OIG Issues Proposed Rules on Exclusion Authority and Civil Monetary Penalties
On May 9 and May 12, 2014, the Office of Inspector General (“OIG”) of the Department of Health and Human Services (“HHS”) published two proposed rules, one expanding its exclusion authority (“Proposed Exclusion Rule”)1 and the other broadening and strengthening the availability of civil monetary penalties (“Proposed CMP Rule”).2 Although many of these proposals would simply codify changes from the Affordable Care Act (“ACA”), the proposals would augment the OIG’s ability to effectively utilize its exclusion and CMP authorities to combat alleged healthcare fraud and abuse. In this update, we have outlined some of the key proposals from each proposed rule that may be of interest to life sciences companies. Comments to the Proposed Exclusion Rule are due July 8, 2014, and comments to the Proposed CMP Rule are due July 11, 2014.
Proposed Exclusion Rule
This proposed rule sets forth a series of amendments to the regulations relating to the OIG’s authority to exclude individuals and entities from participation in Federal healthcare programs (“FHCPs”). To protect beneficiaries and the federal fisc from fraud and abuse, the OIG has discretion to exclude individuals and entities based on specified categories of misconduct and is required to exclude those who commit what are viewed as more serious or repeated offenses. The ACA amended the Social Security Act provisions governing the OIG’s permissive and mandatory exclusion authority, and the Proposed Exclusion Rule seeks to reflect these modifications, as well as to make other revisions the OIG characterizes as clarifications.
Broader definition of “furnish”
The OIG is proposing to expand certain definitional terms in a manner that more closely matches what many have interpreted as the government’s existing enforcement approach. As a consequence of being excluded, individuals and entities cannot receive payment “for any item or service furnished” to a FHCP. The OIG’s new definition would expand the meaning of “furnish” to encompass not only individuals and entities who “submit claims to” FHCPs, but also those who “request or receive payment from” FHCPs. The OIG specifically notes that this “revised wording would be consistent with the False Claims Act’s broad definition of ‘claim.’”
Expanded Bases for Permissive Exclusion Authority
The proposed rule implements the ACA’s broadening of the OIG’s permissive exclusion authority as follows:
- Obstruction of Audits: The ACA extended the OIG’s existing discretion to exclude an individual or entity based on the obstruction of an investigation into direct or indirect misuse of FHCP funds, to additionally reach obstruction of an audit into the same.
- Failure to Supply Payment Information: The OIG proposes to impose exclusions for failure to supply payment information not only to individuals or entities that “furnish” items or services under a FHCP, but also those who “order, refer for furnishing, or certif[y] the need for” items or services reimbursed by a FHCP.
- False Statements: The OIG plans to add a provision incorporating the ACA’s new grant of authority to exclude any individual or entity that makes or causes to be made false statements or misrepresentations of material fact in any application, agreement, bid, or contract to provide or supply items or services under a FHCP. The OIG will look to a broad pool of information sources in determining whether a false statement or misrepresentation has been made, including private insurance companies and Medicare contractors.
Enhanced Subpoena Authority
The ACA not only expanded the bases for exclusion, but also the tools at the OIG’s disposal as part of its investigation. Prior to the enactment of the ACA, the OIG had testimonial subpoena authority only when pursuing CMPs. Pursuant to section 6402(e) of the ACA, the OIG can now issue subpoenas in cases of potential exclusion, regardless of whether it will also seek CMPs.
Removal of Time Limitations
Finally, the OIG proposes removing the current six year limit within which it must find misconduct, even when the exclusion is based on violations of another statute that has a period of limitations. The OIG had declined to finalize a similar proposal over a decade ago, based on criticism that the passage of time would dim the accuracy of evidence collected. Nonetheless, the OIG now explains that “strong policy and legal justifications support [its] interpretation.” The OIG’s rationale seems driven by a desire not to be disadvantaged by the protracted timeline of FCA litigation. The OIG explained that with the time limit, it would be forced to prematurely file notices of proposed exclusion as to defendants in pending FCA cases.
Proposed CMP Rule
The ACA also expanded the CMP provisions, and, like the Proposed Exclusion Rule, the Proposed CMP Rule implements the ACA changes, along with several other mechanisms expanding the OIG’s authority and discretion in this context.
Expanded Scope of Conduct
The ACA expanded the type of conduct that could serve as the predicate for a CMP. The OIG proposes to codify the following five new bases:
- Failure to provide the OIG with “timely access to records” upon “reasonable request,” both interpreted in OIG’s favor;
- Ordering or prescribing while excluded, if the excluded person knows or should know that the item or service may be reimbursed by a FHCP;
- Making false statements, omissions, or misrepresentations in an application to participate in a FHCP;
- Failure to report and return a known overpayment; and
- Although the ACA did not specify a penalty amount, the OIG is proposing to interpret the default penalty as up to $10,000 per day. The OIG is specifically soliciting comments as to whether this default penalty should attach to each claim identified as an overpayment.
- Making or using a false record or statement that is material to a false or fraudulent claim.
CMPs Against Medicare Advantage and Part D Contracting Organizations
The OIG proposes to codify a number of changes to the exposure of Medicare Advantage and Part D contracting organizations to CMPs.
- The ACA clarified that the OIG can impose CMPs against Medicare Advantage and Part D contracting organizations not only for the misconduct of their employees or agents, but also of the providers and suppliers with which they contract, regardless of whether these latter entities are agents.
- Additionally, the ACA created new categories of misconduct that can serve as the basis for CMPs, including: (1) enrolling individuals without prior consent; (2) transferring enrollees to another plan without prior consent; (3) transferring an enrollee “solely for the purpose of earning a commission”; (4) failure to comply with applicable marketing restrictions; and (5) employing or contracting with anyone who engages in certain wrongful conduct, including failure to provide medically necessary care and discouraging enrollment by vulnerable eligible individuals.
Proposals Applying to Both Rules
Factors to Consider When Determining Penalties
The OIG clarified that it will consider a single list of primary factors both when assessing CMPs and in making exclusion determinations. The OIG provided an illustrative, rather than comprehensive list: (1) the nature and circumstances of the violation; (2) the actor’s degree of culpability; (3) the actor’s history of prior offenses; (4) other wrongful conduct; and (5) “other matters as justice may require.”
- Any wrongful conduct: As an aggravating circumstance within the “history of prior offense” factor, the OIG proposes to clarify that it will look not only to the convictions or civil liability of the entity’s principals, but also other previous “wrongful conduct” by key employees that was committed “in connection with the delivery of a healthcare item or service.” This change is intended to allow the OIG to capture a broader range of prior conduct, including private insurance fraud.
- Additionally, if any single aggravating circumstance is present, the OIG is proposing to clarify that a CMP “at or close to the maximum amount may be justified,” and the person “should be excluded.”
- Corrective Action: The OIG is proposing to add “appropriate and timely corrective action in response to the violation” as a new mitigating consideration impacting the degree of culpability factor. To constitute “corrective action,” a person must use the OIG’s Self-Disclosure Protocol.
Alternate Methodology for Calculating CMPs
The OIG’s current approach to calculating CMPs has the potential to trigger a string of payments being recouped, even where others in the chain were unaware of the excluded person’s involvement. This will have an even greater impact as FHCPs move to greater reliance on bundled payments. As such, the OIG is proposing an alternative, per-day methodology for calculating CMPs where an excluded person provides, furnishes, orders, or prescribes a non-separately billable item or service (such as one element of a service reimbursed under a global payment).
If you have any questions regarding this update, please contact one of the following or the Sidley lawyer with whom you usually work.
1 HHS, OIG, Revisions to the Office of Inspector General’s Exclusion Authorities, 79 Fed. Reg. 26,810 (May 9, 2014).
2 HHS, OIG, Revisions to the Office of Inspector General’s Civil Monetary Penalty Rules, 79 Fed. Reg. 27,080 (May 12, 2014), available at http://www.gpo.gov/fdsys/pkg/FR-2014-05-12/pdf/2014-10394.pdf.
To receive future copies of this and other Sidley updates via email, please sign up at www.sidley.com/subscribe.
Sidley Austin provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship.
Attorney Advertising - For purposes of compliance with New York State Bar rules, our headquarters are Sidley Austin LLP, 787 Seventh Avenue, New York, NY 10019, 212.839.5300; One South Dearborn, Chicago, IL 60603, 312.853.7000; and 1501 K Street, N.W., Washington, D.C. 20005, 202.736.8000.