April 23, 2018

Are You Reviewing the OIG and State Exclusion Lists Monthly?

By Joshua Bloom, Supervisor, Assurance Services

Are You Reviewing the OIG and State Exclusion Lists Monthly?

If your organization receives federal funding through Medicare and Medicaid, you should know about the exclusion listings. Not knowing about the exclusion listings can cost your organization a significant sum in civil penalties and/or special assessments, as discussed below.

Vendors and Employees Behaving Badly

The U.S. Department of Health & Human Services’ Office of the Inspector General (“OIG”), as well as many states, maintains lists of individuals and entities that are “excluded” from participating in federal health programs, defined by Section 1128B(f) of the Social Security Act as “any plan or program that provides health benefits, whether directly through insurance, or otherwise, and that is funded directly in whole or in part, by the U.S. government or a state healthcare program.” Individuals and entities can be excluded, or sanctioned, for a variety of different reasons, including false and fraudulent Medicare claims cases, forging signatures on prescriptions, or submitting medically unnecessary claims, among others. The OIG has the authority to exclude individuals and entities pursuant to the Social Security Act.

There are two types of exclusions under the Social Security Act:

  1. Mandatory Exclusions – The OIG is required by law to exclude from participation in all federal healthcare programs individuals and entities convicted of the following criminal offenses: Medicare or Medicaid fraud, as well as any other offenses related to the delivery of items or services under Medicare, Medicaid, SCHIP, or other 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 the unlawful manufacture, distribution, prescription, or dispensing of controlled substances.
  2. Permissive Exclusions – The OIG has discretion to exclude individuals and entities on a number of grounds including, but not limited to, misdemeanor convictions related to healthcare fraud other than Medicare or a state health program; fraud in a program (other than a healthcare program) funded by any federal, state, or local government agency; misdemeanor convictions relating to the unlawful manufacture, distribution, prescription, or dispensing of controlled substances; suspension, revocation, or surrender of a license to provide healthcare for reasons bearing on professional competence, professional performance, or other financial integrity; provision of unnecessary or substandard services; submission of false or fraudulent claims to a federal healthcare program; engaging in unlawful kickback arrangements; defaulting on a health education loan or scholarship obligation; and controlling a sanctioned entity as an owner, officer, or managing employee.


Individuals who have been added to the exclusion list are typically provided with a written Notice of Intent to Exclude, including the basis and reasoning for the exclusion. All exclusions implemented by OIG may be appealed to an HHS administrative law judge, and any adverse decision may be appealed to the HHS Departmental Appeals Board (“DAB”). Judicial review in federal court is also available after a final decision by the DAB. Once individuals or entities are reinstated, they are removed from exclusion listings.

Prohibited Transactions with the Exclusion Listing

In the Special Advisory Bulletin on the Effect of Exclusion from Participation in Federal Health Care Programs issued on May 8, 2013, by the OIG, no federal healthcare program payment may be made for items or services furnished (1) by an excluded person or (2) at the medical direction or on the prescription of an excluded person. The exclusion and payment prohibition continue to apply to an individual even if he or she changes from one healthcare profession to another while excluded. The payment prohibition applies to all methods of federal healthcare program payments, 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.

The prohibition goes beyond direct patient care and applies to services performed by excluded individuals who work for or are under an arrangement with a hospital, nursing home, home health agency, or managed care entity. Excluded persons are also prohibited from furnishing administrative and management services that are payable by federal healthcare programs, even if they are not separately billable. In addition, any items and services furnished at the medical direction or on the prescription of an excluded person are not payable when the person furnishing the items or services either knows or should have known of the exclusion at the time of service.

Examples listed in the Bulletin include:

  1. No payment may be made to a hospital for items or services furnished by an excluded nurse to federal healthcare program beneficiaries, even if the nurse’s services are not separately billed and are paid for as part of a Medicare diagnosis-related group payment received by the hospital. Also, the excluded nurse would be in violation of his or her exclusion for causing a claim to be submitted by the hospital for items or services the nurse furnished while excluded.
  2. Excluded individuals are also prohibited from providing transportation services paid for by a federal healthcare program, such as those provided by ambulance drivers or ambulance company dispatchers.
  3. Another example would be services performed by excluded pharmacists or other excluded individuals who input prescription information for pharmacy billing or who are involved in any way in filling prescriptions for drugs that are billed to a federal healthcare program.
  4. An excluded individual may not serve in an executive or leadership role, such as chief executive officer, chief financial officer, general counsel, director of health information management, general counsel, director of human resources, physician practice office manager, or other senior positions. Excluded individuals may not provide other types of administrative and management services, such as health information technology services and support, strategic planning, billing and accounting, staff training, and human resources, unless wholly unrelated to federal healthcare programs.

OIG may impose civil monetary penalties of up to $10,000 for each item or service furnished by the excluded person for which federal program payment is sought, as well as assess up to three times the amount claimed, and program exclusion.

The Bulletin offers the following guidance under which an excluded person may be employed or contracted by a provider that receives payments from federal healthcare programs.

  • First, an excluded person may be employed if the items or services being provided by the healthcare programs do not pay, directly or indirectly, for the items or services being provided by the excluded persons.
  • Second, a provider that employs or contracts an excluded person to furnish items or services solely to non-federal healthcare program beneficiaries would not be subject to civil monetary penalties.

Best Practices

The most important thing that an organization can do to prevent exposure to OIG investigations and fines is to search the federal and state databases whenever an employee is hired or during the vendor approval process, and to periodically verify whether any current vendors and employees are on the list.

The OIG recommends as a best practice that the exclusion listing is checked on a monthly basis. This should be documents so that the organization can demonstrate that it has acted in good faith to screen against the latest publicly available information.

Recent OIG Settlements

In addition to significant legal costs and reputational risk, failing to exclude those on the exclusion listings can result in civil monetary penalties, as defined by Section 1128A(a)(6) of the Social Security Act, which can have a significant financial impact.

In February 2018, Southwest Trinity Management, LLC (STM) entered into a $141,986.36 settlement with OIG. Through a skilled nursing facility it owns and manages in Oklahoma City, Oklahoma, STM employed a licensed practical nurse who was listed in the excluded database, who provided items or services that were billed to federal healthcare programs.

In December 2017, Turtle Creek Recovery Center entered into a $24,428.58 settlement agreement with OIG. The settlement agreement resolved allegations that Turtle Creek employed a counselor who was excluded from participating in any federal healthcare program, who provided items or services to the center’s patients that were billed to federal healthcare programs.

In October 2017, Shawnee Health Services entered into a $107,761.08 settlement agreement with OIG. The settlement agreement resolved allegations that Shawnee employed a case manager who was excluded from participation in any federal healthcare program. OIG investigated and revealed that the case manager provided items or services to Shawnee clients who were receiving services under a Medicaid waiver program.

Additional cases involving civil monetary penalties and affirmative exclusions are available on the OIG website.

Self-Disclosure Protocol

Self-disclosure information can be submitted online through the OIG portal. You may wish to seek legal counsel.

Related Industry