who stated 
that the proposed $15,000 threshold is low. We have, instead, raised 
the ``substantial loss'' threshold to $50,000. Based on our experience 
resolving health care fraud matters, we believe $50,000 better reflects 
the threshold amount of loss for when a penalty or period of exclusion 
should be increased.
    Comment: Some commenters opposed the proposed change to the 
aggravating factor in proposed Sec.  1003.220(b)(4), which would amend 
existing Sec.  1003.106(b)(1)(iv) to include situations

[[Page 88346]]

in which the violation ``could have resulted'' in patient harm, 
premature discharge, or a need for additional services or subsequent 
hospital admission. These commenters complain that the ``could have 
resulted'' language requires OIG to establish only the mere possibility 
of harm, regardless of what actually occurred. Commenters believed that 
this change would vastly expand the application of this aggravating 
factor and urged OIG to retain the existing language at Sec.  
1003.106(b)(1)(iv).
    Response: We are finalizing the rule, as proposed. The existing 
regulation requires proof that the violation actually caused patient 
harm, premature discharge, or a need for additional services or 
subsequent hospital admission. This formulation is overly constrained 
for several reasons. The CMP authorities in this part, as a general 
matter, aim to redress fraud on the Federal health care programs by 
recovering funds, protecting the programs and beneficiaries from 
untrustworthy providers and suppliers, and deterring improper conduct 
by others. Accordingly, it is highly relevant if the conduct put 
beneficiaries at risk of patient harm. The requirement that OIG prove 
causation does not conform to this aim.
    Comment: Several commenters objected to the proposed definition of 
``reasonable request'' with respect to Sec.  1003.200(b)(10). 
Commenters asked OIG to add to the definition that a request is not 
reasonable unless the recipient has a reasonable period of time to 
respond, taking into account the recipient's resources, regular 
business hours, availability, the location of the records, and the 
complexity and scope of the request. Commenters also asked OIG to 
include an objective, minimum period for compliance, such as 2 weeks or 
10 days. Some commenters suggested that OIG include an exception to 
that minimum period when there is a demonstrated need for a faster 
response. One commenter asked OIG to use discretion when a recipient of 
a request, acting in good faith, does not meet the specified timelines.
    Response: We do not believe a minimum period is necessary or 
appropriate in this context. Given the different purposes for which OIG 
may request access to material, such as audits, evaluations, 
investigations, and enforcement actions, we believe the best approach 
to defining timely access and reasonable request is for OIG to specify 
the date for production or access to the material in a written request. 
In determining the period a provider has to comply with the request, 
OIG will consider the circumstances of the request, including the 
volume of material, size and capabilities of the party subject to the 
request, and OIG's need for the material in a timely way to fulfill its 
responsibilities. The exception to this approach is a case in which OIG 
has reason to believe that the requested material is about to be 
altered or destroyed. Under those circumstances, timely access means 
access at the time the request is made.
    Comment: Some commenters noted that a ``reasonable request'' must 
be ``made by a properly identified agent of OIG during reasonable 
business hours,'' but that the definition does not specify whether it 
refers to OIG's or the recipient's business hours. Commenters urged OIG 
to clarify that the request must be made during the recipient's regular 
business hours and when the recipient's office is open to the public.
    Response: ``Reasonable business hours'' means the recipient's 
business hours. This time includes when the recipient holds itself out 
to the public as open, such as for appointments or walk-in customers. 
However, a recipient may also conduct its business outside of the times 
when it is open to the public. We are finalizing the definition, as 
proposed.
    Comment: One commenter expressed concern about OIG's authority to 
exclude a provider under Sec.  1003.200(b)(10), asserting that OIG 
requests for information could get lost among other mail in light of 
the number of entities that request medical documentation from 
providers to validate services and payment. The commenter asked that a 
single, recognizable standard be put in place to clearly identify a 
request from OIG or any other auditing entity.
    Response: We do not believe that such a single standard needs to be 
put in place. The OIG requests for information are clearly identifiable 
as being from OIG. The requests are made in writing, appear on OIG 
letterhead, and are signed by OIG officials.
Subpart C--CMPs, Assessments, and Exclusions for Anti-Kickback and 
Physician Self-Referral Violations
    Subpart C contains the provisions relating to violations of the 
anti-kickback statute and physician self-referral law, which were found 
in the existing regulations at Sec.  1003.102(a)(5), (b)(9), (b)(10), 
and (b)(11). The proposed changes include various technical corrections 
to improve readability and ensure consistency with the language in the 
anti-kickback statute and physician self-referral law.
    We proposed revising the CMP provisions relating to the physician 
self-referral law to incorporate statutory terms that are unique to the 
physician self-referral law (section 1877 of the Act (42 U.S.C. 
1395nn)). These revisions include using ``designated health service'' 
instead of ``item or service'' and ``furnished'' instead of 
``provided.'' In addition, we proposed revising the authority regarding 
``cross-referral arrangements'' that was in the existing regulations at 
Sec.  1003.102(b)(10) to more closely reflect the statutory language. 
Section 1877(g)(4) of the Act provides for CMPs and exclusion against 
any physician or other person who enters into any arrangement or scheme 
(such as a cross-referral arrangement) that the physician or other 
person knows, or should know, has a principal purpose of ensuring 
referrals by the physician to a particular person who, if the physician 
directly made referrals to such person, would violate the prohibitions 
of 42 CFR 411.353. The regulations, at Sec.  1003.102(b)(10)(i), 
contained an example of a cross-referral arrangement whereby the 
physician-owners of entity ``X'' refer to entity ``Y'' and the 
physician-owners of entity ``Y'' refer to entity ``X'' in violation of 
42 CFR 411.353. While this is one example of a cross-referral 
arrangement, such arrangements and circumvention schemes can take a 
variety of forms. The proposed changes to the regulatory language more 
closely align the regulations to the statute to avoid any 
misinterpretation that Sec.  1003.102(b)(10)(i) limited the conduct 
that circumvents the prohibitions of the physician self-referral law.
    The proposed changes also include minor technical corrections to 
the CMPs related to the anti-kickback statute to improve consistency 
with the statute. First, we added the phrases ``to induce'' and ``in 
whole and in part'' to Sec.  1003.300(d) to better mirror the statutory 
language of the anti-kickback statute. The proposed change also 
clarified that the CMP at section 1128A(a)(7) of the Act permits 
imposing a penalty for each offer, payment, solicitation, or receipt of 
remuneration and that each action constitutes a separate violation. In 
addition, we included the language from the CMPL stating that the 
calculation of the total remuneration for purposes of an assessment 
does not consider whether any portion of the remuneration had a lawful 
purpose.
    We received no comments and finalize this subpart, as proposed, 
except that, for the reasons provided in response to comments to 
proposed Sec.  1003.220(b)(3), we increased the threshold for the 
aggravating factor at

[[Page 88347]]

Sec.  1003.302(b)(3) from $15,000 to $50,000.
Subpart D--CMPs and Assessments for Contracting Organization Misconduct
    Subpart D contains the proposed provisions for penalties and 
assessments against managed care organizations. We proposed several 
stylistic changes to the existing regulations at Sec.  1003.103(f). We 
changed the verbs in this subpart from past tense to present tense to 
conform to the statutory authorities and many other regulations in this 
part. The proposed regulation also removes superfluous phrases, such as 
``in addition to'' or ``in lieu of other remedies available under 
law.'' The proposed regulation replaced references to ``an individual 
or entity'' with ``a person'' because ``person'' is defined in the 
general section as an individual or entity. The proposed regulation 
also removes the phrase ``for each determination by CMS.'' The OIG may 
impose CMPs in addition to or in place of sanctions imposed by CMS 
under its authorities.
    We also added to the regulations OIG's authority to impose CMPs 
against Medicare Advantage contracting organizations pursuant to 
section 1857(g)(1) of the Act and against Part D contracting 
organizations pursuant to section 1860D-12(b)(3) of the Act.
    The ACA amended several provisions of the Act that apply to 
misconduct by Medicare Advantage or Part D contracting organizations. 
We included these provisions in the proposed regulations. We added the 
change in section 6408(b)(2)(C) of the ACA regarding assessing 
penalties against a Medicare Advantage or Part D contracting 
organization when its employees or agents, or any provider or supplier 
that contracts with it, violates section 1857 of the Act. We proposed 
to add the five new violations created in the ACA, and their 
corresponding penalties, at Sec.  1003.400(c). We also proposed to 
include the new assessments, which are available for two of the five 
new violations, at Sec.  1003.410(c). The proposed regulatory text 
closely mirrors that of the statute.
    The violations in this subpart are grouped according to the 
contracting organizations to which they apply. For instance, Sec.  
1003.400(a) violations apply to all contracting organizations. Section 
1003.400(b) violations apply to all Medicare contracting organizations, 
i.e., those with contracts under sections 1857, 1860D-12, or 1876 of 
the Act. Section 1003.400(c) violations apply to Medicare Advantage and 
Part D contracting organizations, i.e., those with contracts under 
sections 1857 or 1860D-12 of the Act. Section 1003.400(d) violations 
apply to Medicare Advantage contracting organizations, i.e., those with 
contracts under section 1857 of the Act. Section 1003.400(e) violations 
apply to Medicaid contracting organizations, i.e., those with contracts 
under section 1903(m) of the Act.
    We also proposed to remove the definition of ``violation,'' which 
was found at Sec.  1003.103(f)(6), because throughout this part, 
violation means each incident or act that violates the applicable CMP 
authority. We also proposed including aggravating circumstances to be 
used as guidelines for taking into account the factors listed in 
proposed Sec.  1003.140. These aggravating circumstances are adapted 
from those listed in the existing regulations at Sec. Sec.  
1003.106(a)(5) and 1003.106(b)(1) and those published in the Federal 
Register in July 1994. 59 FR 36072 (July 15, 1994).
    We received the following comments on the subpart. As discussed in 
response to the comments, we are finalizing this section of the rule as 
proposed.
    Comment: One commenter argued that certain alleged violations of 
Sec.  1003.410(d) by a contracting provider or supplier might not 
entirely be the responsibility of that provider and supplier, but 
rather the result of pressures from the Part C plans. The commenter 
asked that OIG not permit Part C plans to avoid responsibility under 
Sec.  1003.410(d) through indemnity clauses in the plans' contracts 
with providers and suppliers.
    Response: This comment is outside the scope of our rulemaking. The 
OIG does not have regulatory authority over the programmatic aspects of 
the Part C and Part D programs, which would include setting limitations 
on or requirements for contracting organizations' relationships with 
providers and suppliers. CMS has this programmatic authority, which 
includes, among many other things, implementing the provider 
indemnification limitations contained in section 1852 of the Act and at 
42 CFR 422.212.
    Comment: Two commenters expressed concern with the overlapping 
enforcement authority of OIG and CMS with regard to Part D contracting 
organizations. The commenters argued that this overlap could subject 
Part D contracting organizations to duplicative enforcement actions, 
multiple audits of the same activities, and potentially inconsistent 
standards and interpretations of regulatory requirements. The 
commenters recommended that CMS be the sole enforcement authority with 
respect to those areas for which OIG and CMS share jurisdiction, except 
in cases in which OIG's unique investigative authority is necessary to 
determine non-compliance. One commenter recommended that OIG state that 
compliance with the Part D requirements, when assessed by CMS, will be 
deemed to be compliance with OIG's enforcement authorities. The 
commenter argued that, if CMS has already performed audits and other 
oversight activity, there is no reason for OIG to duplicate this work.
    Response: We do not agree with the comments. The OIG and CMS have 
concurrent jurisdiction in various matters concerning the Medicare 
program, including this area. CMS and OIG have internal mechanisms in 
place to ensure that the other agency within the Department is not 
simultaneously pursuing a CMP for the same or similar conduct. The OIG 
will continue to coordinate appropriately with CMS on potentially 
overlapping CMP enforcement actions.
    Comment: A commenter requested a change in the new authority at 
Sec.  1003.400(b)(2) relating to employing or contracting with an 
excluded person for the provision of health care, utilization review, 
medical social work, or administrative services, or employing or 
contracting with an entity for the provision of such services directly 
or indirectly through an excluded person. Specifically, the commenter 
requested that a plan's liability cease with its employees and direct 
contractors and not extend to the employees or contractors of its 
contractor, whether a health care provider or otherwise. The commenter 
accordingly requested that OIG revise Sec.  1003.400(b)(2) by striking 
the text after the term ``administrative services.'' To support this 
recommendation, the commenter noted that plans contract with numerous 
providers, including health systems, that, in turn, employ or contract 
vast numbers of persons. The commenter argued that plans would not be 
able to identify all of the individuals that a health system employs 
nor the persons with which a health system contracts.
    Response: The proposed regulation mirrors the statutory language. 
Specifically, the ACA created a cause of action against a contracting 
organization that employs or contracts with an excluded person for the 
provision of health care, utilization review, medical social work, or 
administrative services, or employs or contracts with any entity for 
the provision of such services (directly or indirectly) through an 
excluded person. Accordingly, we are

[[Page 88348]]

finalizing this section of the rule, as proposed.
    Comment: A commenter also asserted that OIG's proposed reference to 
``health care, utilization review, medical social work, or 
administrative services'' is overly broad and asked OIG to revise 
``administrative services'' to ``administrative services for a Medicare 
or Medicaid eligible individual.''
    Response: We believe that the commenter's proposed revision is 
inappropriately narrow and does not reflect the statutory language. The 
regulation mirrors the language of the ACA. Second, there may be 
administrative services related to a Federal health care program that 
are not for a specific Medicare- or Medicaid-eligible individual.
    Comment: A commenter requested clarification on the potential 
liability of plans for claims submitted by out-of-network providers or 
suppliers who have no privity of contract with the health plan.
    Response: The CMP authority at Sec.  1003.400(b)(2) does not apply 
to out-of-network providers or suppliers because the plan did not 
employ or contract with that person.
Subpart E--CMPs and Exclusions for EMTALA Violations
    Subpart E contains the penalty and exclusion provisions for 
violations of EMTALA, section 1867 of the Act (42 U.S.C. 1395dd). 
EMTALA was passed in 1986 as part of the Consolidated Omnibus Budget 
Reconciliation Act of 1985 (COBRA), Public Law 99-272. Section 1867 of 
the Act sets forth the obligations of a Medicare-participating hospital 
to provide medical screening examinations to individuals who come to 
the hospital's emergency department and request examination or 
treatment for a medical condition. EMTALA further provides that, if the 
individual has an emergency medical condition, the hospital is 
obligated to stabilize that condition or to arrange for an appropriate 
transfer to another medical facility where stabilizing treatment can be 
provided. EMTALA also requires hospitals with specialized capabilities 
or facilities to accept appropriate transfers of individuals from other 
hospitals. Finally, EMTALA creates obligations for physicians 
responsible for the examination, treatment, or transfer of an 
individual in a participating hospital, including a physician on call 
for the care of that individual. The CMS regulations related to section 
1867 of the Act are found at 42 CFR 489.24.
    Under section 1867(d) of the Act, participating hospitals and 
responsible physicians may be liable for CMPs of up to $50,000 ($25,000 
for hospitals with fewer than 100 State-licensed and Medicare-certified 
beds) for each negligent violation of their respective EMTALA 
obligations. Responsible physicians are also subject to exclusion for 
committing a gross and flagrant or repeated violation of their EMTALA 
obligations. The OIG's regulations concerning the EMTALA CMPs and 
exclusion are at 42 CFR 1003.102(c), 103(e) and 106(a)(4) and (d).
    We proposed several updates to the EMTALA CMP regulations. First, 
as part of our proposed general reorganization, we have included the 
EMTALA authorities within a separate subpart. Further, the proposed 
revision removed outdated references to the pre-1991 ``knowing'' 
scienter requirement. We also proposed minor revisions to emphasize 
that the CMP may be assessed for each violation of EMTALA and that all 
participating hospitals subject to EMTALA, including those with 
emergency departments and those with specialized capabilities or 
facilities, are subject to penalties.
    We proposed revising the ``responsible physician'' definition to 
clarify that on-call physicians at any participating hospital subject 
to EMTALA, including the hospital to which the individual initially 
presented and the hospital with specialized capabilities or facilities 
that has received a request to accept an appropriate transfer, face 
potential CMP and exclusion liability under EMTALA.
    Section 1867(d) of the Act provides that any physician who is 
responsible for the examination, treatment, or transfer of an 
individual in a participating hospital, including any physician on-call 
for the care of such an individual, and who negligently violates 
section 1867 of the Act may be penalized under section 1867(d)(1)(B) of 
the Act. The definition of ``responsible physician'' also provides for 
on-call physician liability. We proposed to revise the definition to 
clarify the circumstances when an on-call physician has EMTALA 
liability. An on-call physician who fails or refuses to appear within a 
reasonable time after such physician is requested to come to the 
hospital for examination, treatment, or transfer purposes is subject to 
EMTALA liability. This includes on-call physicians at the hospital 
where the individual presents initially and requests medical 
examination or treatment as well as on-call physicians at a hospital 
with specialized capabilities or facilities where the individual may 
need to be transferred. In addition, an on-call physician at the 
hospital with specialized capabilities or facilities may violate EMTALA 
by refusing to accept an appropriate transfer.
    We also proposed revising the factors that were set forth in 
Sec. Sec.  1003.106(a)(4) and (d) to improve clarity and better reflect 
OIG's enforcement policy. First, we proposed clarifying that the 
factors listed in proposed Sec.  1003.520 will be used in making both 
CMP and exclusion determinations. Further, we proposed incorporating 
the general factors listed in Sec.  1003.140 and provide additional 
guidance on the EMTALA subpart at proposed Sec.  1003.520. Many of the 
factors that were in Sec.  1003.106(a)(4) and (d) duplicate those 
general factors.
    Finally, we examined the factors that were at Sec.  1003.106(d) in 
light of our lengthy enforcement experience. Congress enacted EMTALA to 
ensure that individuals with emergency medical conditions are not 
denied essential lifesaving services. 131 Cong. Rec. S13904 (daily ed. 
Oct. 23, 1985) (statement of Sen. David Durenberger); H.R. Rep. No 99-
241, pt. 1, at 27 (1986), reprinted 1986 U.S.C.C.A.N. 579, 605. In 
light of this statutory purpose, the circumstances surrounding the 
individual's presentment to a hospital are important to determinations 
about whether and to what extent a CMP or an exclusion is appropriate. 
Thus, the proposed regulations revised the factors to clarify that 
aggravating circumstances include: A request for proof of insurance or 
payment prior to screening or treating; patient harm, unnecessary risk 
of patient harm, premature discharge, or a need for additional services 
or subsequent hospital admission that resulted, or could have resulted, 
from the incident; and whether the individual presented with an 
emergency medical condition. While we removed the language at Sec.  
1003.106(a)(4), we consider these circumstances to be included in the 
general factors listed at proposed Sec.  1003.140. Thus, while the 
proposed regulations do not state that OIG will consider ``other 
instances where the respondent failed to provide appropriate medical 
screening examination, stabilization and treatment of individuals 
coming to a hospital's emergency department or to effect an appropriate 
transfer,'' OIG will consider each of these failures when determining a 
penalty because they relate to a respondent's history.
    We concluded that for several reasons, the mitigating factors 
should be removed. Because of the overall statutory purpose, the fact-
specific nature of EMTALA violations, and the CMS certification 
process, the mitigating factors that were found at

[[Page 88349]]

Sec.  1003.106(d) are not useful in determining an appropriate penalty 
amount. For example, Sec.  1003.106(d)(5) stated that it should be 
considered a mitigating circumstance if an individual presented a 
request for treatment but subsequently exhibited conduct that 
demonstrated a clear intent to leave the hospital voluntarily. In our 
enforcement activities, however, we have found situations in which the 
individual may have demonstrated a clear intent to leave because the 
hospital failed to properly screen the individual within a reasonable 
amount of time. We do not believe that in this circumstance, the 
hospital's penalty should be mitigated. Further, the factor at Sec.  
1003.106(d)(6)(A) in the existing regulation is not relevant to 
mitigation because developing and implementing a corrective action plan 
is a requirement of the CMS certification process following an 
investigation of an EMTALA violation. However, in response to comments 
discussed below, we have determined that certain corrective action 
could be mitigating. Specifically, it should be considered a mitigating 
circumstance if a hospital took appropriate and timely corrective 
action in response to the violation prior to CMS initiating an 
investigation. That corrective action must include disclosing the 
violation to CMS prior to CMS receiving a complaint regarding the 
violation from another source or otherwise learning of the violation.
    We will continue to evaluate the circumstances of each EMTALA 
referral to determine whether to exercise our discretion to pursue the 
violation and to determine the appropriate remedy.
    We received the following comments on the subpart. To the extent 
the provisions of the proposed rule are not addressed in response to 
the comments below, we are finalizing this section of the rule, as 
proposed.
    Comment: One commenter urged OIG to adopt a regulation that does 
not impose penalties where the violation of EMTALA is based only on 
negligence and not on willful conduct.
    Response: The suggestion is beyond the scope of the proposed rule 
and does not reflect the statutory language, which sets the scienter 
level at negligence.
    Comment: Several commenters addressed OIG's changes to the 
definition of ``responsible physician.'' One commenter requested that 
OIG clarify that it is not creating a new application of EMTALA to 
hospitals with specialized capabilities, but simply clarifying that on-
call physicians at hospitals with specialized capabilities are 
considered ``responsible physicians.'' Another commenter asserted that 
OIG's revised definition is an expansion of EMTALA to physicians and 
on-call physicians who fail to accept an appropriate transfer. This 
commenter argued that the nondiscrimination provisions in section 
1867(g) of the Act apply only to participating hospitals and do not 
create CMP liability for physicians at such hospitals. One commenter 
noted that assessing whether a responsible physician has neglected his 
or her responsibilities under EMTALA is a rigorous undertaking. The 
commenter said that the assessment should include more than whether the 
on-call physician showed up when called, but also whether the on-call 
physician was in the operating room when called or whether a community 
call arrangement existed. Finally, a commenter urged OIG to ensure that 
its enforcement against a ``responsible physician'' is consistent with 
the regulations and guidance promulgated by CMS.
    Response: We are finalizing the rule, as proposed. In response to 
comments, we confirm that OIG is clarifying that on-call physicians at 
hospitals with specialized capabilities are considered ``responsible 
physicians.'' The OIG believes this is an appropriate reading of the 
statute and that the proposed regulation does not expand the 
application of EMTALA. The OIG recognizes that a determination of 
potential liability for an on-call physician is fact-intensive and 
takes into account factors that include a hospital's compliance with 
CMS regulations and guidance regarding the adoption of written policies 
governing on-call physicians and an on-call physician's compliance with 
such policies.
    Comment: Several commenters discussed OIG's proposal to remove the 
mitigating factors related to EMTALA CMPs. Two commenters objected to 
the removal of the mitigating factor under which an individual 
presented a request for treatment but subsequently exhibited conduct 
that demonstrated a clear intent to leave the hospital voluntarily. 
Another commenter stated that removal of this mitigating factor would 
remove consideration of a hospital's or physician's attempts to comply 
with EMTALA's requirements where they were unable to do so because of 
patient conduct over which they had no control. Further, a commenter 
asserted that EMTALA is not violated when a patient leaves of his or 
her free will.
    Response: We are finalizing the rule, as proposed. The OIG believes 
that the evaluation of whether an EMTALA violation occurred when the 
individual who presented for treatment left the hospital voluntarily is 
fact- and circumstance-specific. If no violation is found to have 
occurred, the lack of the former mitigating factor would be of no 
consequence. If a violation is found to have occurred, the patient's 
having left voluntarily should not be a mitigating circumstance.
    Comment: A commenter stated that additional mitigating factors, 
including the implementation of appropriate policies, procedures, 
training and action against hospital personnel prior to a CMS 
investigation, are useful and fair factors to distinguish hospitals 
making good faith and effective efforts to address EMTALA violations.
    Response: The OIG agrees and has added as a mitigating factor 
situations in which a hospital takes appropriate and timely corrective 
action in response to a violation. For purposes of this mitigating 
factor, corrective action must be completed prior to CMS initiating an 
investigation of the hospital for violations of EMTALA and must include 
disclosing the violation to CMS prior to CMS receiving a complaint 
regarding the violation from another source or otherwise learning of 
the violation.
    Comment: One commenter objected to the proposed removal of the term 
``clearly'' from the existing regulation at Sec.  1003.106(d)(2). The 
commenter stated that, under proposed Sec.  1003.520(c), an aggravating 
circumstance would exist even if screenings were applied with optimal 
consistency and fairness. The commenter asserted that even hospitals' 
and physicians' best efforts to comply with EMTALA will invariably fail 
to identify an emergency medical condition and, therefore, physicians 
and hospitals may be subject to maximum CMPs even in cases in which the 
violation falls short of negligence.
    Response: The OIG is finalizing the proposal. While determination 
of EMTALA violations are fact- and circumstance-dependent, OIG would 
not impose a CMP where a physician or hospital did not at least 
demonstrate negligence in failing to comply with EMTALA. Further, if 
the hospital complied with EMTALA and still failed to diagnose an 
emergency medical condition, there would be no violation.
    Comment: Several commenters addressed OIG's proposed aggravating 
factors. One commenter expressed concern with including premature 
discharge in the aggravating factor at Sec.  1003.520(b) given 
continually evolving triage proposals and Federal guidelines that 
support reduction in emergency department use. That commenter further 
stated that all three of OIG's proposed aggravating factors were vague 
and subject to widely varying

[[Page 88350]]

interpretations. Another commenter expressed concern that the use of 
the phrase ``could have resulted'' in Sec.  1003.520(b) would divorce 
the list of potential aggravating factors from a causal nexus to the 
EMTALA violation.
    Response: In response to the comments, OIG is revising the proposed 
aggravating factor at Sec.  1003.520(b) to include only patient harm or 
risk of patient harm that resulted from the incident. However, ``risk 
of patient'' harm could, depending on the facts and circumstances of a 
case, include premature discharge or the need for additional services. 
The existing regulation requires OIG to prove that patient harm 
actually resulted from the violation. This formulation is overly 
constrained. It is highly relevant if the violation put a beneficiary 
at risk of patient harm. Contrary to the commenter's assertion that the 
proposed aggravating factors are vague, OIG considers them to be clear 
and specific and based on OIG's lengthy experience pursuing penalties 
for violations of EMTALA.
Subpart F--CMPs for Section 1140 Violations
    Subpart F applies to violations of section 1140 of the Act (42 
U.S.C. 1320b-10). The most significant proposed change to this subpart 
was clarifying the application of section 1140 of the Act to 
telemarketing, Internet, and electronic mail solicitations. Section 
1140 of the Act, as amended by the Bipartisan Budget Act of 2015 
(Bipartisan Budget Act, Pub. L. 114-74, section 814(a), 129 stat. 604 
(2015)), prohibits the use of words, letters, symbols, or emblems of 
HHS, CMS, Medicare, or Medicaid in connection with ``an advertisement, 
solicitation, circular, book, pamphlet, or other communication 
(including any Internet or other electronic communication), or a play, 
motion picture, broadcast, telecast, or other production'' in a manner 
that could reasonably be interpreted as conveying the false impression 
that HHS, CMS, Medicare, or Medicaid has approved, endorsed, or 
authorized such use. (Emphasis added.)
    We previously defined conduct that constituted a violation for (1) 
direct or printed mailing solicitations or advertisements and (2) 
broadcasts or telecasts. The proposed regulations were updated to also 
reflect telephonic and Internet communications. Under a plain reading 
of the Act, telemarketing solicitations, email, and Web sites fall 
within the statutory terms emphasized above. In fact, since the 
publication of the proposed rule, the Bipartisan Budget Act of 2015 
amended section 1140(a)(1) of the Act to expressly include Internet and 
other electronic communications. We believe telephonic and Internet 
communications are analogous to, and therefore proposed imposing 
penalties that would apply in the same manner as, those for direct mail 
and other printed materials. The number of individuals who received 
direct mail and other printed materials can be more easily quantified 
than the number of individuals who saw a television commercial or heard 
a radio commercial. Telemarketing calls, electronic messages, and Web 
page views can be similarly quantified. Thus, we proposed subjecting 
telemarketing, email, and Web site violations to the same $5,000 
penalty as printed media. Each separate email address that received the 
email, each telemarketing call, and each Web page view would constitute 
a separate violation. This proposal is further supported by the 
Bipartisan Budget Act of 2015, which amended section 1140(b) of the Act 
to state that, for violations involving the Internet or other 
electronic communications, ``each dissemination, viewing, or accessing 
of such communication . . . shall represent a separate violation.'' 
Bipartisan Budget Act of 2015, section 814(b).
    The final rule includes changes from the proposed rule to reflect 
the Bipartisan Budget Act of 2015. We changed ``electronic message'' 
and ``electronic mail'' to ``electronic communication.'' We also state 
``each dissemination, viewing, or accessing of the electronic 
communication,'' as opposed to ``each separate email address that 
received the email message,'' will constitute a violation. The proposed 
rule used email addresses as a way to determine the number of 
disseminations, views, or accessing of the communication. Because not 
all ``electronic communications'' involve an ``email address,'' we 
believe ``each dissemination, viewing, or accessing of the electronic 
communication'' is a more appropriate description of potential 
violations of the rule.
    We received no comments on this subpart and finalize, as proposed, 
except as explained above.
Subpart H--CMPs for Adverse Action Reporting and Disclosure Violations
    Subpart H covers violations for failing to report payments in 
settlement of a medical malpractice claim in accordance with section 
421 of Public Law 99-660 (42 U.S.C. 11131); failing to report adverse 
actions pursuant to section 221 of Public Law 104-191 as set forth in 
section 1128E of the Act (42 U.S.C. 1320a-7e); or improperly 
disclosing, using, or permitting access to information reported in 
accordance with Part B of Title IV of Public Law 99-660 (42 U.S.C. 
11137).
    The language in proposed subpart H remains largely unchanged from 
the existing regulations at Sec. Sec.  1003.102(b)(5)-(6) and 
Sec. Sec.  1003.103(c), (g). We proposed to remove the reference to the 
Healthcare Integrity and Protection Data Bank (HIPDB) in conformity 
with section 6403(a) of the ACA, which removed the reference from 
section 1128E of the Act. The relevant reporting requirements, 
violation, and penalties would remain unchanged. Under section 1128E of 
the Act, providers must still report the same information. Once the 
HIPDB is phased out pursuant to section 6403(a) of ACA, the information 
will be collected and stored in the National Practitioner Data Bank 
established pursuant to the Health Care Quality Improvement Act of 1986 
(42 U.S.C. 11101 et seq.). In the penalty section, we proposed to 
clarify that a CMP may be imposed for each failure to report required 
information or adverse action and for each improper disclosure, use, or 
permitting of access to information.
    We received no comments on this subpart and finalize, as proposed.
Subpart I--CMPs for Select Agent Program Violations
    Subpart I contains penalties for violations involving select 
agents, found in the existing regulations at Sec.  1003.102(b)(16) and 
Sec.  1003.103(l). The Public Health Security and Bioterrorism 
Preparedness and Response Act of 2002 (Bioterrorism Act of 2002), 
Public Law 107-188, provides for the regulation of certain biological 
agents and toxins (referred to below as ``select agents and toxins'') 
by HHS. The regulations created pursuant to the Bioterrorism Act of 
2002 are found at 42 CFR part 73. The regulations set forth 
requirements for the possession and use in the United States, receipt 
from outside the United States, and transfer within the United States 
of the select agents and toxins. For each violation of 42 CFR part 73, 
OIG is authorized to impose CMPs of up to of $250,000 in the case of an 
individual, and $500,000 in the case of an entity.
    Proposed subpart I explains that the CMP may be assessed for each 
individual violation of 42 CFR part 73. The Bioterrorism Act of 2002 
states that any person who violates ``any provision'' of the 
regulations is subject to the maximum statutory penalty. The plain 
meaning of ``any provision'' means that any single violation can

[[Page 88351]]

subject a person to the maximum penalty. Thus, we proposed amending the 
regulation to add ``each individual'' before ``violation'' to clarify 
our longstanding interpretation of this section to mean that each 
violation subjects a person to a CMP up to the maximum amount.
    In addition, proposed subpart I includes several aggravating 
circumstances to guide our penalty determinations. Aggravating factors 
include: (1) The Responsible Official participated in or knew or should 
have known of the violation; (2) the violation was a contributing 
factor, regardless of proportionality, to an unauthorized individual's 
access to or possession of a select agent or toxin, an individual's 
exposure to a select agent or toxin, or the unauthorized removal of a 
select agent or toxin from the person's physical location as identified 
on the person's certificate of registration; and (3) the person 
previously received a statement of deficiency from HHS or the 
Department of Agriculture for the same or substantially similar 
conduct. In the final rule, we removed ``regardless of 
proportionality'' from the second aggravating factor. Such 
proportionality would be relevant to our qualitative weighing of the 
aggravating factor, but it would not be relevant to the applicability 
of the aggravating factor. We also added ``observation'' and 
``finding'' to previous ``statements of deficiency'' in the third 
aggravating factor to better reflect the terminology used by HHS and 
the Department of Agriculture in Facility Inspection Reports.
    We received no comments on this subpart and, except as noted above, 
finalize, as proposed.
Subpart J--CMPs, Assessments, and Exclusions for Beneficiary Inducement 
Violations
    Subpart J covers two statutory provisions concerning beneficiary 
inducement violations. We proposed moving the existing regulation, 
Sec.  1003.102(b)(13), concerning the beneficiary inducement provision 
in the CMPL (section 1128A(a)(5) of the Act), to this subpart. We also 
proposed regulatory language for the authority at section 1862(b)(3)(C) 
of the Act. The statutory authority is self-implementing and does not 
require a regulation. We proposed adding the regulatory language at 
this time in light of the general reorganization. Under section 
1862(b)(3)(C) of the Act, a penalty of up to $5,000 may be imposed 
against any person who offers any financial or other incentive for an 
individual entitled to benefits under Medicare not to enroll, or to 
terminate enrollment, under a group health plan or a large group health 
plan that would, in the case of such enrollment, be a primary plan as 
defined in section 1862(b)(2)(A) of the Act. The proposed regulatory 
text closely follows the language of the statute.
    We proposed to incorporate the general factors listed in Sec.  
1003.140 for determining amounts of penalties and assessments for 
violations in this subpart and to clarify that we will consider the 
amount of remuneration, other financial incentives, or other 
incentives. This provision was in the existing regulations at Sec.  
1003.106(a)(1)(vii).
    We changed the basis for penalties for violations of Sec.  
1003.1000(a) in the final rule to reflect the statute, which uses the 
CMPL default of penalties for each item or service.
    We received the following comment on this subpart. As the comment 
was outside the scope of this rulemaking, we are finalizing this 
subpart, as proposed, except as explained above.
    Comment: A commenter urged OIG to include in proposed Sec.  
1003.1000(a) the current exceptions to the beneficiary inducement 
prohibition. As examples, the commenter included gifts or free services 
to beneficiaries that do not exceed $10 per item and $50 annually, and 
services or other remuneration permissibly furnished to financially 
needy beneficiaries.
    Response: Any exceptions to liability under Sec.  1003.1000(a) 
would be appropriately located in the definition of ``remuneration,'' 
which is at Sec.  1003.101, not in Sec.  1003.1000(a) itself. Any 
proposed amendments to the definition of ``remuneration'' are outside 
the scope of this rulemaking. The OIG proposed changes to that 
definition in a separate notice of proposed rulemaking, 79 FR 59,717 
(October 3, 2014). The OIG plans to address the dollar limits discussed 
in this comment as part of that other rulemaking. Moreover, the 
examples raised by the commenter do not clearly fall within any of the 
exceptions set forth at Sec.  1128A(i)(6) of the Act.
Subpart K--CMPs for the Sale of Medicare Supplemental Policies
    Subpart K covers violations relating to the sale of Medicare 
supplemental policies. The statutory authority is self-implementing and 
does not require a regulation. Omnibus Budget Reconciliation Act of 
1990, Public Law 101-508, section 4354(c), 104 Stat. 3327 (1990); 42 
U.S.C. 1395ss(d). However, we proposed adding the regulatory language 
at this time in light of the general reorganization.
    The OIG may impose a penalty against any person who it determines 
has violated section 1882(d)(1) of the Act (42 U.S.C. 1395ss(d)(1)) by 
knowingly and willfully making or causing to be made or inducing or 
seeking to induce the making of any false statement or representation 
of material fact with respect to the compliance of any policy with 
Medicare supplemental policy standards and requirements or with respect 
to the use of the Secretary's emblem (described at section 1882(a)(1) 
of the Act (42 U.S.C. 1395ss(a)(1))) indicating that a policy has 
received the Secretary's certification. We proposed to add this 
violation at Sec.  1003.1100(a).
    The OIG may impose a penalty against any person who it determines 
has violated section 1882(d)(2) of the Act (42 U.S.C. 1395ss(d)(2)) by 
falsely assuming or pretending to be acting, or misrepresenting in any 
way that he is acting, under the authority of or in association with, 
Medicare or any Federal agency, for the purpose of selling or 
attempting to sell insurance, or in such pretended character demands or 
obtains money, paper, documents or anything of value. We proposed to 
add this violation at Sec.  1003.1100(b).
    The OIG may also impose a penalty against any person who it 
determines has violated section 1882(d)(4)(A) of the Act (42 U.S.C. 
1395ss(d)(4)(A)) by mailing or causing to be mailed any matter for 
advertising, soliciting, offering for sale, or the delivery of Medicare 
supplemental insurance policy that has not been approved by the State 
commissioner or superintendent of insurance. We proposed to add this 
violation at Sec.  1003.1100(c).
    The OIG may impose a penalty against any person who it determines 
has violated section 1882(d)(3)(A)(i) of the Act (42 U.S.C. 
1395ss(d)(3)(A)) by issuing or selling to an individual entitled to 
benefits under Part A or enrolled in Part B (including an individual 
electing a Medicare Part C plan): (1) A health insurance policy with 
the knowledge that the policy duplicates Medicare or Medicaid health 
benefits to which the individual is otherwise entitled; (2) a Medicare 
supplemental policy to an individual who has not elected a Medicare 
Part C plan where the person knows that the individual is entitled to 
benefits under another Medicare supplemental policy; (3) a Medicare 
supplemental policy to an individual who has elected a Medicare Part C 
plan where the person knows that the policy duplicates health

[[Page 88352]]

benefits to which the individual is otherwise entitled under the 
Medicare Part C plan or under another Medicare supplemental policy; and 
(4) a health insurance policy (other than a Medicare supplemental 
policy) with the knowledge that the policy duplicates health benefits 
to which the individual is otherwise entitled, other than benefits to 
which the individual is entitled under a requirement of State or 
Federal law. We proposed to add this violation at Sec.  1003.1100(d).
    The OIG may also impose a penalty against any person who violated 
section 1882(d)(3)(A)(vi)(II) of the Act (42 U.S.C. 
1395ss(d)(3)(A)(vi)(II)) by issuing or selling a health insurance 
policy (other than a policy described in section 1882(d)(3)(A)(vi)(III) 
of the Act) to an individual entitled to benefits under Part A or 
enrolled under Part B who is applying for a health insurance policy 
without furnishing a disclosure statement (described at section 
1882(d)(3)(A)(vii) of the Act). We proposed to add this violation at 
Sec.  1003.1100(e).
    The OIG may also impose a penalty against any person who it 
determines has violated section 1882(d)(3)(B)(iv) of the Act (42 U.S.C. 
1395ss(d)(3)(B)(iv)) by issuing or selling a Medicare supplemental 
policy to any individual eligible for benefits under Part A or enrolled 
under Part B without obtaining the written statement from the 
individual or written acknowledgement from the seller required by 
section 1882(d)(3)(B) of the Act (42 U.S.C. 1395ss(d)(3)(B)). We 
proposed to add this violation at Sec.  1003.1100(f).
    For violations of section 1882(d)(1), (d)(2), and (d)(4)(A) of the 
Act, OIG may impose a penalty of not more than $5,000 for each 
violation. We proposed to add this penalty at Sec.  1003.1110(a). For 
violations of section 1882(d)(3)(A) and (B) of the Act, OIG may impose 
a penalty of not more than $25,000 for each violation by a seller that 
is also the issuer of the policy and a penalty of not more than $15,000 
for each violation by a seller that is not the issuer of the policy. We 
proposed to add these penalties at Sec. Sec.  1003.1110(b) and (c). In 
determining the amount of the penalty in accordance with proposed 
subpart K, OIG would consider the factors listed in the proposed Sec.  
1003.140.
    We received the following comment on this subpart. As discussed 
below, we are finalizing this subpart, as proposed.
    Comment: A commenter requested that OIG defer adopting the proposed 
Sec.  1003.1100(d), which relates to the issuance or sale of 
duplicative coverage, until the application of the prohibitions in that 
section to QHPs and State and Federally facilitated exchanges are 
better understood. The commenter stated that questions arose during the 
2013 open enrollment period for exchange-based health insurance 
coverage as to individuals eligible for or enrolled in Medicare and 
exchange-based health insurance coverage. According to the commenter, 
some exchanges did not inquire as to a beneficiary's Medicare status 
prior to instructing plans to enroll these individuals into QHPs. The 
commenter asserted that exchanges are best-positioned to verify an 
individual's Medicare status and that it would be inappropriate to 
penalize QHPs under this CMP authority.
    Response: We respectfully disagree with the suggestion to defer 
issuance of the regulation and are finalizing the rule, as proposed. 
The CMP authorities covered in this subpart have existed in statute for 
many years and should be added to part 1003 at this time in light of 
our reorganization. In addition, the concerns raised by the commenter 
appear to be addressed by the fact that Sec.  1003.1100(d)(1) and (2) 
apply only when a health insurance policy is issued with knowledge that 
the policy duplicates health benefits to which the individual is 
otherwise entitled.
Subpart L--CMPs for Drug Price Reporting
    Subpart L contains the CMPs for drug-price reporting found in 
section 1927(b)(3)(B)-(C) of the Act (42 U.S.C. 1396r-8(b)(3)(B)-(C)). 
Although the statutory authority is self-implementing and does not 
require a regulation, we proposed adding the regulatory language at 
this time in light of the general reorganization. The proposed 
regulation text closely mirrors the language of the statute.
    Section 1927(a) of the Act implements a drug-pricing program in 
which manufacturers that sell covered outpatient drugs to covered 
entities must agree to charge a price that will not exceed an amount 
determined under a statutory formula. Under section 1927(a) of the Act, 
manufacturers must provide certain statutorily mandated discounts to 
covered entities. Section 1927(b)(3)(A) of the Act requires 
manufacturers with Medicaid Drug Rebate Agreements to provide specified 
drug-pricing and product information to the Secretary, including, but 
not limited to, average manufacturer price (AMP), average sales price 
(ASP), wholesale acquisition cost, and best price. Labelers are 
required to certify each product and pricing data submission made to 
CMS.
    Manufacturers submit the product and pricing information required 
by section 1927 of the Act using the National Drug Code (NDC) product 
identifier. The OIG proposed calculating CMPs under section 
1927(b)(3)(C) of the Act at the NDC level. For example, a manufacturer 
that fails to provide the information required by section 1927(b)(3)(A) 
of the Act for five separate NDCs may be penalized for each NDC, in an 
aggregate amount of not more than $50,000 per day for each day that the 
information is not provided. If, after 2 days, the manufacturer in this 
example submitted information for two of the missing NDCs, the 
manufacturer would be subject to an aggregate penalty of not more than 
$30,000 per day for each additional day that information was not 
provided for the remaining three NDCs. The OIG believes that this 
interpretation is supported by the statutory text, which refers to 
NDCs, and by the reporting systems employed by CMS, under which 
manufacturers are required to report AMP and ASP product and pricing 
data using NDCs.
    Section 1927(b)(3)(B) of the Act provides for verification surveys 
of AMPs and establishes that a penalty of not more than $100,000 may be 
imposed against a wholesaler, direct seller, or manufacturer that 
directly distributes its covered outpatient drugs for refusing a 
request for information by, or for knowingly providing false 
information to, the Secretary about charges or prices in connection 
with such a survey.
    Pursuant to section 1927(b)(3)(C) of the Act, OIG may impose a 
penalty of not more than $100,000 against any manufacturer with an 
agreement under section 1927 of the Act that knowingly provides false 
information for each item of false information.
    We received the following comments on this subpart. To the extent 
provisions of the proposed rule are not addressed in our response to 
the comments below, we are finalizing this section of the rule, as 
proposed.
    Comment: One commenter expressed concern with OIG's proposal to 
calculate penalties at the NDC level instead of per late report. The 
commenter argued that, where one report contained multiple NDCs, 
imposing multiple penalties per day instead of one penalty per day 
would be unduly harsh.
    Response: The OIG is finalizing the rule, as proposed. The OIG 
believes that this interpretation is supported by the statutory text, 
which refers to NDCs, and by the reporting systems employed by CMS, 
under which manufacturers are required to report AMP and ASP product 
and pricing data using NDCs.
    Comment: One commenter expressed concern with OIG's proposal to

[[Page 88353]]

calculate penalties at the 9-digit NDC level. The commenter suggested 
that OIG avoid establishment of a bright-line rule that would rigidly 
define products at the 9-digit NDC level for the purposes of 
calculating penalties. This commenter noted that the preamble language 
in which OIG proposed calculating penalties at the 9-digit NDC level is 
not reflected in the regulation text.
    Response: We agree that OIG should have discretion to determine the 
appropriate NDC level at which to calculate penalties based on the 
particular requirements and submissions for each manufacturer. Neither 
section 1927(b)(3)(C) of the Act nor the regulation dictates which NDC 
level must be used in calculating the penalties. Therefore, we have not 
included the discussion of 9-digit and 11-digit NDC levels in the text 
of the final rule. To the extent the commenter may have been 
recommending that OIG not use NDCs to calculate penalties, OIG believes 
that the use of NDCs is appropriate based on the statutory text and the 
reporting systems employed by CMS.
Subpart M--CMPs for Notifying a Skilled Nursing Facility, Nursing 
Facility, Home Health Agency, or Community Care Setting of a Survey
    In subpart M, we proposed to add regulations providing for CMPs for 
notifying a skilled nursing facility (SNF), nursing facility (NF), home 
health agency (HHA), or a community care setting of the date or time of 
a survey. The statutory authority for these CMPs is self-implementing 
and does not require a regulation. Sections 1819(g)(2)(A), 
1919(g)(2)(A), 1891(c)(1), 1929(i)(3)(A); 42 U.S.C. 1395i-3(g)(2)(A), 
1396r(g)(2)(A), 1395bbb(c)(1), 1396t(i)(3)(A) of the Act. However, we 
proposed adding the regulatory language at this time in light of the 
general reorganization. The proposed regulation text closely mirrors 
the language of the statute.
    SNFs, NFs, HHAs, and community care settings are subject to State 
compliance surveys without any prior notice. Sections 1819(g)(2)(A), 
1919(g)(2)(A), 1891(c)(1), and 1929(i)(3)(A) of the Act provide for 
imposing a penalty of not more than $2,000 against any individual who 
notifies, or causes to be notified, a SNF, NF, home health agency, or 
community care setting of the time or date on which a survey is 
scheduled to be conducted.
    The OIG will consider the general factors listed in Sec.  1003.140 
when determining the amount of the penalties to be imposed under this 
subpart.
    We received no comments on this subpart and finalize, as proposed.
Subpart O--Procedures for the Imposition of CMPs, Assessments, and 
Exclusions
    Subpart O contains the procedural provisions that apply to part 
1003. We proposed several clarifying changes to procedures in this 
subpart. We proposed amending the methods permitted for service of a 
notice of a proposal of a penalty, assessment, or exclusion under part 
1003. Section 1003.109 required service by certified mail, return 
receipt requested. Section 1128A(c)(1) of the Act, however, permits 
service by any method authorized by Rule 4 of the Federal Rules of 
Civil Procedure (FRCP), which has been amended to authorize various 
service methods depending on whether the recipient is a domestic or 
foreign individual or corporation. Therefore, we are amending our 
regulation at Sec. Sec.  1003.1500(a) and 1003.1510 to permit service 
under any means authorized by FRCP Rule 4. By referencing the rule, the 
regulation would reflect any future amendments to Rule 4 automatically.
    We also proposed technical changes to the judicial review provision 
at Sec.  1003.127 in the existing regulation and redesignated as Sec.  
1003.1540 to better conform to the statutory scheme requiring a person 
to exhaust his or her administrative remedies before filing a claim in 
Federal court. Exhaustion of administrative remedies is a well-settled 
legal principle, particularly concerning section 405(g) of the Act (42 
U.S.C. 205(g)). Consistent with existing law, the proposed regulations 
clarify that a person may not bring a claim in Federal court without 
first raising that claim at every applicable stage within the 
administrative process, including any administrative appeal process. In 
the context of part 1003, that administrative process consists of 
making a timely request for a hearing before an ALJ pursuant to 42 CFR 
1005.2 and, if the respondent loses at the ALJ level, timely filing an 
appeal of the ALJ decision to the Appellate Division of the 
Departmental Appeals Board. Only after the Departmental Appeals Board 
makes a final decision under 42 CFR 1005.21(j) is the respondent 
eligible to file an action in Federal court.
    We also proposed a technical change to the regulatory language to 
clarify the statutory limit on issues eligible for judicial review. 
Section 1128A(e) of the Act provides that ``[n]o objection that has not 
been urged before the Secretary shall be considered by the court, 
unless the failure or neglect to urge such objection shall be excused 
because of extraordinary circumstances.'' We interpret this to mean 
that a person is precluded from making arguments or raising issues in 
Federal court that were not first raised during the administrative 
process, unless the court finds that extraordinary circumstances 
prevented raising those arguments or issues. We interpret 
``extraordinary circumstances'' to mean that those arguments or issues 
were beyond the authority of the administrative process.
    We received no comments on this subpart and finalize, as proposed.
Other Changes in Part 1003
    The OIG has authority to impose CMPs against endorsed sponsors 
under the Medicare Prescription Drug Discount Card Program that 
knowingly commit certain violations. The discount card program has been 
defunct since January 1, 2006, when Medicare Part D went into effect. 
We proposed to remove this CMP from the regulations as the statute of 
limitations has expired for any conduct that might implicate this CMP.
    We received no comments on removing this CMP and finalize, as 
proposed.

F. Appeals of Exclusions, Civil Monetary Penalties, and Assessments

    We proposed changes to OIG regulations at 42 CFR part 1005 to 
correct an internal inconsistency in Sec.  1005.4(c). The regulation 
states at Sec.  1005.4(c)(5)-(6) that an ALJ is not authorized to (1) 
review the exercise of discretion by OIG to exclude an individual or 
entity under section 1128(b) of the Act, (2) determine the scope or 
effect of the exclusion, or (3) set a period of exclusion at zero when 
the ALJ finds that the individual or entity committed an act described 
in section 1128(b) of the Act. Section 1005.4(c)(7) stated that an ALJ 
is not authorized to review the exercise of discretion by OIG to impose 
a CMP, an assessment, or an exclusion under part 1003. The second and 
third limits on ALJ authority with respect to exclusions under section 
1128(b) of the Act should also apply to exclusions imposed under part 
1003. To correct this inconsistency, we proposed to clarify that when 
reviewing exclusions imposed pursuant to part 1003, an ALJ is not 
authorized to (1) review OIG's exercise of discretion to exclude an 
individual or entity, (2) determine the scope or effect of the 
exclusion, or (3) set a period of exclusion at zero if the ALJ finds 
that the individual or entity committed an act described in part 1003. 
We believe that this requirement is consistent with congressional 
intent in enacting the statutes providing authority for part

[[Page 88354]]

1003 that explicitly provide for exclusion as an appropriate remedy for 
the commission of any of the acts specified in those statutes. Thus, in 
every case in which OIG has exercised its discretion to impose an 
exclusion and when the ALJ decides that a violation did occur, 
exclusion is appropriate.
    We received the following comment on this proposal. As discussed in 
response to the comment, we are finalizing this section of the rule, as 
proposed.
    Comment: A commenter asked OIG to reconsider our proposal to limit 
an ALJ's authority in the absence of a specific legislative mandate.
    Response: We respectfully disagree with the commenter's suggestion 
and finalize the rule, as proposed. The rule ensures consistency in the 
ALJ review of discretionary exclusions imposed under sections 1128(b) 
and 1128A of the Act.

III. Regulatory Impact Statement

    We have examined the impact of this proposed rule as required by 
Executive Order 12866, Executive Order 13563, the Regulatory 
Flexibility Act (RFA) of 1980, the Unfunded Mandates Reform Act of 
1995, and Executive Order 13132.
Executive Order Nos. 12866 and 13563
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulations are necessary, to select regulatory approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety effects; distributive impacts; and equity). 
Executive Order 13563 is supplemental to and reaffirms the principles, 
structures, and definitions governing regulatory review as established 
in Executive Order 12866. A regulatory impact analysis must be prepared 
for major rules with economically significant effects, i.e., $100 
million or more in any given year. This is not a major rule as defined 
at 5 U.S.C. 804(2); it is not economically significant because it does 
not reach that economic threshold.
    This proposed rule is designed to codify in regulations new 
statutory provisions, including new CMP authorities. This proposed rule 
is also designed to clarify the intent of existing statutory 
requirements and to reorganize CMP regulation sections for ease of use. 
The vast majority of providers, suppliers, and other persons 
participating in Federal health care programs would be minimally 
affected, if at all, by these proposed revisions.
    Accordingly, we believe that the likely aggregate economic effect 
of these regulations would be significantly less than $100 million.
Regulatory Flexibility Act
    The Regulatory Flexibility Act (RFA) and the Small Business 
Regulatory Enforcement and Fairness Act of 1996, which amended the RFA, 
require agencies to analyze options for regulatory relief of small 
businesses. For purposes of the RFA, small entities include small 
businesses, nonprofit organizations, and government agencies. Most 
providers are considered small entities if they have revenues of $5 
million to $25 million or less in any one year. For purposes of the 
RFA, most physicians and suppliers are considered small entities.
    The aggregate effect of the changes to the CMP provisions would be 
minimal.
    In summary, we have concluded that this proposed rule should not 
have a significant impact on the operations of a substantial number of 
small providers and that a regulatory flexibility analysis is not 
required for this rulemaking.
    In addition, section 1102(b) of the Act (42 U.S.C. 1302) requires 
us to prepare a regulatory impact analysis if a rule under Titles XVIII 
or XIX or section B of Title XI of the Act may have a significant 
impact on the operations of a substantial number of small rural 
hospitals. This analysis must conform to section 604 of the RFA. Only 
one proposed change has been made under the relevant title, the 
amendments to the Medicare Contracting Organization Rule at proposed 
Sec.  1003.400, et seq. This rule applies only to Medicare contracting 
organizations, not to rural hospitals, and would have no effect on 
rural hospitals. Thus, an analysis under section 1102(b) is not 
required for this rulemaking.
Unfunded Mandates Reform Act
    Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 
104-4, also requires that agencies assess anticipated costs and 
benefits before issuing any rule that may result in expenditures in any 
one year by State, local, or tribal governments, in the aggregate, or 
by the private sector, of $110 million or more. As indicated above, 
these proposed revisions comport with statutory amendments and clarify 
existing law. We believe that as a result, there would be no 
significant costs associated with these proposed revisions that would 
impose any mandates on State, local, or tribal governments or the 
private sector that would result in an expenditure of $110 million or 
more (adjusted for inflation) in any given year and that a full 
analysis under the Unfunded Mandates Reform Act is not necessary.
Executive Order 13132
    Executive Order 13132, Federalism, establishes certain requirements 
that an agency must meet when it promulgates a rule that imposes 
substantial direct requirements or costs on State and local 
governments, preempts State law, or otherwise has Federalism 
implications. In reviewing this rule under the threshold criteria of 
Executive Order 13132, we have determined that this proposed rule would 
not significantly affect the rights, roles, and responsibilities of 
State or local governments.

IV. Paperwork Reduction Act

    These proposed changes to parts 1003 and 1005 impose no new 
reporting requirements or collections of information. Therefore, a 
Paperwork Reduction Act review is not required.

List of Subjects

42 CFR Part 1003

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

42 CFR Part 1005

    Administrative practice and procedure, Fraud, Investigations, 
Penalties.

    For the reasons set forth in the preamble, the Office of the 
Inspector General, Department of Health and Human Services, amends 42 
CFR chapter V, subchapter B as follows:

PART 1003--CIVIL MONEY PENALTIES, ASSESSMENTS AND EXCLUSIONS

0
1. The authority citation for part 1003 continues to read as follows:

    Authority: 42 U.S.C. 262a, 1302, 1320-7, 1320a-7a, 1320b-10, 
1395u(j), 1395u(k), 1395cc(j), 1395w-141(i)(3), 1395dd(d)(1), 
1395mm, 1395nn(g), 1395ss(d), 1396b(m), 11131(c), and 11137(b)(2).

0
2. Designate Sec. Sec.  1003.100 through 1003.135 as subpart A, and add 
a heading for subpart A to read as follows:

Subpart A--General Provisions

0
3. Revise Sec.  1003.100 to read as follows:


Sec.  1003.100  Basis and purpose.

    (a) Basis. This part implements sections 1128(c), 1128A, 1140, 
1819(b)(3)(B), 1819(g)(2)(A), 1857(g)(2)(A), 1860D-12(b)(3)(E), 1860D-
31(i)(3), 1862(b)(3)(C), 1867(d)(1), 1876(i)(6), 1877(g), 1882(d),

[[Page 88355]]

1891(c)(1); 1903(m)(5), 1919(b)(3)(B), 1919(g)(2)(A), 1927(b)(3)(B), 
1927(b)(3)(C), and 1929(i)(3) of the Social Security Act; sections 
421(c) and 427(b)(2) of Public Law 99-660; and section 201(i) of Public 
Law 107-188 (42 U.S.C. 1320a-7(c), 1320a-7a, 1320b-10, 1395i-
3(b)(3)(B), 1395i-3(g)(2)(A), 1395w-27(g)(2)(A), 1395w-112(b)(3)(E), 
1395w-141(i)(3), 1395y(b)(3)(B), 1395dd(d)(1), 1395mm(i)(6), 1395nn(g), 
1395ss(d), 1395bbb(c)(1), 1396b(m)(5), 1396r(b)(3)(B), 1396r(g)(2)(A), 
1396r-8(b)(3)(B), 1396r-8(b)(3)(C), 1396t(i)(3), 11131(c), 11137(b)(2), 
and 262a(i)).
    (b) Purpose. This part--
    (1) Provides for the imposition of civil money penalties and, as 
applicable, assessments and exclusions against persons who have 
committed an act or omission that violates one or more provisions of 
this part and
    (2) Sets forth the appeal rights of persons subject to a penalty, 
assessment, and exclusion.


Sec. Sec.  1003.102 through 1003.110, 1003.114, 1003.126 through 
1003.129, and 1003.132 through 1003.135  [Removed]

0
4. Remove Sec. Sec.  1003.102 through 1003.110, 1003.114, 1003.126 
through 1003.129, and 1003.132 through 1003.135.


Sec.  1003.101  [Redesignated as Sec.  1003.110]

0
5. Redesignate Sec.  1003.101 as Sec.  1003.110.

0
6. Amend newly designated Sec.  1003.110 by:
0
a. Removing the definitions of ``Act'', ``Adverse effect'', and 
``ALJ'';
0
b. Revising the definitions of ``Assessment'' and ``Claim'';
0
c. Removing the definition of ``CMS'';
0
d. Revising the definitions of ``Contracting organization'' and 
``Enrollee'';
0
e. Removing the definitions of ``Department'', ``Exclusion'', 
``Inspector General'', and ``Item or service'';
0
f. Adding in alphabetical order definitions for ``Items and services or 
items or services'', ``Knowingly'', and ``Material'';
0
g. Removing the definition of ``Medicaid'';
0
h. Revising the definition of ``Medical malpractice claim or action'';
0
i. Removing the definition of ``Medicare'';
0
j. Adding in alphabetical order definitions for ``Non-separately-
billable item or service'', and ``Overpayment'';
0
k. Revising the definitions of ``Participating hospital'', ``Penalty'', 
and ``Physician incentive plan'';
0
l. Adding in alphabetical order definitions for ``Reasonable request'', 
and ``Responsible Official'';
0
m. Revising the definition of ``Responsible physician'';
0
n. Removing the definition of ``Secretary'';
0
o. Revising the definition of ``Select agents and toxins'';
0
p. Adding in alphabetical order a definition for ``Separately billable 
item or service'';
0
q. Revising the definitions of ``Should know, or should have known'' 
and ``Social Services Block Grant Program'';
0
r. Removing the definitions of ``State'' and ``State health care 
program'';
0
s. Revising the definition of ``Timely basis''; and
0
t. Removing the definition of ``Transitional assistance''.
    The revisions and additions read as follows:


Sec.  1003.110  Definitions.

* * * * *
    Assessment means the amounts described in this part and includes 
the plural of that term.
    Claim means an application for payment for an item or service under 
a Federal health care program.
* * * * *
    Contracting organization means a public or private entity, 
including a health maintenance organization, Medicare Advantage 
organization, Prescription Drug Plan sponsor, or other organization 
that has contracted with the Department or a State to furnish, or 
otherwise pay for, items and services to Medicare or Medicaid 
beneficiaries pursuant to sections 1857, 1860D-12, 1876(b), or 1903(m) 
of the Act.
    Enrollee means an individual who is eligible for Medicare or 
Medicaid and who enters into an agreement to receive services from a 
contracting organization.
* * * * *
    Items and services or items or services includes without 
limitation, any item, device, drug, biological, supply, or service 
(including management or administrative services), including, but not 
limited to, those that are listed in an itemized claim for program 
payment or a request for payment; for which payment is included in any 
Federal or State health care program reimbursement method, such as a 
prospective payment system or managed care system; or that are, in the 
case of a claim based on costs, required to be entered in a cost 
report, books of account, or other documents supporting the claim 
(whether or not actually entered).
    Knowingly means that a person, with respect to an act, has actual 
knowledge of the act, acts in deliberate ignorance of the act, or acts 
in reckless disregard of the act, and no proof of specific intent to 
defraud is required.
    Material means having a natural tendency to influence, or be 
capable of influencing, the payment or receipt of money or property.
* * * * *
    Medical malpractice claim or action means a written complaint or 
claim demanding payment based on a physician's, dentist's, or other 
health care practitioner's provision of, or failure to provide, health 
care services and includes the filing of a cause of action based on the 
law of tort brought in any State or Federal court or other adjudicative 
body.
* * * * *
    Non-separately-billable item or service means an item or service 
that is a component of, or otherwise contributes to the provision of, 
an item or a service, but is not itself a separately billable item or 
service.
    Overpayment means any funds that a person receives or retains under 
Medicare or Medicaid to which the person, after applicable 
reconciliation, is not entitled under such program.
    Participating hospital means either a hospital or a critical access 
hospital, as defined in section 1861(mm)(1) of the Act, that has 
entered into a Medicare provider agreement under section 1866 of the 
Act.
    Penalty means the amount described in this part and includes the 
plural of that term.
* * * * *
    Physician incentive plan means any compensation arrangement between 
a contracting organization and a physician or physician group that may 
directly or indirectly have the effect of reducing or limiting services 
provided with respect to enrollees in the organization.
* * * * *
    Reasonable request, with respect to Sec.  1003.200(b)(10), means a 
written request, signed by a designated representative of the OIG and 
made by a properly identified agent of the OIG during reasonable 
business hours. The request will include: A statement of the authority 
for the request, the person's rights in responding to the request, the 
definition of ``reasonable request'' and ``failure to grant timely 
access'' under part 1003, the deadline by which the OIG requests 
access, and the amount of the civil money penalty or assessment that 
could be imposed and the effective date, length, and scope and effect 
of the exclusion that would be imposed for failure to comply with the 
request, and

[[Page 88356]]

the earliest date that a request for reinstatement would be considered.
* * * * *
    Responsible Official means the individual designated pursuant to 42 
CFR part 73 to serve as the Responsible Official for the person holding 
a certificate of registration to possess, use, or transfer select 
agents or toxins.
    Responsible physician means a physician who is responsible for the 
examination, treatment, or transfer of an individual who comes to a 
participating hospital's emergency department requesting examination or 
treatment, including any physician who is on-call for the care of such 
individual and fails or refuses to appear within a reasonable time at 
such hospital to provide services relating to the examination, 
treatment, or transfer of such individual. Responsible physician also 
includes a physician who is responsible for the examination or 
treatment of individuals at hospitals with specialized capabilities or 
facilities, as provided under section 1867(g) of the Act, including any 
physician who is on-call for the care of such individuals and refuses 
to accept an appropriate transfer or fails or refuses to appear within 
a reasonable time to provide services related to the examination or 
treatment of such individuals.
* * * * *
    Select agents and toxins is defined consistent with the definition 
of ``select agent and/or toxin'' and ``overlap select agent and/or 
toxin'' as set forth in 42 CFR part 73.
    Separately billable item or service means an item or service for 
which an identifiable payment may be made under a Federal health care 
program, e.g., an itemized claim or a payment under a prospective 
payment system or other reimbursement methodology.
    Should know, or should have known, means that a person, with 
respect to information, either acts in deliberate ignorance of the 
truth or falsity of the information or acts in reckless disregard of 
the truth or falsity of the information. For purposes of this 
definition, no proof of specific intent to defraud is required.
    Social Services Block Grant Program means the program authorized 
under Title XX of the Act.
* * * * *
    Timely basis means, in accordance with Sec.  1003.300(a) of this 
part, the 60-day period from the time the prohibited amounts are 
collected by the individual or the entity.
* * * * *

0
7. Add Sec. Sec.  1003.120, 1003.130, 1003.140, 1003.150, and 1003.160 
to subpart A to read as follows:
Sec.
* * * * *
1003.120 Liability for penalties and assessments.
1003.130 Assessments.
1003.140 Determinations regarding the amount of penalties and 
assessments and the period of exclusion.
1003.150 Delegation of authority.
1003.160 Waiver of exclusion.


Sec.  1003.120  Liability for penalties and assessments.

    (a) In any case in which it is determined that more than one person 
was responsible for a violation described in this part, each such 
person may be held liable for the penalty prescribed by this part.
    (b) In any case in which it is determined that more than one person 
was responsible for a violation described in this part, an assessment 
may be imposed, when authorized, against any one such person or jointly 
and severally against two or more such persons, but the aggregate 
amount of the assessments collected may not exceed the amount that 
could be assessed if only one person was responsible.
    (c) Under this part, a principal is liable for penalties and 
assessments for the actions of his or her agent acting within the scope 
of his or her agency. This provision does not limit the underlying 
liability of the agent.


Sec.  1003.130  Assessments.

    The assessment in this part is in lieu of damages sustained by the 
Department or a State agency because of the violation.


Sec.  1003.140  Determinations regarding the amount of penalties and 
assessments and the period of exclusion.

    (a) Except as otherwise provided in this part, in determining the 
amount of any penalty or assessment or the period of exclusion in 
accordance with this part, the OIG will consider the following 
factors--
    (1) The nature and circumstances of the violation;
    (2) The degree of culpability of the person against whom a civil 
money penalty, assessment, or exclusion is proposed. It should be 
considered an aggravating circumstance if the respondent had actual 
knowledge where a lower level of knowledge was required to establish 
liability (e.g., for a provision that establishes liability if the 
respondent ``knew or should have known'' a claim was false or 
fraudulent, it will be an aggravating circumstance if the respondent 
knew the claim was false or fraudulent). It should be a mitigating 
circumstance if the person took appropriate and timely corrective 
action in response to the violation. For purposes of this part, 
corrective action must include disclosing the violation to the OIG 
through the Self-Disclosure Protocol and fully cooperating with the 
OIG's review and resolution of such disclosure, or in cases of 
physician self-referral law violations, disclosing the violation to CMS 
through the Self-Referral Disclosure Protocol;
    (3) The history of prior offenses. Aggravating circumstances 
include, if at any time prior to the violation, the individual--or in 
the case of an entity, the entity itself; any individual who had a 
direct or indirect ownership or control interest (as defined in section 
1124(a)(3) of the Act) in a sanctioned entity at the time the violation 
occurred and who knew, or should have known, of the violation; or any 
individual who was an officer or a managing employee (as defined in 
section 1126(b) of the Act) of such an entity at the time the violation 
occurred--was held liable for criminal, civil, or administrative 
sanctions in connection with a program covered by this part or in 
connection with the delivery of a health care item or service;
    (4) Other wrongful conduct. Aggravating circumstances include proof 
that the individual--or in the case of an entity, the entity itself; 
any individual who had a direct or indirect ownership or control 
interest (as defined in section 1124(a)(3) of the Act) in a sanctioned 
entity at the time the violation occurred and who knew, or should have 
known, of the violation; or any individual who was an officer or a 
managing employee (as defined in section 1126(b) of the Act) of such an 
entity at the time the violation occurred--engaged in wrongful conduct, 
other than the specific conduct upon which liability is based, relating 
to a government program or in connection with the delivery of a health 
care item or service. The statute of limitations governing civil money 
penalty proceedings does not apply to proof of other wrongful conduct 
as an aggravating circumstance; and
    (5) Such other matters as justice may require. Other circumstances 
of an aggravating or mitigating nature should be considered if, in the 
interests of justice, they require either a reduction or an increase in 
the penalty, assessment, or period of exclusion to achieve the purposes 
of this part.
    (b)(1) After determining the amount of any penalty and assessment 
in accordance with this part, the OIG considers the ability of the 
person to pay the proposed civil money penalty or assessment. The 
person shall provide, in a time and manner requested by the OIG, 
sufficient financial documentation,

[[Page 88357]]

including, but not limited to, audited financial statements, tax 
returns, and financial disclosure statements, deemed necessary by the 
OIG to determine the person's ability to pay the penalty or assessment.
    (2) If the person requests a hearing in accordance with 42 CFR 
1005.2, the only financial documentation subject to review is that 
which the person provided to the OIG during the administrative process, 
unless the ALJ finds that extraordinary circumstances prevented the 
person from providing the financial documentation to the OIG in the 
time and manner requested by the OIG prior to the hearing request.
    (c) In determining the amount of any penalty and assessment to be 
imposed under this part the following circumstances are also to be 
considered--
    (1) If there are substantial or several mitigating circumstances, 
the aggregate amount of the penalty and assessment should be set at an 
amount sufficiently below the maximum permitted by this part to reflect 
that fact.
    (2) If there are substantial or several aggravating circumstances, 
the aggregate amount of the penalty and assessment should be set at an 
amount sufficiently close to or at the maximum permitted by this part 
to reflect that fact.
    (3) Unless there are extraordinary mitigating circumstances, the 
aggregate amount of the penalty and assessment should not be less than 
double the approximate amount of damages and costs (as defined by 
paragraph (e)(2) of this section) sustained by the United States, or 
any State, as a result of the violation.
    (4) The presence of any single aggravating circumstance may justify 
imposing a penalty and assessment at or close to the maximum even when 
one or more mitigating factors is present.
    (d)(1) The standards set forth in this section are binding, except 
to the extent that their application would result in imposition of an 
amount that would exceed limits imposed by the United States 
Constitution.
    (2) The amount imposed will not be less than the approximate amount 
required to fully compensate the United States, or any State, for its 
damages and costs, tangible and intangible, including, but not limited 
to, the costs attributable to the investigation, prosecution, and 
administrative review of the case.
    (3) Nothing in this part limits the authority of the Department or 
the OIG to settle any issue or case as provided by Sec.  1003.1530 or 
to compromise any exclusion and any penalty and assessment as provided 
by Sec.  1003.1550.
    (4) Penalties, assessments, and exclusions imposed under this part 
are in addition to any other penalties, assessments, or other sanctions 
prescribed by law.


Sec.  1003.150  Delegation of authority.

    The OIG is delegated authority from the Secretary to impose civil 
money penalties and, as applicable, assessments and exclusions against 
any person who has violated one or more provisions of this part. The 
delegation of authority includes all powers to impose and compromise 
civil monetary penalties, assessments, and exclusion under section 
1128A of the Act.


Sec.  1003.160  Waiver of exclusion.

    (a) The OIG will consider a request from the administrator of a 
Federal health care program for a waiver of an exclusion imposed under 
this part as set forth in paragraph (b) of this section. The request 
must be in writing and from an individual directly responsible for 
administering the Federal health care program.
    (b) If the OIG subsequently obtains information that the basis for 
a waiver no longer exists, the waiver will cease and the person will be 
fully excluded from the Federal health care programs for the remainder 
of the exclusion period, measured from the time the full exclusion 
would have been imposed if the waiver had not been granted.
    (c) The OIG will notify the administrator of the Federal health 
care program whether his or her request for a waiver has been granted 
or denied.
    (d) If a waiver is granted, it applies only to the program(s) for 
which waiver is requested.
    (e) The decision to grant, deny, or rescind a waiver is not subject 
to administrative or judicial review.

0
8. Add subparts B through F to read as follows:
Subpart B--CMPs, Assessments, and Exclusions for False or Fraudulent 
Claims and Other Similar Misconduct
Sec.
1003.200 Basis for civil money penalties, assessments, and 
exclusions.
1003.210 Amount of penalties and assessments.
1003.220 Determinations regarding the amount of penalties and 
assessments and the period of exclusion.
Subpart C--CMPs, Assessments, and Exclusions for Anti-Kickback and 
Physician Self-Referral Violations
1003.300 Basis for civil money penalties, assessments, and 
exclusions.
1003.310 Amount of penalties and assessments.
1003.320 Determinations regarding the amount of penalties and 
assessments and the period of exclusion.
Subpart D--CMPs and Assessments for Contracting Organization Misconduct
1003.400 Basis for civil money penalties and assessments.
1003.410 Amount of penalties and assessments.
1003.420 Determinations regarding the amount of penalties and 
assessments.
Subpart E--CMPs and Exclusions for EMTALA Violations
1003.500 Basis for civil money penalties and exclusions.
1003.510 Amount of penalties.
1003.520 Determinations regarding the amount of penalties and the 
period of exclusion.
Subpart F--CMPs for Section 1140 Violations
1003.600 Basis for civil money penalties.
1003.610 Amount of penalties.
1003.620 Determinations regarding the amount of penalties.

Subpart B--CMPs, Assessments, and Exclusions for False or 
Fraudulent Claims and Other Similar Misconduct


Sec.  1003.200  Basis for civil money penalties, assessments, and 
exclusions.

    (a) The OIG may impose a penalty, assessment, and an exclusion 
against any person who it determines has knowingly presented, or caused 
to be presented, a claim that was for--
    (1) An item or service that the person knew, or should have known, 
was not provided as claimed, including a claim that was part of a 
pattern or practice of claims based on codes that the person knew, or 
should have known, would result in greater payment to the person than 
the code applicable to the item or service actually provided;
    (2) An item or service for which the person knew, or should have 
known, that the claim was false or fraudulent;
    (3) An item or service furnished during a period in which the 
person was excluded from participation in the Federal health care 
program to which the claim was presented;
    (4) A physician's services (or an item or service) for which the 
person knew, or should have known, that the individual who furnished 
(or supervised the furnishing of) the service--
    (i) Was not licensed as a physician;
    (ii) Was licensed as a physician, but such license had been 
obtained through a misrepresentation of material fact (including 
cheating on an examination required for licensing); or
    (iii) Represented to the patient at the time the service was 
furnished that the physician was certified by a medical specialty board 
when he or she was not so certified; or
    (5) An item or service that a person knew, or should have known was 
not

[[Page 88358]]

medically necessary, and which is part of a pattern of such claims.
    (b) The OIG may impose a penalty; an exclusion; and, where 
authorized, an assessment against any person who it determines--
    (1) Has knowingly presented, or caused to be presented, a request 
for payment in violation of the terms of--
    (i) An agreement to accept payments on the basis of an assignment 
under section 1842(b)(3)(B)(ii) of the Act;
    (ii) An agreement with a State agency or other requirement of a 
State Medicaid plan not to charge a person for an item or service in 
excess of the amount permitted to be charged;
    (iii) An agreement to be a participating physician or supplier 
under section 1842(h)(1) of the Act; or
    (iv) An agreement in accordance with section 1866(a)(1)(G) of the 
Act not to charge any person for inpatient hospital services for which 
payment had been denied or reduced under section 1886(f)(2) of the Act;
    (2) Has knowingly given, or caused to be given, to any person, in 
the case of inpatient hospital services subject to section 1886 of the 
Act, information that he or she knew, or should have known, was false 
or misleading and that could reasonably have been expected to influence 
the decision when to discharge such person or another person from the 
hospital;
    (3) Is an individual who is excluded from participating in a 
Federal health care program under section 1128 or 1128A of the Act, and 
who--
    (i) Knows, or should know, of the action constituting the basis for 
the exclusion and retains a direct or indirect ownership or control 
interest of 5 percent or more in an entity that participates in a 
Federal health care program or
    (ii) Is an officer or a managing employee (as defined in section 
1126(b) of the Act) of such entity;
    (4) Arranges or contracts (by employment or otherwise) with an 
individual or entity that the person knows, or should know, is excluded 
from participation in Federal health care programs for the provision of 
items or services for which payment may be made under such a program;
    (5) Has knowingly and willfully presented, or caused to be 
presented, a bill or request for payment for items and services 
furnished to a hospital patient for which payment may be made under a 
Federal health care program if that bill or request is inconsistent 
with an arrangement under section 1866(a)(1)(H) of the Act or violates 
the requirements for such an arrangement;
    (6) Orders or prescribes a medical or other item or service during 
a period in which the person was excluded from a Federal health care 
program, in the case when the person knows, or should know, that a 
claim for such medical or other item or service will be made under such 
a program;
    (7) Knowingly makes, or causes to be made, any false statement, 
omission, or misrepresentation of a material fact in any application, 
bid, or contract to participate or enroll as a provider of services or 
a supplier under a Federal health care program, including contracting 
organizations, and entities that apply to participate as providers of 
services or suppliers in such contracting organizations;
    (8) Knows of an overpayment and does not report and return the 
overpayment in accordance with section 1128J(d) of the Act;
    (9) Knowingly makes, uses, or causes to be made or used, a false 
record or statement material to a false or fraudulent claim for payment 
for items and services furnished under a Federal health care program; 
or
    (10) Fails to grant timely access to records, documents, and other 
material or data in any medium (including electronically stored 
information and any tangible thing), upon reasonable request, to the 
OIG, for the purpose of audits, investigations, evaluations, or other 
OIG statutory functions. Such failure to grant timely access means:
    (i) Except when the OIG reasonably believes that the requested 
material is about to be altered or destroyed, the failure to produce or 
make available for inspection and copying the requested material upon 
reasonable request or to provide a compelling reason why they cannot be 
produced, by the deadline specified in the OIG's written request, and
    (ii) When the OIG has reason to believe that the requested material 
is about to be altered or destroyed, the failure to provide access to 
the requested material at the time the request is made.
    (c) The OIG may impose a penalty against any person who it 
determines, in accordance with this part, is a physician and who 
executes a document falsely by certifying that a Medicare beneficiary 
requires home health services when the physician knows that the 
beneficiary does not meet the eligibility requirements in section 
1814(a)(2)(C) or 1835(a)(2)(A) of the Act.
    (d) The OIG may impose a penalty against any person who it 
determines knowingly certifies, or causes another individual to 
certify, a material and false statement in a resident assessment 
pursuant to sections 1819(b)(3)(B) and 1919(b)(3)(B).


Sec.  1003.210  Amount of penalties and assessments.

    (a) Penalties.\1\ (1) Except as provided in this section, the OIG 
may impose a penalty of not more than $10,000 for each individual 
violation that is subject to a determination under this subpart.
---------------------------------------------------------------------------

    \1\ The penalty amounts in this section are updated annually, as 
adjusted in accordance with the Federal Civil Monetary Penalty 
Inflation Adjustment Act of 1990 (Pub. L. 101-140), as amended by 
the Federal Civil Penalties Inflation Adjustment Act Improvements 
Act of 2015 (section 701 of Pub. L. 114-74). Annually adjusted 
amounts are published at 45 CFR part 102.
---------------------------------------------------------------------------

    (2) The OIG may impose a penalty of not more than $15,000 for each 
person with respect to whom a determination was made that false or 
misleading information was given under Sec.  1003.200(b)(2).
    (3) The OIG may impose a penalty of not more than $10,000 per day 
for each day that the prohibited relationship described in Sec.  
1003.200(b)(3) occurs.
    (4) For each individual violation of Sec.  1003.200(b)(4), the OIG 
may impose a penalty of not more than $10,000 for each separately 
billable or non-separately-billable item or service provided, 
furnished, ordered, or prescribed by an excluded individual or entity.
    (5) The OIG may impose a penalty of not more than $2,000 for each 
bill or request for payment for items and services furnished to a 
hospital patient in violation of Sec.  1003.200(b)(5).
    (6) The OIG may impose a penalty of not more than $50,000 for each 
false statement, omission, or misrepresentation of a material fact in 
violation of Sec.  1003.200(b)(7).
    (7) The OIG may impose a penalty of not more than $50,000 for each 
false record or statement in violation of Sec.  1003.200(b)(9).
    (8) The OIG may impose a penalty of not more than $10,000 for each 
item or service related to an overpayment that is not reported and 
returned in accordance with section 1128J(d) of the Act in violation of 
Sec.  1003.200(b)(8).
    (9) The OIG may impose a penalty of not more than $15,000 for each 
day of failure to grant timely access in violation of Sec.  
1003.200(b)(10).
    (10) For each false certification in violation of Sec.  
1003.200(c), the OIG may impose a penalty of not more than the greater 
of--
    (i) $5,000; or
    (ii) Three times the amount of Medicare payments for home health 
services that are made with regard to the false certification of 
eligibility by a

[[Page 88359]]

physician, as prohibited by section 1814(a)(2)(C) or 1835(a)(2)(A) of 
the Act.
    (11) For each false certification in violation of Sec.  
1003.200(d), the OIG may impose a penalty of not more than--
    (i) $1,000 with respect to an individual who willfully and 
knowingly falsely certifies a material and false statement in a 
resident assessment; and
    (ii) $5,000 with respect to an individual who willfully and 
knowingly causes another individual to falsely certify a material and 
false statement in a resident assessment.
    (b) Assessments. (1) Except for violations of Sec.  1003.200(b)(4), 
(5), and (7), and Sec.  1003.200(c) and (d), the OIG may impose an 
assessment for each individual violation of Sec.  1003.200, of not more 
than 3 times the amount claimed for each item or service.
    (2) For violations of Sec.  1003.200(b)(4), the OIG may impose an 
assessment of not more than 3 times--
    (i) The amount claimed for each separately billable item or service 
provided, furnished, ordered, or prescribed by an excluded individual 
or entity or
    (ii) The total costs (including salary, benefits, taxes, and other 
money or items of value) related to the excluded individual or entity 
incurred by the person that employs, contracts with, or otherwise 
arranges for an excluded individual or entity to provide, furnish, 
order, or prescribe a non-separately-billable item or service.
    (3) For violations of Sec.  1003.200(b)(7), the OIG may impose an 
assessment of not more than 3 times the total amount claimed for each 
item or service for which payment was made based upon the application 
containing the false statement, omission, or misrepresentation of 
material fact.


Sec.  1003.220  Determinations regarding the amount of penalties and 
assessments and the period of exclusion.

    In considering the factors listed in Sec.  1003.140--
    (a) It should be considered a mitigating circumstance if all the 
items or services or violations included in the action brought under 
this part were of the same type and occurred within a short period of 
time, there were few such items or services or violations, and the 
total amount claimed or requested for such items or services was less 
than $5,000.
    (b) Aggravating circumstances include--
    (1) The violations were of several types or occurred over a lengthy 
period of time;
    (2) There were many such items or services or violations (or the 
nature and circumstances indicate a pattern of claims or requests for 
payment for such items or services or a pattern of violations);
    (3) The amount claimed or requested for such items or services, or 
the amount of the overpayment was $50,000 or more;
    (4) The violation resulted, or could have resulted, in patient 
harm, premature discharge, or a need for additional services or 
subsequent hospital admission; or
    (5) The amount or type of financial, ownership, or control interest 
or the degree of responsibility a person has in an entity was 
substantial with respect to an action brought under Sec.  
1003.200(b)(3).

Subpart C--CMPs, Assessments, and Exclusions for Anti-Kickback and 
Physician Self-Referral Violations


Sec.  1003.300  Basis for civil money penalties, assessments, and 
exclusions.

    The OIG may impose a penalty, an assessment, and an exclusion 
against any person who it determines in accordance with this part--
    (a) Has not refunded on a timely basis, as defined in Sec.  
1003.110, amounts collected as a result of billing an individual, third 
party payer, or other entity for a designated health service furnished 
pursuant to a prohibited referral as described in 42 CFR 411.353.
    (b) Is a physician or other person who enters into any arrangement 
or scheme (such as a cross-referral arrangement) that the physician or 
other person knows, or should know, has a principal purpose of ensuring 
referrals by the physician to a particular person that, if the 
physician directly made referrals to such person, would be in violation 
of the prohibitions of 42 CFR 411.353.
    (c) Has knowingly presented, or caused to be presented, a claim 
that is for a payment that such person knows, or should know, may not 
be made under 42 CFR 411.353;
    (d) Has violated section 1128B(b) of the Act by unlawfully 
offering, paying, soliciting, or receiving remuneration to induce or in 
return for the referral of business paid for, in whole or in part, by 
Medicare, Medicaid, or other Federal health care programs.


Sec.  1003.310  Amount of penalties and assessments.

    (a) Penalties.\2\ The OIG may impose a penalty of not more than--
---------------------------------------------------------------------------

    \2\ The penalty amounts in this section are adjusted for 
inflation annually. Adjusted amounts are published at 45 CFR part 
102.
---------------------------------------------------------------------------

    (1) $15,000 for each claim or bill for a designated health service, 
as defined in Sec.  411.351 of this title, that is subject to a 
determination under Sec.  1003.300(a) or (c);
    (2) $100,000 for each arrangement or scheme that is subject to a 
determination under Sec.  1003.300(b); and
    (3) $50,000 for each offer, payment, solicitation, or receipt of 
remuneration that is subject to a determination under Sec.  
1003.300(d).
    (b) Assessments. The OIG may impose an assessment of not more than 
3 times--
    (1) The amount claimed for each designated health service that is 
subject to a determination under Sec.  1003.300(a), (b), or (c).
    (2) The total remuneration offered, paid, solicited, or received 
that is subject to a determination under Sec.  1003.300(d). Calculation 
of the total remuneration for purposes of an assessment shall be 
without regard to whether a portion of such remuneration was offered, 
paid, solicited, or received for a lawful purpose.


Sec.  1003.320  Determinations regarding the amount of penalties and 
assessments and the period of exclusion.

    In considering the factors listed in Sec.  1003.140:
    (a) It should be considered a mitigating circumstance if all the 
items, services, or violations included in the action brought under 
this part were of the same type and occurred within a short period of 
time; there were few such items, services, or violations; and the total 
amount claimed or requested for such items or services was less than 
$5,000.
    (b) Aggravating circumstances include--
    (1) The violations were of several types or occurred over a lengthy 
period of time;
    (2) There were many such items, services, or violations (or the 
nature and circumstances indicate a pattern of claims or requests for 
payment for such items or services or a pattern of violations);
    (3) The amount claimed or requested for such items or services or 
the amount of the remuneration was $50,000 or more; or
    (4) The violation resulted, or could have resulted, in harm to the 
patient, a premature discharge, or a need for additional services or 
subsequent hospital admission.

[[Page 88360]]

Subpart D--CMPs and Assessments for Contracting Organization 
Misconduct


Sec.  1003.400  Basis for civil money penalties and assessments.

    (a) All contracting organizations. The OIG may impose a penalty 
against any contracting organization that--
    (1) Fails substantially to provide an enrollee with medically 
necessary items and services that are required (under the Act, 
applicable regulations, or contract with the Department or a State) to 
be provided to such enrollee and the failure adversely affects (or has 
the substantial likelihood of adversely affecting) the enrollee;
    (2) Imposes a premium on an enrollee in excess of the amounts 
permitted under the Act;
    (3) Engages in any practice that would reasonably be expected to 
have the effect of denying or discouraging enrollment by beneficiaries 
whose medical condition or history indicates a need for substantial 
future medical services, except as permitted by the Act;
    (4) Misrepresents or falsifies information furnished to a person 
under sections 1857, 1860D-12, 1876, or 1903(m) of the Act;
    (5) Misrepresents or falsifies information furnished to the 
Secretary or a State, as applicable, under sections 1857, 1860D-12, 
1876, or 1903(m) of the Act;
    (6) Fails to comply with the requirements of 42 CFR 417.479(d) 
through (i) for Medicare and 42 CFR 417.479(d) through (g) and (i) for 
Medicaid regarding certain prohibited incentive payments to physicians; 
or
    (7) Fails to comply with applicable requirements of the Act 
regarding prompt payment of claims.
    (b) All Medicare contracting organizations. The OIG may impose a 
penalty against any contracting organization with a contract under 
section 1857, 1860D-12, or 1876 of the Act that--
    (1) Acts to expel or to refuse to reenroll a beneficiary in 
violation of the Act; or
    (2) Employs or contracts with a person excluded, under section 1128 
or 1128A of the Act, from participation in Medicare for the provision 
of health care, utilization review, medical social work, or 
administrative services, or employs or contracts with any entity for 
the provision of such services (directly or indirectly) through an 
excluded person.
    (c) Medicare Advantage and Part D contracting organizations. The 
OIG may impose a penalty, and for Sec.  1003.400(c)(4) or (5), an 
assessment, against a contracting organization with a contract under 
section 1857 or 1860D-12 of the Act that:
    (1) Enrolls an individual without the individual's (or his or her 
designee's) prior consent, except as provided under subparagraph (C) or 
(D) of section 1860D-1(b)(1) of the Act;
    (2) Transfers an enrollee from one plan to another without the 
individual's (or his or her designee's) prior consent;
    (3) Transfers an enrollee solely for the purpose of earning a 
commission;
    (4) Fails to comply with marketing restrictions described in 
subsection (h) or (j) of section 1851 of the Act or applicable 
implementing regulations or guidance; or
    (5) Employs or contracts with any person who engages in the conduct 
described in paragraphs (a) through (c) of this section.
    (d) Medicare Advantage contracting organizations. The OIG may 
impose a penalty against a contracting organization with a contract 
under section 1857 of the Act that fails to comply with the 
requirements of section 1852(j)(3) or 1852(k)(2)(A)(ii) of the Act.
    (e) Medicaid contracting organizations. The OIG may impose a 
penalty against any contracting organization with a contract under 
section 1903(m) of the Act that acts to discriminate among individuals 
in violation of the Act, including expulsion or refusal to reenroll an 
individual or engaging in any practice that would reasonably be 
expected to have the effect of denying or discouraging enrollment by 
eligible individuals with the contracting organization whose medical 
condition or history indicates a need for substantial future medical 
services.


Sec.  1003.410  Amount of penalties and assessments for Contracting 
Organization.

    (a) Penalties.\3\ (1) The OIG may impose a penalty of up to $25,000 
for each individual violation under Sec.  1001.400, except as provided 
in this section.
---------------------------------------------------------------------------

    \3\ The penalty amounts in this section are adjusted for 
inflation annually. Adjusted amounts are published at 45 CFR part 
102.
---------------------------------------------------------------------------

    (2) The OIG may impose a penalty of up to $100,000 for each 
individual violation under Sec.  1003.400(a)(3), (a)(5), or (e).
    (b) Additional penalties. In addition to the penalties described in 
paragraph (a) of this section, the OIG may impose--
    (1) An additional penalty equal to double the amount of excess 
premium charged by the contracting organization for each individual 
violation of Sec.  1003.400(a)(2). The excess premium amount will be 
deducted from the penalty and returned to the enrollee.
    (2) An additional $15,000 \4\ penalty for each individual expelled 
or not enrolled in violation of Sec.  1003.400(a)(3) or (e).
---------------------------------------------------------------------------

    \4\ This penalty amount is adjusted for inflation annually. 
Adjusted amounts are published at 45 CFR part 102.
---------------------------------------------------------------------------

    (c) Assessments. The OIG may impose an assessment against a 
contracting organization with a contract under section 1857 or 1860D-12 
of the Act (Medicare Advantage or Part D) of not more than the amount 
claimed in violation of Sec.  1003.400(a)(4) or (a)(5) on the basis of 
the misrepresentation or falsified information involved.
    (d) The OIG may impose a penalty or, when applicable, an 
assessment, against a contracting organization with a contract under 
section 1857 or 1860D-12 of the Act (Medicare Advantage or Part D) if 
any of its employees, agents, or contracting providers or suppliers 
engages in any of the conduct described in Sec.  1003.400(a) through 
(d).


Sec.  1003.420  Determinations regarding the amount of penalties and 
assessments.

    In considering the factors listed in Sec.  1003.140, aggravating 
circumstances include--
    (a) Such violations were of several types or occurred over a 
lengthy period of time;
    (b) There were many such violations (or the nature and 
circumstances indicate a pattern of incidents);
    (c) The amount of money, remuneration, damages, or tainted claims 
involved in the violation was $15,000 or more; or
    (d) Patient harm, premature discharge, or a need for additional 
services or subsequent hospital admission resulted, or could have 
resulted, from the incident; and
    (e) The contracting organization knowingly or routinely engaged in 
any prohibited practice that acted as an inducement to reduce or limit 
medically necessary services provided with respect to a specific 
enrollee in the organization.

Subpart E--CMPs and Exclusions for EMTALA Violations


Sec.  1003.500  Basis for civil money penalties and exclusions.

    (a) The OIG may impose a penalty against any participating hospital 
with an emergency department or specialized capabilities or facilities 
for each negligent violation of section 1867 of the Act or Sec.  489.24 
(other than Sec.  489.24(j)) of this title.

[[Page 88361]]

    (b) The OIG may impose a penalty against any responsible physician 
for each--
    (1) Negligent violation of section 1867 of the Act;
    (2) Certification signed under section 1867(c)(l)(A) of the Act if 
the physician knew, or should have known, that the benefits of transfer 
to another facility did not outweigh the risks of such a transfer; or
    (3) Misrepresentation made concerning an individual's condition or 
other information, including a hospital's obligations under section 
1867 of the Act.
    (c) The OIG may, in lieu of or in addition to any penalty available 
under this subpart, exclude any responsible physician who commits a 
gross and flagrant, or repeated, violation of this subpart from 
participation in Federal health care programs.
    (d) For purposes of this subpart, a ``gross and flagrant 
violation'' is a violation that presents an imminent danger to the 
health, safety, or well-being of the individual who seeks examination 
and treatment or places that individual unnecessarily in a high-risk 
situation.


Sec.  1003.510  Amount of penalties.

    The OIG may impose \5\--
---------------------------------------------------------------------------

    \5\ The penalty amounts in this section are adjusted for 
inflation annually. Adjusted amounts are published at 45 CFR part 
102.
---------------------------------------------------------------------------

    (a) Against each participating hospital, a penalty of not more than 
$50,000 for each individual violation, except that if the participating 
hospital has fewer than 100 State-licensed, Medicare-certified beds on 
the date the penalty is imposed, the penalty will not exceed $25,000 
for each violation, and
    (b) Against each responsible physician, a penalty of not more than 
$50,000 for each individual violation.


Sec.  1003.520  Determinations regarding the amount of penalties and 
the period of exclusion.

    In considering the factors listed in Sec.  1003.140,
    (a) It should be considered a mitigating circumstance if a hospital 
took appropriate and timely corrective action in response to the 
violation. For purposes of this subpart, corrective action must be 
completed prior to CMS initiating an investigation of the hospital for 
violations of section 1867 of the Act and must include disclosing the 
violation to CMS prior to CMS receiving a complaint regarding the 
violation from another source or otherwise learning of the violation.
    (b) Aggravating circumstances include:
    (1) Requesting proof of insurance, prior authorization, or a 
monetary payment prior to appropriately screening or initiating 
stabilizing treatment for an emergency medical condition, or requesting 
a monetary payment prior to stabilizing an emergency medical condition;
    (2) Patient harm, or risk of patient harm, resulted from the 
incident; or
    (3) The individual presented to the hospital with a request for 
examination or treatment of a medical condition that was an emergency 
medical condition, as defined by Sec.  489.24(b) of this title.

Subpart F--CMPs for Section 1140 Violations


Sec.  1003.600  Basis for civil money penalties.

    (a) The OIG may impose a penalty against any person who it 
determines in accordance with this part has used the words, letters, 
symbols, or emblems as defined in paragraph (b) of this section in such 
a manner that such person knew, or should have known, would convey, or 
in a manner that reasonably could be interpreted or construed as 
conveying, the false impression that an advertisement, a solicitation, 
or other item was authorized, approved, or endorsed by the Department 
or CMS or that such person or organization has some connection with or 
authorization from the Department or CMS.
    (b) Civil money penalties may be imposed, regardless of the use of 
a disclaimer of affiliation with the United States Government, the 
Department, or its programs, for misuse of--
    (1) The words ``Department of Health and Human Services,'' ``Health 
and Human Services,'' ``Centers for Medicare & Medicaid Services,'' 
``Medicare,'' or ``Medicaid'' or any other combination or variations of 
such words;
    (2) The letters ``DHHS,'' ``HHS,'' or ``CMS,'' or any other 
combination or variation of such letters; or
    (3) A symbol or an emblem of the Department or CMS (including the 
design of, or a reasonable facsimile of the design of, the Medicare 
card, the check used for payment of benefits under Title II, or 
envelopes or other stationery used by the Department or CMS) or any 
other combination or variation of such symbols or emblems.
    (c) Civil money penalties will not be imposed against any agency or 
instrumentality of a State, or political subdivision of the State, that 
uses any symbol or emblem or any words or letters that specifically 
identify that agency or instrumentality of the State or political 
subdivision.


Sec.  1003.610  Amount of penalties.

    (a) The OIG may impose a penalty of not more than \6\--
---------------------------------------------------------------------------

    \6\ The penalty amounts in this section are adjusted for 
inflation annually. Adjusted amounts are published at 45 CFR part 
102.
---------------------------------------------------------------------------

    (1) $5,000 for each individual violation resulting from the misuse 
of Departmental, CMS, or Medicare or Medicaid program words, letters, 
symbols, or emblems as described in Sec.  1003.600(a) relating to 
printed media;
    (2) $5,000 for each individual violation in the case of such misuse 
related to an electronic communication, Web page, or telemarketing 
solicitation;
    (3) $25,000 for each individual violation in the case of such 
misuse related to a broadcast or telecast.
    (b) For purposes of this paragraph, a violation is defined as--
    (1) In the case of a direct mailing solicitation or advertisement, 
each separate piece of mail that contains one or more words, letters, 
symbols, or emblems related to a determination under Sec.  1003.600(a);
    (2) In the case of a printed solicitation or advertisement, each 
reproduction, reprinting, or distribution of such item related to a 
determination under Sec.  1003.600(a);
    (3) In the case of a broadcast or telecast, each airing of a single 
commercial or solicitation related to a determination under Sec.  
1003.600(a);
    (4) In the case of an electronic communication, each dissemination, 
viewing, or accessing of the electronic communication that contains one 
or more words, letters, symbols, or emblems related to a determination 
under Sec.  1003.600(a);
    (5) In the case of a Web page accessed by a computer or other 
electronic means, each instance in which the Web page was viewed or 
accessed and that Web page contains one or more words, letters, 
symbols, or emblems related to a determination under Sec.  1003.600(a); 
and
    (6) In the case of a telemarketing solicitation, each individual 
unsolicited telephone call regarding an item or service under Medicare 
or Medicaid related to a determination under Sec.  1003.600(a).


Sec.  1003.620  Determinations regarding the amount of penalties.

    (a) In considering the factors listed in Sec.  1003.140, the 
following circumstances are to be considered--
    (1) The nature and objective of the advertisement, solicitation, or 
other communication and the degree to which it had the capacity to 
deceive members of the public;

[[Page 88362]]

    (2) The frequency and scope of the violation and whether a specific 
segment of the population was targeted; and
    (3) The prior history of the individual, organization, or entity in 
its willingness or refusal to comply with a formal or informal request 
to correct violations.
    (b) The use of a disclaimer of affiliation with the United States 
Government, the Department, or its programs will not be considered as a 
mitigating factor in determining the amount of penalty in accordance 
with Sec.  1003.600(a).

Subpart G--[Reserved]

0
9. Add reserved subpart G.

0
10. Add subparts H through M to read as follows:
Subpart H--CMPs for Adverse Action Reporting and Disclosure Violations
Sec.
1003.800 Basis for civil money penalties.
1003.810 Amount of penalties.
1003.820 Determinations regarding the amount of penalties.
Subpart I--CMPs for Select Agent Program Violations
1003.900 Basis for civil money penalties.
1003.910 Amount of penalties.
1003.920 Determinations regarding the amount of penalties.
Subpart J--CMPs, Assessments, and Exclusions for Beneficiary Inducement 
Violations
1003.1000 Basis for civil money penalties, assessments, and 
exclusions.
1003.1010 Amount of penalties and assessments.
1003.1020 Determinations regarding the amount of penalties and 
assessments and the period of exclusion.
Subpart K--CMPs for the Sale of Medicare Supplemental Policies
1003.1100 Basis for civil money penalties.
1003.1110 Amount of penalties.
1003.1120 Determinations regarding the amount of penalties.
Subpart L--CMPs for Drug Price Reporting
1003.1200 Basis for civil money penalties.
1003.1210 Amount of penalties.
1003.1220 Determinations regarding the amount of penalties.
Subpart M--CMPs for Notifying a Skilled Nursing Facility, Nursing 
Facility, Home Health Agency, or Community Care Setting of a Survey
1003.1300 Basis for civil money penalties.
1003.1310 Amount of penalties.
1003.1320 Determinations regarding the amount of penalties.

Subpart H--CMPs for Adverse Action Reporting and Disclosure 
Violations


Sec.  1003.800  Basis for civil money penalties.

    The OIG may impose a penalty against any person (including an 
insurance company) who it determines--
    (a) Fails to report information concerning--
    (1) 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 Public Law 99-660 (42 U.S.C. 11131) and as required by 
regulations at 45 CFR part 60 or
    (2) An adverse action required to be reported under section 1128E, 
as established by section 221 of Public Law 104-191.
    (b) Improperly discloses, uses, or permits access to information 
reported in accordance with Part B of Title IV of Public Law 99-660 (42 
U.S.C. 11137) or regulations at 45 CFR part 60. (The disclosure of 
information reported in accordance with Part B of Title IV in response 
to a subpoena or a discovery request is considered an improper 
disclosure in violation of section 427 of Public Law 99-660. However, 
disclosure or release by an entity of original documents or underlying 
records from which the reported information is obtained or derived is 
not considered an improper disclosure in violation of section 427 of 
Public Law 99-660.)


Sec.  1003.810  Amount of penalties.

    The OIG may impose a penalty of not more than \7\--
---------------------------------------------------------------------------

    \7\ The penalty amounts in this section are adjusted for 
inflation annually. Adjusted amounts are published at 45 CFR part 
102.
---------------------------------------------------------------------------

    (a) $11,000 for each payment for which there was a failure to 
report required information in accordance with Sec.  1003.800(a)(1) or 
for each improper disclosure, use, or access to information in 
accordance with a determination under Sec.  1003.800(b); and
    (b) $25,000 against a health plan for each failure to report 
information on an adverse action required to be reported in accordance 
with section 1128E of the Act and Sec.  1003.800(a)(2).


Sec.  1003.820  Determinations regarding the amount of penalties.

    In determining the amount of any penalty in accordance with this 
subpart, the OIG will consider the factors listed in Sec.  1003.140.

Subpart I--CMPs for Select Agent Program Violations


Sec.  1003.900  Basis for civil money penalties.

    The OIG may impose a penalty against any person who it determines 
in accordance with this part is involved in the possession or use in 
the United States, receipt from outside the United States or transfer 
within the United States, of select agents and toxins in violation of 
sections 351A(b) or (c) of the Public Health Service Act or 42 CFR part 
73.


Sec.  1003.910  Amount of penalties.

    For each individual violation of section 351A(b) or (c) of the 
Public Health Service Act or 42 CFR part 73, the OIG may impose a 
penalty of not more than $250,000 in the case of an individual, and not 
more than $500,000 in the case of any other person.\8\
---------------------------------------------------------------------------

    \8\ The penalty amounts in this section are adjusted for 
inflation annually. Adjusted amounts are published at 45 CFR part 
102.
---------------------------------------------------------------------------


Sec.  1003.920  Determinations regarding the amount of penalties.

    In considering the factors listed in Sec.  1003.140, aggravating 
circumstances include:
    (a) The Responsible Official participated in or knew, or should 
have known, of the violation;
    (b) The violation was a contributing factor to an unauthorized 
individual's access to or possession of a select agent or toxin, an 
individual's exposure to a select agent or toxin, or the unauthorized 
removal of a select agent or toxin from the person's physical location 
as identified on the person's certificate of registration; or
    (c) The person previously received an observation, finding, or 
other statement of deficiency from the Department or the Department of 
Agriculture for the same or substantially similar conduct.

Subpart J--CMPs, Assessments, and Exclusions for Beneficiary 
Inducement Violations


Sec.  1003.1000  Basis for civil money penalties, assessments, and 
exclusions.

    (a) The OIG may impose a penalty, an assessment, and an exclusion 
against any person who it determines offers or transfers remuneration 
(as defined in Sec.  1003.110) to any individual eligible for benefits 
under Medicare or a State health care program that such person knows, 
or should know, is likely to influence such individual to order or to 
receive from a particular provider, practitioner, or supplier, any item 
or

[[Page 88363]]

service for which payment may be made, in whole or in part, under 
Medicare or a State health care program.
    (b) The OIG may impose a penalty against any person who it 
determines offered any financial or other incentive for an individual 
entitled to benefits under Medicare not to enroll, or to terminate 
enrollment, under a group health plan or a large group health plan that 
would, in the case of such enrollment, be a primary plan as defined in 
section 1862(b)(2)(A) of the Act.


Sec.  1003.1010  Amount of penalties and assessments.

    The OIG may impose a penalty of not more than \9\--
---------------------------------------------------------------------------

    \9\ The penalty amounts in this section are adjusted for 
inflation annually. Adjusted amounts are published at 45 CFR part 
102.
---------------------------------------------------------------------------

    (a) $10,000 for each item or service for which payment may be made, 
in whole or in part, under Medicare or a State health care program, 
ordered by or received from a particular provider, practitioner, or 
supplier for a beneficiary who was offered or received remuneration in 
violation of Sec.  1003.1000(a) that was likely to influence the 
beneficiary to order or receive the item or service from the provider, 
practitioner, or supplier, and an assessment of not more than 3 times 
the amount claimed for each such item or service and
    (b) $5,000 for each individual violation of Sec.  1003.1000(b).


Sec.  1003.1020  Determinations regarding the amount of penalties and 
assessments and the period of exclusion.

    In determining the amount of any penalty or assessment or the 
period of exclusion under this subpart, the OIG will consider the 
factors listed in Sec.  1003.140, as well as the amount of remuneration 
or the amount or nature of any other incentive.

Subpart K--CMPs for the Sale of Medicare Supplemental Policies


Sec.  1003.1100  Basis for civil money penalties.

    The OIG may impose a penalty against any person who--
    (a) Knowingly and willfully makes or causes to be made or induces 
or seeks to induce the making of any false statement or representation 
of a material fact with respect to--
    (1) The compliance of any policy with the standards and 
requirements for Medicare supplemental policies set forth in section 
1882(c) of the Act or in promulgating regulations, or
    (2) The use of the emblem designed by the Secretary under section 
1882(a) of the Act for use as an indication that a policy has received 
the Secretary's certification;
    (b) Falsely assumes or pretends to be acting, or misrepresents in 
any way that he or she is acting, under the authority of or in 
association with Medicare or any Federal agency, for the purpose of 
selling or attempting to sell insurance, or in such pretended character 
demands, or obtains money, paper, documents, or anything of value;
    (c) Knowingly, directly, or through his or her agent, mails or 
causes to be mailed any matter for the advertising, solicitation, or 
offer for sale of a Medicare supplemental policy, or the delivery of 
such a policy, in or into any State in which such policy has not been 
approved by the State commissioner or superintendent of insurance;
    (d) Issues or sells to any individual entitled to benefits under 
Part A or enrolled under Part B of Medicare--
    (1) A health insurance policy with knowledge that the policy 
duplicates health benefits to which the individual is otherwise 
entitled under Medicare or Medicaid,
    (2) A health insurance policy (other than a Medicare supplemental 
policy) with knowledge that the policy duplicates health benefits to 
which the individual is otherwise entitled, other than benefits to 
which the individual is entitled under a requirement of State or 
Federal law,
    (3) In the case of an individual not electing a Part C plan, a 
Medicare supplemental policy with knowledge that the individual is 
entitled to benefits under another Medicare supplemental policy, or
    (4) In the case of an individual electing a Part C plan, a Medicare 
supplemental policy with knowledge that the policy duplicates health 
benefits to which the individual is otherwise entitled under the Part C 
plan or under another Medicare supplemental policy;
    (e) Issues or sells a health insurance policy (other than a policy 
described in section 1882(d)(3)(A)(vi)(III)) to any individual entitled 
to benefits under Medicare Part A or enrolled under Medicare Part B who 
is applying for a health insurance policy and fails to furnish the 
appropriate disclosure statement described in section 
1882(d)(3)(A)(vii); or
    (f) Issues or sells a Medicare supplemental policy to any 
individual eligible for benefits under Part A or enrolled under 
Medicare Part B without obtaining the written statement or the written 
acknowledgment described in section 1882(d)(3)(B) of the Act.


Sec.  1003.1110  Amount of penalties.

    The OIG may impose a penalty of not more than \10\--
---------------------------------------------------------------------------

    \10\ The penalty amounts in this section are adjusted for 
inflation annually. Adjusted amounts are published at 45 CFR part 
102.
---------------------------------------------------------------------------

    (a) $5,000 for each individual violation of Sec.  1003.1100(a), 
(b), or (c).
    (b) $25,000 for each individual violation of Sec.  1003.1100(d), 
(e), or (f) by a seller who is also the issuer of the policy; and
    (c) $15,000 for each individual violation of Sec.  1003.1100(d), 
(e), or (f) by a seller who is not the issuer of the policy.


Sec.  1003.1120  Determinations regarding the amount of penalties.

    In determining the amount of the penalty in accordance with this 
subpart, the OIG will consider the factors listed in Sec.  1003.140.

Subpart L--CMPs for Drug Price Reporting


Sec.  1003.1200  Basis for civil money penalties.

    The OIG may impose a penalty against--
    (a) Any wholesaler, manufacturer, or direct seller of a covered 
outpatient drug that--
    (1) Refuses a request for information by, or
    (2) Knowingly provides false information to, the Secretary about 
charges or prices in connection with a survey being conducted pursuant 
to section 1927(b)(3)(B) of the Act; and
    (b) Any manufacturer with an agreement under section 1927 of the 
Act that--
    (1) Fails to provide any information required by section 
1927(b)(3)(A) of the Act by the deadlines specified therein, or
    (2) Knowingly provides any item information required by section 
1927(b)(3)(A) or (B) of the Act that is false.


Sec.  1003.1210  Amount of penalties.

    The OIG may impose a penalty of not more than \11\--
---------------------------------------------------------------------------

    \11\ The penalty amounts in this section are adjusted for 
inflation annually. Adjusted amounts are published at 45 CFR part 
102.
---------------------------------------------------------------------------

    (a) $100,000 for each individual violation of Sec.  1003.1200(a) or 
Sec.  1003.1200(b)(2); and
    (b) $10,000 for each day that such information has not been 
provided in violation of Sec.  1003.1200(b)(1).


Sec.  1003.1220  Determinations regarding the amount of penalties.

    In determining the amount of the penalty in accordance with this 
subpart,

[[Page 88364]]

the OIG will consider the factors listed in Sec.  1003.140.

Subpart M--CMPs for Notifying a Skilled Nursing Facility, Nursing 
Facility, Home Health Agency, or Community Care Setting of a Survey


Sec.  1003.1300  Basis for civil money penalties.

    The OIG may impose a penalty against any individual who notifies, 
or causes to be notified, a skilled nursing facility, nursing facility, 
home health agency, a community care setting, of the time or date on 
which a survey pursuant to sections 1819(g)(2)(A), 1919(g)(2)(A), 
1891(c)(1), or 1929(i) of the Act is scheduled to be conducted.


Sec.  1003.1310  Amount of penalties.

    The OIG may impose a penalty of not more than $2,000 for each 
individual violation of Sec.  1003.1300.\12\
---------------------------------------------------------------------------

    \12\ This penalty amount is adjusted for inflation annually. 
Adjusted amounts are published at 45 CFR part 102.
---------------------------------------------------------------------------


Sec.  1003.1320  Determinations regarding the amount of penalties.

    In determining the amount of the penalty in accordance with this 
subpart, the OIG will consider the factors listed in Sec.  1003.140.

Subpart N--[Reserved]

0
11. Add reserved subpart N.

0
12. Add subpart O to read as follows:
Subpart O--Procedures for the Imposition of CMPs, Assessments, and 
Exclusions
Sec.
1003.1500 Notice of proposed determination.
1003.1510 Failure to request a hearing.
1003.1520 Collateral estoppel.
1003.1530 Settlement.
1003.1540 Judicial review.
1003.1550 Collection of penalties and assessments.
1003.1560 Notice to other agencies.
1003.1570 Limitations.
1003.1580 Statistical sampling.
1003.1590 Effect of exclusion.
1003.1600 Reinstatement.

Subpart O--Procedures for the Imposition of CMPs, Assessments, and 
Exclusions


Sec.  1003.1500  Notice of proposed determination.

    (a) If the OIG proposes a penalty and, when applicable, an 
assessment, or proposes to exclude a respondent from participation in 
all Federal health care programs, as applicable, in accordance with 
this part, the OIG must serve on the respondent, in any manner 
authorized by Rule 4 of the Federal Rules of Civil Procedure, written 
notice of the OIG's intent to impose a penalty, an assessment, and an 
exclusion, as applicable. The notice will include--
    (1) Reference to the statutory basis for the penalty, assessment, 
and exclusion;
    (2) A description of the violation for which the penalty, 
assessment, and exclusion are proposed (except in cases in which the 
OIG is relying upon statistical sampling in accordance with Sec.  
1003.1580, in which case the notice shall describe those claims and 
requests for payment constituting the sample upon which the OIG is 
relying and will briefly describe the statistical sampling technique 
used by the OIG);
    (3) The reason why such violation subjects the respondent to a 
penalty, an assessment, and an exclusion,
    (4) The amount of the proposed penalty and assessment, and the 
length of the period of proposed exclusion (where applicable);
    (5) Any factors and circumstances described in this part that were 
considered when determining the amount of the proposed penalty and 
assessment and the length of the period of exclusion;
    (6) Instructions for responding to the notice, including--
    (i) A specific statement of the respondent's right to a hearing and
    (ii) A statement that failure to request a hearing within 60 days 
permits the imposition of the proposed penalty, assessment, and 
exclusion without right of appeal; and
    (7) In the case of a notice sent to a respondent who has an 
agreement under section 1866 of the Act, the notice also indicates that 
the imposition of an exclusion may result in the termination of the 
respondent's provider agreement in accordance with section 
1866(b)(2)(C) of the Act.
    (b) Any person upon whom the OIG has proposed the imposition of a 
penalty, an assessment, or an exclusion may appeal such proposed 
penalty, assessment, or exclusion to the Departmental Appeals Board in 
accordance with 42 CFR 1005.2. The provisions of 42 CFR part 1005 
govern such appeals.
    (c) If the respondent fails, within the time period permitted, to 
exercise his or her right to a hearing under this section, any 
exclusion, penalty, or assessment becomes final.


Sec.  1003.1510  Failure to request a hearing.

    If the respondent does not request a hearing within 60 days after 
the notice prescribed by Sec.  1003.1500(a) is received, as determined 
by 42 CFR 1005.2(c), by the respondent, the OIG may impose the proposed 
penalty, assessment, and exclusion, or any less severe penalty, 
assessment, or exclusion. The OIG shall notify the respondent in any 
manner authorized by Rule 4 of the Federal Rules of Civil Procedure of 
any penalty, assessment, and exclusion that have been imposed and of 
the means by which the respondent may satisfy the judgment. The 
respondent has no right to appeal a penalty, an assessment, or an 
exclusion with respect to which he or she has not made a timely request 
for a hearing under 42 CFR 1005.2.


Sec.  1003.1520  Collateral estoppel.

    (a) Where a final determination pertaining to the respondent's 
liability for acts that violate this part 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.
    (b) In a proceeding under this part, a person is estopped from 
denying the essential elements of the criminal offense if the 
proceeding--
    (1) Is against a person who has been convicted (whether upon a 
verdict after trial or upon a plea of guilty or nolo contendere) of a 
Federal crime charging fraud or false statements, and
    (2) Involves the same transactions as in the criminal action.


Sec.  1003.1530  Settlement.

    The OIG has exclusive authority to settle any issues or case 
without consent of the ALJ.


Sec.  1003.1540  Judicial review.

    (a) Section 1128A(e) of the Act authorizes judicial review of a 
penalty, an assessment, or an exclusion that has become final. The only 
matters subject to judicial review are those that the respondent raised 
pursuant to 42 CFR 1005.21, unless the court finds that extraordinary 
circumstances existed that prevented the respondent from raising the 
issue in the underlying administrative appeal.
    (b) A respondent must exhaust all administrative appeal procedures 
established by the Secretary or required by law before a respondent may 
bring an action in Federal court, as provided in section 1128A(e) of 
the Act, concerning any penalty, assessment, or exclusion imposed 
pursuant to this part.
    (c) Administrative remedies are exhausted when a decision becomes 
final in accordance with 42 CFR 1005.21(j).


Sec.  1003.1550  Collection of penalties and assessments.

    (a) Once a determination by the Secretary has become final, 
collection of any penalty and assessment will be the responsibility of 
CMS, except in the

[[Page 88365]]

case of the Maternal and Child Health Services Block Grant Program, in 
which the collection will be the responsibility of the Public Health 
Service (PHS); in the case of the Social Services Block Grant program, 
in which the collection will be the responsibility of the 
Administration for Children and Families; and in the case of violations 
of subpart I, collection will be the responsibility of the Program 
Support Center (PSC).
    (b) A penalty or an assessment imposed under this part may be 
compromised by the OIG and may be recovered in a civil action brought 
in the United States district court for the district where the claim 
was presented or where the respondent resides.
    (c) The amount of penalty or assessment, when finally determined, 
or the amount agreed upon in compromise, may be deducted from any sum 
then or later owing by the United States Government or a State agency 
to the person against whom the penalty or assessment has been assessed.
    (d) Matters that were raised, or that could have been raised, in a 
hearing before an ALJ or in an appeal under section 1128A(e) of the Act 
may not be raised as a defense in a civil action by the United States 
to collect a penalty under this part.


Sec.  1003.1560  Notice to other agencies.

    (a) Whenever a penalty, an assessment, or an exclusion becomes 
final, the following organizations and entities will be notified about 
such action and the reasons for it: The appropriate State or local 
medical or professional association; the appropriate quality 
improvement organization; as appropriate, the State agency that 
administers each State health care program; the appropriate Medicare 
carrier or intermediary; the appropriate State or local licensing 
agency or organization (including the Medicare and Medicaid State 
survey agencies); and the long-term-care ombudsman. In cases involving 
exclusions, notice will also be given to the public of the exclusion 
and its effective date.
    (b) When the OIG proposes to exclude a nursing facility under this 
part, the OIG will, at the same time the facility is notified, notify 
the appropriate State licensing authority, the State Office of Aging, 
the long-term-care ombudsman, and the State Medicaid agency of the 
OIG's intention to exclude the facility.


Sec.  1003.1570  Limitations.

    No action under this part will be entertained unless commenced, in 
accordance with Sec.  1003.1500(a), within 6 years from the date on 
which the violation occurred.


Sec.  1003.1580  Statistical sampling.

    (a) In meeting the burden of proof in 42 CFR 1005.15, the OIG may 
introduce the results of a statistical sampling study as evidence of 
the number and amount of claims and/or requests for payment, as 
described in this part, that were presented, or caused to be presented, 
by the respondent. Such a statistical sampling study, if based upon an 
appropriate sampling and computed by valid statistical methods, shall 
constitute prima facie evidence of the number and amount of claims or 
requests for payment, as described in this part.
    (b) Once the OIG has made a prima facie case, as described in 
paragraph (a) of this section, the burden of production shall shift to 
the respondent to produce evidence reasonably calculated to rebut the 
findings of the statistical sampling study. The OIG will then be given 
the opportunity to rebut this evidence.


Sec.  1003.1590  Effect of exclusion.

    The effect of an exclusion will be as set forth in 42 CFR 
1001.1901.


Sec.  1003.1600  Reinstatement.

    A person who has been excluded in accordance with this part may 
apply for reinstatement at the end of the period of exclusion. The OIG 
will consider any request for reinstatement in accordance with the 
provisions of 42 CFR 1001.3001 through 1001.3004.

PART 1005--[AMENDED]

0
13. The authority citation for part 1005 continues to read as follows:

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


0
14. Section 1005.4 is amended by republishing paragraph (c) 
introductory text and revising paragraphs (c)(5) and (6) to read as 
follows:


Sec.  1005.4  Authority of the ALJ.

* * * * *
    (c) The ALJ does not have the authority to--
* * * * *
    (5) Review the exercise of discretion by the OIG to exclude an 
individual or entity under section 1128(b) of the Act or under part 
1003 of this chapter, or determine the scope or effect of the 
exclusion;
    (6) Set a period of exclusion at zero, or reduce a period of 
exclusion to zero, in any case in which the ALJ finds that an 
individual or entity committed an act described in section 1128(b) of 
the Act or under part 1003 of this chapter; or
* * * * *

    Dated: August 3, 2016.
Daniel R. Levinson,
Inspector General.

    Approved: August 4, 2016.
Sylvia M. Burwell,
Secretary.

    Note: This document was received by the Office of the Federal 
Register on November 18, 2016.

[FR Doc. 2016-28293 Filed 12-6-16; 8:45 am]
BILLING CODE 4152-01-P