OIG’s Enforcement Authority Expands

Understand two proposed rules and what they could mean for you.

By Robert A. Pelaia, Esq., CPC, CPCO, and Drew Krieger, MBA
The Office of Inspector General (OIG) released two proposed rules in May 2014 that would expand its authority to exclude individuals and entities from federal healthcare programs, and to impose civil monetary penalties (CMPs) for certain types of misconduct. Here’s what you need to know, should the provisions in these proposed rules become law.
Proposal One:
Changes to Permissive Exclusionary Authority
Two types of exclusionary authorities allow OIG to exclude individuals and entities from participating in the programs (i.e., Medicare and Medicaid). Both exclusionary authorities aim to protect the programs and their beneficiaries from untrustworthy healthcare providers.

  1. Mandatory exclusionary authority requires OIG, by law, to exclude in certain instances. A mandatory exclusion will last for a minimum of five years in situations ranging from a healthcare fraud felony conviction to patient abuse.
  2. Permissive exclusionary authority is more subjective, often less severe, and gives OIG the discretion to determine the exclusion’s duration. Situations where permissive exclusionary authority may be appropriate include a misdemeanor conviction relating to a controlled substance or failing to repay student loans.

The first of OIG’s proposed rules would adopt from the Patient Protection and Affordable Care Act of 2010 (ACA) the ability for OIG to exercise permissive exclusionary authority if the individual:

  • Has been convicted of an offense in connection with obstruction or interference with an audit.

This would create a new authority for OIG. Currently, OIG may exercise permissive exclusionary authority if an individual or entity “has a misdemeanor relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct” (42 C.F.R. § 1001.201). OIG notes that prior to the proposed rule, “if an individual was convicted of an offense in connection with the obstruction of an audit, [OIG] did not have a basis to exclude the individual or entity under section 1128(b)(2) of the Act” (79 Federal Register 26810, 26814: May 9, 2014). Section 6408(c) of the ACA expanded the authority by allowing OIG to exclude those individuals.

  • Has made, or causes to be made, any false statements, omissions, or misrepresentations of material fact in applications for the programs.

The language in the proposed rule gives OIG new authority to exercise permissive exclusionary authority on “any individual or entity that knowingly makes, or causes to be made, any false statement, omission, or misrepresentation of a material fact in any application, agreement, bid, or contract to participate or enroll as a provider of services or supplier under [the programs]” (Ibid. at 26811).

  • Has failed to supply payment information for items or services for which payment may be made under the programs.

The OIG “may exclude any individual or entity that furnishes items or services for which payment may be made” (42 C.F.R. § 1001.1201). For clarity, OIG changes the language in the proposal to, “order, refer for furnishing, or certify the need for” items or services for which payment may be made under the programs (79 Federal Register 26810, 26811: May 9, 2014).
Early Reinstatement
The OIG recognizes that there will be instances when it may be appropriate to issue an early reinstatement for an individual or entity that has been excluded for a less serious offense resulting in a loss of license. The OIG is considering a policy allowing early reinstatement when an individual has lost his or her license, and it’s later decided that the individual “poses little or no threat to patients or the programs” (79 Federal Register 26810, 26815: May 9, 2014).
New Authority
Proposed permissive authority would allow OIG to issue testimonial subpoenas in permissive exclusion cases. Testimonial subpoenas operate as orders to provide a testimonial deposition to a party. This same authority already exists under OIG’s authority to impose CMPs, and would now apply in exclusion investigations.
Proposal Two:
Changes to CMP Authority for OIG
(79 Federal Register 27080: May 12)
A CMP is a fine charged by a civil court to an entity or person that has benefitted from either illegal or ethically questionable activity. OIG currently may impose CMPs for a number of reasons, including violating anti-kickback statutes or presenting a fraudulent claim to the Programs.
The second proposed rule would expand on OIG authority to impose CMPs on individuals or entities that:

  • Have made false statements that are part of a fraudulent claim.

This would leave the current authority essentially unchanged; however, it aims to improve the clarity of the current authority that reads, “making false statements or misrepresentations of material fact” (42 U.S.C. § 1320a-7(b) (16)).

  • Have made false statements, omissions, or misrepresentations on enrollment applications to the programs.

This language is taken directly from the CMP portion of text of the ACA to give full effect to the CMP penalty and assessment law sections.

  • Have failed to report and return overpayments within 60 days after the date the overpayment was identified.

This would adopt the ACA’s meaning of what constitutes a failure to report and return an overpayment. Federal law, as amended by the ACA in 2010, states, “overpayments must be reported and returned by the later of 60 days after the date the overpayment was identified, or the date any corresponding cost report is due, if applicable” (79 Federal Register 27080, 27086: May 12, 2014).
The penalty for not reporting and returning an overpayment within this deadline is set at the default amount under the CMP law. The language used in the CMP law states that the default penalty is “up to $10,000 for each item or service.” (Ibid). OIG suggests that this default penalty could be interpreted as being “$10,000 for each day a person fails to report and return an overpayment by the deadline.” (Ibid). In the proposed rule, the OIG admits the language is unclear, and has asked for comments from the general public to help clarify.

  • Have failed to provide OIG with timely access to documents.

Language in the proposed rule appears to indicate that the term “timely” is subjective and to be determined on a case-by-case basis. The OIG will use factors such as “the volume of the material, the size and capabilities of the party subject to the request, or OIG’s need for the material in a timely way” (Ibid) to decide whether documents have been provided in a “timely” manner.

  • Have ordered or prescribed medicine or services while excluded from the programs when they know or should know that the item may be paid for by a federal healthcare program.

Generally, when an excluded entity or person, such as a pharmacist, prescribes or “furnishes” a prescription, OIG can impose a penalty for each prescription filled while excluded.
Changes for Medicare Advantage and Medicare Part D
The second proposed rule would amend and clarify the OIG’s current authority to impose CMPs on Medicare Advantage and Medicare Part D organizations if any of their employees or contractors engage in fraudulent activity. According to the proposed rule, this would expand the liability of principals to include those not typically considered agents of the organization. Traditionally, suppliers and contractors do not have the authority to bind the principal organization unless some other agreement is made. This is an important distinction for principal organizations to become aware of, given the broadened exposure to liability.
Mitigating and Aggravating Factors
For any given violation, the defendant may present evidence that shows an attempt to mitigate the loss or damage caused by the initial bad conduct. In light of these “mitigating factors,” the court will weigh caused damages against prevented damages. The proposed rule would update the claims mitigating factor by increasing the maximum dollar amount considered as mitigation from $1,000 to $5,000. The court would consider more serious any conduct resulting in more than a $5,000 loss to the programs. OIG suggests that the $1,000 number is too low, given the rising costs of healthcare over the last 15 years.
Aggravating factors used by the OIG to determine the degree of guilt would also be amended under the second proposed rule. The OIG proposes “to consider as an aggravating factor a person’s having a level of intent to commit the violation that is greater than the minimum intent required to establish liability” (79 Federal Register 27080, 27082: May 12, 2014). It will also be considered a mitigating factor if there is evidence that the offender took appropriate steps to correct the problem and limit potential damages. The act of disclosing the violation to the OIG by the offending party will typically be a prerequisite for a mitigating factor to be considered at all.
Penalty Amount Determination Factors
The OIG suggests the status quo for implementing CMPs is clumsy and perplexing because the information is scattered across different sections of the law. To add both clarity and transparency to OIG’s judgment, the second proposed rule sets forth an easier way to determine the amount of penalties and assessments for violations. The proposed single list of primary factors are: “(1) the nature of the violation, (2) the degree of guilt by the individual, (3) the existence of any prior offenses, (4) other wrongful conduct, and (5) other matters as justice may require” (Ibid). These are illustrative factors to be considered when determining the amount of a CMP, rather than a comprehensive list of elements that must all be satisfied.
Realize the Impact
The financial impact of the proposed changes could be staggering. OIG has collected $165.2 million in CMPs over the last nine years (although this pales in comparison to the vast penalties handed down in False Claims Act settlements, which totaled more than $4.9 billion in 2012 settlements, alone). A final rule, to be published later, may include some or all of the elements set forth in the proposed rule.

Robert A. Pelaia, Esq., CPC, CPCO, is senior university counsel for health affairs at the University of Florida College of Medicine in 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.
Drew Krieger, MBA, attends Florida Coastal School of Law, where he is now a full-time, second year law student, J.D. candidate May 2015. After graduation, he plans to remain in the Jacksonville area working in the health law field. Krieger is a student member of the Jacksonville Bar Association and a Staff Editor of Florida Coastal Law Review.

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Renee Dustman, BS, AAPC MACRA Proficient, is managing editor - content & editorial at AAPC. She holds a Bachelor of Science degree in Media Communications - Journalism. Renee has more than 30 years' experience in journalistic reporting, print production, graphic design, and content management. Follow her on Twitter @dustman_aapc.

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