OIG’s Updated Special Advisory Bulletin on the Effect of Exclusions

OIG Sanction Checks
The Office of the Inspector General (OIG) Broadly Interprets Exclusion Regulations
OIG’s Demonstrated Interest in Exclusion Screening and Forewarning of Increased Enforcement Efforts
By Paul Weidenfeld

The OIG’s Special Advisory Bulletin on the Effect of Exclusion from Participation in Federal Health Care Programs[1] explains the types of conduct that could violate the payment prohibition, which regards items or services provided by excluded persons, and the potential administrative sanction checks for employing excluded persons or contractors. The advisory was issued less than a month after OIG specifically amended its Self-Disclosure[2] protocol to include exclusion violations.

Although the advisory bulletin provides some guidance on the screening of employees and contractors, it is not very helpful. Thus, the timing of the advisory and its emphasis on enforcement strongly suggested that OIG would expand its efforts. Subsequent events have shown this to be true.

I.  The Regulations on Payment and Penalties

The regulation prohibiting payment for services furnished or provided by excluded persons, 42 CFR § 1001.1901(b), states that payments should not be made for items or services furnished “by an excluded individual or entity, or at the medical direction or on the prescription of a physician or other authorized individual who is excluded when the person furnishing such item or service knew or had reason to know of the exclusion.” The regulation’s language makes no reference to services or items provided by employees or contractors, so one could reasonably understand the payment prohibition to be relatively narrow.

Reasonable or not, the OIG takes the opposite view and interprets the prohibition expansively. In its view, the regulation applies to “all methods of . . . payment,”[3] and includes virtually any item or service performed by an excluded person or entity that contributes in any way to any form of reimbursement. The bulletin advises, for instance, that the preparation of a surgical tray by an excluded person could run afoul of the prohibition, as could inputting information into a computer by an excluded person. Administrative and management services, IT support, and even strategic planning would also be prohibited “unless wholly unrelated to Federal health care programs.” Even a volunteer’s assistance might trigger the prohibition if he or she was excluded.

OIG takes a similar approach when interpreting 42 CFR §1003.102(a)(2), which gives OIG authority to issue Civil Money Penalties (CMPs) for violations of the payment prohibition in addition to sanction checks for the submission of false or fraudulent claims.[4] In its view, the imposition of penalties are appropriate if an “excluded person participates in any way in the furnishing of items or services that are payable by a Federal health care program” and if the provider “knew or should have known” of the exclusion. Furthermore, the prohibition extends to “all categories of items or services”—whether they involve direct or indirect care, are administrative or management services, or even, as noted previously, if an excluded volunteer provided part of a service that was ultimately reimbursed. As long as the provider’s claim includes “any items or services furnished by an excluded person,” and the provider “knew or should have known” of the exclusion, OIG has the authority to issue CMPs.

II.  OIG Sanction Checks Guidance on Screening: Follow at your own Peril!

According to the advisory, providers can “avoid potential CMP liability” by checking the LEIE (OIG’s List of Excluded Individuals and Entities) “to determine the exclusion status of current employees and contractors.” OIG describes the LEIE as a “tool” that is “searchable” and “downloadable” to enable providers to identify excluded employees and contractors, and recommends that providers check it monthly to “minimize potential overpayment and CMP liability.”[5]

The section on screening suggests that the process is a relatively easy one. It states that providers have to simply “review each job category or contractual relationship to determine whether the item or service being provided is directly or indirectly, in whole or in part, payable by a Federal health care program. If the answer is yes, then . . .  [providers must] screen all persons that perform under that contract or that are in that job category.”[6] Simple as that? Unfortunately, no. There are a number of problems the guidance fails to recognize or understand.

III. Failures of OIG’s Guidance in Advisory Bulletin

To begin, though the LEIE can be searched, it can only search five employees at a time. Each name has to be entered manually, and potential matches must be verified individually. This might work if a provider only has to screen a handful of employees or contractors, but imagine how long searching 100 employees, five at a time, would take. Or 1,000? Or 10,000? Nor does downloading the database help many providers. Most do not have the IT capability to compare their employee database to the LEIE in any reliable or economically viable way.

The OIG’s guidance that providers simply need to use “the same analysis” for contractors and subcontractors “that they would for their own employees” is also problematic.[7] It is difficult enough to identify every employee who contributes in any way to items or services that contribute to any amount of reimbursement in any form, but it is extremely unrealistic to expect a provider to meet that standard for his contractors, subcontractors, and their employees. Wouldn’t almost every person that walked into hospital or nursing home that wasn’t a patient or relative be a candidate? And what about their co-employees working out of their offices?

Still another concern, perhaps the most significant one, is that the guidance can be read to give the impression that providers can satisfy their screening obligations by conducting searches of the LEIE on a regular basis. The OIG might be satisfied with screening the LEIE on a regular basis, but such a screening protocol is unlikely to satisfy the various state Medicaid requirements or state regulations. For instance, approximately 38 states have their own sanction checks lists, and providers are required to check these state lists. Some states also require providers to certify that none of their employees or contractors have been “suspended, or excluded from Medicare, Medicaid or other Health Care Program in any state![8] Even the OIG’s advice that exclusion checks be completed on a “regular” basis would be inadequate in most states, as CMS has directed State Medicaid directors to require monthly screening and most, perhaps all, have followed that directive.

IV.  Final Thoughts

Exclusion screening has clearly become a “front burner” issue for OIG. Providers should take note of OIG’s broad interpretation of their obligations and of its inclusion in the Self-Disclosure Protocol. Providers also need to be aware of the regulations in their States which are typically more onerous that federal ones. Finally, while there are a number of difficult questions that don’t have easy answers (such as, Who do I need to screen? Which databases do I screen? How can I accomplish screening? and How do I deal with contractors?), they are easier to deal with sooner rather than later, and they are dangerous to put off.

OIG Sanction Checks

Paul 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.


[1] The 2013 Bulletin “replaces and supersedes the 1999 Bulletin.” Dep’t of Health and Human Servs. Office of the Inspector Gen., Updated Special Advisory Bulletin on the Effect of Exclusion from Participation in Federal Health Care Programs, 4 (May 8, 2013).

[2] Update to Self-Disclosure Protocol issued April 17, 2013, Dep’t of Health and Human Servs. Office of the Inspector Gen.

[3] “This payment prohibition applies to all methods of Federal health care program payment, whether from itemized claims, cost reports, fee schedules, capitated payments, a prospective payment system or other bundled payment, or other payment system and applies even if the payment is made to a State agency or a person that is not excluded.” Updated Special Advisory Bulletin on the Effect of Exclusion from Participation in Federal Health Care Programs at 6.

[4] The regulation authorizes CMPs under circumstances where a person making a claim:

“knew, or should have known, that the claim was false or fraudulent, including a claim for any item or service furnished by an excluded individual employed by or otherwise under contract with that person.”

While the regulation’s reference to excluded persons seems clearly intended to clarify the circumstances under which CMPs would be applicable to false claims, the OIG’s interpretation that it also authorizes sanctions for violations of the payment prohibition is accepted and rarely, if ever, questioned.

[5] Updated Special Advisory Bulletin on the Effect of Exclusion from Participation in Federal Health Care Programs at 15. The OIG recognizes that there is no federal requirement to check the LEIE monthly, recommends it. It also recommends that providers rely on the LEIE over other databases such as GSA-SAM and NPDB.

[6] Updated Special Advisory Bulletin on the Effect of Exclusion from Participation in Federal Health Care Programs at 15. Providers were also advised that they could rely on contractor screening, but that they would remain responsible for overpayment liability and CMPs if it failed to ensure that “appropriate exclusion screening had been performed.” Id.

[7] Updated Special Advisory Bulletin on the Effect of Exclusion from Participation in Federal Health Care Programs at 16.

[8] See, for example, Rule § 352.5 of the Texas Administrative Code which states:

Prior to submitting an enrollment application, the applicant or re-enrolling provider must conduct an internal review to confirm that neither the applicant or the re-enrolling provider, nor any of its employees, owners, managing partners, or contractors (as applicable), have been excluded from participation in a program under Title XVIII, XIX, or XXI of the Social Security Act.

An even more exacting obligation is found in Louisiana where provider agreements require applicants to certify that no employee is:

not now or … ever been: suspended or excluded from Medicare, Medicaid or other Health Care Program in any state” or “employed by a corporation, business, or professional association that is now or has ever been suspended or excluded from Medicare, Medicaid or other Health Care Programs in any state” (emphasis added).

OIG Provides Guidance on Disclosures for Conduct Involving Excluded Persons in the Updated Self-Disclosure Protocol

Provider Self-Disclosure
I. Provider Self-Disclosure Protocol: New Guidance Sheds Light on Disclosure

On April 17, 2013, the Office of the Inspector General (OIG) issued an updated Provider Self-Disclosure Protocol that many viewed as an attempt to make the process somewhat more “user friendly.”[1] Regardless of whether that was the aim – or if it was achieved to some extent – the reason the update is of particular interest to us is that it has a section which contains specific guidance on the disclosure of conduct involving excluded employees or contractors. The original protocol, however, was silent on the topic.

By most measures, the OIG’s  protocol for self-disclosure is still an onerous one. Providers are required to conduct an internal investigation and present its findings in the form of a detailed provider self-disclosure narrative. The narrative must include, among other things, a complete accounting of the investigation itself, the conduct involved, the corrective efforts taken, the damages incurred, and how that amount was determined.[2]

II.  Additional Requirements

In addition to these general requirements, disclosures relating to excluded employees or contractors has to include the following additional information:

  • Who was excluded, their job duties and the dates of employment or contract
  • The screening that was done before and/or during the employment or contract
  • Why or how the screening process failed
  • The corrective actions that have taken
  • A calculation of the total amounts claimed and paid by Federal Program
  • The revised protocol also requires that all other employees be screened through the OIG list of excluded individual employees[3]
III.  Calculating the Cost

It is also significant that the revision contains guidance for calculating the damages. While the OIG holds fast to the notion that all services directly provided and individually billed by an excluded individual are overpayments, it recognizes that quantifying services that were not billed separately can be problematic. In such cases, the guidance suggests that the amount paid should be estimated by taking the total cost of employment or contracting and multiplying by the federal payor mix (by unit if possible, or by the entire entity if not). According to the OIG, that amount should then be used “as a proxy” for the amount paid “for purposes of compromising OIG’s [Civil Monetary Penalty] CMP authorities” in a settlement.

IV.  Final Thoughts

The revision of the Provider Self-Disclosure Protocol is important from the perspective of exclusion screening for three reasons. First, it strongly suggested that self-disclosures are the OIG’s preferred avenue for resolving issues arising out of exclusion violations. Second, it provided a methodology for approaching the difficult issue of computing the value of indirect and bundled services. Third, but perhaps most notably, it significantly raised the profile of issues related to conduct involving excluded persons and entities. This can sometimes have enforcement implications and serve as a sort of warning to the industry, and that appears to have been the case.

OIG Exclusion

Paul 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@www.exclusionscreening.com or 1-800-294-0952.


[1] Originally issued in 1999 in an attempt to encourage self-disclosure, the process has been viewed with skepticism from the outset and has met great favor as a resolution option.

[2] In return, the OIG states it may reduce CMP’s to 1.5 times the loss. In addition, the OIG may still be required by a Memorandum of Understanding with DOJ to refer the matter for civil or criminal prosecution. Furthermore, entry into the program does not constitute a “public disclosure” under the False Claims Act. These considerations help explain the lack of popularity of the program.

[3] Dep’t of Health and Human Servs. Office of the Inspector Gen., at 9.