Exclusion Loophole: Medicaid Managed Care

Medicaid Managed CareIn August, we discussed an OIG audit, which revealed that Medicaid providers who were terminated for cause were often able to still participate in other state Medicaid programs. Through this audit, OIG discovered that many providers were able to take advantage of a particular exclusion loophole within the Medicaid Managed Care program. Specifically, OIG discovered that 25 of the 41 states that participate in Medicaid Managed Care do not require providers to enroll in their state’s Medicaid program. The states instead permit providers to perform Medicaid managed care services based on contracts with managed care companies.

Identifying and Terminating

This loophole creates two unique problems for state Medicaid programs. First, it is much harder for a state to keep track of the providers participating in its Medicaid Managed Care program if the state does not require providers to actually enroll. In addition, if a state does not know exactly who is participating in its Medicaid Managed Care Program, then it is also difficult to search for providers to ensure that they were not terminated from participation in another state as required by ACA 6501. Second, it is very difficult for a state to terminate a provider from participating in its Medicaid program if it has no contractual relationship with that provider. In other words, it is very hard to end a relationship with someone if there was never a mutual agreement to actually begin the relationship.

Solution in Sight?

OIG recommended that CMS require state Medicaid programs to enroll Medicaid managed care providers. This would ensure that state Medicaid programs are actually able to identify and terminate providers who are terminated from participating in the federal health care programs by another state. CMS, not only heard this recommendation, but issued a Notice of Proposed Rulemaking in June 2015 which will close the loophole if finalized. Even if this loophole is officially closed, Exclusion Screening, LLC will continue to recommend that providers screen all available federal and state lists to protect their practices. This is just one of the many ways terminated providers have gamed the system. Call Exclusion Screening, LLC today at 1(800) 294-0952 for a free assessment of your needs and costs.

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.

Who Is to Blame for Gaps in OIG and State Exclusion Lists? What Is the Impact on Providers?


The failure to report excludable offenses by state Medicaid offices and licensing boards is a longstanding issue for the OIG. Recent OIG audits and reports have confirmed these state failures to report. For example, an OIG study released in August found that over 12% of terminated providers were able to continue participating in other state Medicaid programs because states were not sharing terminated provider information. In addition, two recent Medicaid Fraud Control Unit (MFCU) audits discovered that they routinely failed to timely report conviction information to the OIG and sometimes did not report them at all.[1] Reporting failures lead to gaps in the OIG Exclusion List (LEIE) because the OIG cannot exclude an individual if the OIG is never informed of the state’s conviction, termination, or suspension of providers. Such failures to report are important because the information that would have been reported can lead to exclusion violations, which are listed on the LEIE. But, state compliance failures are not the only cause of gaps in OIG and State exclusion lists – as we discuss, no matter who is at fault, the provider may pay for anyone’s mistake.

The OIG Exclusion List Has Limited Search Capabilities

One important reason providers should not rely on screening only the LEIE is that its search function is extremely narrow.  If an excluded individual uses a different name, such as a middle or maiden name, an LEIE search using the person’s first and last names my not produce any results.[2]  For example, J. A.[3] was excluded from participation on Georgia’s state exclusion list in August 2015. However, a search for “J.A.” on the LEIE currently produces zero results. 

J.A. LEIE_Redacted

Conversely, when we searched J.A. on SAFERTM, our proprietary exclusion database, we not only found a match on the Georgia list (“J.A.”), but we also found a match on the LEIE and SAM databases for “R.J.A.”. Interestingly, “J.A.” has the same middle and last name as “R.J.A.,” they are both Georgia residents, and they were both excluded from participation in April 2015. Like many states, the identifying information on Georgia’s list is sparse. Nevertheless, it is extremely likely that R.J.A. and J.A. are the same person, which a provider would have missed if he only searched the LEIE for J.A.


Reported Cases May Not Be Picked Up by OIG

Florida’s Agency for Health Care Administration publishes monthly press releases which identify persons terminated from participation in Florida Medicaid.  It expressly states that the exclusion information was “reported to the federal government for placement on the federal exclusion list,” and named providers appear on Florida’s Excluded Provider List.  When we conducted a SAFERTM search for G.B., who was listed on the April 2015 memo as “terminated from participation,” the only two “hits” were from Florida’s state exclusion list.  

G.B. SAFER_Redacted

However, an LEIE search for G.B. produced zero results.  

G.B. LEIE_Redacted

One possible explanation for why G.B. fails to show up on the LEIE could be the administrative process of OIG actually reviewing the reason for the termination and then formally excluding G.B. Nevertheless, a provider who only screens the LEIE and employs or is considering employing G.B. would miss this exclusion.  

OIG Just Misses Some Cases

K.B., a Registered Nurse (RN) with multistate licensure privileges, was placed on probation for substance abuse in February 2005. After testing positive for morphine, Iowa revoked her license and several other states revoked her multistate privileges. While the revocations were reported, the licensure revocation only resulted in K.B.’s exclusion from participation by California and the GSA-SAM in 2010. K.B. is not listed on the LEIE. This means that K.B. is unable to participate in any other state Medicaid program because under the ACA 6501, if you are terminated for cause from participation in one state, then you are terminated in all states, and K.B. is barred from contracting with the federal government. However, if a provider only screened the LEIE he would be completely unaware and could potentially face very hefty fines.

What This Means

Clearly some information is getting lost or mixed up in the reporting pipeline between state Medicaid offices, MFCUs, and the OIG, and the lesson for providers is that merely screening the LEIE is not enough. The examples above demonstrate that human error, narrow search functions, and simply missed information all play a role in the gaps that exist between publication on state exclusion lists and the LEIE.

State Medicaid offices are responsible for compiling and reporting information about excluded providers. However, as demonstrated by the “J.A.” case, the probable human error of transposing names combined with the LEIE’s limited search capabilities could result in a provider employing an excluded person, even though he was properly screened against the LEIE. To avoid this, providers should screen against the LEIE, the GSA-SAM, and all available state lists monthly. Practices should also ensure they use wide search parameters (alternate spellings, full names, maiden names, etc.) when conducting searches or they should select a vendor, like Exclusion Screening, LLC, with a system designed to anticipate these issues.

Notwithstanding name discrepancies, some information just does not make it to the LEIE. As the “G.B.” example reveals, a practice may face considerable monetary fines because it failed to screen the Florida exclusion list and relied solely on the LEIE for exclusion information, and the OIG failed to add G.B.’s name to the LEIE. Similarly, a provider who considered employing “K.B.” would be totally unaware that she was excluded from participation unless the provider screened the GSA-SAM and/or the California exclusion list. Remember that ACA section 6501 states that when an individual or contractor is excluded in one state, he or she is excluded in all states. When a provider misses such state exclusion information, he or she could be liable for CMPs of $10,000 for each claim provided directly or indirectly by the excluded individual, an assessment of up to three times the total amount paid by the government, and potential false claims liability.  Relying on the LEIE’s exclusion information without checking all other available state exclusion lists is a substantial monetary risk for a practice to take. If screening and verifying 40 state and federal exclusion lists each month is overly burdensome for your practice, contact Exclusion Screening, LLC today for a free assessment: 1 (800) 294-0952.

[1] MFCUs are supposed to send a referral letter to the OIG within 30 days of sentencing for the purpose of alerting the OIG about providers excluded from state programs, but the OIG found that in some cases this exclusion information was not referred to the OIG for over 100 days.

[2] We have even found that hyphenated names frustrate LEIE searches even where the actual names are used!

[3] Full names have been redacted for privacy.

Health Care Fraud: Second Conviction Secured in Michigan Excluded Provider Scheme

health care fraudIn February, we reported that the Michigan Attorney General secured a racketeering and health care fraud conviction against an excluded Michigan podiatrist. The podiatrist participated in an elaborate health care fraud scheme with another Michigan provider. In early July, the Michigan Attorney General successfully convicted the doctor who knew or should have known that the podiatrist was excluded.

Health Care Fraud Conviction Details

The Attorney General’s investigators determined that the provider hired a former podiatrist who was convicted of health care fraud in 2003. The podiatrist was subsequently excluded from participation in the federal health care programs for a period of 25 years. The provider billed private insurance and the government for the excluded podiatrist’s medical services as if he performed them. Trial testimony indicated that the provider made payments to the excluded podiatrist from the same account where health care program payments were deposited.

For entering into this scheme, the provider was convicted of racketeering (20-year felony), thirteen counts of health care fraud (4-year felony), and five counts of Medicaid fraud (4-year felony). Up to $200,000 in fines accompanied the convictions.


The Michigan provider was held liable because he “knew or should have known” that the podiatrist he contracted with was excluded from participation in the federal health care programs. The OIG and state Attorney Generals are working to end health care fraud by seeking out providers who employ or contract with excluded persons or entities. The best way to protect yourself from liability is to screen all employees and contractors against all federal and state exclusion lists monthly. Call Exclusion Screening, LLC today for a free assessment of your needs and costs at 1(800) 294-0952


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.

Excluded Individual Conducts Elaborate Health Care Fraud Scheme



The owner of a New Jersey ambulance company was indicted for health care fraud in mid-August of 2015. The owner was excluded from participation in the federal health care programs after being convicted of defrauding New Jersey health care programs in 2003. This is just the latest in a steady stream of health care related enforcement actions by state attorney generals.


New Jersey prosecutors allege that the provider has been the owner and operator of a New Jersey ambulance company to which Medicare and Medicaid have paid out a combined $7.5 million since 2010. The provider allegedly hid his involvement in the company by paying employees in cash. The defendant has owned and operated the ambulance company since 2005, which is only two years after he was excluded from participation in the federal health care programs for a period of 11 years. The provider now faces a 17-count federal indictment with a possible sentence of 30 years in prison for conducting the health care fraud scheme.


It may be difficult to protect yourself from individuals like this New Jersey provider who explicitly sought to defraud the federal health care programs. Providers should, however, try to protect themselves by conducting monthly exclusion screening searches of their employees and contractors. Providers should also maintain proper records of these searches. States, like the federal government, are actively pursuing those who are in violation of federal health care regulations. Remember, compliance is always the best policy!

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.

How to Apply for Reinstatement

OIG Exclusion Reinstatement

I. The OIG Exclusion Reinstatement Process

Most exclusions are imposed for a definite time period. The question for an excluded individual or entity is: What happens at the end of the exclusion period?

   The answer is that the excluded individual or entity must apply for reinstatement. The U.S. Department of Health and Human Services (HHS) will NOT automatically reinstate the person or entity at the end of the exclusion period.

An excluded provider may apply for reinstatement 90 days before the date specified on his, her, or its exclusion notice letter. To apply for reinstatement the excluded individual or entity must send a written request to:

Attn: Exclusions
P.O. Box 23871
Washington, DC 20026
(202) 691-2298 (Fax)

  The Office of the Inspector General (OIG) will send the provider Statement and Authorization forms to complete, notarize, and return. OIG will review these forms and will send the provider a written notification of its final decision. This process may take 120 days or longer to complete.

II. Denial of OIG Exclusion Reinstatement

If the application for reinstatement is denied, the excluded individual or entity may submit evidence and a written argument against the continued exclusion; a written request to present written evidence and oral argument to an OIG official; or documentary evidence and a written request to present oral argument.[1] The evidence, written argument, or written request for a hearing must be submitted 30 days after the provider receives the written notice of OIG’s final decision.[2]

After reviewing the materials (or after the 30-day period, if no materials are submitted), OIG will send the provider written notice either confirming the denial or approving the request for reinstatement.[3] If OIG confirms its decision to deny reinstatement, the decision will not be subject to administrative or judicial review and the provider must wait at least one year to submit another request for reinstatement.[4]

Read more on OIG Exclusion 

 OIG Exclusion Reinstatement 

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] 42 C.F.R. 1001.3004 (2014).

[2] 42 C.F.R. 1001.3004.

[3] 42 C.F.R. 1001.3004.

[4] 42 C.F.R. 1001.3004.

What is an OIG Exclusion?

an OIG Exclusion

By Paul Weidenfeld

I.  What is an OIG Exclusion?

An OIG Exclusion is a final administrative action by the Office of the Inspector General (OIG)  that  prohibits participation in any Federal Health Care Program.  Exclusions are imposed because the individual or entity is found to pose unacceptable risks to patient safety and/or program fraud.  As a result, Federal health care programs such as  MedicareMedicaid and TRICARE will not pay for any service provided — either directly or indirectly — by an excluded person or entity. 

II.  Who Has the Authority to Impose an OIG Exclusion?

The Department of Health and Human Services (HHS) has the overall responsibility of administering the Medicare and Medicaid Programs. HHS decides who may receive benefits under these programs and who will be allowed to provide them.  

The authority to exclude individuals and entities from federal health care programs is delegated to OIG.[1] OIG enforces the exclusion penalty through its authority to impose civil money penalties (CMPs) where claims are submitted for services performed or furnished by an excluded person or entity and the person making the claim “knew or should have known” of the exclusion. 

III. OIG Exclusion Types

There are two types of OIG exclusions, mandatory and permissive, and both have the effect of barring an individual or entity from participating in all Federal health care programs from the time they are excluded until such time, if ever, that their privilege is reinstated.[2]  Mandatory exclusions last a minimum of 5 years and must be imposed if a person or entity is convicted of certain criminal offenses.  These include:

  • Conviction for Medicare or Medicaid fraud, or any other offense related to the fraudulent delivery of items or services to Federal or State health care programs;
  • Patient abuse or neglect;
  • Felony convictions for other health care related fraud, theft, or other financial misconduct; and
  • Felony convictions relating to unlawful manufacture, distribution, prescription, or dispensing of controlled substances.

The discretionary authority to exclude individuals and entities implicates a much wider range of conduct. We discuss this topic in a later article, but examples for which permissive exclusions may be imposed include:

  • Misdemeanor convictions related to defrauding a heath care fraud program,
  • Misdemeanor convictions relating to the unlawful manufacture, distribution, prescription, or dispensing of controlled substances,
  • Suspension, revocation, or surrender of a license to provide health care for reasons bearing on professional competence, performance, or financial integrity,
  • Provision of unnecessary or substandard services;
  • Submission of false or fraudulent claims to a Federal health care program,
  • Engaging in unlawful kickback arrangements,
  • Defaulting on health education loan or scholarship obligation, and
  • Controlling a sanctioned entity as an owner, officer, or managing employee.

IV.  Consequences of OIG Exclusion

Federal health care programs, principally Medicare and Medicaid, will not pay for any item or service that is furnished or performed by, or on the prescription or direction of, an excluded individual.[3] Since federal health programs subsidize virtually all hospitals and account for 60-65% of all health care dollars spent, exclusion is a severe restriction and is often a death knell to providers.

Providers of the federal health care programs must ensure that their employees, contractors, and vendors are not excluded and the failure to do so can result in significant penalties.  The OIG has the authority to impose penalties of up to$21,562.80 for each item or service furnished by the excluded person or entity, as well as assessments of up to three times the amount claimed.[4]  In addition, providers may be liable for overpayments.  

Even when a provider is unaware that a person was excluded at the time the claim was made, OIG has issued guidance advising that such inadvertent violations must be reported and repaid.[5] In light of this guidance, any claim that might involve an excluded person or entity could potentially have False Claims Act implications under the Affordable Care Act if it is not dealt with in a timely and proper manner.

v. Conclusion

This article is just intended to be an introductory outline of the basics to answer the question, What is an OIG Exclusion? Our other posts have additional information, but if you have any questions about exclusions and your screening obligations, feel free to contact any of us at Exclusion Screening, LLCSM

Read more on OIG Exclusion

an OIG ExclusionPaul Weidenfeld, Co-Founder and CEO of Exclusion Screening, LLC, is the author of this article. He is a longtime health care lawyer whose practice has focused on False Claims Act cases and health care fraud matters generally. Contact Paul should you have any questions at: pweidenfeld@exclusionscreening.com or 1-800-294-0952.

Sections 1128 and 1156 of the Social Security Act.

[2] Mandatory exclusions are found at 42 USC § 1320a-7; permissive exclusions are principally found at 42 USC § 1320a-7(b).

[3] Section 1862(e)(1) of the Social Security Act and 42 CFR § 1001.1901(b)(1).

[4] 42 CFR §1003.102 (a)(2).

[5] It was issued April 17, 2013 and it is also the subject of an article posted on our site.