Health Care Programs: Fraud and Abuse; Revised OIG Sanction Authorities Resulting From Public Law 105-33

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Inspector General

42 CFR Parts 1001, 1002, and 1003

RIN 0991-AA95

Health Care Programs: Fraud and Abuse; Revised OIG Sanction

Authorities Resulting From Public Law 105-33

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

ACTION: Notice of proposed rulemaking.

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SUMMARY: This rulemaking proposes revisions to the OIG's exclusion and

civil money penalty authorities set forth in 42 CFR parts 1001, 1002

and 1003, resulting from the Balanced Budget Act of 1997, Public Law

105-33. These proposed revisions are intended to protect and strengthen

Medicare and State health care programs by increasing the OIG's anti-

fraud and abuse authority through new or revised exclusion and civil

money penalty provisions.

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

the address provided below by no later than 5 p.m. on November 2, 1998.

ADDRESSES: Please mail or deliver your written comments to the

following address: Office of Inspector General, Department of Health

and Human Services, Attention: OIG-30-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-30-P.

FOR FURTHER INFORMATION CONTACT: Joel Schaer, (202) 619-0089, OIG

Regulations Officer.

SUPPLEMENTARY INFORMATION:

I. Background

A. The Health Insurance Portability and Accountability Act

ndependence 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-30-P.

FOR FURTHER INFORMATION CONTACT: Joel Schaer, (202) 619-0089, OIG

Regulations Officer.

SUPPLEMENTARY INFORMATION:

I. Background

A. The Health Insurance Portability and Accountability Act

The Health Insurance Portability and Accountability Act (HIPAA) of

1996, Public Law 104-191, was enacted on August 21, 1996 and set forth

a number of significant amendments to the OIG's exclusion and civil

money penalty (CMP) authorities. Among the various provisions related

to program exclusion authority, HIPAA: (1) expanded the OIG's minimum

5-year mandatory exclusion authority to cover any felony conviction

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

if governmental programs were not involved; (2) established minimum

periods of exclusion from 1 to 3 years for certain permissive

exclusions from Medicare and the State health care programs; and (3)

established a new permissive exclusion authority applicable to

individuals who have a majority ownership in, or have significant

control over the operations of, an entity that has been convicted of a

program-related offense. Proposed regulations addressing these revised

or expanded OIG exclusion authorities were published in the Federal

Register on September 8, 1997 (62 FR 47182).

In addition, HIPAA revised and strengthened the OIG's existing CMP

authorities, and extended the application of the CMP provisions beyond

those programs funded by the Department to include all Federal health

care programs. The revised or expanded CMP provisions resulting from

HIPAA are being addressed in a separate OIG proposed rulemaking.

B. The Balanced Budget Act of 1997

97 (62 FR 47182).

In addition, HIPAA revised and strengthened the OIG's existing CMP

authorities, and extended the application of the CMP provisions beyond

those programs funded by the Department to include all Federal health

care programs. The revised or expanded CMP provisions resulting from

HIPAA are being addressed in a separate OIG proposed rulemaking.

B. The Balanced Budget Act of 1997

In conjunction with many of the HIPAA fraud and abuse authorities,

the Balanced Budget Act (BBA) of 1997, enacted on August 5, 1997,

contained a number of provisions designed to further preserve and

protect the integrity of Medicare, Medicaid and all other Federal

health care programs for current and future beneficiaries, and combat

fraudulent and abusive program activities. Specifically, the fraud and

abuse provisions of BBA serve to strengthen the OIG's exclusion and CMP

authorities with respect to Federal health care programs.

The new exclusion and CMP authorities under BBA are effective for

violations occurring on or after August 5, 1997. As the new statutory

provisions allow the Department some policy discretion in their

implementation, we are developing this proposed rulemaking and

soliciting public comments. The proposed regulation text changes

reflected in this rule are designed to address statutory revisions

resulting from BBA. As indicated above, revisions to 42 CFR chapter V

resulting from the HIPAA fraud and abuse provisions are being published

and addressed through separate proposed rulemakings. All final

regulation text changes resulting from the HIPAA and BBA fraud and

abuse proposed rules will be coordinated and collectively addressed in

a final rulemaking document that will amend OIG's exclusion and CMP

authorities.

II. Provisions of the Proposed Rule

A. Revised Exclusion Authorities Resulting from BBA

ons are being published

and addressed through separate proposed rulemakings. All final

regulation text changes resulting from the HIPAA and BBA fraud and

abuse proposed rules will be coordinated and collectively addressed in

a final rulemaking document that will amend OIG's exclusion and CMP

authorities.

II. Provisions of the Proposed Rule

A. Revised Exclusion Authorities Resulting from BBA

1. OIG Authority to Direct Exclusions From State Health Care Programs,

and to Extend the Application of OIG Exclusions to all Federal Health

Care Programs

Prior to the enactment of BBA, a program exclusion imposed by the

OIG was applicable to Medicare and State health care programs, as

defined in section 1128(h) of the Social Security Act (the Act). As

part of the fraud and abuse provisions set forth in HIPAA, section 231

of Public Law 104-191 amended the criminal and CMP provisions in

sections 1128A and 1128B of the Act to encompass acts occurring with

respect to a ``Federal health care program,'' as defined in section

1128B(f) of the Act.1 With the enactment of HIPAA, however,

this extension of coverage was not replicated with respect to the

Secretary's program exclusion authority as set forth in section 1128 of

the Act. In addition, prior to BBA, the OIG was authorized to impose

exclusions from participation in Medicare, but only to direct State

health care programs to impose parallel exclusions from State health

care programs such as Medicaid. The practical result of this bifurcated

exclusion implementation process was that States frequently failed to

implement exclusions in a timely or otherwise appropriate manner.

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ation in Medicare, but only to direct State

health care programs to impose parallel exclusions from State health

care programs such as Medicaid. The practical result of this bifurcated

exclusion implementation process was that States frequently failed to

implement exclusions in a timely or otherwise appropriate manner.

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\1\ Section 1128B(f) of the Act defines the term ``Federal

health care program'' to encompass any plan or program providing

health care benefits, whether directly through insurance or

otherwise, which is funded directly, in whole or in part, by the

United States Government (other than the Federal Employees Health

Benefits Program).

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To ensure that the OIG's program exclusion authority is consistent

with other sanction authorities set forth in sections 1128A and 1128B,

section 4331(c) of BBA specifically amended sections 1128(a) and (b) of

the Act to provide that the scope of an OIG exclusion extends beyond

Medicare and the State health care programs to all Federal health care

programs, as defined in section 1128B(f) of the Act, and to enable the

OIG to impose exclusions from all Federal health care programs

directly. As a result, we propose to add a definition for the term

``Federal health care program'' in Sec. 1001.2, and make conforming

revisions in Secs. 1001.1(a), 1001.1901, 1001.3003, 1001.3005 and

1002.2(a).

Section 1001.1901, Scope and effect of exclusion, would be amended

by revising paragraph (a) to reflect the revised scope of exclusions

under title XI of the Act. As indicated above, under section 4331(c) of

BBA, exclusions imposed by the OIG under title XI of the Act are now

directly to indicate the Secretary, through the OIG, would have the

authority to direct the imposition of exclusions from all Federal

health care programs

f exclusion, would be amended

by revising paragraph (a) to reflect the revised scope of exclusions

under title XI of the Act. As indicated above, under section 4331(c) of

BBA, exclusions imposed by the OIG under title XI of the Act are now

directly to indicate the Secretary, through the OIG, would have the

authority to direct the imposition of exclusions from all Federal

health care programs. Section 1001.1901 would be amended to indicate

that the Secretary, through the OIG, now has the direct authority to

impose exclusions from all Federal health care programs. The reference

in this section to an exclusion's effect with respect to other Federal

agency procurement and nonprocurement programs and activities is being

deleted. The effect of an exclusion on such programs (other than

Federal health care programs) is specifically addressed in the Federal

Acquisition Regulation at 48 CFR 9.405 and the HHS Common Rule at 45

CFR part 76.

With regard to program agency notification, since all affected

agencies within the Department, as well as all Federal health care

programs outside of the Department, must now effectuate an OIG decision

to exclude an individual or entity, we intend to provide notice to

these program agencies regarding any action taken by the OIG. Since we

believe that it would not be practical to send program agencies an

individual notice on every case, we are proposing to inform all

affected agencies through the OIG's web site (http://www.dhhs.gov/

progorg/oig) every month. The OIG web site will also advise the public

of all individuals and entities excluded from program participation. We

are advising program

action taken by the OIG. Since we

believe that it would not be practical to send program agencies an

individual notice on every case, we are proposing to inform all

affected agencies through the OIG's web site (http://www.dhhs.gov/

progorg/oig) every month. The OIG web site will also advise the public

of all individuals and entities excluded from program participation. We

are advising program

agencies to check the web site and to take action, as appropriate, to

exclude individuals and entities from their programs.

Broadening factors for the circumstances and length of exclusion--

We are also proposing to amend the mitigating and aggravating factors

for length of exclusion in Secs. 1001.201(b)(3)(iii)(A),

1001.301(b)(2)(ii) and (b)(3)(ii)(A), 1001.401(c)(2)(ii) and

(c)(3)(i)(A), 1001.1301(b)(2)(iii), 1001.1401(b)(1) and (b)(4), and

1001.1501(a)(3) to incorporate consideration of all Federal health care

programs, not just Medicare and the State health care programs, in

determining an appropriate period of exclusion. We believe that since

the OIG's authority to exclude individuals and entities has been

broadened under section 4331(c) of BBA to encompass all Federal health

care programs, it is reasonable for the OIG to consider the impact of

exclusion with respect to all of these health care programs.

Effect of exclusion on employment and the reimbursement of items

and services in the Federal health care programs--The effect of an

exclusion as a result of this authority remains the same as it had been

prior to the BBA expansion, i.e., with limited exceptions, no payment

may be made for any health care item or service furnished, ordered or

prescribed by an excluded individual. There is one significant

difference, however, that results from broadening the scope of an

exclusion to encompass all Federal health care programs

xclusion as a result of this authority remains the same as it had been

prior to the BBA expansion, i.e., with limited exceptions, no payment

may be made for any health care item or service furnished, ordered or

prescribed by an excluded individual. There is one significant

difference, however, that results from broadening the scope of an

exclusion to encompass all Federal health care programs. An individual

who was excluded from Medicare and the State health care programs prior

to BBA could be employed by another agency which funded a Federal

health care program, such as the Department of Defense (which funds the

CHAMPUS health care program). In addition, while other Federal agencies

were instructed to give government-wide affect to the OIG exclusion,

each agency retained some discretion as to whether it would debar that

individual or entity from its programs. Such Federal agencies no longer

have the discretion to permit excluded individuals and entities to

remain in their programs. With the expanded scope of the OIG's

exclusion authority, no agency which funds a Federal health care

program may reimburse excluded individuals for items and services they

provide, nor may any such agency pay the salaries or expenses of such

persons using Federal dollars. As a result, an agency which funds a

Federal health care program may only employ an excluded individual in

limited situations, where the program is able to pay the individual

with private grant funds or other non-Federal funding sources. In most

instances, the effect of an OIG exclusion will preclude the employment

of an excluded individual in any capacity by a Federal or State agency,

or other entity, where reimbursement is made by any Federal health care

program.

2

loy an excluded individual in

limited situations, where the program is able to pay the individual

with private grant funds or other non-Federal funding sources. In most

instances, the effect of an OIG exclusion will preclude the employment

of an excluded individual in any capacity by a Federal or State agency,

or other entity, where reimbursement is made by any Federal health care

program.

2. Permanent Exclusions for Individuals Convicted of 3 or More Health

Care Related Crimes, and 10 Year Exclusions for Individuals Convicted

of 2 Health Care Related Crimes

Prior to the enactment of BBA, section 1128(a) of the Act directed

the Secretary to impose mandatory exclusions of individuals and

entities from participation in the Medicare and State health care

programs upon conviction of certain criminal offenses, including

Medicare and Medicaid program-related crimes, patient abuse crimes,

health care fraud felonies and felonies relating to controlled

substances. While such mandatory exclusions were, in most cases, for a

minimum period of 5 years, no established mechanism was in place to

require a fixed exclusion period for repeat offenders.

As a result of the ability of some health care providers to re-

enter participation in the Federal and State health care programs after

a minimum exclusion period, section 4301 of BBA imposes a mandatory

exclusion of not less than 10-years on individuals who have been twice

convicted of mandatory exclusion offenses (including program-related

crimes, patient abuse, health care fraud and convictions relating to

controlled substances) under section 1128(a) of the Act. In addition, a

mandatory permanent program exclusion would also be imposed against

those individuals who have been convicted on 3 or more occasions for

conduct relating to a Federal health care program under section 1128(a)

of the Act. Accordingly, we propose to amend Sec. 1001.102 by adding a

new paragraph (d) to reflect these new mandatory lengths of exclusion

er section 1128(a) of the Act. In addition, a

mandatory permanent program exclusion would also be imposed against

those individuals who have been convicted on 3 or more occasions for

conduct relating to a Federal health care program under section 1128(a)

of the Act. Accordingly, we propose to amend Sec. 1001.102 by adding a

new paragraph (d) to reflect these new mandatory lengths of exclusion.

An exclusion of not less than 10 years, in the case of a second

conviction, or a permanent exclusion, in the case of three or more

convictions, will be mandatory where the final conviction has occurred

on or after August 5, 1997--the date of enactment of BBA. We are also

proposing to add a new paragraph (b)(7) to Sec. 1001.102, the provision

governing the length of mandatory exclusions, to include as a new

aggravating factor consideration of whether prior criminal offenses

involved same or similar circumstances.

3. Exclusion of Entities Controlled by Family or Household Members of

Sanctioned Individuals

Under section 1128(b)(8) of Act, the OIG may exclude entities that

are owned at least 5 percent, or controlled, by an individual who has

been convicted of a health care related offense, or who has been

sanctioned by the OIG. This authority enables OIG to enforce its

exclusions by ensuring that health care companies operated by excluded

individuals, in addition to the individuals themselves, do not continue

doing business and receiving reimbursement from Government health care

programs. Some excluded health care providers, however, have been able

to circumvent the impact of a sanction by expediting transfers on paper

of their ownership and control interests in health care entities to a

family or household member. These individuals have thus been able to

retain silent control of health care businesses that participate in

Medicare, Medicaid and all other Federal health care programs despite

their exclusion from these same programs

able

to circumvent the impact of a sanction by expediting transfers on paper

of their ownership and control interests in health care entities to a

family or household member. These individuals have thus been able to

retain silent control of health care businesses that participate in

Medicare, Medicaid and all other Federal health care programs despite

their exclusion from these same programs. To address this concern of

``paper transfers'' of ownership or control interest by excluded

individuals who still retain control of the health care business,

section 4303 of BBA amended section 1128(b)(8) of the Act by expanding

existing exclusion authority to include entities owned or controlled by

the family or household members of excluded individuals when the

transfer of ownership or control interest was made in anticipation of,

or following a conviction, assessment of a CMP, or exclusion.

We propose to amend Sec. 1001.1001(a)(1)(ii) to reflect this new

statutory authority. With regard to an individual excluded under

section 1128(b)(8) of the Act, and consistent with the statute,

Sec. 1001.1001(a)(2) would also be amended by adding definitions for

the terms ``Immediate family member'' and ``Member of household.''

B. Revised Civil Money Penalty Authorities Resulting from BBA

1. CMPs Against Institutional Health Care Providers That Employ or

Enter in Contracts for Medical Services With Excluded Individuals

The OIG has been made aware of situations where individuals who

have been excluded from Medicare or State health care program

participation have, nonetheless, been able to obtain (or retain)

employment, staff privileges or other affiliation with various health

care entities, and to render services that are ultimately paid for by

the programs.

ts for Medical Services With Excluded Individuals

The OIG has been made aware of situations where individuals who

have been excluded from Medicare or State health care program

participation have, nonetheless, been able to obtain (or retain)

employment, staff privileges or other affiliation with various health

care entities, and to render services that are ultimately paid for by

the programs.

Providers, such as hospitals, that hire excluded practitioners have

often failed to investigate or query available sources such as the

National Practitioner Data Bank (NPDB) or the OIG's cumulative Sanction

Report on the internet (as discussed in section II.A.1. of this

preamble), that would have informed them of an individual's exclusion

status 2. While CMP authority has existed for health

maintenance organizations that employ or contract with excluded

individuals, there was no parallel CMP authority in situations where a

group medical practice, hospital, nursing home, home health agency,

hospice or other provider continues to bill the programs for services

rendered by excluded individuals.

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\2\ Under the Health Care Quality Improvement Act of 1986,

hospitals are required to query the National Practitioner Data Bank

when hiring or granting clinical privileges to a practitioner, and

must perform follow-up checks on all such practitioners every two

years.

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\2\ Under the Health Care Quality Improvement Act of 1986,

hospitals are required to query the National Practitioner Data Bank

when hiring or granting clinical privileges to a practitioner, and

must perform follow-up checks on all such practitioners every two

years.

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Section 4304(a) of BBA, amending section 1128A(a) of the Act, added

a new provision authorizing the imposition of a CMP against any

provider that submits, or causes to be submitted, claims for health

care items or services rendered by employees or other individuals under

contract, whom they know or should know have been excluded from

participation in the Federal health care programs. Accordingly,

paragraph (a)(2) of Sec. 1003.102 and paragraph (a) of Sec. 1003.103 of

the OIG regulations would be revised to implement this new CMP of up to

$10,000 against any entity that submits, or causes to be submitted,

claims for health care services rendered by employees or other

individuals under contract whom they know, or should know, have been

excluded from participation in the Federal health care programs.

In determining the appropriate amount of the penalty for each

violation, we propose to amend Sec. 1003.106(a)(1) to include the

following five criteria: (1) The degree of culpability of the

contracting provider; (2) whether the contracting provider knew or

should have known of the exclusion; (3) the harm to patients or any

Federal health care program which resulted or could have resulted from

the provision of care by a person or entity with which the contracting

provider is expressly prohibited from contracting under section

1128A(a)(6) of the Act; (4) the history of prior offenses by the

contracting provider or principals of the contracting provider,

including whether at any time prior to the determination of the current

violation(s) the contracting provider or any of its principals were

convicted of

by a person or entity with which the contracting

provider is expressly prohibited from contracting under section

1128A(a)(6) of the Act; (4) the history of prior offenses by the

contracting provider or principals of the contracting provider,

including whether at any time prior to the determination of the current

violation(s) the contracting provider or any of its principals were

convicted of a criminal charge or were held liable for civil or

administrative sanctions in connection with a Federal, State or private

health care program; and (5) such other matters as justice may require.

2. New CMP for Failure to Report Information to the Healthcare

Integrity and Protection Data Bank

Section 1128E of the Act, as added by section 221 of HIPAA,

established a national health care fraud and abuse data collection

program, the Healthcare Integrity and Protection Data Bank (HIPDB), for

the reporting of final adverse actions against health care providers,

suppliers and practitioners. This authority mandated that private

health plans 3, as well as certain State and Federal

entities such as medical licensing boards, report information to the

national fraud and abuse data collection program concerning certain

final adverse actions taken against a health care provider, supplier or

practitioner. However, while the Health Care Quality Improvement Act of

1986, which established the NPDB, provided sanction authority against

those who do not report required information to the NPDB, the HIPAA

authority for the HIPDB set forth no parallel provision to induce

health care plans' compliance with the reporting requirements.

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ver, while the Health Care Quality Improvement Act of

1986, which established the NPDB, provided sanction authority against

those who do not report required information to the NPDB, the HIPAA

authority for the HIPDB set forth no parallel provision to induce

health care plans' compliance with the reporting requirements.

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\3\ Section 1128E of the Act defines the term ``health plan''

consistent with the definition set forth in section 1128C(c) of the

Act; that is, a plan or program that provides health benefits

whether directly, through insurance, or otherwise, and includes (1)

a policy of health insurance; (2) a contract of a service benefit

organization; and (3) a membership agreement with a health

maintenance organization or other prepaid health plan.

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Section 4331(d) of BBA added a provision to the health care fraud

and abuse data collection program to provide for the imposition of a

CMP against any health plan that fails to report information on an

adverse action required to be reported under this program. In

accordance with section 1128E(b)(6) of the Act, Sec. 1003.102(b)(5)

would be amended to add a new subparagraph addressing violations by any

health plan that fails to report information on an adverse action

required to be reported under this authority. In addition, a new

Sec. 1003.103(g) would be added to impose a CMP of not more than

$25,000 for each such adverse action not reported. In determining the

penalty amount for each occurrence, we are proposing five criteria for

consideration that would be set forth in an amended

Sec

health plan that fails to report information on an adverse action

required to be reported under this authority. In addition, a new

Sec. 1003.103(g) would be added to impose a CMP of not more than

$25,000 for each such adverse action not reported. In determining the

penalty amount for each occurrence, we are proposing five criteria for

consideration that would be set forth in an amended

Sec. 1003.106(a)(2): (1) the nature and circumstances of the failure to

report any adverse actions taken against a health care provider; (2)

the degree of culpability of the health plan in failing to provide

timely and complete data; (3) the materiality or significance of

omission of the information to be reported to the Data Bank; (4) any

prior history of the individual or plan with respect to these

occurrences; and (5) in general, other matters required by justice.

3. CMPs for Health Care Providers who Violate the Anti-Kickback Statute

Prior to the enactment of BBA, the only remedies available to the

Federal Government to combat kickback violations involving the Federal

health care programs were criminal penalties (section 1128B(b) of the

Act), and exclusion from participation in Medicare and the State health

care programs (section 1128(b)(7) of the Act) against individuals and

entities that offer or receive improper remuneration in return for the

referral of business paid for by Federal health care programs.

Enforcement in the kickback area has been constrained since the two

existing remedies were quite severe.

To create an alternative intermediate remedy, section 4304 of BBA

amended section 1128A(a) of the Act, specifically authorizing a CMP of

up to $50,000 and an assessment of up to three times the total amount

of the kickback for any violations of the anti-kickback statute. A new

Sec. 1003.102(b)(11) would be added to codify this new CMP authority.

Additionally, a new Sec

ies were quite severe.

To create an alternative intermediate remedy, section 4304 of BBA

amended section 1128A(a) of the Act, specifically authorizing a CMP of

up to $50,000 and an assessment of up to three times the total amount

of the kickback for any violations of the anti-kickback statute. A new

Sec. 1003.102(b)(11) would be added to codify this new CMP authority.

Additionally, a new Sec. 1003.103(h) is being proposed in accordance

with section 4304 of BBA, setting forth $50,000 as the amount of

penalty to be imposed for each kickback violation under section

1128B(b) of the Act, and an assessment (reflected in a new paragraph

(b) in revised Sec. 1003.104) of up to 3 times the total amount of

remuneration offered, paid, solicited or received without regard to

whether a portion of such remuneration was offered, paid, solicited or

received for a lawful purpose.

4. Notification, Effectuation and Appeal Procedures

With respect to all 3 new proposed CMPs, violators of these

provisions would be subject to the same notification, effectuation and

appeal procedures as other CMP violations under section 1128A(a) of the

Act and 42 CFR part 1003 of the OIG regulations.

C. Additional Technical and Other Revisions to 42 CFR Parts 1001 and

1003

1. Technical Revisions

A number of proposed technical revisions consistent with the policy

provisions resulting from BBA and these regulatory amendments are also

being set forth. Specifically, we propose to amend the authority

citation cites for parts 1001 and 1003, Secs. 1001.302 (Basis for

reinstatement), 1003.100 (Basis and purpose), and 1003.114 (Collateral

estoppel) to reflect the above-cited revisions being proposed in

accordance with revised OIG exclusion and CMP authorities.

In addition, we are revising Sec

hese regulatory amendments are also

being set forth. Specifically, we propose to amend the authority

citation cites for parts 1001 and 1003, Secs. 1001.302 (Basis for

reinstatement), 1003.100 (Basis and purpose), and 1003.114 (Collateral

estoppel) to reflect the above-cited revisions being proposed in

accordance with revised OIG exclusion and CMP authorities.

In addition, we are revising Sec. 1003.109(a)(3) by deleting the

phrase ``the amount of the proposed penalty, assessment and the period

of proposed exclusion (where applicable).'' This language appears in

paragraph (a)(4) of this section, and appears inadvertently in

paragraph (a)(3).

2. Proposed Revision to OIG Exclusion Reinstatement Considerations

We are proposing to add two new elements to Sec. 1001.3002(b) that

would pertain to the OIG's review of an individual's or entity's

request for reinstatement in the Federal health care programs after the

individual's or entity's exclusion period. The first new proposed

element would address the OIG's expectation that excluded parties

adequately and promptly inform all their clients or patients of the

exclusion so that the clients or patients will have a clear

understanding that items and services provided by that individual or

entity will not be paid for under any Federal health care program.

Section 1001.1901(b) of the regulations authorizes Medicare

reimbursement to a beneficiary for the first claim submitted for an

item or service provided by the excluded party, at which time the

beneficiary is notified that future claims will be denied due to the

provider's excluded status. We do not believe that notification only

after the submission of a claim provides adequate protection for

program beneficiaries

the regulations authorizes Medicare

reimbursement to a beneficiary for the first claim submitted for an

item or service provided by the excluded party, at which time the

beneficiary is notified that future claims will be denied due to the

provider's excluded status. We do not believe that notification only

after the submission of a claim provides adequate protection for

program beneficiaries. By stating in regulations that the OIG, in

making its reinstatement decisions, will consider whether a provider

has adequately and promptly informed clients or patients of an

exclusion, we hope to offer an incentive for providers to give the

earliest possible notification to beneficiaries of any exclusion.

A second proposed reinstatement element would codify existing OIG

policy which, in making reinstatement decisions, considers whether the

individual or entity has, during the period of exclusion, submitted

claims or caused claims to be submitted, or payments to be made by any

Federal health care program for items or services the excluded party

furnished, ordered or prescribed, including health care administrative

services. Such conduct is impermissible and is a basis for a CMP under

section 1128A(a)(1)(D) of the Act. By setting forth this regulatory

clarification, we hope to make clear that the submission of claims for

payment to any Federal health care program during a provider's period

of exclusion will jeopardize the provider's chances for reinstatement

into the programs.

III. Regulatory Impact Statement

Executive Order 12866 and Regulatory Flexibility Act

CMP under

section 1128A(a)(1)(D) of the Act. By setting forth this regulatory

clarification, we hope to make clear that the submission of claims for

payment to any Federal health care program during a provider's period

of exclusion will jeopardize the provider's chances for reinstatement

into the programs.

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 substantial number of small entities the Secretary must

specifically consider the economic effect of a rule on small entities

and analyze regulatory options that could lessen the impact of the

rule.

As indicated above, the provisions set forth in this proposed

rulemaking implement new or revised OIG statutory requirements set

forth in Public Law 105-33. These provisions are designed both to

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

entities from Medicare, Medicaid and all other Federal health care

programs, and strengthen current legal authorities pertaining to the

imposition of CMPs against individuals and entities engaged in

prohibited actions and activities

statutory requirements set

forth in Public Law 105-33. These provisions are designed both to

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

entities from Medicare, Medicaid and all other Federal health care

programs, and strengthen current legal authorities pertaining to the

imposition of CMPs against individuals and entities engaged in

prohibited actions and activities. The proposed regulations would

implement the new statutory requirements by (1) expanding the

application of the OIG's exclusions to all Federal health care

programs; (2) implementing permanent exclusions for individuals

convicted of 3 or more offenses for which an exclusion can be imposed

under section 1128(a) of the Act, and 10 year exclusions for

individuals convicted of two or more such offenses; (3) allowing for

the exclusion of entities controlled by family or household members of

sanctioned individuals; and (4) establishing new CMPs in three specific

areas.

With regard to the OIG's new exclusion authorities, the process for

excluding individuals and entities who are convicted in accordance with

these new provisions remains essentially the same, even though the

types of convictions requiring mandatory exclusions have been

broadened. While there may be a resulting increase in the number of

mandatory and permissive exclusions imposed as a result of the expanded

scope of the OIG's exclusion authority, we do not believe these

increases will be significant. The clarification of exclusion authority

in Sec. 1001.1001 regarding a sanctioned individual's transfer of

ownership or control interest to a family or household member, for

example, should not result in a significant increase in exclusion

actions in accordance with section 1128(b)(8) of the Act since the

provision is likely to act as an effective deterrent against the

occurrence of such transfer arrangements

of exclusion authority

in Sec. 1001.1001 regarding a sanctioned individual's transfer of

ownership or control interest to a family or household member, for

example, should not result in a significant increase in exclusion

actions in accordance with section 1128(b)(8) of the Act since the

provision is likely to act as an effective deterrent against the

occurrence of such transfer arrangements. In addition, we do not

foresee significant increases resulting from the implementation of

section 4301 of BBA, and proposed regulations at Sec. 1001.102,

regarding the permanent exclusion of individuals convicted of 3 or more

health care related crimes. The authority for promulgating this

exclusion is clear cut, and should limit the total number of repeat

exclusions effectuated by the OIG against such fraudulent providers.

The proposed regulations addressing the new OIG CMPs also remain

consistent with the congressional intent of BBA and with the OIG's

existing CMP authority which allows for imposition of civil money

penalties against individuals and entities who commit fraud. These CMPs

are targeted to a limited group of individuals and entities; that is,

those institutional health care providers that employ or enter into

medical service contracts with excluded individuals, health care plans

that fail to report information to the Healthcare Integrity and

Protection Data Bank, and health care providers who violate the anti-

kickback statute.

As indicated, these proposed regulations are narrow in scope and

effect, comport with congressional and statutory intent, and strengthen

the Department's legal authorities against those who defraud or

otherwise act improperly against the Federal and State health care

programs. Since the vast majority of individuals, organizations and

entities involved in delivering health care do not engage in the

dicated, these proposed regulations are narrow in scope and

effect, comport with congressional and statutory intent, and strengthen

the Department's legal authorities against those who defraud or

otherwise act improperly against the Federal and State health care

programs. Since the vast majority of individuals, organizations and

entities involved in delivering health care do not engage in the

prohibited activities and practices described in this rulemaking, we

believe that the aggregate economic impact of these regulations will

not be economically significant. Since there is minimal economic effect

on the industry as a whole, there would be little likelihood of effect

on Federal or State expenditures to implement these regulations.

With regard to the effect of these proposed regulations on a

substantial number of small entities, the provisions are targeted

specifically to those individuals and entities who would defraud or

abuse the health care programs, rather than to the health care industry

as a whole. While some of the perpetrators of fraud effected by this

rule may be small entities, it is the nature of the violation and not

the size of the entity that will induce action on the part of the OIG.

In summary, we have concluded, and the Secretary certifies, that

since this proposed rule should not have a significant economic impact

on Federal, State or local economies and expenditures, nor have a

significant economic impact on a substantial number of small entities,

a regulatory flexibility analysis would not be required.

Paperwork Reduction Act

The provisions of these proposed regulations impose no new

reporting or recordkeeping requirements necessitating clearance by OMB.

IV. Public Inspection of Comments

Comments will be available for public inspection September 16, 1998

in Room 5518 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.

List of Subjects

ions impose no new

reporting or recordkeeping requirements necessitating clearance by OMB.

IV. Public Inspection of Comments

Comments will be available for public inspection September 16, 1998

in Room 5518 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.

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 1003

Administrative practice and procedure, Fraud, Grant programs--

health, Health facilities, Health professions, Maternal and child

health, Medicaid, Medicare, Penalties.

Accordingly, 42 Parts 1001, 1002 and 1003 would be amended as set

forth below:

PART 1001--[AMENDED]

A. Part 1001 would be amended as follows:

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(h),

1395u(j), 1395u(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 1001.1 would be amended by revising paragraph (a) to

read as follows:

Sec. 1001.1 Scope and purpose.

(a) The regulations in this part specify certain bases upon which

individuals and entities may, or in some cases must, be excluded from

participation in Medicare, Medicaid and all other Federal health care

programs. They also state the effect of exclusion, the factors that

will be considered in determining the length of any exclusion, the

provisions governing notices of exclusions, and the process by which an

excluded individual or entity may seek reinstatement into the programs.

* * * * *

3

some cases must, be excluded from

participation in Medicare, Medicaid and all other Federal health care

programs. They also state the effect of exclusion, the factors that

will be considered in determining the length of any exclusion, the

provisions governing notices of exclusions, and the process by which an

excluded individual or entity may seek reinstatement into the programs.

* * * * *

3. Section 1001.2 would be amended by revising the definition for

the term Exclusion; and by adding a definition for the term Federal

health care program to read as follows:

Sec. 1001.2 Definitions.

* * * * *

Exclusion means that items and services furnished by a specified

individual or entity will not be reimbursed under Medicare, Medicaid

and all other Federal health care programs.

Federal health care program means any plan or program providing

health care benefits, whether directly through insurance or otherwise,

that is funded directly, in whole or part, by the United States

Government (other than the Federal Employees Health Benefits Program),

or any State health care program as defined in this section.

* * * * *

4. Section 1001.102 would be amended by revising paragraphs (b)(5)

and (b)(6); and by adding new paragraphs (b)(7) and (d) to read as

follows:

Sec. 1001.102 Length of exclusion.

* * * * *

(b) * * *

(5) The convicted individual or entity has a prior criminal, civil

or administrative sanction record;

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

of $1,500 or more by Medicare, Medicaid or any other Federal health

care programs as a result of improper billings; or

(7) The individual or entity has previously been convicted of a

criminal offense involving the same or similar circumstances.

* * * * *

or entity has a prior criminal, civil

or administrative sanction record;

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

of $1,500 or more by Medicare, Medicaid or any other Federal health

care programs as a result of improper billings; or

(7) The individual or entity has previously been convicted of a

criminal offense involving the same or similar circumstances.

* * * * *

(d) In the case of an exclusion under this subpart, based on a

conviction occurring on or after August 5, 1997, an exclusion will be--

(1) For not less than 10 years if the individual has been convicted

on one other occasion of one or more offenses for which an exclusion

may be effected under section 1128(a) of the Act (The aggravating and

mitigating factors in paragraphs (b) and (c) of this section can be

used to impose a period of time in excess of the 10-year mandatory

exclusion); or

(2) Permanent if the individual has been convicted on two or more

other occasions of one or more offenses for which an exclusion may be

effected under section 1128(a) of the Act.

5. Section 1001.201 would be amended by revising paragraph

(b)(3)(iii)(A) to read as follows:

Sec. 1001.201 Conviction relating to program or health care fraud.

* * * * *

(b) Length of exclusion. * * *

(3) * * *

(iii) * * *

(A) Others being convicted or excluded from Medicare, Medicaid or

any of the other Federal health care programs, or

* * * * *

6. Section 1001.301 would be amended by revising paragraphs

(b)(2)(ii) and (b)(3)(ii)(A) to read as follows:

Sec. 1001.301 Conviction relating to obstruction of an investigation.

* * * * *

care fraud.

* * * * *

(b) Length of exclusion. * * *

(3) * * *

(iii) * * *

(A) Others being convicted or excluded from Medicare, Medicaid or

any of the other Federal health care programs, or

* * * * *

6. Section 1001.301 would be amended by revising paragraphs

(b)(2)(ii) and (b)(3)(ii)(A) to read as follows:

Sec. 1001.301 Conviction relating to obstruction of an investigation.

* * * * *

(b) Length of exclusion. * * *

(2) * * *

(ii) The interference or obstruction had a significant adverse

mental, physical or financial impact on program beneficiaries or other

individuals or on the Medicare, Medicaid or other Federal health care

programs;

* * * * *

(3) * * *

(ii) * * *

(A) Others being convicted or excluded from Medicare, Medicaid or

any of the other Federal health care programs, or

* * * * *

7. Section 1001.401 would be amended by revising paragraphs

(c)(2)(ii) and (c)(3)(i)(A) to read as follows:

Sec. 1001.401 Conviction relating to controlled substances.

* * * * *

(c) Length of exclusion. * * *

(2) * * *

(ii) The acts that resulted in the conviction or similar acts had a

significant adverse mental, physical or financial impact on program

beneficiaries or other individuals or the Medicare, Medicaid or other

Federal health care programs;

* * * * *

(3) * * *

(i) * * *

(A) Others being convicted or excluded from Medicare, Medicaid or

any of the other Federal health care programs, or

* * * * *

8. Section 1001.1001 would be amended by revising paragraph

(a)(1)(ii); and by amending paragraph (a)(2) by adding definitions for

the terms Immediate family member and Member of household to read as

follows:

Sec. 1001.1001 Exclusion of entities owned or controlled by a

sanctioned person.

cted or excluded from Medicare, Medicaid or

any of the other Federal health care programs, or

* * * * *

8. Section 1001.1001 would be amended by revising paragraph

(a)(1)(ii); and by amending paragraph (a)(2) by adding definitions for

the terms Immediate family member and Member of household to read as

follows:

Sec. 1001.1001 Exclusion of entities owned or controlled by a

sanctioned person.

(a) Circumstances for exclusion. * * *

(1) * * *

(ii) Such a person----

(A)(i) Has a direct or indirect ownership interest (or any

combination thereof) of 5 percent or more in the entity;

(ii) Is the owner of a whole or part interest in any mortgage, deed

of trust, note or other obligation secured (in whole or in part) by the

entity or any of the property assets thereof, in which whole or part

interest is equal to or exceeds 5 percent of the total property and

assets of the entity;

(iii) Is an officer or director of the entity, if the entity is

organized as a corporation;

(iv) Is partner in the entity, if the entity is organized as a

partnership;

(v) Is an agent of the entity; or

(vi) Is a managing employee, that is, an individual (including a

general manager, business manager, administrator or director) who

exercises operational or managerial control over the entity or part

thereof, or directly or indirectly conducts the day-to-day operations

of the entity or part thereof, or

(B) Was formerly described in paragraph (a)(1)(ii)(A) of this

section, but is no longer so described because of a transfer of

ownership or control interest to an immediate family member or a member

of the person's household as defined in paragraph (a)(2) of this

section, in anticipation of or following a conviction, assessment of a

CMP, or imposition of an exclusion.

tity or part thereof, or

(B) Was formerly described in paragraph (a)(1)(ii)(A) of this

section, but is no longer so described because of a transfer of

ownership or control interest to an immediate family member or a member

of the person's household as defined in paragraph (a)(2) of this

section, in anticipation of or following a conviction, assessment of a

CMP, or imposition of an exclusion.

(2) * * *

Immediate family member means, a person's husband or wife; natural

or adoptive parent; child or sibling; stepparent, stepchild,

stepbrother or stepsister; father-, mother-, daughter-, son-, brother-

or sister-in-law; grandparent or grandchild; or spouse of a grandparent

or grandchild. * * *

Member of household means, with respect to a person, any individual

with whom they are sharing a common abode as part of a single family

unit, including domestic employees and others who live together as a

family unit. A roomer or boarder is not considered a member of

household.

* * * * *

9. Section 1001.1301 would be amended by revising paragraph

(b)(2)(iii) to read as follows:

Sec. 1001.1301 Failure to grant immediate access.

* * * * *

(b) Length of exclusion. * * *

(2) * * *

(iii) The impact of the exclusion on Medicare, Medicaid or any of

the other Federal health care programs, beneficiaries or the public;

and

* * * * *

10. Section 1001.1401 would be amended by revising paragraphs

(b)(1) and (b)(4) to read as follows:

Sec. 1001.1401 Violations of PPS corrective action.

* * * * *

e to grant immediate access.

* * * * *

(b) Length of exclusion. * * *

(2) * * *

(iii) The impact of the exclusion on Medicare, Medicaid or any of

the other Federal health care programs, beneficiaries or the public;

and

* * * * *

10. Section 1001.1401 would be amended by revising paragraphs

(b)(1) and (b)(4) to read as follows:

Sec. 1001.1401 Violations of PPS corrective action.

* * * * *

(b) Length of exclusion. * * *

(1) The impact of the hospital's failure to comply on Medicare,

Medicaid or any of the other Federal health care programs, program

beneficiaries or other individuals;

* * * * *

(4) The impact of the exclusion on Medicare, Medicaid or any of the

other Federal health care programs, beneficiaries or the public; and

* * * * *

11. Section 1001.1501 would be amended by revising paragraph (a)(3)

to read as follows:

Sec. 1001.1501 Default of health education loan or scholarship

obligations.

(a) Circumstance for exclusion. * * *

(3) The OIG will take into account access of beneficiaries to

physicians' services for which payment may be made under Medicare,

Medicaid or other Federal health care programs in determining whether

to impose an exclusion.

* * * * *

12. Section 1001.1901 would be amended by revising paragraphs (a),

(b)(1), introductory paragraph (c)(3) and (c)(4)(i) to read as follows:

Sec. 1001.1901 Scope and effect of exclusion.

(a) Scope of exclusion. Exclusions of individuals and entities

under this title will be from Medicare, Medicaid and any of the other

Federal health care programs, as defined in Sec. 1001.2 of this part.

*

(c) Exceptions to paragraph (b)(1) of this section. * * *

(3) Unless the Secretary determines that the health and safety of

beneficiaries receiving services under Medicare, Medicaid or any of the

other Federal health care programs warrants the exclusion taking effect

earlier, payment may be made under such program for up to 30 days after

the effective date of the exclusion for--

* * * * *

(4)(i) Notwithstanding the other provisions of this section,

payment may be made under Medicare, Medicaid or other Federal health

care programs for certain emergency items or services furnished by an

excluded individual or entity, or at the medical direction or on the

prescription of an excluded physician or other authorized individual

during the period of exclusion. To be payable, a claim for such

emergency items or services must be accompanied by a sworn statement of

the person furnishing the items or services specifying the nature of

the emergency and why the items or services could not have been

furnished by an individual or entity eligible to furnish or order such

items or services.

* * * * *

13. Section 1001.3002 would be amended by republishing introductory

paragraph (b), removing existing paragraph (b)(5) and adding new

paragraphs (b)(5) and (b)(6); and by revising paragraph (c)(1) to read

as follows:

Sec. 1001.3002 Basis for reinstatement.

* * * * *

(b) In making the reinstatement determination, the OIG will

consider--

* * * * *

(5) Whether the individual or entity, during the period of

exclusion, has adequately and promptly informed its clients or patients

that any items or services provided will not be reimbursable under any

Federal health care program; and

(6) Whether the individual or entity has, during the period of

exclusion, submitted claims, or caused claims to be submitted or

payment to be made by any Federal health care program, for items or

services the excluded party furnished, ordered or prescribed, including

health care administrative services.

or services provided will not be reimbursable under any

Federal health care program; and

(6) Whether the individual or entity has, during the period of

exclusion, submitted claims, or caused claims to be submitted or

payment to be made by any Federal health care program, for items or

services the excluded party furnished, ordered or prescribed, including

health care administrative services.

(c) * * *

(1) Has properly reduced his or her ownership or control interest

in the entity below 5 percent;

* * * * *

14. Section 1001.3003 would be revised to read as follows:

Sec. 1001.3003 Approval of request for reinstatement.

(a) If the OIG grants a request for reinstatement, the OIG will--

(1) Give written notice to the excluded individual or entity

specifying the date of reinstatement;

(2) Notify HCFA of the date of the individual's or entity's

reinstatement;

(3) Notify appropriate Federal and State agencies that administer

health care programs that the individual or entity has been reinstated

into all Federal health care programs; and

(4) To the extent applicable, give notice to others that were

originally notified of the exclusion.

(b) A determination by the OIG to reinstate an individual or entity

has no effect if a Federal health care program has imposed a longer

period of exclusion under its own authorities.

15. Section 1001.3005 would be amended by revising paragraphs (a)

introductory text, (b) and (d) to read as follows:

Sec. 1001.3005 Reversed or vacated decisions.

(a) An individual or entity will be reinstated into Medicare,

Medicaid and other Federal health care programs retroactive to the

effective date of the exclusion when such exclusion is based on--

* * * * *

(b) If an individual or entity is reinstated in accordance with

paragraph (a) of this section, HCFA and other Federal health care

programs will make payment for services covered under such program that

were furnished or performed during the period of exclusion.

* * * * *

Federal health care programs retroactive to the

effective date of the exclusion when such exclusion is based on--

* * * * *

(b) If an individual or entity is reinstated in accordance with

paragraph (a) of this section, HCFA and other Federal health care

programs will make payment for services covered under such program that

were furnished or performed during the period of exclusion.

* * * * *

(d) An action taken by the OIG under this section will not require

any other Federal health care program to reinstate the individual or

entity if such program has imposed an exclusion under its own

authority.

PART 1002--[AMENDED]

B. Part 1002 would be amended as follows:

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 1002.2 would be amended by revising paragraph (a) to

read as follows:

Sec. 1002.2 General authority.

(a) In addition to any other authority it may have, a State may

exclude an individual or entity from participation in the Medicaid

program for any reason for which the Secretary could exclude that

individual or entity from participation in the Medicare, Medicaid and

other Federal health care programs under sections 1128, 1128A or

1866(b)(2) of the Social Security Act.

* * * * *

PART 1003--[AMENDED]

C. Part 1003 would be amended as follows:

1. The authority citation for part 1003 would be revised to read as

follows:

Authority: 42 U.S.C. 1302, 1320-7, 1320a-7a, 1320a-7e, 1320b-10,

1395dd(d)(1), 1395mm, 1395nn(g), 1395ss(d), 1396b(m), 11131(c) and

11137(b)(2).

2. Section 1003.100 would be amended by revising paragraphs (a) and

(b)(1)(iv), (viii), (x), (xi) and by adding (b)(1)(xii) to read as

follows:

Sec. 1003.100 Basis and purpose.

uthority citation for part 1003 would be revised to read as

follows:

Authority: 42 U.S.C. 1302, 1320-7, 1320a-7a, 1320a-7e, 1320b-10,

1395dd(d)(1), 1395mm, 1395nn(g), 1395ss(d), 1396b(m), 11131(c) and

11137(b)(2).

2. Section 1003.100 would be amended by revising paragraphs (a) and

(b)(1)(iv), (viii), (x), (xi) and by adding (b)(1)(xii) to read as

follows:

Sec. 1003.100 Basis and purpose.

(a) Basis. This part implements sections 1128(c), 1128A, 1128E,

1140, 1876(i)(6), 1877(g), 1882(d) and 1903(m)(5) of the Social

Security Act, and sections 421(c) and 427(b)(2) of Pub. L. 99-660 (42

U.S.C. 1320a-7, 1320a-7a, 1320a-7e, 1320a-7(c), 1320b(10), 1395mm,

1395ss(d), 1396(m), 11131(c) and 11137(b)(2)).

(b) Purpose. This part--

(1) * * *

(iv)(A) Fail to report information concerning medical malpractice

payments or who improperly disclose, use or permit access to

information reported under part B of title IV of Public Law 99-660, and

regulations specified in 45 CFR part 60, or

(B) Are health plans and fail to report information concerning

sanctions or other adverse actions imposed on providers as required to

be reported to the Healthcare Integrity and Protection Data Bank

(HIPDB) in accordance with section 1128E of the Act;

* * * * *

(viii) Have submitted, or caused to be submitted, certain

prohibited claims, including claims for services rendered by excluded

individuals employed by or otherwise under contract with such person,

under one or more Federal health care programs;

* * * * *

equired to

be reported to the Healthcare Integrity and Protection Data Bank

(HIPDB) in accordance with section 1128E of the Act;

* * * * *

(viii) Have submitted, or caused to be submitted, certain

prohibited claims, including claims for services rendered by excluded

individuals employed by or otherwise under contract with such person,

under one or more Federal health care programs;

* * * * *

(x) Have collected amounts that they know or should know were

billed in violation of Sec. 411.353 of this title and have not refunded

the amounts collected on a timely basis;

(xi) Are physicians or entities that enter into an arrangement or

scheme that they know or should know has as a principal purpose the

assuring of referrals by the physician to a particular entity which, if

made directly, would violate the provisions of Sec. 411.353 of this

title; or

(xii) Violate the Federal health care programs' anti-kickback

statute as set forth in section 1128B of the Act.

* * * * *

3. Section 1003.102 would be amended by revising paragraphs (a)(2)

and (b)(5); and by adding a new paragraph (b)(11) to read as follows:

Sec. 1003.102 Basis for civil money penalties and assessments.

(a) * * *

(2) An item or service for which the person knew, or should have

known, that the claim was false or fraudulent, including a claim for

any item or service furnished by an excluded individual employed by or

otherwise under contract with that person;

* * * * *

(b) * * *

(5) Fails to report information concerning--

lows:

Sec. 1003.102 Basis for civil money penalties and assessments.

(a) * * *

(2) An item or service for which the person knew, or should have

known, that the claim was false or fraudulent, including a claim for

any item or service furnished by an excluded individual employed by or

otherwise under contract with that person;

* * * * *

(b) * * *

(5) Fails to report information concerning--

(i) A payment made under an insurance policy, self-insurance or

otherwise, for the benefit of a physician, dentist or other health care

practitioner in settlement of, or in satisfaction in whole or in part

of, a medical malpractice claim or action or a judgment against such a

physician, dentist or other practitioner in accordance with section 421

of Pub. L. 99-660 (42 U.S.C. 11131) and as required by regulations at

45 CFR part 60; or

(ii) An adverse action required to be reported to the Healthcare

Integrity and Protection Data Bank as established by section 221 of

Public Law 104-191 and set forth in section 1128E of the Act.

* * * * *

(11) Has violated section 1128B of the Act by unlawfully offering,

paying, soliciting or receiving remuneration in return for the referral

of business paid for by Medicare, Medicaid or other Federal health care

programs.

* * * * *

4. Section 1003.103 would be amended by revising paragraph (a); and

by adding new paragraphs (g) and (h) to read as follows:

Sec. 1003.103 Amount of penalty.

(a) Except as provided in paragraphs (b) and (d) through (h) of

this section, the OIG may impose a penalty of not more than $10,000 for

each item or service that is subject to a determination under

Sec. 1003.102.

* * * * *

(g) The OIG may impose a penalty of not more than $25,000 against a

health plan for failing to report information on an adverse action

required to be reported to the Healthcare Integrity and Protection Data

Bank in accordance with section 1128E of the Act and

Sec. 1003.102(b)(5)(ii) of this part.

,000 for

each item or service that is subject to a determination under

Sec. 1003.102.

* * * * *

(g) The OIG may impose a penalty of not more than $25,000 against a

health plan for failing to report information on an adverse action

required to be reported to the Healthcare Integrity and Protection Data

Bank in accordance with section 1128E of the Act and

Sec. 1003.102(b)(5)(ii) of this part.

(h) For each violation of Sec. 1003.102(b)(11) of this part, the

OIG may impose--

(1) A penalty of $50,000, and

(2) An assessment of up to 3 times the total amount of remuneration

offered, paid, solicited or received, as specified in Sec. 1003.104(b)

of this section.

5. Section 1003.104 would be revised to read as follows:

Sec. 1003.104 Amount of assessment.

(a) The OIG may impose an assessment, where authorized, in

accordance with Sec. 1003.102 (except for Sec. 1003.102(b)(11)), of not

more than three times the amount claimed for each item or service which

was a basis for the penalty. The assessment is in lieu of damages

sustained by the Department or a State because of that claim.

(b) In accordance with Sec. 1003.102(b)(11), the OIG may impose an

assessment of not more than three times the total amount of

remuneration offered, paid, solicited or received, without regard to

whether a portion of such remuneration was offered, paid, solicited or

received for a lawful purpose.

6. Section 1003.105 would be amended by revising the section

heading, introductory paragraph (a)(1) and paragraph (b)(1) to read as

follows:

Sec. 1003.105 Exclusion from participation in Medicare, Medicaid and

other Federal health care programs.

(a)(1) Except as set forth in paragraph (b) of this section, in

lieu of or in addition to any penalty or assessment, the OIG may

exclude from participation in Medicare, Medicaid and other Federal

health care programs the following persons for a period of time

determined under Sec. 1003.107--

* * * * *

Exclusion from participation in Medicare, Medicaid and

other Federal health care programs.

(a)(1) Except as set forth in paragraph (b) of this section, in

lieu of or in addition to any penalty or assessment, the OIG may

exclude from participation in Medicare, Medicaid and other Federal

health care programs the following persons for a period of time

determined under Sec. 1003.107--

* * * * *

(b)(1) (i) With respect to determinations under Sec. 1003.102(b)(2)

or (b)(3), a physician may not be excluded if the OIG determines that

he or she is the sole community physician or the sole source of

essential specialized services in a community.

(ii) With respect to determinations under Sec. 1003.102(b)(5)(ii)

of this part, no exclusion shall be imposed.

* * * * *

7. Section 1003.106 would be amended by redesignating existing

paragraph (a)(1)(vi) to read as new paragraph (a)(1)(ix); by adding new

paragraphs (a)(1)(vi), (a)(1)(vii) and (a)(1)(viii); and by revising

paragraphs (a)(1)(ii), (a)(1)(iii), (a)(1)(ix), (a)(2)(i), (a)(2)(ii)

and (a)(2)(iii) to read as follows:

Sec. 1003.106 Determinations regarding the amount of the penalty and

assessment.

(a) Amount of penalty.

(1) * * *

(ii) The degree of culpability of the contracting provider, or the

person submitting the claim or request for payment, or giving the

information;

(iii) The history of prior offenses of the contracting provider (or

principals of the contracting provider), or the person submitting the

claim or request for payment, or giving the information;

* * * * *

(vi) The amount of financial interest involved with respect to

Sec. 1003.102(b)(10);

(vii) Whether the contracting provider knew of the exclusion when

employing or otherwise contracting with an excluded individual or

entity in accordance with Sec. 1003.102(a)(2) of this part;

ontracting provider), or the person submitting the

claim or request for payment, or giving the information;

* * * * *

(vi) The amount of financial interest involved with respect to

Sec. 1003.102(b)(10);

(vii) Whether the contracting provider knew of the exclusion when

employing or otherwise contracting with an excluded individual or

entity in accordance with Sec. 1003.102(a)(2) of this part;

(viii) The harm to patients or any Federal or State health care

program which resulted or could have resulted from the provision of

care by a person or entity with which the contracting provider is

expressly prohibited from contracting under section 1128A(a)(6) of the

Act; and

(ix) Such other matters as justice may require.

(2) * * *

(i) The nature and circumstances of the failure to properly report

information, or the improper disclosure of information, as required;

(ii) The degree of culpability of the person in failing to provide

timely and complete data or in improperly disclosing, using or

permitting access to information, as appropriate;

(iii) The materiality, or significance of omission, of the

information to be reported, or the materiality of the improper

disclosure of, or use of, or access to information, as appropriate;

* * * * *

8. Section 1003.109 would be amended by revising introductory

paragraph (a) and paragraph (a)(3) to read as follows:

Sec. 1003.109 Notice of proposed determination.

information, as appropriate;

(iii) The materiality, or significance of omission, of the

information to be reported, or the materiality of the improper

disclosure of, or use of, or access to information, as appropriate;

* * * * *

8. Section 1003.109 would be amended by revising introductory

paragraph (a) and paragraph (a)(3) to read as follows:

Sec. 1003.109 Notice of proposed determination.

(a) If the Inspector General proposes a penalty and, when

applicable, an assessment, or proposes to exclude a respondent from

participation in Medicare, Medicaid and any other Federal health care

program, as applicable, in accordance with this part, he or she must

deliver or send by certified mail, return receipt requested, to the

respondent, written notice of his or her intent to impose a penalty,

assessment and exclusion, as applicable. The notice includes--

* * * * *

(3) The reason why such claims, requests for payments or incidents

subject the respondent to a penalty, assessment and exclusion;

* * * * *

9. Section 1003.114 would be amended by revising paragraph (a) to

read as follows:

Sec. 1003.114 Collateral estoppel.

(a) Where a final determination pertaining to the respondent's

liability under Sec. 1003.102 has been rendered in any proceeding in

which the respondent was a party and had an opportunity to be heard,

the respondent shall be bound by such determination in any proceeding

under this part.

* * * * *

Dated: February 6, 1998.

June Gibbs Brown,

Inspector General, Department of Health and Human Services.

Approved: April 6, 1998.

Donna E. Shalala,

Secretary.

[FR Doc. 98-23463 Filed 8-28-98; 4:23 pm]

BILLING CODE 4150-04-P