Concealing Information Regarding an Excluded Party and Lying on a Medicare CMS-855a Enrollment Application Will Swiftly Make a Bad Situation Even Worse!

CMS-855a Enrollment Application(January 8, 2019): Since first being enacted in 1965, Congress has enacted a number of measures to safeguard the financial integrity of the Medicare and Medicaid programs. The Medicare-Medicaid Anti-violations Fraud and Abuse Amendments of 1977 (Public Law 95-142) are among the most significant. In addition to making of the Federal Anti-Kickback Statute a felony, the legislation also mandated that physicians and other practitioners convicted of program-related crimes be excluded from participating in Medicare and Medicaid.  Since 1977, the scope of mandatory and permissive bases that can result in program exclusion has expanded significantly. Exclusion actions are the proverbial “kryptonite” of administrative sanctions that may be imposed on health care providers and suppliers.  As the exclusion statute now stands, if a health care provider or supplier is excluded from participation in Medicare, Medicaid or other Federal health care benefit plans, no payment can be made for any of the services or items “furnished, ordered, or prescribed by an excluded individual or entity.”[1]

From a practical standpoint an excluded individual or entity cannot bill or work for any practice or entity that bills Federal health care benefit programs. The Department of Health and Human Services (HHS), Office of Inspector General (OIG), is the agency responsible for imposing Federal exclusion actions[2] that are mandated[3] under the law. At its discretion, the OIG may also choose to pursue an exclusion action against individuals and entities that have been subjected to a number of other adverse actions.[4] Although both mandatory and permissive exclusion actions are administrative in nature, the seriousness of an exclusion action cannot be understated. This article examines a recent case where the failure to disclose the ownership of a home health agency by excluded individuals resulted in the indictment and conviction of the agency’s owners and two members of the agency’s staff.

 I. The Medicare Enrollment Process is the First Line of Defense to Prevent Program Fraud:

Among its many responsibilities, the Centers for Medicare and Medicaid Services (CMS) is responsible for administering the Medicare, Medicaid and Children’s Health Insurance Program (CHIP) health care benefits programs. To serve as a participating provider or supplier in the Medicare program, an enrollment application must first be completed.[5]  The specific enrollment application form to be completed, varies depending on the type of provider or supplier entity. For example, home health agencies are required to complete enrollment application CMS-855A.[6] 

A number of items in the enrollment application are specifically intended to identify various adverse actions that may have been imposed against an entity, its owners or managers.  For example, applicants must disclose whether the provider or supplier has a history of any final adverse actions, such as convictions, exclusion actions, revocation actions, or suspensions. Administrative adverse legal actions that must be reported are listed on page 16 of the CMS-855a.  As the application states, the following administrative adverse actions must be disclosed:


If the applicant has a history of one or more final adverse legal actions (either a qualifying conviction or one of the administrative actions listed above), the actions must be detailed in SECTION 3 of the CMS-855a.



Finally, SECTION 15 of the CMS-855a requires that applicants attest to the following: 
SECTION 15, further requires that applicants certify that all of the information contained in CMS-855a is “true, correct and complete. . .”

 II. What’s the Best Way to Make an Administrative Exclusion Action Even Worse? Lie About it:

A recent criminal prosecution out of the Northern District of Texas provides a real-life example of how a health care provider can make things go from bad to worse.  In that case, the concealment of an administrative exclusion action, along with the falsification of Medicare and Medicaid enrollment and re-validation paperwork, resulted in the criminal prosecution and conviction of four individuals associated with this north Texas home health agency.  A chronology of the case is set out below:
  • April 2001. A north Texas-based home health agency (referred to as “NTHHA”) was incorporated as a Texas limited liability company with a business address in Garland, Texas. After being incorporated, NTHAA applied to become a participating home health provider in the Medicare program. The agency also applied to provide Personal Assistance Services (PAS) to Medicaid beneficiaries. The home health agency was owned by Defendant #1 (who also served as Administrator and Director of the agency), and his wife, Defendant #4. 
  • April 2010. The owner of NTHAA (Defendant #1) and one of the agency’s management officials who served as an Administrator / Director of the agency (Defendant #2) were facing state felony charges associated with the delivery of a health care item under the Medicaid program. More specifically, the Medicaid Fraud Control Unit (MFCU) of the Texas Attorney General’s Office conducted an investigation of the defendants in connection with defendants both played roles in the wrongful billing of
  • November 2011. Defendant #3 (an Administrator and Registered Nurse for NTHHA), signed and submitted a Medicare re-validation application for NTHHA. The government alleged that the application submitted by Defendant #3 concealed and failed to disclose that Defendant #1 was an owner of the home health agency and that Defendant #2 was a manager at the same agency. Moreover, Defendant #3 failed to disclose that both Defendant #1 and Defendant #2 had been indicted on felony charges associated with the delivery of a health care item.
  • March 2012. Defendant #1 filed a Texas Franchise Tax Public Information Report for NTHAA and failed to identify himself as an officer, director or member of the home health agency.
  • June 2012. Defendants #1 and #2 pled guilty Texas State District Court to a Class A Misdemeanor Offense of Attempted Theft, in violation of PENAL CODE ANN. § 31.03, related to their 2010 indictment. The defendants were placed on community supervision for one year and an Order of Deferred Adjudication was entered by the District Court. In approximately December 2012, the defendants were granted early discharge from their community service obligations the District Court dismissed all of the proceedings, including the indictments against the defendants.
  • January 2013. The OIG notified Defendants #1 and #2 that they were being excluded from participation from Medicare, Medicaid and all Federal health care benefit programs for a period of 5 years pursuant to Section 1128(a)(1) of the Social Security Act, 42 U.S.C. § 1320a-7(a)(1). Both defendants appealed the exclusion, but the 5-year period of administrative exclusion was upheld by the Administrative Law Judge assigned to hear their respective cases. 
  • April 2013. Defendant #1 signed and filed a Texas Franchise Tax Public Information Report for NTHAA which listed himself as an Administrator and Director of NTHHA.
  • May 2013. Defendant #3 signed and submitted a contract re enrollment application with the Texas Department of Aging and Disability Services (DADS). The re-enrollment application falsely certified that no persons with an ownership interest or managerial role at NTHHA had been convicted of a crime relating to a Federal health care program.  During this time period, Defendant #3 also falsely certified that none of the principals, including officers, directors, owners, partners, or person’s having a primarily management or supervisory responsibility in NTHHA were presently excluded from participation in the Medicare or Medicaid programs.
  • May 2014. Defendant #1 signed and filed a Texas Franchise Tax Public Information Report for NTHAA which listed himself as an Administrator and Director of NTHHA.
  • May 2015. Defendant #1 signed and filed a Texas Franchise Tax Public Information Report for NTHAA which listed himself as an Administrator and Director of NTHHA.
  • September 2015. Defendant #1 opened a bank account under the name of the home health agency, NTHHA. 
  • October 2015. Defendant #3 signed and submitted a Medicaid Advantage Plan provider application for NTHHA which falsely certified that no employees of the agency had been, or were currently excluded, from participation in a government program such as Medicare or Medicaid. The Medicaid Advantage Plan provider application submitted also falsely certified that no representatives of NTHAA had pled guilty to any legal action. Finally, Defendant #3 concealed and failed to disclose that Defendants #1 and #2 had no ownership interests and managerial roles in NTHAA.
  • October 2015. Defendant signed and submitted a provider application to a second Medicaid Advantage Plan, certifying that NTHHA had not been excluded under its current or former name or business identity from any Federal or State health care program.
  • January 2013 – May 2016. Despite their exclusion in January 2015, Defendant #1 and Defendant #2, continued to submit home health and PAS claims to Medicare and Medicaid for payment through May 2016. More than $4 million was billed to the Medicare and Medicaid during this period and Defendant #1 paid himself approximately $346,000 from NTHHA’s bank accounts.   Moreover, during this period, Defendant #1 paid Defendant #2 approximately $77,000 from NTHHA bank accounts.
  • June 2016. In June 2016, a Federal Grand Jury in the Northern District of Texas indicted Defendant #1, Defendant #2, and Defendant #3 (an Administrator and Registered Nurse for NTHHA) for “Conspiracy to Commit Health Care Fraud.”  (Violation of 18 U.S.C. 1349) and (18 U.S.C. 1347).  The government alleged that from approximately April 2010 through May 2016, the three defendants conspired to defraud the Medicare and Medicaid program by making materially false and fraudulent representation and promises in connection with the delivery of services billed to the Medicare and Medicaid programs.
  • December 2017. A Superseding Indictment by a Federal Grand Jury was issued in this case, charging Defendant #1 and Defendant #3 with additional counts of “False Statements in Health Care Matters.” (Violation of 18 U.S.C. 1035). Two unindicted physician co-conspirators were also named in the Superseding Indictment. Additionally, an additional defendant was added to the indictment. Defendant #4 (the wife of Defendant #1) was indicted for one count of “Conspiracy to Commit Health Care Fraud” for her role in the concealment of and falsification of ownership interests in NTHAA.

  • October 2018. After a six-day trial, a Federal jury found that: (A) Defendant #1 was guilty of Conspiracy to Commit Health Care Fraud and of making a False Statement for his role in concealing his ownership interest in NTHAA; (B) Defendant #2 was guilty of Conspiracy to Commit Health Care Fraud for his role in concealing his ownership interest in NTHAA; and (C) Defendant #3 was guilty of Conspiracy to Commit Health Care Fraud and of making a False Statement for her role in concealing the ownership interests of Defendant #1 and Defendant #2.  Defendant #3 was also found to have falsely certified that no one associated with home health agency was excluded.  Moreover, she supposedly indicated that another party owned NTHAA, when in fact, Defendant #1 and Defendant #2 were both excluded parties and had an ownership interest in the agency. 

 III.  How Did a State Class A Misdemeanor That Was Ultimately Dismissed Lead to an OIG Exclusion Action?

 In the case discussed above, the OIG excluded Defendants #1 and #2 from participation in the Medicare and Medicaid programs for 5 years, citing the mandatory exclusion requirements of Social Security Act, 1128(a)(1).
Let this sink in for a moment . . . the defendants pled guilty to a state Class A Misdemeanor in Texas District Court, and the charges, including the indictment, were later dismissed pursuant to an Order of Deferred Adjudication by the Texas State District Court.  Nevertheless, the OIG really had no choice but to exclude the defendants. 
The mandatory exclusions of Defendant 1# and Defendant #2 were brought under Section 1128(a)(1) of the Social Security Act, 42 U.S.C. § 1320a-7(a)(1). This provision of the Act requires the exclusion of any individual or entity convicted of a criminal offense related to the delivery of an item or service under the Medicare or Medicaid programs.[7] Importantly, this mandatory exclusion provision is not limited to only felony convictions.  It also covers misdemeanor convictions. Additionally, it is important to note that the Social Security Act defines “conviction” as including a number of situations.  A summary of actions that qualify as a conviction is set out below:

Social Security Act § 1128(i)(1): When a judgment of conviction has been entered against the individual by a Federal, State, or local court.

Social Security Act § 1128(i)(2): When there has been a finding of guilt against the individual by a Federal, State, or local court. 

Social Security Act § 1128(i)(3): When a plea of guilty or nolo contendere by the individual has been accepted by a Federal, State, or local court.

Social Security Act § 1128(i)(4): When the individual has entered into participation in a first offender, deferred adjudication, or other arrangement or program where judgment of conviction has been withheld

Simply put, the OIG was required by law to exclude Defendant #1 and Defendant #2 from the Medicare program for 5 years, despite the fact that the conviction was a state misdemeanor that was ultimately discussed pursuant to an Order of Deferred Adjudication.

 IV. Lessons Learned:

Lesson #1. Always consider the administrative ramifications of accepting a plea agreement. Even if the charges are later dismissed under a deferred adjudication agreement. pleading guilty to a Class A misdemeanor will lead to an individual’s mandatory exclusion from participating in the Medicare program if the underlying criminal offense was related to the delivery of an item or service under the Medicare or Medicaid programs.  In this case, the OIG had no choice but to exclude these individuals from the Medicare program for 5 years under Section 1128(a)(1) of the Social Security Act.  

Lesson #2.  Medicare and Medicaid providers need to exercise caution when completing Medicare and Medicaid program enrollment applications.  As this case reflects, Federal prosecutors won’t hesitate to pursue false or deceitful conduct that has been taken to hide an excluded party’s ownership interest or involvement with a health care entity. Although an exclusion action is only an administrative sanction, if you are excluded from participation in the Medicare program and attempt to set up a “straw owner” in an effort to hide your ownership interest in a health care entity, you risk turning an administrative sanction into a criminal case.

 V. Concluding Remarks:

In this case, the defendants’ worst enemies were, in fact, themselves.  After being excluded form participation in the Medicare program. The defendants failed to properly divest and dissociate themselves from the home health agency.  Instead, they essentially doubled-down and took steps to conceal their ownership and involvement with the home health agency. This false and deceitful conduct ultimately led to their indictment on federal criminal charges.  Additionally, their actions led to the criminal involvement of another home health agency management official (Defendant #3), and the agency owner’s wife (Defendant #4).  Ultimately, all four individuals were convicted of “Conspiracy to Commit Health Care Fraud,” making a“False Statement,” or both counts. All of the defendants are currently awaiting sentencing.

As a participating provider or supplier in the Medicare, Medicaid or other Federal health care program, you have an affirmative obligation to ensure that no owners, employees, agents or contractors have been excluded from participation in one or more of these programs.  The folks at Exclusion Screening can greatly assist you in meeting those obligations. They can be reached at:  1 (800) 294-0952.

[2]States also have the ability to exclude individual and entities from participating the state’s Medicaid program.
[3]Mandatory exclusion actions must be imposed by the OIG if an individual or entity is convicted of a number of felony criminal health care related statutes or convictions related to fraud, theft of other financial misconduct.  A list of mandatory exclusion bases can be found in the following article.
[4]Permissive exclusion actions are not required by law but may be pursued at the option of the OIG.  A list of permissive exclusion bases can be found in the following article.  
[5]After successfully enrolling in the Medicare program, 42 CFR §424.515 requires that in order to maintain Medicare billing privileges, a provider or supplier (other than a DMEPOS supplier) must resubmit and recertify the accuracy of its enrollment information generally every 5 years. DMEPOS Suppliers must revalidate at least every three years.
[6]A copy of CMS-855A can be found here.
[7]See, Tamara Brown, DAB No. 2195 (2008); Thelma Walley, DAB No. 1367; Boris Lipovsky, M.D., DAB No. 1363 (1992); Lyle Kai, R.Ph., DAB CR1262 (2004), rev’d on other grounds, DAB No. 1979 (2005); see also Russell Mark Posner, DAB No. 2033, at 5-6 (2006).