The Effect of Exclusion From Participation in Federal
Health Care Programs
September 1999
A. Introduction
The Office of Inspector General (OIG) was established in the U.S. Department
of Health and Human Services to identify and eliminate fraud, waste, and abuse
in the Department's programs and to promote efficiency and economy in Departmental
operations. The OIG carries out this mission through a nationwide program of
audits, inspections, and investigations. In addition, the OIG has been given
the authority to exclude from participation in Medicare, Medicaid and other
Federal health care programs(1) individuals and
entities who have engaged in fraud or abuse, and to impose civil money penalties
(CMPs) for certain misconduct related to Federal health care programs (sections
1128 and 1128A of the Social Security Act (the Act)).
Recent statutory enactments have strengthened and expanded the OIG's authority
to exclude individuals and entities from the Federal health care programs. These
laws also expanded the OIG's authority to assess CMPs against individuals and
entities that violate the law. With this expanded authority, the OIG believes
that it is important to explain the effect of program exclusions under the current
statutory and regulatory provisions.
The Health Insurance Portability and Accountability Act (HIPAA) of 1996, Public
Law 104-191, authorized the OIG to provide guidance to the health care industry
to prevent fraud and abuse, and to promote high levels of ethical and lawful
conduct. To further these goals, the OIG issues Special Advisory Bulletins about
industry practices or arrangements that potentially implicate the fraud and
abuse authorities subject to enforcement by the OIG.
In order to assist all affected parties in understanding the breadth of the
payment prohibitions that apply to items and services provided to Federal program
beneficiaries,(2) this Special Advisory Bulletin provides guidance
to individuals and entities that have been excluded from Federal health care
programs, as well as to those who might employ or contract with an excluded
individual or entity to provide items or services reimbursed by a Federal health
care program.
B. Statutory Background
In 1977, in the Medicare-Medicaid Anti-Fraud and Abuse Amendments, Public Law
95-142, Congress first mandated the exclusion of physicians and other practitioners
convicted of program-related crimes from participation in Medicare and Medicaid
(now codified at section 1128 of the Act). This was followed in 1981 with Congressional
enactment of the Civil Monetary Penalties Law (CMPL), Public Law 97-35, to further
address health care fraud and abuse (section 1128A of the Act). The CMPL authorizes
the Department and the OIG to impose CMPs, assessments and program exclusions
against individuals and entities who submit false or fraudulent, or otherwise
improper claims for Medicare or Medicaid payment. "Improper claims"
include claims submitted by an excluded individual or entity for items or services
furnished during a period of program exclusion.
To enhance the OIG's ability to protect the Medicare and Medicaid programs and
beneficiaries, the Medicare and Medicaid Patient and Program Protection Act
of 1987, Public Law 100-93, expanded and revised the OIG's administrative sanction
authorities by, among other things, establishing certain mandatory and discretionary
exclusions for various types of misconduct.
The enactment of HIPAA in 1996 and the Balanced Budget Act (BBA) of 1997, Public
Law 105-33, further expanded the OIG's sanction authorities. These statutes
extended the application and scope of the current CMP and exclusion authorities
beyond programs funded by the Department to all "Federal health care programs."
BBA also authorized a new CMP authority to be imposed against health care providers
or entities that employ or enter into contracts with excluded individuals for
the provision of services or items to Federal program beneficiaries.
In the discussion that follows, it should be understood that the prohibitions
being described apply to items and services provided, directly or indirectly,
to Federal program beneficiaries. The ability of an excluded individual or entity
to render items and services to others is not affected by an OIG exclusion.
C. Exclusion from Federal Health Care Programs
The effect of an OIG exclusion from Federal health care programs is that no
Federal health care program payment may be made for any items or services (1)
furnished by an excluded individual or entity, or (2) directed or prescribed
by an excluded physician (42 CFR 1001.1901). This payment ban applies to all
methods of Federal program reimbursement, whether payment results from itemized
claims, cost reports, fee schedules or a prospective payment system (PPS). Any
items and services furnished by an excluded individual or entity are not reimbursable
under Federal health care programs. In addition, any items and services furnished
at the medical direction or prescription of an excluded physician are not reimbursable
when the individual or entity furnishing the services either knows or should
know of the exclusion. This prohibition applies even when the Federal payment
itself is made to another provider, practitioner or supplier that is not excluded.
The prohibition against Federal program payment for items or services furnished
by excluded individuals or entities also extends to payment for administrative
and management services not directly related to patient care, but that are a
necessary component of providing items and services to Federal program beneficiaries.
This prohibition continues to apply to an individual even if he or she changes
from one health care profession to another while excluded.(3)
In addition, no Federal program payment may be made to cover an excluded individual's
salary, expenses or fringe benefits, regardless of whether they provide direct
patient care.
Set forth below is a listing of some of the types of items or services that
are reimbursed by Federal health care programs which, when provided by excluded
parties, violate an OIG exclusion. These examples also demonstrate the kinds
of items and services that excluded parties may be furnishing which will subject
their employer or contractor to possible CMP liability.
D. Violation of an OIG Exclusion By an Excluded Individual or Entity
An excluded party is in violation of its exclusion if it furnishes to Federal
program beneficiaries items or services for which Federal health care program
payment is sought. An excluded individual or entity that submits a claim for
reimbursement to a Federal health care program, or causes such a claim to be
submitted, may be subject to a CMP of $10,000 for each item or service furnished
during the period that the person or entity was excluded (section 1128A(a)(1)(D)
of the Act). The individual or entity may also be subject to treble damages
for the amount claimed for each item or service. In addition, since reinstatement
into the programs is not automatic, the excluded individual may jeopardize future
reinstatement into Federal health care programs (42 CFR 1001.3002).
E. Employing an Excluded Individual or Entity
As indicated above, BBA authorizes the imposition of CMPs against health care
providers and entities that employ or enter into contracts with excluded individuals
or entities to provide items or services to Federal program beneficiaries (section
1128A(a)(6) of the Act; 42 CFR 1003.102(a)(2)). This authority parallels the
CMP for health maintenance organizations that employ or contract with excluded
individuals (section 1857(g)(1)(G) of the Act). Under the CMP authority, providers
such as hospitals, nursing homes, hospices and group medical practices may face
CMP exposure if they submit claims to a Federal health care program for health
care items or services provided, directly or indirectly, by excluded individuals
or entities.
Thus, a provider or entity that receives Federal health care funding may only
employ an excluded individual in limited situations. Those situations would
include instances where the provider is both able to pay the individual exclusively
with private funds or from other non-federal funding sources, and where the
services furnished by the excluded individual relate solely to non-federal program
patients.
In many instances, the practical effect of an OIG exclusion is to preclude employment
of an excluded individual in any capacity by a health care provider that receives
reimbursement, indirectly or directly, from any Federal health care program.
F. CMP Liability for Employing or Contracting with an Excluded Individual
or Entity
If a health care provider arranges or contracts (by employment or otherwise)
with an individual or entity who is excluded by the OIG from program participation
for the provision of items or services reimbursable under such a Federal program,
the provider may be subject to CMP liability if they render services reimbursed,
directly or indirectly, by such a program. CMPs of up to $10,000 for each item
or service furnished by the excluded individual or entity and listed on a claim
submitted for Federal program reimbursement, as well as an assessment of up
to three times the amount claimed and program exclusion may be imposed. For
liability to be imposed, the statute requires that the provider submitting the
claims for health care items or services furnished by an excluded individual
or entity "knows or should know" that the person was excluded from
participation in the Federal health care programs (section 1128A(a)(6) of the
Act; 42 CFR 1003.102(a)(2)). Providers and contracting entities have an affirmative
duty to check the program exclusion status of individuals and entities prior
to entering into employment or contractual relationships, or run the risk of
CMP liability if they fail to do so.
G. How to Determine If an Individual or Entity is Excluded
In order to avoid potential CMP liability, the OIG urges health care providers
and entities to check the OIG List of Excluded Individuals/Entities on the OIG
web site (www.hhs.gov/oig) prior to hiring or contracting with individuals or
entities. In addition, if they have not already done so, health care providers
should periodically check the OIG web site for determining the participation/exclusion
status of current employees and contractors. The web site contains
OIG program exclusion information and is updated in both on-line searchable
and downloadable formats. This information is updated on a regular basis. The
OIG web site sorts the exclusion of individuals and entities by: (1) the legal
basis for the exclusion, (2) the types of individuals and entities that have
been excluded, and (3) the State where the excluded individual resided at the
time they were excluded or the State where the entity was doing business. In
addition, the entire exclusion file may be downloaded for persons who wish to
set up their own database. Monthly updates are posted to the downloadable information
on the web site.
H. Conclusion
In accordance with the expanded sanction authority provided in HIPAA and BBA,
and with limited exceptions(4), an exclusion
from Federal health care programs effectively precludes an excluded individual
or entity from being employed by, or under contract with, any practitioner,
provider or supplier to provide any items and services reimbursed by a Federal
health care program. This broad prohibition applies whether the Federal reimbursement
is based on itemized claims, cost reports, fee schedules or PPS. Furthermore,
it should be recognized that an exclusion remains in effect until the individual
or entity has been reinstated to participate in Federal health care programs
in accordance with the procedures set forth at 42 CFR 1001.3001 through 1001.3005.
Reinstatement does not occur automatically at the end of a term of exclusion,
but rather, an excluded party must apply for reinstatement.
If you are an excluded individual or entity, or are considering hiring or contracting
with an excluded individual or entity, and question whether or not the employment
arrangement may violate the law, the OIG Advisory Opinion process is available
to offer formal binding guidance on whether an employment or contractual arrangement
may be in violation of the OIG's exclusion and CMP authorities. The process
and procedure for submitting an advisory opinion request can be found at 42
CFR 1008, or on the OIG web site at www.hhs.gov/oig.
1. A Federal health care program is defined as any plan or program that provides health benefits, whether directly, through insurance, or otherwise, which is funded directly, in whole or in part, by the United States Government or a State health care program (with the exception of the Federal Employees Health Benefits Program) (section 1128B(f) of the Act). The most significant Federal health care programs are Medicare, Medicaid, Tricare and the Veterans programs.
2. A Federal program beneficiary is an individual that receives health care benefits that are funded, in whole or in part, by a Federal health care program.
3. For example, the prohibition against Federal program payment for items and services would continue to apply in the situation where an excluded pharmacist completes his or her medical degree and becomes a licensed physician.
4. In certain instances, a State health care program may request a waiver of an exclusion if an individual or entity is the sole community physician or the sole source of essential specialized services in a community (42 CFR 1001.1801(b)).