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Vasilios "Bill" Kalogredis. Vasilios “Bill” Kalogredis.

On May 17, Immediate Home Care (IHC), a home health care company headquartered in Bensalem, Pennsylvania, settled a dispute with the Department of Health & Human Services’ (HHS) Office of the Inspector General (OIG). The $189,445.68 settlement resolved allegations that IHC employed an individual excluded from participating in any federal health care program who, while with IHC, did participate in such programs. According to the results of the OIG’s investigation, the home health care nurse in question provided home health care items or services to IHC’s patients that were subsequently billed to federal health care programs.

That settlement follows a $141,986.36 settlement on Feb. 13 of this year between the OIG and an Oklahoma City-based skilled nursing company called Southwest Trinity Management (STM). STM owned and managed a nursing facility in Oklahoma City that the OIG alleged employed a licensed practical nurse who was likewise excluded from participating in any federal health care programs. As in the IHC case, the allegations against STM involved a single employee whose services were billed to federal health care programs.

The basis for the claims against the two companies is the Civil Monetary Penalties Law, which empowers the HHS secretary to assess civil monetary penalties against those who bill federal health programs falsely, fraudulently, or otherwise improperly. The foregoing examples in Bensalem and Oklahoma City fall into the “otherwise improperly” catch-all category. Section 1128 of the Social Security Act grants the OIG the authority to exclude individuals and entities from any federally funded health care program, including Medicare and state health care programs. The authority is not reserved solely for licensed providers and may be applied against any individual or entity (I/E), including support and administrative staff. Anyone who hires such an excluded individual, even unknowingly, and bills a federal health care program for items and services provided by or through that individual is subject to civil monetary penalties.

The OIG is obligated to put certain entities and individuals on the list of excluded individuals/entities (LEIE)—the so-called mandatory exclusions. It has discretion with regard to including others, known as permissive exclusions, on the list. The former group includes entities and individuals convicted of criminal offenses such as Medicare or Medicaid fraud, patient abuse or neglect, and felony convictions for other health care-related fraud, theft, or other financial misconduct. That group also includes those with a felony conviction related to unlawful manufacture, distribution, prescription, or dispensing of controlled substances. The OIG has no choice but to include such entities and individuals in the exclusions database.

The latter group includes those over whom the OIG exercised its discretion and decided under the circumstances that the behavior in question required the individual’s inclusion on the LEIE. Such behavior includes misdemeanor convictions related to health care fraud (excluding Medicare or state health programs) and misdemeanor convictions relating to the unlawful manufacture, distribution, prescription, or dispensing of controlled substances. It also includes those whose medical license was suspended, revoked, or surrendered due to competence, professional performance, or financial integrity, and those who provided unnecessary or inadequate services, previously submitted false or fraudulent claims to a federal health care program, engaged in unlawful kickback arrangements, and defaulted on health education loans or scholarship obligations.

Before excluding any I/E, the OIG provides the I/E with a notice of intent to exclude. In response, the I/E will have the opportunity to provide any mitigating, defensive or potentially exculpatory materials and information. The OIG will review what is timely provided before deciding whether inclusion on the LEIE is appropriate. If the OIG thereafter decides to include the I/E on the exclusions list, then that I/E has the opportunity to appeal the OIG’s decision to an administrative law judge. After receiving an adverse decision from the judge, the I/E may appeal to the HHS’s Departmental Appeals Board and thereafter to a Federal court. Put simply, the OIG’s decision is subject to considerable review and the excluded I/E is entitled to comprehensive due process.

Not everyone disputes their inclusion on the LEIE. In fact, for those who face OIG allegations of misconduct of one sort or another (either personally or through an employee), that I/E may negotiate a voluntary exclusion lasting a particular number of years as part of the terms of a settlement.

For those who discover an issue before the OIG does, the OIG clarified its guidelines in 2013 to assist entities and individuals with self-disclosure. Such self-disclosure may assist in avoiding or limiting potential liability. Employers who discover that one of their employees is on the LEIE, for example, may disclose that information to the OIG along with an estimate of the damages related to the employee. Before the 2013 guideline clarifications, such an estimate proved difficult to calculate. This is because, as stated above, it is not only billing individuals, such as physicians, who are subject to exclusion. Therefore, properly estimating the damages incurred as a result of an excluded administrative assistant’s various tasks remained a matter of debate. As a result, the OIG provided a suggested process for self-disclosers to follow.

Often, clients looking to hire a new provider or staff member fail to consider the LEIE before moving forward with an otherwise qualified candidate. Various companies offer compliance software that simplifies searching and alerting, but such assistance is only helpful if the exclusions database is on the client’s radar. Once it is, HHS offers a rather helpful search tool on its website and allows anyone to download updated versions of the LEIE. The moral of the story, therefore, is to keep the exclusions list in mind—and in the mind of your clients—and ensure that any hiring process includes a search of the LEIE. Better yet, given the potentially lengthy appeals process, your health care employer clients would do well to regularly run all of their current employees through a search of the LEIE.

—Andrew Stein, an associate at Lamb McErlane who focuses his practice on health and business law, assisted in the preparation of this article.

Vasilios J. Kalogredis is chairman of Lamb McErlane’s health law department. He represents many medical and dental groups and thousands of individual physicians and dentists.

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