Proposed Regulation Would Significantly Expand OIG's Exclusion Authority

On May 9, 2014, the Office of the Inspector General (OIG) of the U.S. Department of Health and Human Services published a proposed rule that significantly expands the OIG’s exclusion authority. 79 Fed. Reg. 26810. The Proposed Rule codifies changes from the Patient Protection and Affordable Care Act of 2010 (ACA) and strengthens the OIG’s ability to combat healthcare fraud.¹ If adopted, it could result in a greater number of providers being excluded from participation in federal health care programs.

The OIG has general authority under the Social Security Act (SSA) to effectuate both mandatory and permissive exclusions of health care providers to protect federal health care programs from fraud and abuse. The ACA expanded that authority with respect to permissive exclusions by adding three new grounds for exclusion. Under the Proposed Rule, the OIG proposes to broaden the scope of its permissive exclusions authority to exclude any individual or entity that:

1. is convicted of an offense in connection with the obstruction of an audit;
2. orders, refers for furnishing, or certifies the need for items or services and subsequently fails to provide payment information;
3. knowingly makes, or causes to be made, any false statement, omission or misrepresentation of a material fact in any application, agreement, bid or contract to participate or enroll as a provider of services or as a supplier under a federal health care program.

Audits

Prior to the ACA, the OIG could exclude only individuals or entities that obstructed an investigation. Under the Proposed Rule, the OIG may exclude individuals and entities that are convicted of an offense in connection with the obstruction of an audit that took place on or after January 1, 2010 related to any criminal offense under the mandatory provisions of the exclusion statute; under the permissive provision related to health care fraud or fraud in a governmental program; or in cases when the investigation or audit related to the use of federal health care program funds received, directly or indirectly. This amendment would encourage a higher level of cooperation with government audits by pressuring providers to be very forthcoming with their information. It will also make it more difficult for providers to push back against potentially burdensome or costly audits.

Payment Information

Under the Proposed Rule, exclusion authority also would be expanded for failure to supply payment information. Under the ACA, this provision was modified to apply to individuals who “order, refer for furnishing, or certify the need for” items or services for which payment may be made under any federal health care program. This amendment would dramatically expand the number of providers that could be subject to exclusion for failure to provide certain payment information. Under the Proposed Rule, the OIG could seek to exclude an ordering or referring physician, or a person who merely certified that services were medically necessary for a beneficiary but who did not bill for the item or service at issue.

Enrollment Applications

The ACA’s new permissive exclusion authority for making, or causing to be made, any false statement, omission or misrepresentation of a material fact in applications to participate as a provider of services or supplier under a federal health care program also would be implemented by the Proposed Rule. This new authority would apply not only to provider enrollment applications, but also to agreements, bids and contracts with federal health care programs. In determining the period of exclusion, OIG proposes to consider the repercussions of the false statement and whether the individual or entity has a documented history of criminal, civil or administrative wrongdoing. Providers will need to take great care in preparing such applications, agreements, bids and contracts and be aware of the potentially severe consequences that may follow erroneous or incomplete responses.

Statute of Limitations

The most contentious aspect of the Proposed Rule, however, is the OIG’s expansive interpretation of its exclusion authority—that there is no statute of limitations upon its ability to exercise its exclusion authority under Section 1128(b)(7) of the SSA for false or improper claims. According to the OIG, its authority is not bound by any statute of limitation for the conduct that can form the basis for exclusion, regardless of whether the conduct is based on the violation of a statute with a statute of limitations. 79 Fed. Reg. 26815. This amendment could require providers to maintain records well beyond the time periods required by the Medicare and Medicaid programs and could potentially subject providers to exclusion for conduct that occurred several years in the past.

The OIG proposed a similar rule change in 2000, and the proposal was met with resistance. 65 Fed. Reg. 63035 (Oct. 20, 2000). As a result, OIG never finalized the rule. 67 Fed. Reg. 11928, 11929 (March 18, 2002).

Comment Period

Comments on the Proposed Rule are due by July 8, 2014. We expect that the final rule will be issued later this year.

*Thanks to summer associate Alexandre Gapihan for his contributions to this article.