Don’t Enter the Exclusion Zone

Know how to avoid the consequences of employing anyone on the OIG’s “list.”

by Robert A. Pelaia, Esq., CPC, CPCO and Rosanne (Rosie) Brandt, DDS
In May 2013, the Office of Inspector General (OIG) issued the “Updated Special Advisory Bulletin on the Effect of Exclusion from Participation in Federal Health Care Programs.” The updated bulletin expands and clarifies the scope and effect of legal prohibition on payment by federal healthcare programs for items or services furnished by an excluded person, or at the medical direction of or prescribed by an excluded person. It describes how you can violate the prohibition, and the administrative sanctions OIG can pursue against the prohibition violators. It also provides guidance on the screening of employees or contractors to determine whether they are an excluded person.
To protect patients and eliminate fraud, waste, and abuse in federal healthcare programs, the OIG has the authority to exclude certain providers from participation in federal healthcare programs. Some common reasons for federal healthcare program exclusion include convictions of fraud, patient abuse, and licensing board actions, such as revocation of a medical license due to concerns over physician competence. Federal law also authorizes civil money penalties (CMPs) against healthcare providers or entities that employ or contract with an individual or entity, which they know or should know is excluded from participation in a federal healthcare program, and that provide, either directly or indirectly, federally reimbursed items or services.

Effects of Exclusion

Exclusion from federal healthcare programs means no payment will be made for items or services furnished, ordered, or prescribed by an excluded provider. Items or services furnished at the direction or prescription of an excluded individual or entity also are not reimbursable when the party furnishing the items or services either knows, or should know, of the exclusion. Healthcare providers and entities may not employ or contract with an excluded individual to provide items or services paid for by a federal healthcare program.
The duration for exclusion may be time limited or permanent. At the conclusion of a time-limited exclusion, an excluded provider may apply for reinstatement in a federal healthcare program, and the OIG may approve the application. Limited exceptions do exist that allow excluded individuals to be paid for certain services, such as emergency services.

Examples of Prohibited Situations

To help providers recognize situations where employment of an excluded person is prohibited, the following examples are mentioned in OIG’s updated 2013 bulletin. In all of these examples, the employer may be subject to overpayment and CMP liability for violations of federal law.
Hospital will not be paid for the items or services furnished by an excluded nurse to federal healthcare program beneficiaries, even if the nurse’s services are not separately billed and are paid for as part of a Medicare diagnosis-related group payment received by the hospital. The excluded nurse also would be in violation of her exclusion for causing a claim to be submitted by the hospital for items or services he or she furnished while excluded.
Federal healthcare program payment is prohibited for items and services provided by a person who was excluded as a pharmacist—even after that person earns his or her medical degree and becomes a licensed physician.
Federal prohibition of healthcare program payment applies to services performed by excluded individuals who work for (or under an arrangement with) a hospital, nursing home, home health agency, or managed care entity when such services are related to, for example, preparation of surgical trays or review of treatment plans—regardless of whether those services are separately billable or are included in a bundled payment.
No federal healthcare program payment is allowed for services performed by excluded pharmacists or other excluded individuals who input prescription information for pharmacy billing or who are involved in any way in filling prescriptions for drugs that are billed to a federal healthcare program.
Excluded individuals are prohibited from providing transportation services (e.g., ambulance driving, ambulance dispatching, etc.) that are paid for by a federal healthcare program.
Excluded persons are prohibited from furnishing administrative and management services payable by federal healthcare programs. This prohibition applies even if the administrative and management services are not separately billable. For example, an excluded individual may not serve in an executive or leadership role (e.g., chief executive officer, chief financial officer, general counsel, director of health information management, director of human resources, physician practice office manager, etc.) for a provider that furnishes items or services payable by federal healthcare programs.
An excluded individual may not provide other administrative and management services, such as health information technology services and support, strategic planning, billing and accounting, staff training, and human resources, unless wholly unrelated to federal healthcare programs.
Any items and services are not payable by a federal healthcare plan when furnished at the medical direction of, or prescribed by, an excluded person when the person furnishing the items or services either knows or should know of the exclusion. Many providers (e.g., laboratories, imaging centers, durable medical equipment suppliers, and pharmacies, etc.) could be subject to liability if they furnish items or services to a federal program beneficiary on the basis of an order or a prescription that was written by an excluded physician. To avoid liability, the OIG encourages providers to ensure, at the point of service, that the ordering or prescribing physician is not excluded.

CMP Liability

Employment of excluded providers results in submission of overpayments that trigger CMP liability if the excluded person provides services payable, directly or indirectly, by a federal healthcare program. If a healthcare provider contracts with or employs an individual that the employer knows or should know is excluded, the provider may be subject to a CMP of up to $10,000 for each item or service, as well as an assessment of up to three times the amount claimed, in addition to program exclusion.
CMP liability applies to furnishing items or services that are OIG exclusion violations. Such exclusions include direct patient care, administrative and management services, and items or services furnished at the direction of an excluded individual—even if the excluded person does not receive payment for the furnished items or services. Liability also applies to any excluded individual regardless of whether the individual is an employee, contractor, volunteer, or any other relationship with the provider. Relying on a staffing agency to check the exclusion status of all potential employees will not avoid CMP liability. The OIG points out that even if another entity is hired to check the exclusion status of potential employees, the provider retains the potential CMP liability if they employ or contract with an excluded individual.

Sources of Excluded Information

The OIG maintains a list of all current excluded individuals and entities called the List of Excluded Individuals and Entities (LEIE). The LEIE is available on the OIG website ( and is updated monthly. The OIG recommends that providers check the list to identify excluded individuals. The OIG sends its list of excluded parties to the Centers for Medicare & Medicaid Services (CMS) (to update its Medicare Exclusions Database: and to the General Services Administration, which maintains an Excluded Parties List System.
State sanctions and licensure databases are another source of exclusion information, but the OIG recommends the LEIE as the primary database for purposes of screening current and potential employees and contractors.

Take Steps to Reduce Liability

Perhaps the most valuable instruction to providers is to use the OIG’s LEIE to screen not just employees, but also contractors, subcontractors, volunteers, and other personnel who may provide services or items payable by a federal healthcare program. Although there is no statutory or regulatory obligation to search the LEIE, it’s advised that providers make use of this valuable resource.
Check all potential names. When checking names against the LEIE, all potential names used by the individual should be searched (including maiden names) because only the name known to the OIG at the time of exclusion is included in the database. If you find a potential match, you must try to verify the results. It is not sufficient to simply find a matching first and last name on the LEIE.
Check for status changes. The OIG also recommends that employers periodically check all employees and contractors against the LEIE to determine whether their status has changed. Other groups highly recommended for screening by the OIG are: employees provided by staffing agencies, physician groups that contract with the hospital to provide emergency room coverage, and billing or coding contractors.
The basis behind these additional screenings is that CMP liability risk is greatest for those providers who cause claims to be submitted to federal healthcare programs for payment of items or services integral to the provision of patient care. If a provider does not periodically rescreen employees and contractors, he or she may be subjected to additional penalties if the OIG determines he or she would have known about the exclusion sooner had a periodic screening been done.
It’s vitally important to comply with the prohibition on payment by federal healthcare programs for items or services furnished by excluded persons or at the medical direction of or prescribed by an excluded person. Providers could save substantial money by knowing the rules and carefully ensuring no prohibited arrangements are entered into. It’s advisable, and necessary, for employers to institute a screening program to identify excluded individuals as quickly as possible and avert potential (and easily avoidable) liability.

Robert A. Pelaia, Esq., CPC, CPCO, is senior university counsel for health affairs at the University of Florida College of Medicine, Jacksonville, Fla. He is certified as a Health Care Law Specialist by the Florida Bar Board of Legal Specialization and Education, serves on AAPC’s Legal Advisory Board, and was a 2011-2013 AAPC National Advisory Board member. Pelaia is a member of the Jacksonville River City, Fla., local chapter.
Rosanne (Rosie) Brandt holds a Doctorate of Dental Surgery from Northwestern University. After practicing dentistry for 20 years, she changed careers to attend Florida Coastal School of Law, where she is now a part-time, second year law student, J.D. candidate 2015, and an extern with the Fifth District Court of Appeals in Daytona Beach, Fla. After graduation, her concentration will be on healthcare law. Brandt occasionally practices dentistry for ACC Healthcare, performing exams and treatment for deploying National Guardsmen throughout the United States.

Certified Professional Compliance Officer - CPCO

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