Criteria for Implementing Permissive Exclusion Authority Under Section 1128(b)(7) of the Social Security Act

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Inspector General

Criteria for Implementing Permissive Exclusion Authority Under

Section 1128(b)(7) of the Social Security Act

AGENCY: Office of Inspector General (OIG), HHS.

ACTION: Notice.

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SUMMARY: This notice sets forth the non-binding guidelines, to be used

by the OIG in assessing whether to impose a permissive exclusion in

accordance with section 1128(b)(7) of the Social Security Act. These

guidelines identify specific factors with regard to whether an

individual's or entity's continued participation in the Medicare,

Medicaid and other Federal health care programs will pose a risk to the

programs or program beneficiaries, and explain how these factors would

be used by the OIG to assess a permissive exclusion decision.

FOR FURTHER INFORMATION CONTACT:

Joel Schaer, Office of Counsel to the Inspector General (202) 619-0089.

SUPPLEMENTARY INFORMATION:

I. Background

Purpose and Rationale

Section 1128(b)(7) of the Social Security Act (the Act) authorizes

the Secretary, and by delegation the Inspector General, to exclude a

provider from Medicare, Medicaid and the other Federal health care

programs for engaging in conduct described in sections 1128A and 1128B

of the Act. These latter provisions establish administrative and

criminal sanctions, respectively, against individuals and entities that

(1) submit, or cause to be submitted, false or fraudulent claims to

Medicare and the Federal and State health care programs; or (2) offer,

pay, solicit or receive remuneration in return for the referral of

business reimbursed by Medicare or Medicaid, a violation of the

Medicare and Medicaid anti-kickback statute. Exclusions in accordance

with section 1128(b)(7) of the Act, based on such conduct, are

permissive in nature, that is, the Secretary has the discretion whether

to exclude or not to exclude. Respondents in these administrative

exclusion proceedings have the right to a hearing before a Department

of Health and Human Services administrative law judge prior to the

imposition of an exclusion.

On October 24, 1997, the OIG published a proposed policy statement

in the Federal Register (62 FR 55410) in the form of non-binding

guidelines to be used by the OIG in assessing whether to impose a

permissive exclusion in accordance with section 1128(b)(7) of the Act.

We indicated that these draft criteria were designed to allow for the

more effective development of OIG investigations and investigative

plans; establish an objective basis for the OIG's permissive exclusion

decisions; evaluate a provider's trustworthiness to continue to conduct

business with the Medicare, Medicaid and other Federal health care

programs; and positively influence providers' future behavior through

the development of corporate integrity programs and other conduct

contemplated by the exclusion criteria.

The factors listed in these proposed guidelines were derived from

two principal sources--the regulations governing exclusions under

sections 1128(b)(7) and 1128A of the Act (42 CFR parts 1001 and 1003),

and the decisions of the Departmental Appeals Board (DAB) in exclusion

matters. The factors derived from DAB decisions reflected the analysis

of the remedial purpose of program exclusion that is, to protect

Federal health care programs by determining whether the respondent is

sufficiently trustworthy to participate.

Structure of Permissive Exclusion Criteria

The proposed exclusion criteria were organized into four general

categories of factors bearing on the trustworthiness of a provider that

has allegedly engaged in health care fraud and abuse--

The first category addressed the circumstances and

seriousness of the

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underlying misconduct. The factors to be considered are historical in

nature and rely on past misconduct as an indicator of the defendant's

propensity for future abuse of the programs.

The second category considered the defendant's response to

the allegations or determination of wrongdoing. These factors indicate

whether the defendant is willing to affirmately modify his or her

conduct, make injured parties whole, and otherwise acknowledge and

remedy past wrongdoing.

The third category identified various other factors

relevant to assessing the likelihood of a future violation of the law.

The implementation of an adequate corporate integrity program is a key

consideration.

The fourth category related to the defendant's financial

ability to provide quality health care services.

Interested parties were invited to comment on these draft criteria

and submit their written comments to the OIG for consideration. The OIG

received two timely-filed public comments in accordance with that

solicitation request. As a result of those comments, we are making two

technical revisions to the final guidelines. The first change relates

to section D and the defendant's financial ability to provide quality

health care services. We are clarifying this section to indicate its

application only to entities and not individual practitioners. Second,

we are revising the language in paragraph 3 of section A to address the

``knowledge standard.'' Specifically, we are now indicating that a

criterion would be whether there is evidence that the defendant knew,

or should have known, that his or her conduct was prohibited.

We believe that the revised internal guidelines set forth below

should now establish specific criteria on which the OIG may base its

decision as to whether to seek the imposition of a permissive exclusion

against a health care provider in accordance with section 1128(b)(7) of

the Act. While these revised exclusion criteria will now serve as

internal agency guidelines for the OIG, these criteria may be subject

to further modification at any time. They are not intended to limit or

bind the OIG's discretionary authority to exclude individuals or

entities that pose a risk to Medicare, Medicaid and other Federal

health care programs or program beneficiaries. These criteria do not

create any rights or privileges in favor of any party. In addition,

these criteria do not supplant to modify in any way the OIG

regulations, codified at 42 CFR part 1001, governing program

exclusions.

II. Criteria To Implement the OIG's Permissive Exclusion Authority

Under Section 1128(b)(7)

The following criteria may be used to determine whether or not it

is appropriate to impose a permissive exclusion in accordance with

section 1128(b)(7) of the Act (42 U.S.C. 1320a-7(b)(7)). These criteria

are informal and non-binding, and may be used as a guide to assist the

OIG in determining in which cases an exclusion should be imposed. The

presence or absence of any or all of the factors that appear below does

not constitute the sole grounds for determining whether exclusion is

appropriate. There is a presumption that some period of exclusion

should be imposed against an individual or entity that has defrauded

Medicare or other Federal and State health care programs.

A. The Circumstances of the Misconduct and Seriousness of the Offense

1. Was a criminal sanction imposed? The amount of any criminal fine

or penalty imposed, and the length of any period of incarceration that

is ordered, is evidence of the seriousness of the statutory misconduct,

and may have an impact on the exclusion determination.

2. Was there evidence of (i) physical or mental harm to patients or

(ii) financial harm to the Medicare or any of the other Federal and

State health care programs? If financial loss to the programs occurred,

what was the extent of such loss? Exclusion may be appropriate not only

in cases where actual harm is present, but potential harm as well.

3. Is the misconduct an isolated incident or a continuous pattern

of wrongdoing over a significant period of time? Is there evidence that

the defendant knew, or should have known, that his or her conduct was

prohibited? Has the defendant had the same or previous problems with

the OIG, the Health Care Financing Administration (HCFA), the carrier

or intermediary, or the State? What was the nature of these problems?

4. Was the defendant's involvement in the misconduct active or

passive? Was the defendant aware of the misconduct when it was

occurring? Did the defendant play a role in the misconduct?

B. Defendant's Response to Allegations/Determination of Unlawful

Conduct

1. What was the defendant's response to any actual or potential

legal violations or harm to the programs or their beneficiaries? Was

the response appropriate and credible?

2. Did the defendant cooperate with investigators and prosecutors,

and timely respond to lawful requests for documents and the provision

of evidence regarding the involvement of other individuals in a

particular scheme, thereby demonstrating trustworthiness?

3. Has the defendant made or agreed to make full restitution to the

Federal and/or state health care programs, thereby demonstrating

present responsibility and willingness to conform to applicable laws,

regulations and program requirements?

4. Has the defendant paid or agreed to pay all criminal, civil, and

administrative fines, penalties, and assessments resulting from the

improper activity?

5. Has the defendant taken steps to undo the questionable conduct

or mitigate the ill effects of the misconduct, e.g., appropriate

disciplinary action against the individuals responsible for the

activity that constitutes cause for exclusion, or other corrective

action?

6. Has the defendant acknowledged its wrongdoing and changed its

behavior, thereby demonstrating future trustworthiness?

C. Likelihood that Offense or Some Similar Abuse Will Occur Again

1. Was the misconduct the result of a unique circumstance not

likely to recur? Is there minimal risk of repeat conduct?

2. Have prior and subsequent conduct been exemplary or improper?

3. What prior measures had been taken to ensure compliance with the

law? Can the defendant demonstrate that it had an effective compliance

plan in place when the activities that constitute cause for exclusion

occurred?

A. Did the defendant make any efforts to contact the OIG, HCFA, or

its contractors to determine whether its conduct complied with the law

and applicable program requirements? Were any contacts documented?

B. Did the defendant bring the activity in question to the

attention of the appropriate Government officials prior to any

Government action, e.g., was there any voluntary disclosure regarding

the alleged wrongful conduct?

C. Did the defendant have effective standards of conduct and

internal control systems in place at the time of the wrongful activity,

e.g., was there a corporate compliance program in place? If there was

an existing corporate compliance plan:

(i) How long had the compliance plan been in effect?

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(ii). What problems had been identified as a result of the

compliance plan?

(iii). Were any overpayments or systemic changes made if problems

were identified?

(iv) Were appropriate staff sufficiently trained in applicable

policies and procedures pertaining to Medicare and other Federal and

State health care programs?

(v) Was there a corporate compliance officer and an effective

corporate compliance committee in place (if appropriate to the size of

the company)?

(vi) Were regular audits undertaken at the time of the unlawful

activity?

4. What measures have been taken, or will be taken, to ensure

compliance with the law? Has the defendant agreed to implement adequate

compliance measures, including institution of a corporate integrity

plan?

D. Financial Responsibility

If the defendant is an entity and is permitted to continue program

participation, is that defendant able to operate without a real threat

of bankruptcy and without a real threat to its ability to provide

quality health care items or services?

Dated: December 16, 1997.

June Gibbs Brown,

Inspector General.

[FR Doc. 97-33524 Filed 12-23-97; 8:45 am]

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