OIG Spotlights Excluded Parties

Introduction
On September 28, 1999, the Office of the Inspector General of the Department of Health and Human Services ("OIG") issued a Special Advisory Bulletin ("OIG Bulletin") on the effect of exclusion from the Federal health care programs. The OIG Bulletin highlights risks facing health care providers that employ, contract with, or bill for services or items provided or ordered by, an excluded individual or entity.

Inspector General June Gibbs Brown describes the OIG Bulletin as a tool to "help make sure excluded individuals are not involved in any way in the care of Federal program beneficiaries." According to the OIG, almost 17,000 individuals and entities have been excluded from participation in Federal health care programs for misconduct ranging from fraud convictions, to patient abuse, to defaults on health education loans. The number of exclusions is expected to rise to approximately 20,000 by the close of the decade. Risks of Civil Money Penalties and Denial of Reimbursement Providers that deal with excluded individuals or entities run the risk of civil money penalties ("CMPs"), program exclusion and reimbursement denial.

• The 1997 Balanced Budget Act calls for a CMP of up to $50,000 on any person who "arranges or contracts (by employment or otherwise) with an individual or entity that the person knows or should know is excluded from participation in a Federal health care program for the provision of items or services for which payment may be made under such a program."
• Providers also are subject to CMPs of up to $10,000 for each item or service furnished by the excluded individual or entity and listed on a claim submitted for Federal program reimbursement, as well as an assessment of up to three times the amount claimed. Program exclusion also may be imposed.

Even in the absence of a contract or arrangement with an excluded party, no payment may be made by any Federal health care program for any item or service furnished: (i) by the excluded individual or entity; or (ii) at the medical direction or on the prescription of an excluded practitioner when the individual or entity furnishing such item or service knew, or had reason to know, of the exclusion.

Scope of Prohibition The OIG Bulletin highlights the scope of the payment prohibition:

• The payment ban applies to all methods of Federal program reimbursement, whether payment results from itemized claims, cost reports, fee schedules or a prospective payment system ("PPS").
• The prohibition on reimbursement applies even when the Federal payment is made to a non-excluded provider, practitioner or supplier.
• The prohibition extends to payment for administrative and management services not directly related to patient care, but that are a necessary component of providing items and services to Federal program beneficiaries.
• No Federal program payment may be made to cover an excluded individual's salary, expenses or fringe benefits, regardless of whether they provide direct patient care.

Examples Of Improper Arrangements
The OIG Bulletin sets forth examples of arrangements with excluded parties that would both violate the person's exclusion and possibly subject the employer or contractor to CMPs:

• Services performed by excluded nurses, technicians or other individuals who work for a hospital, nursing home, home health agency or physician practice that entail administrative duties, preparation of surgical trays or reviews of treatment plans if such services are reimbursed directly or indirectly (such as through a PPS or a bundle payment) by a Federal health care program. The OIG emphasizes that direct care provided to Federal program beneficiaries is not required.
• Services performed by excluded pharmacists or other individuals who input prescription information for pharmacy billing or who are involved in any way in filling prescriptions for drugs reimbursed, directly or indirectly, by a Federal health care program.
• Services performed by excluded ambulance drivers, dispatchers and other individuals involved in providing transportation reimbursed by a Federal health care program to hospital patients or nursing home residents.
• Services performed for program beneficiaries by excluded individuals who sell, deliver or refill orders for medical devices or equipment being reimbursed by a Federal health care program.
• Services performed by excluded social workers who are employed by health care entities to provide services to Federal program beneficiaries and whose services are reimbursed, directly or indirectly, by a Federal health care program.
• Administrative services, including the processing of claims for payment, performed for a Medicare intermediary or carrier, or a Medicaid fiscal agent, by an excluded individual.
• Services performed by an excluded administrator, billing agent, accountant, claims processor or utilization reviewer that are related to and reimbursed, directly or indirectly, by a Federal health care program.
• Items or services provided to a program beneficiary by an excluded individual who works for an entity that has a contractual arrangement with, and is paid by, a Federal health care program.
• Items or equipment sold by an excluded manufacturer or supplier, used in the care or treatment of beneficiaries and reimbursed, directly or indirectly, by a Federal health care program.

Employment Implications
The OIG Bulletin acknowledges the constraints placed on employment relationships by the exclusion requirements:

A provider or entity that receives Federal health care funding may employ an excluded individual only in limited situations ‹ where the provider is both able to pay the individual exclusively with non-Federal funds AND where the services furnished by the excluded individual relate solely to non-Federal program patients.

• In many instances, the practical effect is to preclude employment of an excluded individual in any capacity if the employing provider receives reimbursement, directly or indirectly, from any Federal health care program.
• Under the law, a provider is at risk for CMPs if it submits claims for items or services provided by an employee whom the provider knows or should know was excluded from a Federal health care program. Providers, therefore, have an affirmative duty to verify an individual's status prior to employment. If verification is not completed before a job offer is made, offers of employment should be conditioned upon verification of an individual's eligibility to participate in the Federal health care programs, and verification should be completed before the applicant starts work.

A more difficult issue involves existing employees. While the law speaks primarily to the duty to screen prospective employees, the OIG Bulletin declares that providers periodically should check the status of current employees as well. For example, status could be rechecked at the same time that the employer reconfirms the renewal of an employee's license, registration or certification. Employers may want to require employees to report to their employer if they are ever excluded or become the subject of a proceeding that may lead to exclusion.

Finally, employer personnel policies may need to be revised to reflect that exclusion from participation in a Federal health care program maybe grounds for termination of employment.

Implications And Approaches For Contracting With Individuals And Entities
As with employees, providers must make reasonable efforts to ensure they are not contracting with excluded individuals or entities. These individuals and entities include suppliers, consultants and even physicians (e.g., members of a hospital's medical staff) who provide services at or through the provider. Providers will need to screen these individuals and entities before entering into contracts with them. Once such contracts or arrangements are consummated, providers generally should continue to screen periodically for exclusions.

Providers should review all contracts, including the provider's own master agreements, to ensure appropriate safeguards are in place and make changes as necessary. Items to consider incorporating into such contracts include:

• Representations and warranties that the contractor has not been excluded from Federal health care programs.
• A requirement that the contractor inform the provider if the contractor is excluded from any Federal health care program or subject to proceedings that may lead to exclusion.
• Contract language providing for prompt termination of the contract in the event that the contracting individual or entity is excluded.

Implications For Hospital Medical Staffs
While the OIG Bulletin did not address the implications of these requirements on a hospital's medical staff, the OIG did address this issue in connection with the publication of related regulations on July 22, 1999. In response to a query whether medical staff status could constitute a prohibited arrangement where a staff member is excluded, the OIG stated that, in the absence of any employment or contractual relationship, a medical staff relationship "in and of itself" remains outside the scope of the exclusion requirements. At the same time, the OIG cautioned:

Medical staff membership does not exist in a vacuum, and aspects of such membership could subject hospitals to CMPs. For example:

• Any contract or other arrangement under which an excluded medical staff member provides services would be prohibited. This not only includes contracts for professional or administrative services, such as contracts with hospital-based physicians (e.g., radiologists, anesthesiologists, pathologists and emergency physicians), but also could include call lists (ranging from emergency room call coverage to EKG reading panels).
• Excluded physicians would be unable to take emergency call or provide coverage for their colleagues due to the possibility that they might be obliged to provide services to Federal program beneficiaries.
• A staff member's limitation of his or her practice to private pay patients is not sufficient protection for the hospital. Some managed care organizations have adopted the Federal requirement as a condition of payment. Moreover, patients admitted as private pay patients may convert to Federal beneficiary status down the line, such as those with catastrophic illnesses.

In light of the risks presented, hospitals would be well served to prohibit the granting of medical staff membership or privileges to initial applicants who are excluded from any Federal health care program. Medical staff bylaws should be revised as necessary to support this policy.

As for existing medical staff members, hospitals need to consider carefully the risks they face should they permit excluded practitioners who are already on their staffs to continue to practice at their facilities, even if such practice is restricted to non-Federal beneficiaries. Action items for hospitals include:

• Contracts, call lists or other arrangements with individuals or entities under which providers deliver covered services should contain provisions for termination (or at least suspension or other appropriate limitation) of the arrangement in the event that the contracting individual or entity is excluded.
• At the very least, medical staff bylaws need to protect against the possibility that excluded practitioners are able to order items or services that will not be reimbursed. Consideration also should be given to either suspension of a member's clinical privileges during the period of exclusion or outright termination of staff membership. In either case, the action should be automatic, beginning at least with the effective date of the exclusion.

Implications For Excluded Individuals
Violation of an individual or entity's exclusion may subject the party to CMPs and possibly treble damages. Further, the OIG notes that reinstatement is not automatic upon the expiration of the exclusion term. Excluded parties must apply for reinstatement, and any violations during the exclusion period may jeopardize future reinstatement. Determination of Excluded Status The OIG Bulletin highlights the available resources to verify whether an individual or entity has been excluded from participation in a Federal health care program. The OIG Bulletin urges verification with the OIG web site (http://www.hhs.gov/oig). This web site is updated periodically and allows providers to conduct both on-line searches and to download the information. The OIG web site sorts exclusions by: the legal basis for the exclusion; the types of individuals and entities that have been excluded; and the state where the excluded individual resided at the time he or she was excluded or the state where the entity was doing business. Other sources for such information include the National Practitioner Data Bank, the GSA list of "Parties Excluded from Federal Procurement and Nonprocurement Programs" (http://anet.gov/epls/) and the new Healthcare Integrity and Protection Data Bank. There are also commercial sources of such information sponsored by various organizations.

Conclusion
All health care providers need to be aware of the status of those they employ as well as those with whom they contract or have other arrangements. Failure to know whether such individual or entity is excluded could have significant repercussions.