Beware of Permissive Exclusions

In a prior article, we addressed mandatory exclusions from federally funded health care programs for certain criminal convictions, and the importance of “thinking globally” while resolving a criminal investigation. Put another way, collateral consequences cannot be an afterthought in the representation of health care and life sciences licensees in any investigation, regardless of whether it is criminal, civil, or administrative in nature. This article will address a pernicious, potential collateral consequence of an investigation of a health care or life sciences professional or entity, what is referred to as “permissive exclusions.”

First, it bears repeating that the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS), has the authority by way of the Social Security Act, specifically 42 U.S. Code § 1320a–7, to exclude individuals and entities from Federally funded health care programs for various reasons, including convictions for Medicare or Medicaid fraud. The primary impact of an exclusion is the denial of payments by a Federal health care program, meaning excluded individuals and/or entities can receive no payment from Federal health care programs for “any items or services furnished, ordered or prescribed by an excluded individual or entity.” This exclusion applies not only to excluded individuals and entities, but also to anyone who employs or contracts with the excluded individual, regardless of who submits the claims.

Mandatory exclusions are statutorily required for certain convictions, such as  those involving program related crimes (HHS programs) and/or related to health care fraud, whereas permissive exclusions are a matter of OIG discretion.  When an investigation or case has been resolved such that a mandatory exclusion is avoided, is the threat of exclusion no longer a concern?  Hardly. 

Under section (b) of 42 U.S.C. § 1320a-7 , the OIG may exclude individuals or entities under 17 different categories or authorities:

  • Misdemeanor conviction relating to health care fraud other than Medicare or a State health program
  • Conviction relating to fraud in non-health care programs
  • Conviction relating to obstruction of an investigation or audit
  • Misdemeanor conviction relating to controlled substance
  • Professional license revocation, suspension, or surrender
  • Exclusion or suspension under a Federal or State health care program
  • Claims for excessive charges, unnecessary services or services which fail to meet professionally recognized standards of health care, or failure of an HMO to furnish medically necessary services
  • Fraud, kickbacks, and other prohibited activities
  • Entities controlled by a sanctioned individual
  • Entities controlled by a family or household member of an excluded individual and where there has been a transfer of ownership/control
  • Failure to disclose required information, supply requested information on subcontractors and suppliers; or supply payment information
  • Failure to grant immediate access
  • Failure to take corrective action
  • Default on health education loan or scholarship obligations
  • Individuals controlling a sanctioned entity
  • Making false statements or misrepresentations of material fact
  • Failure to meet statutory obligations of practitioners and providers to provide medically necessary services and/or meeting professionally recognized standards of health care (Quality Improvement Organization (QIO) findings)

When an exclusion is imposed, some of these categories require a baseline period. For example, a misdemeanor conviction relating to health care fraud or a controlled substance requires a baseline exclusion of a 3-year period. A baseline exclusion is a presumptive exclusion, meaning the exclusion will be for the baseline period, unless the aggravating or mitigating circumstances “form a basis for lengthening or shortening that period.” The challenge from a defense standpoint is that by regulation, the mitigating factors that can be asserted are limited in nature and number, whereas the aggravating factors are wide-ranging. 

In addition to baseline periods, some of the above categories require minimum periods of exclusion, meaning that the duration of the exclusion can be more than, but cannot be less than, the minimum period. Other categories require no baseline or minimum period of exclusion.

Regarding those categories that relate to convictions, irrespective of whether they are for felonies or misdemeanors, keep in mind that the definition of “conviction” is very broad under the statute, and includes a finding of guilt or judgment of conviction against the individual or entity in a Federal, State, or local court, regardless of whether there is an appeal pending or expungement; when a plea of guilty or nolo contendere by the individual or entity has been accepted by a Federal, State, or local court; or when the individual or entity has entered into participation in a first offender, deferred adjudication, or other arrangement or program where judgment of conviction has been withheld. 

The summary of the many statutory and regulatory factors alluded to in this article demonstrates that decisions made regarding the resolution of an investigation, and factors bearing on aggravating and mitigating circumstances, can all impact  the OIG’s decision to exercise its discretion to exclude and if so, the length of exclusion. These factors need to be taken into account during all investigations, and particularly so in criminal cases. The “global resolution” thought process needs to take place during the pendency of the investigation, and not as a follow-up to case resolution. Moreover, communications and ongoing dialogue with the OIG should be attempted while negotiating a resolution of the matter with the agency that is conducting the investigation.   

How Frier Levitt Can Help

Frier Levitt has had success in resolving investigations while simultaneously avoiding a potential permissive exclusion. Remember, all investigations raise the concern of collateral consequences, and exclusions from Federally funded health care programs are a serious setback to, if not the death knell of, a health care or life sciences career. If you are involved in an investigation, have been charged with a criminal offense, or have received a Notice of Intent to Exclude, or a Notice of Exclusion, or need advice regarding an excluded individual or entity, contact us immediately to speak with an attorney in its White-Collar Criminal Defense and Government Investigations or Health Care Regulatory practice groups.