Proposed OIG Regulations Seek to Expand “Kiss of Death”

by John W. Kaveney

On May 9, 2014, the Office of Inspector General (“OIG”) of the Department of Health and Human Services (“HHS”) published in the Federal Register (79 Fed. Reg. 26810-26828 (May 9, 2014)) a set of proposed rule amendments to the regulations relating to the OIG’s exclusion authority. The amendments would expand the OIG’s exclusion authority, also known in the industry as the “kiss of death” due to the fact that a provider’s exclusion from federal programs such as Medicare and Medicaid can often spell doom since these programs are often vital revenue sources for providers.

Presently, if a provider is found to have engaged in any of four grounds for mandatory exclusion, the OIG is required to exclude a provider from federal health care program participation. 42 U.S.C. § 1320a-7(a). Mandatory exclusions last a minimum of five years and apply to convictions of the following types of criminal offenses:

  1. Medicare or Medicaid fraud, in addition to any other offenses related to the delivery of items or services pursuant to Medicare, Medicaid, SCHIP or other state health care programs;
  2. Patient abuse or neglect in connection with the delivery of a health care item or service;
  3. Felony convictions, under federal or state law, in connection with the delivery of a health care item or service, for other health care related fraud, theft, or other financial misconduct; and
  4. Felony convictions relating to controlled substances and their unlawful manufacturing, distribution, prescription or dispensing.

There are also 16 different permissive exclusion categories which give the OIG discretion to exclude a provider from participation in any federal health care program. 42 U.S.C. § 1320a-7(b). Permissive exclusions fall into two categories: (1) “derivative” exclusions that are based on actions previously taken by a court or other law enforcement or regulatory agency; and (2) “affirmative” exclusions that are based on OIG-initiated determinations of misconduct. Permissive exclusions include such events as revocation or suspension of the provider’s license, claims for excessive charges or medically unnecessary services, improper kickbacks, controlling a sanctioned entity as an owner, officer or managing employee, and convictions for health care related misdemeanor crimes. While there is no five-year minimum term for permissive exclusions, some categories of permissive exclusions have varying minimum or benchmark exclusion terms.

The OIG’s proposed rule amendment would expand the permissive exclusions to include the following additional circumstances as identified in the Affordable Care Act §§6402(d), 6406(c) and 6408(c):

  1. Conviction of an offense in connection with the obstruction of an audit;
  2. Furnishing, ordering, referring for furnishing or certifying the need for items or services for which payment may be made and then failing to supply the requisite payment information;
  3. Knowingly making, or causing 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 as a supplier under a Federal health care program.

These additional exclusionary circumstances put greater pressure on providers especially with regard to audits. This push to encourage a higher level of cooperation with governmental audits is not surprising given that the OIG, the Department of Justice and various other federal and state agencies continue to expand their audit efforts to uncover waste, fraud and abuse in the system. Providers will therefore only face greater pressure to cooperate fully with all governmental audits now that there is the added threat of exclusion from federal health care programs. Most providers cannot take such a risk and thus are left in the difficult position of deciding when to push back against governmental audits that can easily become burdensome and costly, especially when the agency has targeted a particular individual or entity.