OIG Proposes Amending Rules to Increase its Civil Monetary Penalty and Exclusion Authority

Gavel on top of money false claim settlement
exclusion authority

In May 2014, the Office of the Inspector General (OIG) for the U.S. Department of Health and Human Services published two proposed rules to implement provisions of the Affordable Care Act (ACA). The new rules add and expand upon OIG’s current exclusion and Civil Monetary Penalty (CMP) authority.

I.  Revisions to OIG’s Exclusion Authority 

The new exclusion rule would incorporate ACA provisions that give OIG additional permissive exclusion authority for persons who:

  • Are convicted of an offense in connection with the obstruction of an audit;
  • Fail to supply payment information (ACA expanded this to apply to individuals who “order, refer for furnishing, or certify the need for” items or services for which payment may be made under Medicare or any State health care program); and
  • Make or cause 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.[1]

With respect to the new permissive exclusion for the obstruction of an audit, the OIG would have authority under section 6408(c) of the ACA to increase the length of the exclusion if the acts that resulted in the obstruction conviction caused a financial loss of $15,000 or more.

The proposed rule would also implement section 6402(d) of the ACA and expand OIG’s permissive exclusion authority to “any individual or entity that 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 supplier under a Federal health care program.” OIG’s permissive exclusion authority would also reach to “[a]ny individual or entity furnishing, ordering, referring for furnishing, or certifying the need for items or services.”[2]

II. OIG Considerations for Exclusion Penalty

OIG states that it would base its decision on whether to inflict an exclusion by weighing information from a variety of sources like: Centers for Medicare and Medicaid Services (CMS), Medicaid state agencies, fiscal agents or contractors, private insurance companies, state or local licensing authorities, and law enforcement agencies. Then, OIG would decide the period of exclusion by considering “the repercussions of the false statement . . . and whether the individual or entity has a documented history of criminal, civil, or administrative wrongdoing.”[3]

OIG also addressed the current six year statute of limitations on exclusion claims. It concluded that conduct older than six years “may sometimes form a proper basis to conclude that a person should be excluded.” OIG supported its position, stating that often in False Claims Act cases, OIG does not decide to impose an exclusion until after the case reaches a settlement or judgment, which may take longer than six years. Additionally, OIG considers “whether the provider has agreed to pay appropriate restitution, fines, or penalties and whether it will agree to appropriate compliance measures,” which all require a settlement or judgment. OIG claims that adhering to a six year statute of limitations would force it to “file exclusion actions prematurely,” which may disrupt civil cases.[4]

III. Exclusion Lengths Amended

The proposed rules additionally modernize the financial loss number that is used to help determine an exclusion’s length. The rules would increase the “aggravating factor” threshold of the financial loss to the government to $15,000 or more. According to OIG, this number is a “realistic marker for determining whether someone is untrustworthy.”[8] In addition, OIG wants to update the claims mitigating factor relating to misdemeanor offenses and loss to government programs from $1,000 to $5,000. OIG also clarified that this misdemeanor provision only applies to section 1128(a)(1). Furthermore, OIG stated that this number is consistent with the justification for the original amount, and explained that using this dollar threshold as a mitigating factor would help OIG differentiate between less serious and more serious conduct.

OIG’s proposed exclusion rule also recommends clarifying how the length of an exclusion is calculated for individuals with ownership interests in sanctioned entities. Under the new rule, the length of a person’s exclusion would be “for the same period as that of the sanctioned entity with which the individual has or had the prohibited relationship.”[9] OIG would also exclude individuals who terminated their relationship with a sanctioned entity after it had been excluded for the same period that the entity is excluded.

IV. Other Added Provisions of the Proposed Rules

The proposed rules would update the waiver provision to make it consistent with the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) and the ACA. Under section 949 of the MMA, a Federal health care program administrator may request a waiver if he or she believes that the exclusion would impose a hardship on a Medicare beneficiary. On the other hand, section 6402(k) of the ACA permits a Federal health care program administrator to request a waiver if he or she concludes that the exclusion will impose a hardship on any beneficiary eligible to receive items or services under a Federal health care program. Therefore, the new rule will expand OIG’s waiver authority and permit Federal health care program administrators to request a waiver if any beneficiary will suffer a hardship due to the exclusion.[5]

OIG also introduced a provision that would permit those who are excluded under section 1128(b)(4) to apply for early reinstatement in select situations. Providers are excluded under section 1128(b)(4) due to the loss of a health care license for professional competence, professional performance, or financial integrity. The first set of scenarios would permit an excluded person to request an early reinstatement if “after fully and accurately disclosing the circumstances surrounding the original license action that formed the basis for the exclusion, the individual obtained a health care license, was allowed to retain a health care license in another state, or retained a different health care license in the same state.”[6] Alternatively, the rule would permit an excluded individual to request early reinstatement “if he or she did not have a valid health care license of any kind provided that the individual could demonstrate that he or she would no longer pose a threat to Federal health care programs and their beneficiaries.”[7]

Furthermore, the new rule would permit CMS to pay claims submitted by Medicare enrollees even if the item or service was furnished by an excluded individual, so long as the “enrollee does not know or have reason to know of the exclusion.”[10] Currently, this payment exception is limited to Medicare Part B enrollees, but the new provision would extend to Part C and D enrollees as well.

Finally, the proposed rules would alter two of OIG’s procedural authorities. First, it would give the individuals who OIG intends to exclude an opportunity to present oral argument in front of an OIG official before the exclusion is imposed.[11] Second, it would expand its ability to use testimonial subpoenas as an investigative tool for all section 1128 cases instead of just section 1128A cases.[12]

V.  Revisions to CMP Authority

The new rule to amend the CMP regulations[13] would implement authorities under the ACA. Specifically, ACA permits CMPs to be imposed for:

  • Failure to grant OIG timely access to records, upon reasonable request;
  • Ordering or prescribing while excluded when the person knows or should know that the item or service may be paid for by a Federal health care program;
  • Making false statements, omissions, or misrepresentations in an enrollment application to participate in a Federal health care program;
  • Failure to report and return an overpayment that is known to the person; and
  • Making or using a false record or statement that is material to a false or fraudulent claim.[14]

In an effort to add clarity and transparency to the OIG CMP calculation process, OIG proposed five new factors to guide its decision making process:

  • The nature and circumstances of the violation,
  • The degree of culpability of the person,
  • The history of prior offenses,
  • Other wrongful conduct, and
  • Other matters as justice may require.[15]

OIG notes that this is an “illustrative” rather than comprehensive list. Also, the five new factors apply to “both exclusion determinations under part 1003 as well as penalty and assessment amount determinations.”[16]

VI. New Method to Calculate Penalties

OIG also proposed a new method to calculate “penalties and assessments for employing excluded individuals for positions in which the individuals do not directly bill the Federal health care programs for furnishing items or services.”[17] It focuses on two specific kinds of violations: (1) when the items or services provided by the excluded person are identifiable on the submitted claims and may therefore be billed separately to the federal health care programs; and (2) when 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 program in some manner as part of the item or service claimed.[18]

For items or services that may be billed separately, the employer would be subject to penalties and assessments based on the number and value of those separately billed items and services. For non-separately billable items or services, OIG recommends a new method to calculate penalties and assessments. Penalties would be based on the number of days the excluded individual was employed. Assessments would be based on the total cost to the employer during the exclusion. The total cost includes the person’s salary, benefits, and other items of value.[19]

VII. Conclusion

Finally, the proposed rules clarify liability guidelines as they pertain to the Civil Monetary Penalties Law (CMPL), the Emergency Medical Treatment and Labor Act (EMTALA), section 1140 of the Social Security Act for conduct involving electronic mail, Internet, and telemarketing solicitations; and section 1927 of the Social Security Act for late or incomplete reporting of drug-pricing information.[20]

 Ashley Hudson 

Ashley Hudson, Associate Attorney at Liles Parker, LLP and former Chief Operating Officer for Exclusion Screening, LLC, is the author of this article. Feel free to contact us at 1-800-294-0952 or online for a free consultation.


[1] Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General’s Exclusion Authority, 79 Fed. Reg. 26,810 (proposed May 9, 2014) (to be codified at 42 C.F.R. §§ 1000, 1001, 1002, 1006).

[2] Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General’s Exclusion Authority, 79 Fed. Reg. 26,816.

[3] Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General’s Exclusion Authority, 79 Fed. Reg. 26,817.

[4] Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General’s Exclusion Authority, 79 Fed. Reg. 26,815–16.

[5] Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General’s Exclusion Authority, 79 Fed. Reg. 26,817.

[6] Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General’s Exclusion Authority, 79 Fed. Reg. 26,823.

[7] Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General’s Exclusion Authority, 79 Fed. Reg. 26,823.

[8] Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General’s Exclusion Authority, 79 Fed. Reg. 26,813.

[9] Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General’s Exclusion Authority, 79 Fed. Reg. 26,816.

[10] Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General’s Exclusion Authority, 79 Fed. Reg. 26,817.

[11] Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General’s Exclusion Authority, 79 Fed. Reg. 26,817–18.

[12] Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General’s Exclusion Authority, 79 Fed. Reg. 26,819.

[13] Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General’s Civil Monetary Penalty Rules, 79 Fed. Reg. 27,080 (proposed May 12, 2014) (to be codified at 42 C.F.R. §1003,1005).

[14] Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General’s Civil Monetary Penalty Rules, 79 Fed. Reg. 27,081.

[15] Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General’s Civil Monetary Penalty Rules, 79 Fed. Reg. 27,082.

[16] Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General’s Civil Monetary Penalty Rules, 79 Fed. Reg. 27,082.

[17] Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General’s Civil Monetary Penalty Rules, 79 Fed. Reg. 27,080.

[18] Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General’s Civil Monetary Penalty Rules, 79 Fed. Reg. 27,085.

[19] Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General’s Civil Monetary Penalty Rules, 79 Fed. Reg. 27,085.

[20] Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General’s Civil Monetary Penalty Rules, 79 Fed. Reg. 27,080.

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