Exclusion Actions Under 42 U.S.C. § 1320a-7(b)(5)(B) — The Collateral Consequences of a State Medicaid Enrollment Termination Action

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Exclusion Actions Under 42 U.S.C. § 1320a-7(b)(5)(B) 

(November 2020):  Since 1976, the Department of Health and Human Services (HHS), Office of Inspector General (OIG) has been at the forefront of our nation’s efforts to fight waste, fraud and abuse in the Medicare, Medicaid and more than 100 other programs.  Collectively, the costs of the federal programs safeguarded by the OIG exceed $1 trillion each year.  One of the ways that the OIG protects both patients and the financial integrity of the Medicare and Medicaid programs is the agency’s exercise of its authority to exclude individuals and entities from participating in the Medicare,   and other federal health care programs.[1] This article reviews a recent case where an individual working as a in-home personal care worker providing services to a disabled client was alleged to have engaged in improper billing practices.  Ultimately, the domino-effect of this these allegations led to imposition of significant and severe administrative sanctions, culminating in the individual’s exclusion from participation in the Medicare and Medicaid programs under 42 U.S.C. §1320a-7(b)(5)(B).

I.  Improper Conduct Committed While Serving as a Homecare Worker Can Lead an Individual’s Enrollment in the State Medicaid Program:

In a recent case out of Oregon, the Oregon Department of Human Services, Aging, and People with Disabilities (ODHS) terminated the enrollment of a homecare worker in the state’s “Consumer-Employed Provider Program,”[2] which provides Medicaid in-home services, such as help with a client’s activities of daily living (ADLs), to qualified disabled persons. ODHS’s letter of termination from December 2017 stated that the individual (who provided services to at least two ODHS in-home disabled clients) had violated several of the homecare worker enrollment standards mandated by the state. After a State administrative hearing, the ODHS issued a final order affirming that the individual was being terminated from their program based on two of the initial five[3] allegations levied by the state.  The two allegations affirmed by the ODHS included:

  • The individual was accused of committing fiscal improprieties due to repeated instances of overbilling and double billing. Regarding fiscal improprieties, ODHS presented evidence showing that the individual had on multiple occasions billed overlapping time for two clients and even billed hours coinciding with her incarceration in county jail. The individual committed other improprieties like billing time spent travelling between the homes of clients, had received multiple warnings from ODHS, and was the subject of an investigation by the Medicaid Fraud Unit. 
  • The individual allegedly failed to report a potentially disqualifying crime. The ODHS alleged that the individual had failed to report a prior DUI charge for driving under the influence of opioids and amphetamines.

After ODHS terminated the individual’s enrollment in the state’s Consumer-Employed Provider Program, she requested an in-person hearing.  The Office of Administrative Hearings for ODHS affirmed the agency’s decision and terminated her Medicaid enrollment and number.

As a final added twist in this case, the individual working as a homecare worker whose Medicaid enrollment was terminated also happened to be a licensed nurse practitioner. In her capacity as a licensed nurse practitioner, she ran a completely separate clinic where she offered “individualized primary care services in-office and at home or the patient’s residence.”  Although the individual was terminated from serving as a Medicaid-funded healthcare worker, she continued to provide care and treatment services through her clinic in her capacity as a properly licensed nurse practitioner.  Importantly, no action was taken by the Oregon Board of Nursing to revoke, suspend or otherwise impose some sort of sanction on the individual’s professional license to work as a nurse practitioner.

II. Termination from a State Medicaid Program Can Lead to an Individual’s Permissive Exclusion from the Medicare Program:

“Exclusion” actions fall into two categories – Mandatory Exclusions and “Permissive Exclusions.”

Mandatory exclusions are identified in Sections 42 U.S.C. §§ 1128(a)(1)-(4) of the Social Security Act (SSA).14  If an individual or entity is convicted of certain program-related crimes, patient abuse, health care fraud or a controlled substance felony, the is required by law to exclude the party from participation in federal health care programs.[4]

Permissive exclusions, on the other hand, are discretionary and can be imposed by the OIG for a broad range of conduct. There are currently eighteen different bases upon which the OIG may choose to exercise its permissive exclusion authority.  These authorities are outlined in 42 U.S.C. §§ 1128(b)(1)-(17) and 42 U.S.C. §1156 of the SSA.  In this case, the individual at issue was sanctioned by the Oregon Medicaid program due to her improper billing conduct while working as a personal care / homecare worker. 

Oregon’s termination of the homecare worker’s Medicaid enrollment triggered a potential permissive exclusion action by the OIG under 42 U.S.C. §1320a-7(b)(5)(B).    Under this statutory provision, at the option of the OIG, the government may choose to exclude an individual or entity from participating in federal health care programs and his name be added in Medicaid Exclusion List based on the following: 

  • “(5) Exclusion or suspension under Federal or State health care programAny individual or entity which has been suspended or excluded from participation, or otherwise sanctioned, under—
  • (A) any Federal program, including programs of the Department of Defense or the Department of Veterans Affairs, involving the provision of health care, or 
  • (B) a State health care program, for reasons bearing on the individual’s or entity’s professional competence, professional performance, or financial integrity.” (emphasis added). 

III.  The OIG Chose to Exercise its Permissive Exclusion Authority under 42 U.S.C. § 1320a-7(b)(5)(B):

State Medicaid authorities are supposed to notify the OIG of any qualifying adverse actions it has taken against an individual or entity enrolled in the state Medicaid program.  Unfortunately, compliance with this requirement has been spotty at best, and varies from jurisdiction to jurisdiction.  In this case, the OIG did, in fact, learn that the individual’s enrollment as a homecare worker in the Oregon Medicare program had been terminated.  It therefore initiated a review of the case and ultimately chose to exercise its permissive exclusion authority under 42 U.S.C. § 1320a-7(b)(5)(B).[5]     

In August 2019, the OIG notified the individual that she was being “excluded from participation in any capacity” in the Medicare, Medicaid, and other federal health care programs under 42 U.S.C. § 1320a-7(b)(5)) due to the fact that ODHS had “suspended, excluded or otherwise sanctioned” her under “a State health care program, for reasons bearing on” her “professional competence, professional performance or financial integrity.” 

IV. Licensure is Not Required in Order to be Excluded from Participation under 42 U.S.C. § 1320a-7(b)(5)(B):  

Not surprisingly, the individual appealed the search’s proposed permissive exclusion action arguing that the termination of her homecare worker enrollment in the Oregon Medicare program was NOT a valid basis for the OIG to exercise its permissive exclusion authority.  In support of this position, she noted that a homecare worker was not a licensed health care practitioner or professional.  Therefore, she argued that her Medicaid enrollment termination by the state from serving as a homecare worker did not constitute a license revocation, suspension or sanction, as envisioned by the statute in 42 U.S.C. § 1320a-7(b)(5).  

V. Collateral Impact of the Termination of a Homecare Worker’s Enrollment in the Oregon Medicaid Program: 

While the initial adverse action taken by the ODHS was based on the individual’s improper conduct while working in a non-licensed capacity as a homecare worker, it led to her exclusion from federal health care programs by the OIG.  This severely impacted the individual in her capacity as a licensed nurse practitioner.  Simply put, as an excluded individual, she was no longer eligible to be paid for any items or services that are furnished, either directly or indirectly, by an excluded individual or entity, or at the medical direction or on the prescription of an excluded person.[6] This made it difficult, if not impossible, for her to continue run her clinic.  As a consequence of the OIG’s exclusion action, she was forced to close her clinic.[7]

On appeal, the case was heard by an HHS Administrative Law Judge (ALJ) who upheld the OIG’s decision to exercise its permissive exclusion authority under 42 U.S.C. § 1320a-7(b)(5)(B) of the Social Security Act. The ALJ held that the individual had been terminated by ODHS for reasons bearing on the petitioner’s financial integrity and professional competence or performance.  As result, the ALJ concluded that there was a lawful basis for the OIG to exclude her from federal health care programs. 

The individual next appealed the ALJ holding to HHS’s Departmental Appeals Board (Board).  In its opinion, the Board held that the status of a person’s professional license has no effect on termination of other unlicensed services, such as those performed by homecare workers. Section 1128(b)(5)(B) of the Act, the Board reasoned, authorizes the OIG to exclude an individual not only in cases where the state has revoked or suspended the individual’s license but in all other situations where the individual has been “otherwise sanctioned” under a state health care program. As stated in 42 C.F.R. § 1001.601(a)(2), the term “otherwise sanctioned” from the Social Security Act applies to: 

“. . . all actions that limit the ability of a person to participate in the program at issue regardless of what such an action is called, and includes situations where an individual or entity voluntarily withdraws from a program to avoid a formal sanction.” 

Even if, as the Board noted, the petitioner did not lose her license as a nurse practitioner and may have even continued employment in that function, a limitation of her participation in unlicensed Medicaid homecare services alone warranted OIG Exclusion from federal health care programs under 1128(b)(5)(B).[8] The Board affirmed the ALJ’s ruling on the grounds that the petitioner’s overbilling and double billing breached the criterion of financial integrity under the Social Security Act. The Board further found the length of the exclusion, which was contingent on the petitioner’s reinstatement with the state program, was reasonable and not excessive or unjust, as the petitioner had alleged. 

VI. How Should You Respond in a Similar Situation?

This case first demonstrates that engaging in financial irregularities like overbilling or double billing may expose someone to state sanctions which can, in turn, prompt an exclusion from federal health care programs. Equally important, this case also shows that individuals facing exclusion under the Social Security Act do not necessarily have to be licensed practitioners in Medicare or Medicaid programs.  Finally, the Board made it clear that depending on the facts, a licensed health care provider or practitioner can are subject to sanctions for misconduct involving separate unlicensed services. 

VII. Lessons to be Learned from an Exclusion Screening Perspective:

In this particular case, the alleged improper billing practices of a homecare worker triggered a series of adverse actions that led to her permissive exclusion from federal health care programs.  There are several lessons to take away from this recent case.  These include: 

  • Improper billing practices while working in the capacity of a non-skilled homecare worker can lead to the termination of a person’s enrollment as a state Medicaid program provider. 
  • Sanctions taken against an individual by a state Medicaid program may give rise to a permissive Medicare exclusion action by the OIG. 
  • There is no requirement that an individual be working in the capacity of a licensed health care professional in order for him or her to be subject to exclusion from Medicaid and / or Medicare programs. 

From a screening perspective, it is important to keep in mind that this case started out as a Medicaid enrollment termination case.  Although the adverse action taken by Oregon was later picked up by the OIG, we have seen multiple cases where the state failed to either submit a qualifying adverse action for inclusion on the National Practitioner Data Bank (NPDB) or did not report the sanction to the OIG for its review and consideration.  It is therefore imperative that you screen all federal and state exclusion databases to ensure that your prospective applicants, employees, agents, vendors, and contractors have not been excluded from participation.  The experienced screening professionals can help you accomplish your obligations in this regard.  Need help?  Give us a call at: 1 (800) 294-0952. 


[1] Among its various provisions, the , Public Law 95-142, mandated that physicians and other health care providers convicted of certain program-related crimes be excluded from participated in the Medicare and Medicaid programs.  The authority to exclude was granted to the Secretary of the Department of Health and Human services in the Civil Money Penalties Law (Public Law 97-35, 1981 (as codified at section 1128A of the SSA). The Secretary delegated it to its Office of Inspector General in 1988 (53 Fed. Reg. 12,993 (April 20, 1988)).  Since this time, a number of further enhancements and expansions of OIG’s exclusion authorities have taken place.  

[2] The Client-Employed Provider Program (CEP) is a program for Medicaid eligible, Oregon seniors and persons with disabilities that require assistance with their Activities of Daily Living (ADLs) and Instrumental Activities of Daily Living (IADLs).  Notably, under the CEP program, adult children can be employed as caregivers by the aging parents. 

[3] The letter said ODHS was terminating Petitioner’s “HCW provider enrollment” based on a statement alleging that Petitioner had violated five HCW enrollment standards:  (1) Lack of Knowledge, Skills and Abilities; (2) Protective Service and Abuse Rules; (3) Fiscal Improprieties; (4) Failure to Report an Arrest of a Potentially Disqualifying Crime; and (5) Failure to Resubmit to a Background Check.   

[4] The term “federal health care programs” is defined under Section 1128B(f) of the Social Security Act 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 (other than the health insurance program under chapter 89 of title 5, United States Code); or 
  • any State health care program, as defined in section 1128(h). 42 U.S.C. § 1320a-7b(f). 

[5] As the Departmental Appeals Board (Board) noted in its decision in George Iturralde, M.D.,  DAB No. 1374 at 6 (1992), an exclusion under section 1128(b)(5(B) isderivative in nature.”  In other words, the OIG has been given the statutory authority to base its permissive exclusion decision on the determination of another agency – in this case, Oregon’s Department of Human Services, Aging, and People with Disabilities (ODHS).  As an aside, it is worth noting that the 42 U.S.C. § 1320a-7(b)(4), which covers licensure revocations and suspensions, is also a derivative permissive exclusion authority. Statistically, 42 U.S.C. § 1320a-7(b)(4) is also the basis most frequently cited in permissive exclusion cases. 

[6]  42 C.F.R. 1001.1901(b), 42 C.F.R. § 1001.10.  

[7]  For an overview of yet another case where an individual was subject to considerable unexpected, adverse consequences, we refer you to an article which examines a recent criminal case where the defendant accepted a plea deal, not realizing that it would lead to his exclusion from participation in the Medicare program.  

[8] The Act does authorize the I.G. to exclude someone based on a person’s license revocation or suspension, but that provision, section 1128(b)(4)(A), does not apply in this case, where an unlicensed homecare worker had been terminated from state Medicaid enrollment.  

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