Health Care Programs: Fraud and Abuse; Revised OIG Exclusion Authorities Resulting From Public Law 104-191

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Inspector General

42 CFR Parts 1000, 1001, 1002 and 1005

RIN 0991-AA87

Health Care Programs: Fraud and Abuse; Revised OIG Exclusion

Authorities Resulting From Public Law 104-191

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

ACTION: Notice of proposed rulemaking.

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SUMMARY: This rulemaking addresses proposed revisions to the OIG's

sanction authorities in conjunction with sections 211, 212 and 213 of

the Health Insurance Portability and Accountability Act of 1996, along

with other technical and conforming changes to the OIG exclusion

authorities set forth in 42 CFR parts 1000, 1001, 1002 and 1005. These

proposed revisions are specifically designed to expand the protection

of certain basic fraud authorities, and revise and strengthen the

current legal authorities pertaining to exclusions from the Medicare

and State health care programs.

DATES: To assure consideration, public comments must be delivered to

the address provided below by no later than 5 p.m. on November 7, 1997.

ADDRESSES: Please mail or deliver your written comments to the

following address: Office of Inspector General, Department of Health

and Human Services, Attention: OIG-20-P, Room 5246, Cohen Building, 330

Independence Avenue, S.W., Washington, D.C. 20201. Because of staffing

and resource limitations, we cannot accept comments by facsimile (FAX)

transmission. In commenting, please refer to file code OIG-20-P.

FOR FURTHER INFORMATION CONTACT:

Joel Schaer, (202) 619-0089, OIG Regulations Officer.

SUPPLEMENTARY INFORMATION: Comments will be available for public

inspection September 22, 1997 in Room 5550 of the Office of Inspector

General at 330 Independence Avenue, S.W., Washington, D.C., on Monday

through Friday of each week from 8:00 a.m. to 4:30 p.m., (202) 619-

0089.

I. Background

A. Overview of OIG Exclusion Authorities

NTACT:

Joel Schaer, (202) 619-0089, OIG Regulations Officer.

SUPPLEMENTARY INFORMATION: Comments will be available for public

inspection September 22, 1997 in Room 5550 of the Office of Inspector

General at 330 Independence Avenue, S.W., Washington, D.C., on Monday

through Friday of each week from 8:00 a.m. to 4:30 p.m., (202) 619-

0089.

I. Background

A. Overview of OIG Exclusion Authorities

All exclusions imposed by the Office of Inspector General (OIG) are

based on the authorities set forth in sections 1128, 1156 and 1892 of

the Social Security Act (Act). In imposing these exclusions, the

Secretary's primary objective and obligation is to protect the health

and safety of patients receiving care under the Medicare and State

health care programs, and to safeguard the integrity of these programs.

The authorities contained in these sections of the Act were designed to

protect the programs and their beneficiaries from unfit health care

providers, individuals and businesses whose behavior has demonstrated

that they pose a risk to program beneficiaries or to the integrity of

the Medicare and State health care programs.

In 1987, the OIG's civil administrative sanction authorities were

significantly revised and expanded by the Medicare and Medicaid Patient

and Program Protection Act (MMPPPA), Public Law 100-93. Congress

enacted MMPPPA ``to improve the ability of the [Department] to protect

the Medicare and Medicaid programs for fraud and abuse, and to protect

the beneficiaries of these programs from incompetent practioners and

from inappropriate and inadequate care.'' MMPPPA authorized both

mandatory and discretionary program exclusions intended to protect the

integrity of the Medicare and State health care programs, as well as

beneficiaries.

Manadatory exclusions. Section 1128(a) of the Act specifically sets

forth the exclusion authorities with mandated enforcement provisions

rams from incompetent practioners and

from inappropriate and inadequate care.'' MMPPPA authorized both

mandatory and discretionary program exclusions intended to protect the

integrity of the Medicare and State health care programs, as well as

beneficiaries.

Manadatory exclusions. Section 1128(a) of the Act specifically sets

forth the exclusion authorities with mandated enforcement provisions.

This section of the Act requires the OIG to exclude from program

participation any individuals or entities convicted of a program-

related crime or patient abuse or neglect. These mandatory exclusions

must be imposed for a minimum 5-year period.

Permissive exclusions. In addition, section 1128(b) sets forth a

variety of sanction authorities all of which are permissive authorities

that do not

necessarily mandate an action by the Department. Prior to recent

statutory changes discussed below, a conviction relating to the

delivery of a health care item or service that was not program-related,

whether a felony or a misdemeanor, served as grounds for a permissive

exclusion only. A number of these authorities are ``derivative''

exclusions, based on actions previously taken by a court, or other law

enforcement or regulatory agencies. For example, these exclusions have

been based on convictions for fraud, theft, financial misconduct and

controlled substance violations, as well as license suspensions and

revocations, and sanctions by other health agencies. Other permissive

exclusions are ``non-derivative'' exclusions, that is, they are based

on OIG-initiated determinations of misconduct that relate to such

matters as quality of care and access of information. There were no

specified minimum periods of exclusion under these permissive exclusion

authorities, with the exception of the exclusion for failure to grant

``immediate access'' under section 1128(b)(12) of the Act

ns are ``non-derivative'' exclusions, that is, they are based

on OIG-initiated determinations of misconduct that relate to such

matters as quality of care and access of information. There were no

specified minimum periods of exclusion under these permissive exclusion

authorities, with the exception of the exclusion for failure to grant

``immediate access'' under section 1128(b)(12) of the Act.

These authorities have provided for the imposition of an exclusion

from the Medicare (title 18), Medicaid (title 19), Maternal and Child

Health Service Block Grant (title 5) and Block Grants to States for

Social Services (title 20) programs, and are codified in 42 CFR parts

1001 and 1002 of the OIG regulations.

B. The Health Insurance Portability and Accountability Act of 1996

In the first significant amendments to the OIG's exclusion

authorities since MMPPA, the Health Insurance Portability and

Accountability Act (HIPAA) of 1996, Public Law 104-191, contains many

important improvements to the laws that are intended as major steps

towards the elimination of health care fraud and abuse. Among other

things, HIPAA revises and strengthens the OIG's current sanction

authorities pertaining to exclusions from Medicare and the State health

care programs. Specifically, HIPAA broadens the OIG's mandatory

exclusion; and establishes a new permissive exclusion applicable to

individuals with ownership or control interest in sanctioned entities.

The revisions to the OIG's sanction authorities regarding our

mandatory exclusion authority and the permissive exclusion authorities

related to fraud under section 1128(b)(1) of the Act are effective upon

enactment; the amendments regarding the minimum exclusion period and

the permissive exclusion of individuals with ownership or control

interest are effective on January 1, 1997. The provisions do allow,

however, the Department some policy discretion in their implementation

uthority and the permissive exclusion authorities

related to fraud under section 1128(b)(1) of the Act are effective upon

enactment; the amendments regarding the minimum exclusion period and

the permissive exclusion of individuals with ownership or control

interest are effective on January 1, 1997. The provisions do allow,

however, the Department some policy discretion in their implementation.

As a result, we are developing this proposed rulemaking to address

these new statutory provisions, along with other technical revisions to

the OIG's exclusion authorities codified in 42 CFR parts 1000, 1001,

1002 and 1005.

II. Provisions of the Proposed Rule

A. Mandatory OIG Exclusion From Participation in the Medicare and State

Health Care Programs

Section 211 of HIPAA has expanded the minimum 5-year mandatory

exclusion authority of the OIG to cover any felony conviction under

Federal, State or local law relating to health care fraud, even if

governmental programs were not involved. Felony convictions relating to

controlled substances are also the basis for a mandatory exclusion. The

expanded mandatory exclusion provisions serve to recognize the

seriousness of such felony convictions and ensure that beneficiaries of

the Medicare and State health care programs are well protected from

dealing with such individuals and entities. Section 211 still provides

the Secretary with discretionary authority to exclude those individuals

and entities from Medicare and State health care programs who have been

convicted of a misdemeanor criminal health care fraud offense or who

have been convicted of a criminal offense relating to fraud, theft,

embezzlement, breach of fiduciary responsibility or other financial

misconduct in programs (other than health care programs) funded by any

Federal, State or local agency.

In accordance with section 211 of HIPAA, we would revise

Sec

e programs who have been

convicted of a misdemeanor criminal health care fraud offense or who

have been convicted of a criminal offense relating to fraud, theft,

embezzlement, breach of fiduciary responsibility or other financial

misconduct in programs (other than health care programs) funded by any

Federal, State or local agency.

In accordance with section 211 of HIPAA, we would revise

Sec. 1001.101 of our regulations by adding new paragraphs (c) and (d)

to address the mandatory provisions set forth in sections 1128a(3) and

1128a(4) of the Act. In terms of the scope of this provision, in order

to appropriately restrict the imposition of these mandatory exclusions

to only individuals and entities who might reasonably be expected to

have future contact with Medicare, the State health care programs or

other health care programs or systems, we are also proposing in

Secs. 1001.101(d) and 1001.401(a) to limit the applicability of this

provision to any individual or entity that: (1) Is or has ever been a

health care practitioner, provider or supplier; (2) holds or has held a

direct or indirect ownership or control interest, as defined in section

1124(a)(3) of the Act, in an entity that is a health care provider or

supplier; or (3) is or has ever been an officer, director, agent or

managing employee, as defined in section 1126(b) of the Act, of such an

entity, or is or has ever been employed in any capacity in the health

care industry. A conforming change to our regulations at

Sec. 1001.102(b)(1), consistent with the sections 1128(a)(3) 1128(a)(4)

of the statute, would also be made to reference any fraudulent acts--

including theft, breach of fiduciary responsibility or other financial

misconduct--committee in other governmental programs as a basis for an

exclusion by the OIG from Medicare and the State health care programs.

The section heading for Sec

gulations at

Sec. 1001.102(b)(1), consistent with the sections 1128(a)(3) 1128(a)(4)

of the statute, would also be made to reference any fraudulent acts--

including theft, breach of fiduciary responsibility or other financial

misconduct--committee in other governmental programs as a basis for an

exclusion by the OIG from Medicare and the State health care programs.

The section heading for Sec. 1001.201 would be revised to read as

``Conviction relating to fraud'' to indicate that this authority is not

just relating to program and health care fraud. The section heading for

Sec. 1001.401 would be revised to read as ``Misdemeanor conviction

relating to controlled substances.''

B. Establishment of Minimum Periods of Exclusion for Certain Permissive

Exclusions

The absence of a statutorily required minimum exclusion period for

permissive exclusions has resulted in an exceptional amount of

administrative litigation over the issue of the length of exclusion in

these cases. Since the reasonableness of the length of exclusions

imposed is the single most litigated issue, this has required

significant agency resources in each instance to defend the exclusion

period imposed by the OIG. Section 212 has established minimum periods

of exclusion from 1 to 3 years for permissive exclusions from the

Medicare and State health care programs.

For (1) convictions of misdemeanor criminal health care fraud

offenses, (2) criminal offenses relating to fraud in non-health care

Federal or State programs, (3) convictions relating to obstruction of

an investigation of health care fraud and (4) convictions of

misdemeanor offenses relating to controlled substances, section 212 of

HIPAA has established a minimum period of exclusion of 3 years, unless

the Secretary determines that a longer or shorter period is appropriate

due to aggravating or mitigating circumstances

re

Federal or State programs, (3) convictions relating to obstruction of

an investigation of health care fraud and (4) convictions of

misdemeanor offenses relating to controlled substances, section 212 of

HIPAA has established a minimum period of exclusion of 3 years, unless

the Secretary determines that a longer or shorter period is appropriate

due to aggravating or mitigating circumstances.

For permissive exclusions from Medicare and the State health care

programs as a result of revocation, surrender or suspension of an

individual's or entity's health care license, section 212 establishes a

minimum exclusion period that would be not less than the period during

which the individual's or entity's license was

revoked or suspended. Likewise, for permissive exclusions due to a

suspension or exclusion from other Federal health care programs (such

as CHAMPUS or the Veterans' Administration) or other State health care

programs for reasons bearing on an individual's or entity's

professional competence, professional performance or financial

integrity, section 212 of HIPAA also establishes a minimum period of

exclusion of not less than the period the individual or entity is

excluded or suspended from that Federal or State health care program.

As indicated above, this statutory provision is effective for any

exclusion imposed or proposed by the OIG on or after January 1, 1997.

In addition, section 212 establishes a minimum of a 1-year period

of exclusion for (1) individuals or entities who are found to have

submitted (or caused to be submitted) claims for excessive charges, or

who furnished (or caused to be furnished) unnecessary items or

services; or (2) health maintenance organizations (as defined by

section 1903(m) of the Act), or entity under a waiver established by

section 1915(b)(1) of the Act, that are found to have failed to provide

medically necessary items and services

e found to have

submitted (or caused to be submitted) claims for excessive charges, or

who furnished (or caused to be furnished) unnecessary items or

services; or (2) health maintenance organizations (as defined by

section 1903(m) of the Act), or entity under a waiver established by

section 1915(b)(1) of the Act, that are found to have failed to provide

medically necessary items and services. The establishment of these

minimum exclusion periods will aid to conserve governmental resources

by reducing the amount of litigation and will foster more consistency.

Consistent with these statutory amendments, we would revise

Secs. 1001.701(d)(1) and 1001.801(c)(1) to add that with regard to the

length of exclusion under these authorities, in no case may the period

be shorter than one year. Furthermore, we would also revise

Sec. Sec. 1001.501 and 1001.601 to state that the length of exclusion

under this authority will never be for a period of time less than the

period during which the individual or entity is excluded from that

Federal or State health care program.

C. Permissive Exclusions of Individuals With Ownership or Control

Interest in Sanctioned Entities

Prior to HIPAA, section 1128(b)(8) of the Act permitted the

Secretary to exclude an entity when a convicted individual had an

ownership, control or agency relationship with such entity. However, if

an entity, rather than an individual, was convicted of Medicare or

State health care program fraud, the OIG did not have the authority to

exclude the individuals(s) who owned or controlled the entity and who

may, in fact, have been responsible for the fraud. This created an

obvious loophole whereby an individual who was indicted for fraud along

with a business entity owned or controlled by that individual could

avoid program exclusion by agreeing to have the business entity plead

guilty and pay the fines

have the authority to

exclude the individuals(s) who owned or controlled the entity and who

may, in fact, have been responsible for the fraud. This created an

obvious loophole whereby an individual who was indicted for fraud along

with a business entity owned or controlled by that individual could

avoid program exclusion by agreeing to have the business entity plead

guilty and pay the fines. Having avoided conviction, the individual was

then free to form a new corporation and continue to participate in the

health care programs.

Section 213 of HIPAA has now expanded the statute by adding a new

permissive exclusion authority (section 1128(b)(15) of the Act)

applicable to individuals who have an ownership interest in, or have

significant control over the operations of, an entity that has been

convicted of a program-related offense. Specifically, under this

provision, an individual who has a direct or indirect ownership or

control interest in a sanctioned entity and who knows, or should know,

of the action constituting the basis for the conviction or exclusion,

may also be excluded from participation in Medicare and the State

health care programs if the entity has been convicted of an offense

under sections 1128(a) or 1128 (b)(1) through (b)(3) of the Act, or

otherwise excluded from program participation. Under this authority,

the culpable individual is also subject to program exclusion even if

not initially convicted or excluded.

Accordingly, we would add a new Sec. 1001.1051, Exclusion of

individuals with ownership or control interest in sanctioned entities,

to reflect the new statutory authority. Consistent with the statute,

under this regulatory authority the OIG would need to demonstrate that,

in the case of an investor, the individual acted in deliberate

ignorance of the offense constituting the sanctionable action. In the

case of an officer or managing employee of the business entity, the OIG

will not need to demonstrate such knowledge. Under proposed

Sec

new statutory authority. Consistent with the statute,

under this regulatory authority the OIG would need to demonstrate that,

in the case of an investor, the individual acted in deliberate

ignorance of the offense constituting the sanctionable action. In the

case of an officer or managing employee of the business entity, the OIG

will not need to demonstrate such knowledge. Under proposed

Sec. 1001.1051, when the entity has been excluded, the length of the

individual's exclusion would be for the same period as that of the

sanctioned entity with which the individual has had the prohibited

relationship. Consistent with statutory intent, we are defining the

term ``sanctioned entity'' under this section to mean an entity that

has been convicted of any offense under Secs. 1001.101 through 1001.104

of these regulations, or that has been terminated or excluded from

participation in Medicare or a State health care program. Thus, under

this authority, when an entity is no longer reimbursed under Medicare

or the State health care programs as a result of a termination or

exclusion by the Department, the owners of the entity will be subject

to an exclusion as well.

In a conforming change, we also propose to revise Sec. 1001.3002 by

adding a new paragraph to clarify that if the specified criteria of

this section are met, an individual excluded in accordance with the new

proposed Sec. 1001.1051 would be reinstated only upon an OIG

determination that the excluded entity upon which the individual's

exclusion was based has been reinstated in accordance with

Secs. 1001.3002(a) or 1001.3005.

D. Technical and Conforming Regulatory Revisions

aragraph to clarify that if the specified criteria of

this section are met, an individual excluded in accordance with the new

proposed Sec. 1001.1051 would be reinstated only upon an OIG

determination that the excluded entity upon which the individual's

exclusion was based has been reinstated in accordance with

Secs. 1001.3002(a) or 1001.3005.

D. Technical and Conforming Regulatory Revisions

In addition to the changes to the OIG regulations at 42 CFR parts

1001 and 1002 to comply with the revised sanction provisions set forth

in HIPAA, we are proposing a number of technical and conforming

regulatory changes in accordance with the HIPAA. Specifically, under

the new statute, the OIG has been delegated authority for 3 new

authorities referenced in Public Law 104-191--sections 1128 (a)(3) and

(a)(4) and 1128 (b)(15) of the Act. As a result, technical and

conforming changes to the OIG regulations are necessary. In addition,

several minor conforming changes are also being proposed to correct

omissions from previous regulatory issuances, and to clarify and expand

the applicability of the existing regulations. A limited number of

policy decisions are being proposed that relate to the clarification of

(1) The definition of the term ``furnished;'' (2) the OIG's exclusion

authority under section 1128(a)(2) of the Act concerning patient

neglect and abuse convictions; (3) time limits on payments to suppliers

for services by excluded providers; (4) when a reinstatement request

will be received in accordance with an OIG exclusion taken under

section 1128(b)(5) of the Act; and (5) terms ``incarceration'' and

``patient.''

Section 1000.10, General definitions: We would clarify the current

definition of the term ``furnished'' to indicate that exclusions will

apply to any individual or entity that provides or supplies items or

services, directly or indirectly

t request

will be received in accordance with an OIG exclusion taken under

section 1128(b)(5) of the Act; and (5) terms ``incarceration'' and

``patient.''

Section 1000.10, General definitions: We would clarify the current

definition of the term ``furnished'' to indicate that exclusions will

apply to any individual or entity that provides or supplies items or

services, directly or indirectly. When an individual or entity is

excluded from Medicare and the State health care programs, the effect

of the exclusion is that the programs may not pay for items and

services furnished by that excluded individual or entity. The OIG has

the authority--and sometimes the obligation when a mandatory exclusion

is appropriate--to impose an exclusion on individuals or entities when

the statutory requirements of section 1128 of the Act are met,

regardless of whether (1) The individual or entity is paid by the

programs directly or (2) the items or

services provided by the individual or entity are reimbursed by the

programs indirectly through the submission of claims by a third party

who is a direct provider, supplier or practitioner. In the past, we

have elected not to exercise this authority in the case of

manufacturers or distributors that do not submit claims for the items

they provide because of concern that it would be difficult to

administer exclusions against such entities are not reimbursed directly

by the Department. At this time, the OIG is proposing to change this

approach by exercising the authority given to us and clarifying the

existing definition for ``furnished.''

Notwithstanding the difficulty in monitoring and administering

exclusion against so-called ``indirect'' providers--such as

manufacturers and distributors of drugs, medical devices and other

items of durable medical equipment reimbursable under Medicare and the

State health care programs--the OIG has determined that an exception

for indirect providers and suppliers is not appropriate as a matter of

policy

ng the difficulty in monitoring and administering

exclusion against so-called ``indirect'' providers--such as

manufacturers and distributors of drugs, medical devices and other

items of durable medical equipment reimbursable under Medicare and the

State health care programs--the OIG has determined that an exception

for indirect providers and suppliers is not appropriate as a matter of

policy. As a result, in clarifying the definition for the term

``furnished,'' we would make clear that exclusions of indirect

providers will be imposed when appropriate, and that the effect of such

exclusions will be that no payment may be made to any direct provider,

practitioner or supplier for items or services manufactured,

distributed or otherwise provided by any excluded individual or entity.

Section 1001.2, Definitions: Throughout part 1001, the current

regulations list various aggravating factors to be considered as a

basis for lengthening a period of exclusion. One aggravating factor in

all instances when the exclusion is based on a conviction is whether

the sentence imposed by the court included incarceration. Because many

white collar criminals are not actually placed in jails, there has been

some uncertainty over what incarceration entails. Consistent with

Federal sentencing guidelines, we are proposing to add a definition in

Sec. 1002 for the term ``incarceration'' to include imprisonment or any

type of confinement with or without supervised release. This would

include, but would not be limited to, a correctional facility or other

community confinement (such as a work release center), as well as house

arrest and home detention

Consistent with

Federal sentencing guidelines, we are proposing to add a definition in

Sec. 1002 for the term ``incarceration'' to include imprisonment or any

type of confinement with or without supervised release. This would

include, but would not be limited to, a correctional facility or other

community confinement (such as a work release center), as well as house

arrest and home detention.

We are proposing a new definition for the term ``patient'' to

include any individual who is receiving health care items or services,

including any item or service provided to meet his or her physical,

mental or emotional needs, whether or not the item or service is

reimbursed under Medicare or a State health care program and regardless

of the location in which it is provided. We are concerned that the term

``patient'' has been narrowly defined in some instances to restrict its

meaning to only an individual in a traditional medical care setting or

within a traditional physician/patient relationship. We believe that

the statute intended to prohibit neglect and abuse of all individuals

receiving health care items and services regardless of the caretaker or

the location within which the items or services are provided.

We are also proposing two changes to the existing definition of the

term ``exclusion.'' To conform to the statutory language set forth in

MMPPPA, Public Law 100-93, we are adding the words ``ordered or

prescribed'' to indicate that items and services will not be reimbursed

under Medicare and the State health care programs when furnished,

ordered or prescribed by a specified individual or entity (underlining

added). Under this definition, we are also codifying current OIG policy

to indicate that even after an exclusion has expired, the individual or

entity will not be eligible for program reimbursement until they are

formally reinstated by the OIG

be reimbursed

under Medicare and the State health care programs when furnished,

ordered or prescribed by a specified individual or entity (underlining

added). Under this definition, we are also codifying current OIG policy

to indicate that even after an exclusion has expired, the individual or

entity will not be eligible for program reimbursement until they are

formally reinstated by the OIG.

A revision to the term ``sole source of essential specialized

services in the community'' is also being proposed to indicate that it

is a health professional shortage area (formally known as a health man

power shortage area); and that this designation is now made by the

Health Resources Services Administration, and not the Public Health

Service. A proposed change under the term ``professionally recognized

standards of health care'' would remove the specific references to the

``Food and Drug Administration,'' the ``Health Care Financing

Administration'' (HCFA) and the ``Public Health Service,'' and

substitute ``the Department'' as the entity in general who may declare

a particular treatment modality as not being safe and effective.

Section 1001.101, Basis for liability: We are proposing to revise

paragraph (b) to clarify the scope of the term ``neglect or patient

abuse'' to indicate that it covers both the individual's custodial as

well as medical treatment. In recent years, we have been seeing more

cases arise from abuse and neglect in residential settings where the

abused or neglected individual is not referred to as a ``patient.''

Further, the individual may not be receiving strictly medical care

treatment, but rather may be provided with custodial care, such as

ensuring that medicines are taken and meals are prepared. In

implementing the OIG's exclusion authorities, administrative law judges

(ALJs) have varied in their interpretation of the statute and have not

developed a consistent standard for defining a patient and patient

abuse

ividual may not be receiving strictly medical care

treatment, but rather may be provided with custodial care, such as

ensuring that medicines are taken and meals are prepared. In

implementing the OIG's exclusion authorities, administrative law judges

(ALJs) have varied in their interpretation of the statute and have not

developed a consistent standard for defining a patient and patient

abuse. In order to provide consistent protection for all individuals

similarly situated, notwithstanding the variations of State law, we are

proposing to revise the regulations to indicate that the delivery of a

health care service includes the provision of any items or services to

an individual designed to meet their physical, mental or emotional

needs or well-being, whether or not reimbursed under Medicare or a

State health care program.

Section 1001.102, Length of exclusion: We are proposing to add a

new factor that may be considered aggravating and therefore a basis for

lengthening the exclusion period. In order to help distinguish between

more egregious and less egregious cases involving patient abuse, we

propose to include a new Sec. 1001.102(b)(4) to provide that in the

case of any conviction involving patient abuse or neglect, we will

consider whether the action that resulted in the conviction (1) was

premeditated, (2) was part of a continuing pattern of behavior, or (3)

consisted of non-consensual sexual acts.

In addition, we are proposing an additional aggravating factor for

consideration in Sec. 1001.102 and elsewhere throughout part 1001 (see

Secs. 1001.201(b)(2)(vi), 1001.301(b)(2)(vi), 1001.401(c)(2)(v),

1001.501(b)(2)(iv), 1001.601(b)(2)(iii), 1001.701(d)(2)(v),

1001.801(c)(2)(v), 1001.901(b)(4), and 1001.951(b)(1)(iv). The proposed

factor specifically relates to any other adverse action taken by any

other Federal, State or local government agency or board based on the

same set of circumstances that is serving as the basis for imposition

of the exclusion

01.301(b)(2)(vi), 1001.401(c)(2)(v),

1001.501(b)(2)(iv), 1001.601(b)(2)(iii), 1001.701(d)(2)(v),

1001.801(c)(2)(v), 1001.901(b)(4), and 1001.951(b)(1)(iv). The proposed

factor specifically relates to any other adverse action taken by any

other Federal, State or local government agency or board based on the

same set of circumstances that is serving as the basis for imposition

of the exclusion. This additional factor is consistent with ALJ

decisions regarding aggravating factors and the length of exclusion.

Further, Sec. 1001.102(b) and the other sections referenced above,

as currently written, do not allow the OIG to increase the length of

exclusion if an individual or entity was convicted of other offenses at

the same time as he or she was convicted of the offense that served as

the basis for the exclusion. For example, this aggravating factor

permits the OIG to increase the length of exclusion when the individual

convicted of Medicare fraud has a prior drug conviction or income tax

evasion conviction. However, if the individual is simultaneously

convicted of Medicare fraud and any other offense, such as drug

distribution or income tax evasion, there is currently no aggravating

factor

that permits the OIG to consider the additional conviction or

convictions. We believe it is not sensible to factor in conduct or

wrongdoing that occurred in the past to demonstrate that an individual

or entity lacks trustworthiness, but not to give as much weight to more

recent conduct. To address this problem and allow greater flexibility

to the OIG, we are proposed to amend Sec. 1001.102(b) to indicate that

in determining the length of exclusion, the OIG will consider whether

the individual or entity (1) was convicted of other offenses besides

those which formed the basis for the exclusion, or (2) has a documented

history of criminal, civil or administrative wrongdoing

ct. To address this problem and allow greater flexibility

to the OIG, we are proposed to amend Sec. 1001.102(b) to indicate that

in determining the length of exclusion, the OIG will consider whether

the individual or entity (1) was convicted of other offenses besides

those which formed the basis for the exclusion, or (2) has a documented

history of criminal, civil or administrative wrongdoing. This would

permit the OIG to consider any conviction prior to, concurrent with or

subsequent to the conviction upon which the exclusion is based.

(Parallel changes would be made, as applicable, throughout part 1001 in

Secs. 1001.201(b)(2), 1001.301(b)(2), 1001.401(c)(2), 1001.501(b)(2),

1001.601(b)(2), 1001.701(d)(2), 1001.801(c)(2), 1001.901(b),

1001.951(b)(1), 1001.1101(b), 1001.1201.(b), 1001.1301(b)(2),

1001.1401(b), 1001.1601(b)(1) and 1001,1701(c)(1).)

In addition to these aggravating factors, we are also proposing to

include in Sec. 1001.102(c)(3) (as well as in

Secs. 1001.201(b)(3)(iii), 1001.301.(b)(3)(ii), 101.401(c)(3)(i),

1001.501(b)(3)(i) and 1001.601(b)(3)(ii)) a new mitigating factor that

would take into account whether the cooperation of an individual or

entity resulted in additional cases being investigated, or reports

being issued, by the appropriate law enforcement agency identifying

program vulnerabilities or weaknesses. This new mitigating factor would

only be taken into consideration in those situations where the law

enforcement agency validated the person's information by opening up a

case or by writing a report where, for example, a system vulnerability

to HCFA or other program agency is identified and a solution

recommended. We believe that the inclusion of this additional

mitigating factor would (1) encourage greater cooperation by

individuals and entities, and (2) afford the OIG greater flexibility in

identifying and addressing issues related to program waste, fraud and

abuse

by writing a report where, for example, a system vulnerability

to HCFA or other program agency is identified and a solution

recommended. We believe that the inclusion of this additional

mitigating factor would (1) encourage greater cooperation by

individuals and entities, and (2) afford the OIG greater flexibility in

identifying and addressing issues related to program waste, fraud and

abuse.

Section 1001.501, License revocation or suspension: Consistent with

and to conform to the new statutory authority, we would delete

paragraph (c) of Sec. 1001.501, currently setting forth exceptions

related to the length of exclusion for license revocation or

suspension.

Section 1001.601, Exclusion or suspension under a Federal or State

health care program: Prior to HIPAA, Sec. 1001.601 set forth both

mitigating and aggravating factors that are to be considered in

determining the length of exclusion under this authority. To conform

with the statute, we would revise paragraph (b)(3) of this section to

indicate that with the establishment of a base exclusion period under

this authority, mitigating factors may only be considered if

aggravating factors exist that would justify a longer exclusion beyond

the base period.

We are also proposing to clarify OIG policy and correct an

inadvertent inconsistency that exists in the language set forth in

Sec. 1001.601(b)(4). The current paragraph states that ``[t]he OIG will

normally not consider a request for reinstatement * * * until the

period of exclusion imposed by the OIG expires.'' This language has

created a problem for these OIG exclusions which are based entirely on

State-imposed exclusions, and which must continue until the State

exclusion ends. Since the law requires the Medicaid program to exclude

for the same period as Medicare, this has resulted in a loop that makes

it technically impossible for either the OIG of the State to end the

exclusion except by an arrangement to do so simultaneously

oblem for these OIG exclusions which are based entirely on

State-imposed exclusions, and which must continue until the State

exclusion ends. Since the law requires the Medicaid program to exclude

for the same period as Medicare, this has resulted in a loop that makes

it technically impossible for either the OIG of the State to end the

exclusion except by an arrangement to do so simultaneously.

Specifically, in many instances, a State is prepared to reinstate an

individual or entity but is unable to do so because of the existing

Medicare exclusion that the OIG has imposed in as a result of the

original State Action. To solve this problem, we are proposing to

revise paragraph (b)(4) of this section to state that if an individual

or entity is eligible to apply for reinstatement, and the sole reason

that the State has denied reinstatement is that the existing exclusion

under Medicare imposed by the OIG is still in effect, the OIG will

consider a request for reinstatement.

Section 1001.701, Excessive claims or furnishing of unnecessary or

substandard items or services: In an effort to more clearly define the

scope of an action under section 1128(b)(6) of the act, we are

proposing to revise paragraph (a)(1) of this section to further clarify

to whom an individual's or entity's excess charges or costs apply. The

revised language would indicate that the OIG may exclude an individual

or entity that has submitted, or caused to be submitted, bills or

requests for Medicare or State health care program payments that

contain charges or costs that are substantially in excess of their

usual charges or costs for items or services furnished to any of their

customers, clients or patients. We specifically welcome comments on

this OIG policy clarification.

Section 1001.953, OIG report on compliance with investment interest

safe harbor: We would delete this section since the time frame being

reflected in this section is no longer operative

t are substantially in excess of their

usual charges or costs for items or services furnished to any of their

customers, clients or patients. We specifically welcome comments on

this OIG policy clarification.

Section 1001.953, OIG report on compliance with investment interest

safe harbor: We would delete this section since the time frame being

reflected in this section is no longer operative. The current language

stipulates that an OIG report to the Secretary be prepared within 180

days of the effective date addressing the investment interest safe

harbor provisions. Those provisions were published as part of a final

rulemaking (56 FR 35952, July 29, 1991) became effective upon the date

of its publication. The report was not prepared for several reasons.

The overriding reason for not issuing this report within the stipulated

time frame was that it was not practical to effectively study this

subject area until health care businesses had the opportunity to alter

their practices to take advantage of this safe harbor. By the time a

study might appropriately have been undertaken, this subject was

superseded to a large degree by the enactment of section 1877 of the

Act.

Section 1001.1001; Exclusion of entities owned or controlled by a

sanctioned person: Questions have been raised regarding the legitimacy

of the transfer of health care entities from excluded individuals to

their spouses, and the circumstances under which such a transfer should

constitute divestment of ownership and control of the entity by the

excluded individual, and should thus preclude exclusion of the entity

under Sec. 1001.1001. In an effort to reiterate and emphasize existing

OIG policy on this matter, we are proposing to revise the definition

set forth in Sec

rom excluded individuals to

their spouses, and the circumstances under which such a transfer should

constitute divestment of ownership and control of the entity by the

excluded individual, and should thus preclude exclusion of the entity

under Sec. 1001.1001. In an effort to reiterate and emphasize existing

OIG policy on this matter, we are proposing to revise the definition

set forth in Sec. 1001.1001(a)(2) for the term ``agent.'' This policy

was clearly enunciated in the preamble of the final regulations

implementing amendments to the OIG's exclusion authorities resulting

from Public Law 100-93 (57 FR 3309, January 29, 1992), and we are now

proposing to codify it in regulations.

Section 1001.1901, Scope and effect of exclusion: Some individuals

and entities have mistakenly believed that merely obtaining a program

provider number would automatically result in their reinstatement back

into the programs. This has never been the case; an individual or

entity must formally be reinstated by the OIG in order to again

participate in the Medicare and State health care programs. We would

revise paragraph (b)(1) of this section, regarding the effect of an

exclusion on excluded individuals and entities, to specifically clarify

existing OIG policy that an excluded individual or entity

continues to be excluded until officially reinstated by the OIG,

regardless of whether he, she or it has obtained a program number--

either as an individual or as a member of a group--prior to their being

reinstated for program participation. (A similar clarification would be

made in Secs

dividuals and entities, to specifically clarify

existing OIG policy that an excluded individual or entity

continues to be excluded until officially reinstated by the OIG,

regardless of whether he, she or it has obtained a program number--

either as an individual or as a member of a group--prior to their being

reinstated for program participation. (A similar clarification would be

made in Secs. 1001.3001(a)(1) and 1001.3002(a) to indicate that the

obtaining of a program provider number does not in and of itself

reinstate eligibility for an entity or an individual, either as a

single person or as a member of a group.) The word ``person'' appearing

in the first sentence of paragraph (b)(1) would be revised to read as

``individual or entity.''

In addition, we would revise paragraph (b)(3) of this section to

clearly indicate that submitting claims, or causing claims to be

submitted or payment to be made by the programs for items or services

that were furnished, ordered or prescribed by the excluded individual

or entity--including any administrative and management services or

salaries--may serve as the basis for denying the individual's or

entity's reinstatement back into the programs. The addition of this

language would serve to more clearly define what an excluded individual

or entity can do, and would codify and re-enforce existing OIG policy

that is currently contained in the exclusion notice letters sent to

individuals and entities.

We are also proposing to add a new Sec. 1001.1901(c)(4) that serves

to codify the current HCFA policy with regard to payment to suppliers

for claims after notice of an excluded provider's exclusion.

Specifically, we would reiterate that HCFA will not pay for any claims

submitted by, or for items or services ordered or prescribed by, an

excluded provider for dates of service 5 days or more after the date

that notice of the provider's exclusion was mailed by the contractor to

the supplier

licy with regard to payment to suppliers

for claims after notice of an excluded provider's exclusion.

Specifically, we would reiterate that HCFA will not pay for any claims

submitted by, or for items or services ordered or prescribed by, an

excluded provider for dates of service 5 days or more after the date

that notice of the provider's exclusion was mailed by the contractor to

the supplier.

Section 1001.2001, Notice of intent to exclude: We propose to

delete existing paragraph (b) of Sec. 1001.2001. The language currently

states that if the OIG proposes to exclude an individual or entity in

accordance with Sec. 1001.701 or 1001.801, the individual or entity may

submit a written request to present evidence or argument orally to the

OIG. In eliminating the in-person hearing on these cases, the

individual or entity would still have the opportunity to submit

additional material for review to the OIG. The vast majority of cases

for proposed exclusion are medical in nature, and while the OIG

contracts for the review of medical records and related material, we do

not retain an in-house medical review officer that would be readily

accessible to hear and review such submitted material. We believe this

existing provision does not represent an effective use of time and

current OIG resources, and are therefore proposing to delete this

language. This change would not diminish due process since the

individual or entity retains the ability to challenge the OIG's

proposed exclusion.

Section 1001.2002, Notice of exclusion: We are proposing to amend

this section by adding a new paragraph (e) indicating, consistent with

existing OIG policy, that the notice letter to the affected individual

or entity could be amended should any additional information come to

our attention or wrongdoing occur subsequent to the issuance of the

initial notice letter. We are also proposing to make a similar

clarifying change in Sec

: We are proposing to amend

this section by adding a new paragraph (e) indicating, consistent with

existing OIG policy, that the notice letter to the affected individual

or entity could be amended should any additional information come to

our attention or wrongdoing occur subsequent to the issuance of the

initial notice letter. We are also proposing to make a similar

clarifying change in Sec. 1005.15 by revising paragraph (f) to

explicitly state that, with certain exceptions, additional items or

information--including any aggravating and mitigating circumstances

that arose or became known subsequent to the issue of the notice

letter--may be introduced by either party.

Section 1001.2003, Notice of proposal to exclude: A discrepancy

currently existing between the language in Sec. 1001.2003(a)--

indicating that an exclusion is effective 60 days after the date of

notice, unless an individual or entity files a written request for a

hearing--and the language set forth in Sec. 1005.2(c)--that a request

for a hearing is to be filed 60 days after the notice letter is

received by the respondent, which is presumed to be 5 days after the

date of the notice unless there is a reasonable showing to the

contrary. To be consistent in our language and intent, we would revised

Sec. 1001.2003(a) to reference the language and procedure set forth in

Sec. 1005.(c). i.e., that a request for a hearing be made 60 days after

service of the notice letter.

Section 1001.2005, Notice to State licensing agencies: We propose

deleting paragraph (b) of this section. While the regulations would

still indicate that the Department will notify the appropriate State or

local agencies or authorities responsible for licensing or

certification of the circumstances leading to an individual's or

entity's exclusion, we do not want to be locked into a specific

notification process if alternative methods can be considered for

notifying provider licensing and certification boards

ulations would

still indicate that the Department will notify the appropriate State or

local agencies or authorities responsible for licensing or

certification of the circumstances leading to an individual's or

entity's exclusion, we do not want to be locked into a specific

notification process if alternative methods can be considered for

notifying provider licensing and certification boards.

Section 1001.2006, Notice to others regarding exclusion: Section

221 of HIPAA established a new national health care fraud and abuse

data collection program for the reporting of final adverse actions

against health care providers, suppliers and practitioners. As a

result, we would revise Sec. 1001.2006(a) to indicate that, in addition

to the general public and program beneficiaries, the Department will

not also provide notice of the exclusion and its effective date to the

new Adverse Action Data Bank.

Section 1001.3001, Timing and method of request for reinstatement:

Because there has been some misunderstanding as to when an exclusion

period ends, in addition to clarifying that the act of obtaining a

provider number does not reinstate program eligibility (see discussion

of Sec. 1001.1901 above), we would also revise paragraphs (1) (a) and

(b) to indicate that an excluded individual or entity (other than those

excluded in accordance with Secs. 1001.1001, 1001.1051 and 1001.1101)

may submit a request for reinstatement to the OIG only after the

minimum period of exclusion specified in the notice of exclusion has

expired. A conforming change would also be made in

Sec. 1001.3002(a)(1)

), we would also revise paragraphs (1) (a) and

(b) to indicate that an excluded individual or entity (other than those

excluded in accordance with Secs. 1001.1001, 1001.1051 and 1001.1101)

may submit a request for reinstatement to the OIG only after the

minimum period of exclusion specified in the notice of exclusion has

expired. A conforming change would also be made in

Sec. 1001.3002(a)(1).

Section 1001.3002, Basis for reinstatement: Section 214(b) of HIPAA

has amended the statute by indicating that in making a determination on

whether to sanction a practitioner or other person--based on a

recommendation from a Peer Review Organization (PRO)--for failing to

comply with statutory obligations relating to quality and medical

necessity of health care services, the Department will no longer to be

required to prove that the practitioner or other person was either

unwilling or unable to comply with such obligations. While this

statutory change is being addressed through separate rulemaking

addressing the PRO sanctions process and changes to part 1004 of our

regulations, we would make a conforming change to paragraph (b) of

Sec. 1001.3002 to delete the ``unwillingness and inability'' factor as

a basis for consideration by the OIG in making a reinstatement

determination.

Section 1002.3, Disclosure by providers; information on persons

convicted of crimes: Under part 1002, which addresses State-initiated

exclusions from the Medicaid program, we would revise Sec. 1002.3(b) to

codify in regulations as new paragraph (b)(3) concerning Medicaid State

agency requirements for notification to the OIG. Specifically, the new

paragraph would clearly state that the Medicaid agency is required to

promptly notify the OIG of any and all actions it takes to limit the

individual's or entity's ability to participate in its program. Th is

would include, but would not be limited to: (1)

fy in regulations as new paragraph (b)(3) concerning Medicaid State

agency requirements for notification to the OIG. Specifically, the new

paragraph would clearly state that the Medicaid agency is required to

promptly notify the OIG of any and all actions it takes to limit the

individual's or entity's ability to participate in its program. Th is

would include, but would not be limited to: (1)

Suspension actions, (2) settlement agreements and (3) situations where

the individual or entity may have voluntarily agreed to withdraw from

the program in order to avoid a formal sanction action.

III. Regulatory Impact Statement

Executive Order 12866 and Regulatory Flexibility Act

The Office of Management and Budget (OMB) has reviewed this

proposed rule in accordance with the provisions of Executive Order

12866 and the Regulatory Flexibility Act (5 U.S.C. 601-612), and has

determined that it does not meet the criteria for a significant

regulatory action. Executive Order 12866 directs agencies to assess all

costs and benefits of available regulatory alternatives and, when

rulemaking is necessary, to select regulatory approaches that maximize

net benefits (including potential economic, environmental, public

health, safety distributive and equity effects). In addition, under the

Regulatory Flexibility Act, if a rule has a significant economic effect

on a number of small businesses the Secretary must specifically

consider the economic effect of a rule on small business entities and

analyze regulatory options that could lessen the impact of the rule.

The provisions set forth in this proposed rulemaking, for the most

part, implement statutory requirements, and are designed to lengthen

and broaden the scope of the OIG's authority to include individuals and

entities from the Medicare and the State health care programs

economic effect of a rule on small business entities and

analyze regulatory options that could lessen the impact of the rule.

The provisions set forth in this proposed rulemaking, for the most

part, implement statutory requirements, and are designed to lengthen

and broaden the scope of the OIG's authority to include individuals and

entities from the Medicare and the State health care programs. As

indicated above, these provisions would implement the new statutory

requirements regarding the period of exclusion for some individuals and

entities by: (1) Broadening the minimum 5-year mandatory exclusion

authority to cover felony convictions under Federal, State or local law

relating to health care fraud, and (2) establishing minimum periods of

exclusion for certain permissive exclusions. We believe that the number

of individuals and entities effected by this lengthening of exclusions

would be minimal.

Further, while the provisions in this rule serve to clarify the

OIG's sanction authorities by (1) Establishing a new permissive

exclusion applicable to individuals having majoring ownership interest

in (or significant control over the operations of) an entity convicted

of a program-related offenses; (2) clarifying what would constitute

patient abuse or neglect for purposes of exclusion; and (3) setting

forth a definition for ``furnished'' that would apply to individuals

and entities that provide or supply items or services directly or

indirectly, we likewise believe the increase in the number of exclusion

cases will be small. Specifically, while the statutory requirement to

impose exclusions in cases of certain types of convictions has been

broadened in sections 1128 (a)(3) and (a)(4) of the Act, the process

for excluding individuals and entities who are convicted in accordance

with the new requirements remains essentially the same. Cases to be

processed under the new mandatory provisions set forth in sections 1128

ecifically, while the statutory requirement to

impose exclusions in cases of certain types of convictions has been

broadened in sections 1128 (a)(3) and (a)(4) of the Act, the process

for excluding individuals and entities who are convicted in accordance

with the new requirements remains essentially the same. Cases to be

processed under the new mandatory provisions set forth in sections 1128

(a)(3) and (a)(4) for the minimum mandatory 5-year exclusion were

previously processed under the permissive authority provisions in

sections 1128 (b)(1) and (b)(3) of the Act, with a benchmark of 3

years. As a result, while there may be minor increases in the number of

mandatory exclusions imposed, we see no significant increase or

decrease in the number of these cases. Similarly, the clarification of

what constitutes patient neglect or abuse should not result in a

significant increase in the number of cases under section 1128(a)(2) of

the Act, but merely support prior findings of abuse and neglect while

delivering health care services.

In addition, we do not anticipate a significant workload resulting

from the implementation of section 1128(b)(15) of the Act, and proposed

Sec. 1001.1051 of these regulations, as the requirements for

effectuating this authority are rather stringent at the present time,

and will limit the number of exclusions to be implemented under this

authority.

Since the vast majority of individuals, organizations and entities

addressed by these regulations do not engage in such prohibited

activities and practices, we believe that any aggregate economic effect

of these revised exclusion regulations will be minimal, affecting only

those limited few who engage in prohibited behavior in violation of the

statute. As such, this proposed rule should have no significant

economic impact. Similarly, while some sanctions may have an impact on

small entities, it is the nature of the violation and not the size of

the entity that will result in an action by the OIG

hese revised exclusion regulations will be minimal, affecting only

those limited few who engage in prohibited behavior in violation of the

statute. As such, this proposed rule should have no significant

economic impact. Similarly, while some sanctions may have an impact on

small entities, it is the nature of the violation and not the size of

the entity that will result in an action by the OIG. We believe that

the aggregate economic impact of this rulemaking should be minimal,

affecting only those limited few who have chosen to engage in

prohibited arrangements, schemes or practices in violation of statutory

intent. Therefore, we have concluded, and the Secretary certifies, that

this proposed rule would not have a significant economic impact on a

number of small business entities, and that a regulatory flexibility

analysis is not required for this rulemaking.

Paperwork Reduction Act

Section 1002.3 of this rulemaking contains information collection

requirements that require approval by OMB. We are required to solicit

public comments under section 3506(c)(2)(A) of the Paperwork Reduction

Act of 1995. Specifically, we are inviting comments on (1) whether the

collection of information is necessary for the proper performance of

the functions of the agency, including whether the information will

have practical utility; (2) the accuracy of the estimate of the burden

of the collection of information; (3) ways to enhance the quality,

utility and clarity of the information collected; and (4) ways to

minimize the burden of the collection of information on practitioners

and other persons, including through the use of automated collection

techniques or other forms of information technology.

Title: Information on persons convicted of crimes

imate of the burden

of the collection of information; (3) ways to enhance the quality,

utility and clarity of the information collected; and (4) ways to

minimize the burden of the collection of information on practitioners

and other persons, including through the use of automated collection

techniques or other forms of information technology.

Title: Information on persons convicted of crimes.

Summary of the collection of information: In order to effectuate

the requirements of section 1128(b)(5) of the Social Security Act,

authorizing the OIG to exclude individuals and entities that are

sanctioned by a Federal or State agency (including State Medicaid

agencies), a State Medicaid agency must promptly notify the OIG of any

action it takes to limit an individual's or entity's participation in

Medicaid. To implement this statutory authority, we are clarifying in

Sec. 1002.3 of the regulations the scope of conduct constituting a

basis for State Medicaid notice of denials of participation or

imposition of a sanction. Specifically, under section 1902(a) (39) and

(41) of the Social Security Act, State agencies are required to notify

the Secretary when a provider has been denied participation status in

Medicaid, or has been terminated, suspended or ``otherwise sanctioned''

under the Medicaid program. We are clarifying what actions fall within

the ambit of these provisions. The reporting obligation set forth in

Sec. 1002.3 is consistent with the requirements of the statute.

Respondents: The ``respondents'' for the collection of information

described in Sec. 1002.3 are the individual State Medicaid agencies.

Estimated number of respondents: The OIG annually receives

approximately 500 notifications from State Medicaid agencies regarding

actions taken against an individual or entity. While we are

specifically clarifying that these actions are to

ts of the statute.

Respondents: The ``respondents'' for the collection of information

described in Sec. 1002.3 are the individual State Medicaid agencies.

Estimated number of respondents: The OIG annually receives

approximately 500 notifications from State Medicaid agencies regarding

actions taken against an individual or entity. While we are

specifically clarifying that these actions are to

include any suspension actions, settlement agreements and situations

where an individual or entity voluntarily withdraws from the program to

avoid a formal sanction, we believe that the number of actions reported

by the State agencies to the Secretary will remain low.

Estimated number of responses per respondent: 1.

Estimated total annual burden on respondents: We believe that the

burden on the State Medicaid agencies in preparing the notification to

the OIG will be minimal. We estimate that the average burden for each

submitted notification to the OIG will be less than one-half hour. The

total burden for this information collection activity is estimated not

to exceed 250 hours annually.

Comments on these information collection activities should be sent

to both:

Cynthia Agens Bauer, OS Reports Clearance Officer, ASMB Budget Office,

Room 503-H, Humphrey Building, 200 Independence Avenue, S.W.,

Washington, D.C. 20201, FAX: (202) 690-6352

Allison Herron Eydt, OIG Desk Officer, Office of Management and Budget,

Room 10235, New Executive Office Building, 715 17th Street, N.W.,

Washington, D.C. 20053, FAX: (202) 395-6974

Comments on these paperwork reduction requirements should be

submitted to the above individuals within 60 days following the Federal

Register publication of this proposed rule.

List of Subjects

42 CFR Part 1001

Administrative practice and procedure, Fraud, Health facilities,

Health professions, Medicaid, Medicare.

42 CFR Part 1002

Fraud, Grant programs--health, Health facilities, Health

professions, Medicaid, Reporting and recordkeeping.

42 CFR Part 1005

d to the above individuals within 60 days following the Federal

Register publication of this proposed rule.

List of Subjects

42 CFR Part 1001

Administrative practice and procedure, Fraud, Health facilities,

Health professions, Medicaid, Medicare.

42 CFR Part 1002

Fraud, Grant programs--health, Health facilities, Health

professions, Medicaid, Reporting and recordkeeping.

42 CFR Part 1005

Administrative practice and procedure, Fraud, Penalties.

Accordingly, 42 CFR Parts 1000, 1001, 1002 and 1005 would be

amended as set forth below:

A. Part 1000 would be amended as follows:

PART 1000--[AMENDED]

1. The authority citation for part 1000 would continue to read as

follows:

Authority: 42 U.S.C. 1320 and 1395hh.

2. Section 1000.10 would be amended by republishing the

introductory paragraph and by revising the definition for the term

Furnished to read as follows:

Sec. 1000.10 General definitions.

In this chapter, unless the context indicates otherwise--

* * * * *

Furnished refers to items or services provided or supplied,

directly or indirectly, by any individual or entity. This includes

items and services manufactured, distributed or otherwise provided by

individuals or entities that do not directly submit claims to Medicare

or State health care programs, but that supply items or services to

providers, practitioners or suppliers who submit claims to these

programs for such items or services.

* * * * *

B. Part 1001 would be amended as follows:

PART 1001--[AMENDED]

1. The authority citation for part 1001 would be revised to read as

follows:

Authority: 42 U.S.C. 1302, 1320a-7, 1320a-7b, 1395u(j),

1359u(k), 1395y(d), 1395y(e), 1395cc(b)(2) (D), (E) and (F), and

1395hh; and sec. 2455, Pub. L. 103-355, 108 Stat. 3327 (31 U.S.C.

6101 note).

ese

programs for such items or services.

* * * * *

B. Part 1001 would be amended as follows:

PART 1001--[AMENDED]

1. The authority citation for part 1001 would be revised to read as

follows:

Authority: 42 U.S.C. 1302, 1320a-7, 1320a-7b, 1395u(j),

1359u(k), 1395y(d), 1395y(e), 1395cc(b)(2) (D), (E) and (F), and

1395hh; and sec. 2455, Pub. L. 103-355, 108 Stat. 3327 (31 U.S.C.

6101 note).

(2) Section 1001.2 would be amended by revising the definitions for

the terms Exclusion, Professionally recognized standards of health

care, and Sole source of essential specialized services in the

community; and by adding definitions for the terms Incarceration and

Patient to read as follows:

Sec. 1001.2 Definitions.

* * * * *

Exclusion means that items and services furnished, ordered or

prescribed by a specified individual or entity will not be reimbursed

under Medicare or the State health care programs until the individual

or entity is reinstated by the OIG.

* * * * *

Incarceration means imprisonment or any type of confinement with or

without supervised release, including, but not limited to, community

confinement, house arrest and home detention.

* * * * *

Patient means any individual who is receiving health care items or

services, including any item or service provided to meet his or her

physical, mental or emotional needs or well-being, whether or not

reimbursed under Medicare or a State health care program and regardless

of the location in which such item or service is provided.

* * * * *

Professionally recognized standards of health care are Statewide or

national standards of care, whether in writing or not, that

professional peers of the individual or entity whose provision of care

is an issue, recognized as applying to those peers practicing or

providing care within a State

th care program and regardless

of the location in which such item or service is provided.

* * * * *

Professionally recognized standards of health care are Statewide or

national standards of care, whether in writing or not, that

professional peers of the individual or entity whose provision of care

is an issue, recognized as applying to those peers practicing or

providing care within a State. When the Department has declared a

treatment modality not to be safe and effective, practitioners who

employ such a treatment modality will be deemed not to meet

professionally recognized standards of health care. This definition

shall not be construed to mean that all other treatments meet

professionally recognized standards.

* * * * *

Sole source of essential specialized services in the community

means that an individual or entity--

(a) Is the only practitioner, supplier or provider furnishing

specialized services in an area designated by the Health Resources

Services Administration as a health professional shortage area for that

medical specialty, as listed in 42 CFR part 5, appendices B-F;

(b) Is a sole community hospital, as defined in Sec. 412.92 of this

title; or

(c) Is the only source of specialized services in a reasonably

defined service area where services by a non-specialist could not be

substituted for the source without jeopardizing the health or safety of

beneficiaries.

* * * * *

3. Section 1001.101 would be revised to read as follows:

Sec. 1001.101 Basis for liability.

The OIG will exclude any individual or entity that--

(a) Has been convicted of a criminal offense related to the

delivery of an item or service under Medicare or a State health care

program, including the performance of management or administrative

services relating to the delivery of items or services under any such

program;

e revised to read as follows:

Sec. 1001.101 Basis for liability.

The OIG will exclude any individual or entity that--

(a) Has been convicted of a criminal offense related to the

delivery of an item or service under Medicare or a State health care

program, including the performance of management or administrative

services relating to the delivery of items or services under any such

program;

(b) Has been convicted, under Federal or State law, of a criminal

offense related to the neglect or abuse of a patient, in connection

with the delivery of a health care item or service, including any

offense that the OIG concludes entailed, or resulted in, neglect or

abuse of patients (the delivery of a health care item or service

includes the provision of any item or service to an individual to meet

his or her physical, mental or emotional needs or well-being, whether

or not reimbursed under Medicare or a State health care program);

(c) Has been convicted, under Federal or State law, of a felony

that occurred

after August 21, 1996 relating to fraud, theft, embezzlement, breach of

fiduciary responsibility, or other misconduct--

(1) In connection with the delivery of a health care item or

service, including the performance of management or administrative

services relating to the delivery of such items or services, or

(2) With respect to any act or omission in a health care program

(other than Medicare or the State health care programs) operated by, or

financed in whole or in part, by any Federal, State or local government

agency; or

with the delivery of a health care item or

service, including the performance of management or administrative

services relating to the delivery of such items or services, or

(2) With respect to any act or omission in a health care program

(other than Medicare or the State health care programs) operated by, or

financed in whole or in part, by any Federal, State or local government

agency; or

(d) Has been convicted, under Federal or State law, of a felony

that occurred after August 21, 1996 relating to the unlawful

manufacture, distribution, prescription or dispensing of a controlled

substance, as defined under Federal or State law. This applies to any

individual or entity that--

(1) Is, or has ever been, a health care practitioner, provider or

supplier;

(2) Holds, or has held, a direct or indirect ownership or control

interest (as defined in section 1124(a)(3) of the Act) in an entity

that is a health care provider or supplier, or is, or has ever been, an

officer, director, agent or managing employee (as defined in section

1126(b) of the Act) of such an entity; or

(3) Is, or has ever been, employed in any capacity in the health

care industry.

4. Section 1001.102 would be amended by revising paragraph (b);

republishing the introductory text of paragraph (c); and revising

paragraph (c)(3) to read as follows:

Sec. 1001.102 Length of exclusion.

* * * * *

(b) Any of the following factors may be considered to be

aggravating and a basis for lengthening the period of exclusion--

(1) The acts resulting in the conviction, or similar acts, resulted

in financial loss to a government program or to one or more entities of

$1,500 or more. (The entire amount of financial loss to such programs

or entities, including any amounts resulting from similar acts not

adjudicated, will be considered regardless of whether full or partial

restitution has been made);

(2) The acts that resulted from in the conviction, or similar acts,

were committed over a period of one year or more;

ent program or to one or more entities of

$1,500 or more. (The entire amount of financial loss to such programs

or entities, including any amounts resulting from similar acts not

adjudicated, will be considered regardless of whether full or partial

restitution has been made);

(2) The acts that resulted from in the conviction, or similar acts,

were committed over a period of one year or more;

(3) The acts that resulted in the conviction, or similar acts, had

a significant adverse physical, mental or financial impact on one or

more program beneficiaries or other individuals;

(4) In convictions involving patient abuse or neglect, the action

that resulted in the conviction was premeditated, was part of a

continuing pattern or behavior, or consisted of non-consensual sexual

acts;

(5) The sentence imposed by the court included incarceration;

(6) Whether the individual or entity has a documented history of

criminal, civil or administrative wrongdoing;

(7) The individual or entity has at any time been overpaid a total

of $1,500 or more by Medicare or State health care programs, or other

third-party payers, as a result of improper billings; or

(8) Whether the individual or entity was convicted of other

offenses besides those which formed the basis for the exclusion, or has

been the subject of any other adverse action by any Federal, State or

local government agency or board, even if the adverse action is based

on the same set of circumstances that serves as the basis for

imposition of the exclusion.

(c) Only if any of the aggravating factors set forth in paragraph

(b) of this section justifies an exclusion longer than 5 years, may

mitigating factors be considered as the basis for reducing the period

of exclusion to no less than 5 years. Only the following factors may be

considered mitigating--

* * * * *

(3) The individual's or entity's cooperation with Federal or State

officials resulted in--

roductory text of

paragraph (b)(3) and revising paragraphs (b)(3)(i) and (b)(3)(iii) to

read as follows:

Sec. 1001.201 Conviction relating to fraud.

(a) Circumstance for exclusion. The OIG may exclude an individual

or entity convicted under Federal or State law of--

(1) A misdemeanor relating to fraud, theft, embezzlement, breach of

fiduciary responsibility, or other financial misconduct--

(i) In connection with the delivery of any health care item or

service, including the performance of management or administrative

services relating to the delivery of such items or services, or

(ii) With respect to any act or omission in a health care program,

other than Medicare or a State health care program, operated by, or

financed in whole or in part by, any Federal, State or local government

agency; or

(2) Fraud, theft, embezzlement, breach or fiduciary responsibility,

or other financial misconduct with respect to any act or omission in a

program, other than a health care program, operated by or financed in

whole or in part by any Federal, State or local government agency.

(b) Length of exclusion. * * *

(2) Any of the following factors may be considered to be

aggravating and a basis for lengthening the period of exclusion--

* * * * *

(iv) The sentence imposed by the court included incarceration;

(v) Whether the individual or entity has a documented history of

criminal, civil or administrative wrongdoing; or

(vi) Whether the individual or entity was convicted of other

offenses besides those which formed the basis for the exclusion, or has

been the subject of any other adverse action by any Federal, State or

local government agency or board, even if the adverse action is based

on the same set of circumstances that serves as the basis for the

imposition of the exclusion.

(3) Only the following factors may be considered as mitigating and

a basis for reducing the period of exclusion--

ch formed the basis for the exclusion, or has

been the subject of any other adverse action by any Federal, State or

local government agency or board, even if the adverse action is based

on the same set of circumstances that serves as the basis for the

imposition of the exclusion.

(3) Only the following factors may be considered as mitigating and

a basis for reducing the period of exclusion--

(i) The individual or entity was convicted of 3 or fewer offenses,

and the entire amount of financial loss to a government program or to

other individuals or entities due to the acts that resulted in the

conviction and similar acts is less than $1,500;

* * * * *

(iii) The individual's or entity's cooperation with Federal or

State officials resulted in--

(A) Others being convicted or excluded from Medicare or any of the

State health care programs,

(B) Additional cases being investigated or reports being used by

the appropriate law enforcement agency identifying program

vulnerabilities or weaknesses, or

(C) The imposition of a civil money penalty against others; or

* * * * *

6. Section 1001.301 would be amended by republishing the

introductory text of paragraph (b)(2); revising paragraphs (b)(2) (iv)

and (v); by adding a new paragraph (b)(2)(vi); by republishing the

introductory text of paragraph (b)(3); and by revising paragraph

(b)(3)(ii) to read as follows:

Sec. 1001.301 Conviction relating to obstruction of an investigation.

* * * * *

(b) Length of exclusion. * * *

(2) Any of the following factors may be considered to be

aggravating and a basis for lengthening the period of exclusion--

* * * * *

(iv) The sentence imposed by the court included incarceration;

ory text of paragraph (b)(3); and by revising paragraph

(b)(3)(ii) to read as follows:

Sec. 1001.301 Conviction relating to obstruction of an investigation.

* * * * *

(b) Length of exclusion. * * *

(2) Any of the following factors may be considered to be

aggravating and a basis for lengthening the period of exclusion--

* * * * *

(iv) The sentence imposed by the court included incarceration;

(v) Whether the individual or entity has a documented history of

criminal, civil or administrative wrongdoing; or

(vi) Whether the individual or entity was convicted of other

offenses besides those which formed the basis for the exclusion, or has

been the subject of any other adverse action by any Federal, State or

local government agency or board, even if the adverse action is based

on the same set of circumstances that serves as the basis for the

imposition of the exclusion.

(3) Only the following factors may be considered as mitigating and

a basis for reducing the period of exclusion--

* * * * *

(ii) The individual's or entity's cooperation with Federal or State

officials resulted in--

(A) Others being convicted or excluded from Medicare or any of the

State health care programs,

(B) Additional cases being investigated or reports being issued by

the appropriate law enforcement agency identifying program

vulnerabilities or weaknesses, or

(C) The imposition of a civil money penalty against others; or

* * * * *

7. Section 1001.401 would be amended by revising the section

heading; revising paragraph (a); by republishing the introductory text

of paragraph (c)(2); by revising paragraphs (c)(2) (iii) and (iv); by

adding a new paragraph (c)(2)(v); by republishing introductory

paragraph (c)(3); and by revising paragraph (c)(3)(i) to read as

follows:

Sec. 1001.401 Misdemeanor conviction relating to controlled

substances.

01 would be amended by revising the section

heading; revising paragraph (a); by republishing the introductory text

of paragraph (c)(2); by revising paragraphs (c)(2) (iii) and (iv); by

adding a new paragraph (c)(2)(v); by republishing introductory

paragraph (c)(3); and by revising paragraph (c)(3)(i) to read as

follows:

Sec. 1001.401 Misdemeanor conviction relating to controlled

substances.

(a) Circumstance for exclusion. The OIG may exclude an individual

or entity convicted under Federal or State law of a misdemeanor

relating to the unlawful manufacture, distribution, prescription or

dispensing of a controlled substance, as defined under Federal or State

law. This section applies to any individual or entity that--

(1) Is, or has ever been, a health care practitioner, provider or

supplier;

(2) Holds or has held a direct or indirect ownership or control

interest, as defined in section 1124(a)(3) of the Act, in an entity

that is a health care provider or supplier, or is or has been an

officer, director, agent or managing employee, as defined in section

1126(b) of the Act, of such an entity; or

(3) Is, or has ever been, employed in any capacity in the health

care industry.

* * * * *

(c) Length of exclusion. * * *

(2) Any of the following factors may be considered to be

aggravating and a basis for lengthening the period of exclusion--

* * * * *

(iii) The sentence imposed by the court included incarceration;

(iv) Whether the individual or entity has a documented history of

criminal, civil or administrative wrongdoing; or

ny capacity in the health

care industry.

* * * * *

(c) Length of exclusion. * * *

(2) Any of the following factors may be considered to be

aggravating and a basis for lengthening the period of exclusion--

* * * * *

(iii) The sentence imposed by the court included incarceration;

(iv) Whether the individual or entity has a documented history of

criminal, civil or administrative wrongdoing; or

(v) Whether the individual or entity was convicted of other

offenses besides those which formed the basis for the exclusion, or has

been the subject of any other adverse action by any other Federal,

State or local government agency or board, even if the adverse action

is based on the same set of circumstances that serves as the basis for

the imposition of the exclusion.

(3) Only the following factors may be considered as mitigating and

a basis for shortening the period of exclusion--

(i) The individual's or entity's cooperation with Federal or State

officials resulted in--

(A) Others being convicted or excluded from Medicare or any of the

State health care programs,

(B) Additional cases being investigated or reports being issued by

the appropriate law enforcement agency identifying program

vulnerabilities or weaknesses, or

(C) The imposition of a civil money penalty against others; or

* * * * *

8. Section 1001.501 would be amended by revising paragraph (b)(1);

republishing the introductory text of paragraph (b)(2), revising

paragraphs (b)(2) (ii) and (iii), and adding a new paragraph

(b)(2)(iv); by republishing the introductory text of paragraph (b)(3)

and revising paragraph (b)(3)(i); and by deleting paragraph (c) to read

as follows:

Sec. 1001.501 License revocation or suspension.

* * * * *

1001.501 would be amended by revising paragraph (b)(1);

republishing the introductory text of paragraph (b)(2), revising

paragraphs (b)(2) (ii) and (iii), and adding a new paragraph

(b)(2)(iv); by republishing the introductory text of paragraph (b)(3)

and revising paragraph (b)(3)(i); and by deleting paragraph (c) to read

as follows:

Sec. 1001.501 License revocation or suspension.

* * * * *

(b) Length of exclusion. (1) An exclusion imposed in accordance

with this section will not be for a period of time less than the period

during which an individual's or entity's license is revoked, suspended

or otherwise not in effect as a result of, or in connection with, a

State licensing agency action.

(2) Any of the following factors may be considered aggravating and

a basis for lengthening the period for exclusion--

* * * * *

(ii) Whether the individual or entity has a documented history of

criminal, civil or administrative wrongdoing;

(iii) The acts, or similar acts, had or could have had a

significant adverse impact on the financial integrity of the programs;

or

(iv) The individual or entity has been the subject of any other

adverse action by any other Federal, State or local government agency

or board, even if the adverse action is based on the same set of

circumstances that serves as the basis for the imposition of the

exclusion.

(3) Only if any of the aggravating factors listed in paragraph

(b)(2) of this section justifies a longer exclusion may mitigating

factors be considered as a basis for reducing the period of exclusion

to a period not less than that set forth in paragraph (b)(1) of this

section. Only the following factors may be considered mitigating--

t serves as the basis for the imposition of the

exclusion.

(3) Only if any of the aggravating factors listed in paragraph

(b)(2) of this section justifies a longer exclusion may mitigating

factors be considered as a basis for reducing the period of exclusion

to a period not less than that set forth in paragraph (b)(1) of this

section. Only the following factors may be considered mitigating--

(i) The individual's or entity's cooperation with a State licensing

authority resulted in--

(A) The sanctioning of other individuals or entities, or

(B) Additional cases being investigated or reports being issued by

the appropriate law enforcement agency identifying program

vulnerabilities or weaknesses; or

* * * * *

9. Section 1001.601 would be amended by revising paragraph (b) to

read as follows:

Sec. 1001.601 Exclusion or suspension under a Federal or State health

care program.

* * * * *

(b) Length of exclusion. (1) An exclusion imposed in accordance

with this section will not be for a period of time less than the period

during which the individual or entity license is excluded or suspended

from a Federal or State health care program.

(2) Any of the following factors may be considered aggravating and

a basis for lengthening the period of exclusion--

(i) The acts that resulted in the exclusion, suspension or other

sanction under the Federal or State healthy care program had, or could

have had, a significant adverse impact on Federal or State health care

programs or the

beneficiaries of those programs or other individuals;

(ii) Whether the individual or entity has a documented history of

criminal, civil or administrative wrongdoing; or

(iii) The individual or entity has been the subject of any other

adverse action by any Federal, State or local government agency or

board, even if the adverse action is based on the same set of

circumstances that serves as the basis for the imposition of the

exclusion.

(3) Only if any of the aggravating factors set forth in paragraph

tory of

criminal, civil or administrative wrongdoing; or

(iii) The individual or entity has been the subject of any other

adverse action by any Federal, State or local government agency or

board, even if the adverse action is based on the same set of

circumstances that serves as the basis for the imposition of the

exclusion.

(3) Only if any of the aggravating factors set forth in paragraph

(b)(2) of this section justifies a longer exclusion may mitigating

factors be considered as a basis for reducing the period of exclusion

to a period not less than that set forth in paragraph (b)(1) of this

section. Only the following factors may be considered mitigating--

(i) The individual or entity's cooperation with Federal or State

officials resulted in--

(A) The sanctioning of other individuals or entities, or

(B) Additional cases being investigated or reports being issued by

the appropriate law enforcement agency identifying program

vulnerabilities or weaknesses; or

(ii) Alternative sources of the types of health care items or

services furnished by the individual or entity are not available.

(4) If the individual or entity is eligible to apply for

reinstatement in accordance with Sec. 1001.3001 of this part, and the

sole reason for the State denying reinstatement is the existing

Medicare exclusion imposed by the OIG as a result of the original State

action, the OIG will consider a request for reinstatement.

10. Section 1001.701 would be amended by republishing introductory

paragraph (a) and revising paragraph (a)(1); revising paragraph (d)(1);

and by republishing introductory paragraph (d)(2), revising paragraphs

(d)(2) (iii) and (iv), and adding paragraph (d)(2)(v) to read as

follows:

Sec. 1001.701 Excessive claims or furnishing of unnecessary or

substandard items or services.

reinstatement.

10. Section 1001.701 would be amended by republishing introductory

paragraph (a) and revising paragraph (a)(1); revising paragraph (d)(1);

and by republishing introductory paragraph (d)(2), revising paragraphs

(d)(2) (iii) and (iv), and adding paragraph (d)(2)(v) to read as

follows:

Sec. 1001.701 Excessive claims or furnishing of unnecessary or

substandard items or services.

(a) Circumstance for exclusion. The OIG may exclude an individual

or entity that has--

(1) Submitted, or caused to be submitted, bills or requests for

payments under Medicare or any of the State health care programs

containing charges or costs for items or services furnished that are

substantially in excess of such individual's or entity's usual charges

or costs for such items or services to any of their customers, clients

or patients; or

* * * * *

(d) Length of exclusion. (1) An exclusion imposed in accordance

with this section will be for a period of 3 years, unless aggravating

or mitigating factors set forth in paragraphs (d)(2) and (d)(3) of this

section form a basis for lengthening or shortening the period. In no

case may the period be shorter than 1 year.

(2) Any of the following factors may be considered aggravating and

a basis for lengthening the period of exclusion--

* * * * *

(iii) Whether the individual or entity has a documented history of

criminal, civil or administrative wrongdoing;

(iv) The violation resulted in financial loss to Medicare or the

State health care programs of $1,500 or more; or

(iv) The individual or entity has been the subject of any other

adverse action by any Federal, State or local government agency or

board, even if the adverse action is based on the same set of

circumstances that serves as the basis for the imposition of the

exclusion.

* * * * *

11. Section 1001.801 would be amended by revising paragraph (c)(1);

and by republishing introductory paragraph (c)(2), revising paragraphs

ntity has been the subject of any other

adverse action by any Federal, State or local government agency or

board, even if the adverse action is based on the same set of

circumstances that serves as the basis for the imposition of the

exclusion.

* * * * *

11. Section 1001.801 would be amended by revising paragraph (c)(1);

and by republishing introductory paragraph (c)(2), revising paragraphs

(c)(2) (iii) and (iv), and adding a new paragraph (c)(2)(v) to read as

follows:

Sec. 1001.801 Failure of HMOs and CMPs to furnish medically necessary

items and services.

* * * * *

(c) Length of exclusion. (1) An exclusion imposed in accordance

with this section will be for a period of 3 years, unless aggravating

or mitigating factors set forth in paragraphs (c)(2) and (c)(3) of this

section form a basis of lengthening or shortening the period. In no

case may the period be shorter than 1 year.

(2) Any of the following factors may be considered aggravating and

a basis for lengthening the period of exclusion--

* * * * *

(iii) The entity's failure to provide a necessary item or service

that had or could have had a serious adverse effect;

(iv) Whether the individual or entity has a documented history of

criminal, civil or administrative wrongdoing; or

(v) The individual or entity has been the subject of any other

adverse action by any Federal, State or local government agency or

board, even if the adverse action is based on the same set of

circumstances that serves as the basis for the imposition of the

exclusion.

* * * * *

12. Section 1001.901 would be amended by republishing introductory

paragraph (b), revising paragraph (b)(3), redesignating existing

paragraph (b)(4) as (b)(5), and adding a new paragraph (b)(4) to read

as follows:

Sec. 1001.901 False or improper claims.

* * * * *

adverse action is based on the same set of

circumstances that serves as the basis for the imposition of the

exclusion.

* * * * *

12. Section 1001.901 would be amended by republishing introductory

paragraph (b), revising paragraph (b)(3), redesignating existing

paragraph (b)(4) as (b)(5), and adding a new paragraph (b)(4) to read

as follows:

Sec. 1001.901 False or improper claims.

* * * * *

(b) Length of exclusion. In determining the length of exclusion

imposed in accordance with this section, the OIG will consider the

following factors--

* * * * *

(3) Whether the individual or entity has a documented history of

criminal, civil or administrative wrongdoing (The lack of any prior is

to be considered neutral);

(4) The individual or entity has been the subject of any other

adverse action by any Federal, State or local government agency or

board, even if the adverse action is based on the same set of

circumstances that serves as the basis for the imposition of the

exclusion; or

(5) Other matters as justice may require.

13. Section 1001.951 would be amended by republishing introductory

paragraph (b)(1), revising paragraph (b)(1)(iii), redesignating

existing paragraph (b)(1)(iv) as (b)(1)(v), and adding a new paragraph

(b)(1)(iv) to read as follows:

Sec. 1001.951 Fraud and kickbacks and other prohibited activities.

* * * * *

(b) Length of exclusion. (1) The following factors will be

considered in determining the length of exclusion in accordance with

this section--

* * * * *

(iii) Whether the individual or entity has a documented history of

criminal, civil or administrative wrongdoing (The lack of any prior

record is to be considered neutral);

1.951 Fraud and kickbacks and other prohibited activities.

* * * * *

(b) Length of exclusion. (1) The following factors will be

considered in determining the length of exclusion in accordance with

this section--

* * * * *

(iii) Whether the individual or entity has a documented history of

criminal, civil or administrative wrongdoing (The lack of any prior

record is to be considered neutral);

(iv) The individual or entity has been the subject of any other

adverse action by any Federal, State or local government agency or

board, even if the adverse action is based on the same set of

circumstances that serves as the basis for the imposition of the

exclusion; or

* * * * *

Sec. 1001.953 [Removed]

14. Section 1001.953 would be removed.

15. Section 1001.1001 would be amended by republishing the heading

for paragraph (a) and introductory paragraph (a)(2); and by revising

the

definition for the term agent set forth in paragraph (a)(2) to read as

follows:

Sec. 1001.1001 Exclusion of entities owned or controlled by a

sanctioned person.

(a) Circumstances for exclusion. * * *

(2) For purposes of this section, the term:

Agent means any person who has express or implied authority to

obligate or act on behalf of an entity. The excluded individual may be

considered an agent even if he or she has transferred ownership or

control interest to his or her spouse or children. For example, if the

excluded individual transfers control of an entity to his or her

spouse, but still acts on behalf of the entity or exercises some

control over the entity, the excluded individual would be an agent

since he or she would have the implied authority to act on behalf of

that entity.

* * * * *

16. A new Sec. 1001.1051 would be added to read as follows:

Sec. 1001.1051 Exclusion of individuals with ownership or control

interest in sanctioned entities.

his or her

spouse, but still acts on behalf of the entity or exercises some

control over the entity, the excluded individual would be an agent

since he or she would have the implied authority to act on behalf of

that entity.

* * * * *

16. A new Sec. 1001.1051 would be added to read as follows:

Sec. 1001.1051 Exclusion of individuals with ownership or control

interest in sanctioned entities.

(a) Circumstance for exclusion. The OIG may exclude any individual

who--

(1) Has a direct or indirect ownership or control interest in a

sanctioned entity, and who knows or should know (as defined in section

1128A(i)(6) of the Act) of the action constituting the basis for the

conviction or exclusion set forth in paragraph (b) of this section; or

(2) Is an officer or managing employee (as defined in section

1126(b) of the Act) of such an entity.

(b) For purposes of paragraph (a) of this section, the term

sanctioned entity means an entity that--

(1) Has been convicted of any offense described in Secs. 1001.101

through 1001.401 of this part; or

(2) Has been terminated or excluded from participation in Medicare

or a State health care program.

(c) Length of exclusion. (1) If the entity has been excluded, the

length of the individual's exclusion will be for the same period as

that of the sanctioned entity with which the individual has the

prohibited relationship.

(2) If the entity was not excluded, the length of the individual's

exclusion will be determined by considering the factors that would have

been considered if the entity had been excluded.

(3) An individual excluded under this section may apply for

reinstatement at any time in accordance with the procedures set forth

in Sec. 1001.3001.

17. Section 1001.1101 would be amended by revising paragraph (b)(3)

to read as follows:

Sec. 1001.1101 Failed to disclose certain information.

* * * * *

y considering the factors that would have

been considered if the entity had been excluded.

(3) An individual excluded under this section may apply for

reinstatement at any time in accordance with the procedures set forth

in Sec. 1001.3001.

17. Section 1001.1101 would be amended by revising paragraph (b)(3)

to read as follows:

Sec. 1001.1101 Failed to disclose certain information.

* * * * *

(b) Length of exclusion. The following factors will be considered

in determining the length of an exclusion under this section--

* * * * *

(3) Whether the individual or entity has a documented history of

criminal, civil or administrative wrongdoing (The lack of any prior

record is to be considered neutral);

* * * * *

18. Section 1001.1201 would be amended by revising paragraph (b)(4)

to read as follows:

Sec. 1001.1201 Failure to provide payment information.

* * * * *

(b) * * *

(4) Whether the individual or entity has a documented history of

criminal, civil or administrative wrongdoing (The lack of any prior

record is to be considered neutral); and

* * * * *

19. Section 1001.1301 would be amended by revising paragraph

(b)(2)(iv) to read as follows:

Sec. 1001.1301 Failure to grant immediate access.

* * * * *

(b) * * *

(2) * * *

* * * * *

(iv) Whether the entity has a documented history of criminal, civil

or administrative wrongdoing (The lack of any prior record is to be

considered neutral).

* * * * *

20. Section 1001.1401 would be amended by revising paragraph (b)(5)

to read as follows:

Sec. 1001.1401 Violations of PPS corrective action.

* * * * *

(b) Length of exclusion. * * *

* * * * *

(5) Whether the individual or entity has a documented history of

criminal, civil or administrative wrongdoing (The lack of any prior

record is to be considered neutral).

21. Section 1001.1601 would be amended by revising paragraph

(b)(1)(iv) to read as follows:

Sec. 1001.1601 Violations of the limitations on physician charges.

* * * * *

.

* * * * *

(b) Length of exclusion. * * *

* * * * *

(5) Whether the individual or entity has a documented history of

criminal, civil or administrative wrongdoing (The lack of any prior

record is to be considered neutral).

21. Section 1001.1601 would be amended by revising paragraph

(b)(1)(iv) to read as follows:

Sec. 1001.1601 Violations of the limitations on physician charges.

* * * * *

(b) Length of exclusion. (1) * * *

(iv) Whether the physicians has a documented history of criminal,

civil or administrative wrongdoing (The lack of any prior record is to

be considered neutral); and

* * * * *

22. Section 1001.1701 would be amended by revising paragraph

(c)(1)(v) to read as follows:

Sec. 1001.1701 Billing for services of assistant at surgery during

cataract operations.

* * * * *

(c) Length of exclusion. * * *

(v) Whether the physician has a documented history of criminal,

civil or administrative wrongdoing (The lack of any prior record is to

be considered neutral); and

23. Section 1001.1901 would be amended by revising paragraphs

(b)(1) and (b)(3); revising existing paragraph (c)(4) and redesignating

is as (c)(5); and by adding a new paragraph (c)(4) to read as follows:

Sec. 1001.1901 Scope and effect of exclusion.

* * * * *

(b) Effect of exclusion on excluded individuals and entities. (1)

Unless and until an individual or entity is reinstated into the

Medicare program in accordance with subpart F of this part, no payment

will be made by Medicare or any of the State health care programs for

any item or service furnished, on or after the effective date specified

in the notice period, 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 individual or entity

furnishing such item or service knew, or had reason to know, of the

exclusion

any of the State health care programs for

any item or service furnished, on or after the effective date specified

in the notice period, 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 individual or entity

furnishing such item or service knew, or had reason to know, of the

exclusion. This section applies regardless of whether an individual or

entity has obtained a program provider number, either as an individual

or as a member of a group, prior to being reinstated.

* * * * *

(3) An excluded individual or entity that submits, or causes to be

submitted, claims for items or services furnished during the exclusion

period is subject to civil money penalty liability under section

1128A(a)(1)(D) of the Act, and criminal liability under section

1128B(a)(3) of the Act and other provisions. In addition, submitting

claims, or causing claims to be submitted or payments to be made for

items or services furnished, ordered or prescribed, including

administrative and management services or salary, may serve as the

basis for denying reinstatement to the programs.

(c) Exceptions to paragraph (b)(1) of this section.

* * * * *

(4) HCFA will not pay any claims submitted by, or for items or

services ordered or prescribed by, an excluded provider for dates of

service 5 days or more after that notice of the provider's exclusion

was mailed by the contractor to the supplier.

(5) * * *

(ii) Notwithstanding paragraph (c)(5)(i) of this section, no claim

for emergency items or services will be payable if such items or

services were provided by an excluded individual who, through an

employment, contractual or any other arrangement, routinely provides

emergency health care items or services.

24. Section 1001.2001 would be revised to read as follows:

Sec. 1001.2001 Notice of intent to exclude.

nding paragraph (c)(5)(i) of this section, no claim

for emergency items or services will be payable if such items or

services were provided by an excluded individual who, through an

employment, contractual or any other arrangement, routinely provides

emergency health care items or services.

24. Section 1001.2001 would be revised to read as follows:

Sec. 1001.2001 Notice of intent to exclude.

(a) Except as provided in paragraph (b) of this section, if the OIG

proposes to exclude an individual or entity in accordance with subpart

C of this part, or in accordance with subpart B of this part where the

exclusion is for a period exceeding 5 years, it will send written

notice of its intent, the basis for the proposed exclusion the

potential effect of an exclusion. Within 30 days of receipt of notice,

which will be deemed to be 5 days after the date on the notice, the

individual or entity may submit documentary evidence and written

argument concerning whether the exclusion is warranted and any related

issues.

(b) Exception. If the OIG proposes to exclude an individual or

entity under the provisions of Secs. 1001.1301, 1001.1401 or 1001.1501

of this part, paragraph (a) of this section will not apply.

(c) If an entity has a provider agreement under section 1866 of the

Act, and the OIG proposes to terminate that agreement in accordance

with section 1866(b)(2)(C) of the Act, the notice provided for in

paragraph (a) of this section will so state.

25. Section 1001.2002 would be amended by adding a new paragraph

(e) to read as follows:

Sec. 1001.2002 Notice of exclusion.

* * * * *

not apply.

(c) If an entity has a provider agreement under section 1866 of the

Act, and the OIG proposes to terminate that agreement in accordance

with section 1866(b)(2)(C) of the Act, the notice provided for in

paragraph (a) of this section will so state.

25. Section 1001.2002 would be amended by adding a new paragraph

(e) to read as follows:

Sec. 1001.2002 Notice of exclusion.

* * * * *

(e) No later than 15 days prior to the final exhibit exchanges

required under Sec. 1005.8 of this chapter, the OIG may amend its

notice letter if information comes to light that justifies the

imposition of a different period of exclusion other than the one

proposed in the original notice letter.

26. Section 1001.2003 would be amended by revising introductory

paragraph (a) to read as follows:

Sec. 1001.2003 Notice of proposal to exclude.

(a) Except as provided in paragraph (c) of this section, if the OIG

proposes to exclude an individual or entity in accordance with

Secs. 1001.901, 1001.951, 1001.1601 or 1001.1701, it will send written

notice of this decision to the affected individual or entity. The

written notice will provide the same information set forth in

Sec. 1001.2002(c). If an entity has a provider agreement under section

1866 of the Act, and the OIG also proposes to terminate that agreement

in accordance with section 1866(b)(2)(C) of the Act, the notice will so

indicate. The exclusion will be effective 60 days after the receipt of

the notice (as defined in Sec. 1005.2 of this chapter) unless, within

that period, the individual or entity files a written request for a

hearing in accordance with part 1005 of this chapter. Such request must

set forth--

* * * * *

27. Section 1001.2005 would be revised to read as follows:

Sec. 1001.2005 Notice to state licensing agencies.

usion will be effective 60 days after the receipt of

the notice (as defined in Sec. 1005.2 of this chapter) unless, within

that period, the individual or entity files a written request for a

hearing in accordance with part 1005 of this chapter. Such request must

set forth--

* * * * *

27. Section 1001.2005 would be revised to read as follows:

Sec. 1001.2005 Notice to state licensing agencies.

HHS will promptly notify the appropriate State(s) or local agencies

or authorities having responsibility for the licensing or certification

of an individual or entity excluded (or directed to be excluded) from

participation of the facts and circumstances of the exclusion.

28. Section 1001.2006 would be amended by republishing introductory

paragraph (a); revising paragraphs (a)(1) and (a)(7); redesignating

existing paragraph (a)(8) as (a)(9); and by adding a new paragraph

(a)(8) to read as follows:

Sec. 1001.2006 Notice to others regarding exclusion.

(a) HHS will give notice of the exclusion and the effective date to

the public, to beneficiaries (in accordance with Sec. 1001.1901(c)),

and, as appropriate, to--

(1) Any entity in which the excluded individual is known to be

serving as an employee, administrator, operator, or in which the

individual is serving in any other capacity and is receiving payment

for providing services (The lack of this notice will not affect HCFA's

ability to deny payment for services);

* * * * *

(7) The State and Area Agencies on Aging established under title

III of the Older Americans Act;

(8) The Adverse Action Data Bank; and

* * * * *

29. Section 1001.3001 would be amended by revising paragraphs

(a)(1) and (a)(2) to read as follows:

Sec. 1001.3001 Timing and method of request for reinstatement.

f this notice will not affect HCFA's

ability to deny payment for services);

* * * * *

(7) The State and Area Agencies on Aging established under title

III of the Older Americans Act;

(8) The Adverse Action Data Bank; and

* * * * *

29. Section 1001.3001 would be amended by revising paragraphs

(a)(1) and (a)(2) to read as follows:

Sec. 1001.3001 Timing and method of request for reinstatement.

(a)(1) Except as provided in paragraphs (a)(2) and (a)(3) of this

section or in Sec. 1001.501(b)(4) of this part, an excluded individual

or entity (other than those excluded in accordance with

Secs. 1001.1001, 1001.1051 and 1001.1501) may submit a written request

for reinstatement to the OIG only after the minimum period of exclusion

specified in the notice of exclusion has expired. Obtaining a program

provider number does not reinstate eligibility.

(2) An entity excluded under Sec. 1001.1001 of this part may apply

for reinstatement prior to the minimum period of exclusion specified in

the notice of exclusion by submitting a written request for

reinstatement that includes documentation demonstrating that the

standards set forth in Sec. 1001.3002(c) have been met.

* * * * *

30. Section 1001.3002 would be amended by revising paragraph (a);

republishing introductory paragraph (b), revising paragraphs (b) (3)

and (4) and removing paragraph (b)(5); revising introductory paragraph

(c); revising existing paragraph (d) and redesignating paragraphs (d),

(e), and (f) as paragraphs (e), (f) and (g) respectively; and by adding

a new paragraph (d) to read as follows:

Sec. 1001.3002 Basis for reinstatement.

(a)(1) The OIG will authorize reinstatement if it determines that--

b), revising paragraphs (b) (3)

and (4) and removing paragraph (b)(5); revising introductory paragraph

(c); revising existing paragraph (d) and redesignating paragraphs (d),

(e), and (f) as paragraphs (e), (f) and (g) respectively; and by adding

a new paragraph (d) to read as follows:

Sec. 1001.3002 Basis for reinstatement.

(a)(1) The OIG will authorize reinstatement if it determines that--

(i) The minimum period of exclusion has expired;

(ii) There are reasonable assurances that the types of actions that

formed the basis for the original exclusion have not recurred and will

not recur; and

(iii) There is no additional basis under sections 1128 (a) or (b)

or 1128A of the Act for continuation of the exclusion.

(2) Submitting claims or causing claims to be submitted or payments

to be made by the programs for items or services furnished, ordered or

prescribed, including administrative and management services or salary,

may serve as the basis for denying reinstatement. This section applies

regardless of whether an individual or entity has obtained a program

provider number, either as an individual or as a member of a group,

prior to being reinstated.

(b) In making the reinstatement determination, the OIG will

consider--

* * * * *

(3) Whether all fines, and all debts due and owing (including

overpayments) to any Federal, State or local government that relate to

Medicare or any of the State health care programs, have been paid or

satisfactory arrangements have been made to fulfill these obligations;

and

(4) Whether HCFA has determined that the individual or entity

complies with, or has made satisfactory arrangements to fulfill, all of

the applicable conditions of participation or supplier conditions for

coverage under the statutes and regulations.

Medicare or any of the State health care programs, have been paid or

satisfactory arrangements have been made to fulfill these obligations;

and

(4) Whether HCFA has determined that the individual or entity

complies with, or has made satisfactory arrangements to fulfill, all of

the applicable conditions of participation or supplier conditions for

coverage under the statutes and regulations.

(c) If the OIG determines that the criteria in paragraphs (a)(1)

(ii) and (iii) of this section have been met, an entity excluded in

accordance with Sec. 1001.1001 will be reinstated upon a determination

by the OIG that the individual whose conviction, exclusion or civil

money penalty was the basis for the entity's exclusion--

* * * * *

(d) If the OIG determines that the criteria in paragraphs (a)(1)

(ii) and (iii) of this section have been met, an individual excluded in

accordance with Sec. 1001.1051 will be reinstated upon a determination

with paragraph (a) of this section of Sec. 1001.3005.

(e) Reinstatement will not be effective until the OIG grants the

request and provides notice under Sec. 1001.3003(a) of this part.

Reinstatement will be effective as provided in the notice.

(f) A determination with respect to reinstatement is not appealable

or reviewable except as provided in Sec. 1001.3004.

(g) An ALJ may not require reinstatement of an individual or entity

in accordance with this chapter.

C. Part 1002 would be amended as follows:

PART 1002--[AMENDED]

1. The authority citation for part 1002 would continue to read as

follows:

Authority: 42 U.S.C. 1302, 1320a-3, 1320a-5, 1320a-7,

1396(a)(4)(A), 1396(p)(1), 1396a(30), 1396a(39) 1396b(a)(6),

1396b(b)(3), 1396b(i)(2) and 1396b(q).

2. Section 1002.3 would be amended by revising paragraph (b)(2) and

by adding a new paragraph (b)(3) to read as follows:

Sec. 1002.3 Disclosure by providers; information on persons convicted

of crimes.

* * * * *

nue to read as

follows:

Authority: 42 U.S.C. 1302, 1320a-3, 1320a-5, 1320a-7,

1396(a)(4)(A), 1396(p)(1), 1396a(30), 1396a(39) 1396b(a)(6),

1396b(b)(3), 1396b(i)(2) and 1396b(q).

2. Section 1002.3 would be amended by revising paragraph (b)(2) and

by adding a new paragraph (b)(3) to read as follows:

Sec. 1002.3 Disclosure by providers; information on persons convicted

of crimes.

* * * * *

(b) Notification to Inspector General. * * *

(2) The agency must promptly notify the Inspector General of any

action it takes on the provider's application for participation in the

program.

(3) The agency must also promptly notify the Inspector General of

any action it takes to limit the ability of an individual or entity to

participate in its program, regardless of what such an action is

called. This includes, but is not limited to, suspension actions,

settlement agreements and situations where an individual or entity

voluntarily withdraws from the program to avoid a formal sanction.

* * * * *

3. Section 1002.203 would be amended by revising paragraph (a) to

read as follows:

Sec. 1002.203 Mandatory exclusion.

(a) The State agency, in order to receive Federal financial

participation (FFP), must provide that it will exclude from

participation any HMO, or entity furnishing services under a waiver

approved under section 1915(b)(1) of the Act, if such organization or

entity--

(1) Could be excluded under Secs. 1001.1001 or 1001.1051 of this

chapter, or

(2) Has, directly or indirectly, a substantial contractual

relationship with an individual or entity that could be excluded under

Secs. 1001.1001 or 1001.1051 of this chapter.

* * * * *

4. Section 1002.211 would be amended by revising paragraph (a) to

read as follows:

Sec. 1002.211 Effect of exclusion.

(a) Denial of payment. Except as provided for in Sec. 1001.1901

51 of this

chapter, or

(2) Has, directly or indirectly, a substantial contractual

relationship with an individual or entity that could be excluded under

Secs. 1001.1001 or 1001.1051 of this chapter.

* * * * *

4. Section 1002.211 would be amended by revising paragraph (a) to

read as follows:

Sec. 1002.211 Effect of exclusion.

(a) Denial of payment. Except as provided for in Sec. 1001.1901

(c)(3), (c)(4) and (c)(5)(i) of this chapter, no payment may be made by

the State agency for any item or service furnished on or after the

effective date specified in the notice by an excluded individual or

entity, or at the medical direction or on the prescription of a

physician who is excluded when a person furnishing such item or service

knew, or had reason to know, of the exclusion.

PART 1005--[AMENDED]

D. Part 1005 would be amended as follows:

1. The authority citation for part 1005 would continue to read as

follows:

Authority: 42 U.S.C. 405(a), 405(b), 1302, 1320a-7, 1320a-7a and

1320c-5.

2. Section 1005.15 would be amended by revising introductory

paragraph (f)(1) to read as follows:

Sec. 1005.15 The hearing and burden of proof.

* * * * *

(f)(1) A hearing under this part is not limited to specific items

and information set forth in the notice letter to the petitioner or

respondent. Subject to the 15-day requirement under Sec. 1005.8,

additional items and information, including aggravating or mitigating

circumstances that arose or became known subsequent to the issuance of

the notice letter, may be introduced by either party during its case-

in-chief unless such information or items are--

* * * * *

Dated: March 13, 1997.

June Gibbs Brown,

Inspector General, Department of Health and Human Services.

Approved: June 18, 1997.

Donna E. Shalala,

Secretary.

[FR Doc. 97-23379 Filed 9-5-97; 8:45 am]

BILLING CODE 4150-04-M