AND THE NEED TO UNDERTAKE

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1 COMPLIANCE CHALLENGE: UNDERSTANDING FEDERAL AND STATE EXCLUSION/DEBARMENT ACTIONS, THEIR IMPLICATIONS, AND THE NEED TO UNDERTAKE REGULAR SANCTION SCREENING

2 Overview Risks associated with exclusions Federal and State authorities, processes and implications related to exclusions New Federal and State initiatives Compliance expectations Reducing risks associated with exclusions 2

3 US Department of Justice (DOJ) Press Release January 10, 2011 CVS Pays Nearly $1 Million to Resolve Allegations of Billing Federal Health Care Programs for Prescriptions Filled by Excluded Pharmacist DOJ Claim: CVS submitted claims for payment to Medicare and Tricare for prescription medications filled by an excluded pharmacist. DOJ Legal Position: The government considers these claims for payment to be false because they would not have been paid had the government known they were filled by an excluded pharmacist. Settlement Amount: $969,230 = double all Medicare/Tricare payments for prescriptions filled by the excluded pharmacist. 3

4 OIG Settlements in Relating to Provider Employment/Contract with an Excluded Individual 4 24 cases Most involved a health care provider employing or contracting with ONE excluded individual Settlement amounts ranged from $6,001 - $308,709

5 Recent Office of Inspector General (OIG) Settlements Over $200,000 Elder Service Plan of the North Shore- contracting with an excluded dentist: $308,709; AdCare Hospital of Worcester - employing an excluded individual: $254,820; Catholic HealthCare West - employing five excluded individuals: $243,819; New York Downtown Hospital - employing an excluded individual: $220,000; University of Arkansas for Medical Sciences - employing an excluded individual: $201,689; East Boston Neighborhood Health Center employing an excluded individual: $200,962. 5

6 OIG Exclusions DHHS has legal authority to exclude individuals and entities from participation in federal health care programs, including Medicare, Medicaid, CHIP and Tricare. Sections 1128 and 1156 Social Security Act 6 The DHHS exclusion program is administered by the OIG and it maintains a List of Excluded Individuals and Entities (LEIE)

7 Statistics on OIG Program Exclusions: 1983: 230 exclusions imposed 1990: 900 exclusions imposed 2010: 3340 exclusions imposed 7 Exclusions Imposed to date: 57,071 Currently Excluded Individuals and Entities: 48,890

8 DHHS Office of Inspector General (OIG) Initiative on Program Exclusions 8 Once we determine that an individual or entity has engaged in fraud or abuse or provided substandard care, OIG can use one of the most powerful tools in our arsenal: the authority to exclude that provider from participating in Federal health care programs. Program exclusions bolster our fraud-fighting efforts by removing from Federal health care programs those who pose the greatest risk to our programs and their beneficiaries. Testimony of Inspector General Daniel Levinson before the U.S. Senate Committee on Homeland Security and Government Affairs, March 9, 2011.

9 Legal Basis for the OIG to Exclude an Individual or Entity From Participation in Federal Health Care Programs Mandatory Exclusions (42 USC 1320a-7(a), Section 1128(a) of the Social Security Act). Conviction of a: Criminal offense relating to Medicare or a State health care program (e.g. Medicaid) Criminal offense relating to patient abuse or neglect; Felony offense relating to health care fraud; 9 Felony offense relating to unlawful manufacture, distribution, prescription, or dispensing of a controlled substance.

10 Mandatory Exclusions : 1554 mandatory exclusions imposed by OIG Very broad definition of term conviction. If a court has made a finding of guilt against an individual or entity or accepted a plea of guilty or nolo condendere, even if the judgment of conviction or other record relating the criminal conduct has been expunged, and regardless of whether an individual or entity has entered into a first offender, deferred adjudication, or other program where judgment of conviction has been withheld. Party cannot challenge underlying basis for exclusion, e.g., conviction. Minimum period of exclusion 5 years. Exclusion may be extended based on aggravating factors. No automatic reinstatement at end of exclusion period.

11 Discretionary Exclusions - Derivative (42 USC 1320a-7(b), section 1128(b) of the SSA) Misdemeanor conviction relating to health care fraud; Conviction of criminal obstruction; Misdemeanor conviction relating to unlawful manufacture, distribution, prescription, or dispensing of a controlled substance; License revocation or suspension; Failure to supply payment information or grant immediate access; Failure to repay a health education assistance loan or fulfill scholarship obligations. 11

12 Discretionary Exclusions Affirmative 12 Fraud False Claims Kickbacks Quality of Care Violations Failing to meet professionally recognized standards of care; Furnishing services/items substantially in excess of patient needs.

13 Discretionary Exclusions : 1786 discretionary exclusions imposed by OIG Example: Exclusion of the owner and operator of a nursing home for failing to properly manage the facility, causing the furnishing of services failing to meet professionally recognized standards of health care, and resulting in harm to patients.

14 Effect of OIG Program Exclusion No payment will be made by Medicare, Medicaid, or any other Federal health care program for any items or services: furnished by an excluded individual or entity; at the medical direction; or on the prescription of a physician or other authorized individual who is excluded when the person furnishing such item or service knew or had reason to know of the exclusion. 42 CFR

15 Scope of Payment Prohibition No Federal health care program payment may be made for any item or service that an excluded person furnishes, orders, or prescribes; The payment prohibition applies to the excluded person, as well as anyone who employs or contracts with the excluded person; The payment prohibition applies to any hospital or other provider where the excluded person provides services; The exclusion applies regardless of who submits the claims and applies to all administrative and management services furnished by an excluded person. See: OIG Special Advisory Bulletin: The Effect of Exclusion From Participation in Federal Health Care Programs. 15

16 Financial Exposure for Employing or Contracting With An Excluded Individual 16 A health care provider who arranges or contracts (by employment or otherwise) with an excluded individual or entity for the provision of items or services paid for by a Federal health care program may be subject to Civil Money Penalties (CMPs) if it provides services paid for, directly or indirectly, by such a program. CMPs of up to $10,000 for each item or service furnished by an excluded individual or entity and listed on a claim submitted for Federal program payment, AND an assessment of up to three times the amount claimed may be imposed. The offending entity may also be excluded from Federal health care program participation. A provider is liable for the actions of its agent acting within the scope of the agency relationship.

17 Standard of Knowledge for CMP Liability 17 CMP liability may be imposed when the provider or other person submits, or causes to be submitted, a claim for Federal health care program payment for items/services furnished by an excluded individual or entity and knows or should know that the person was excluded from participation in Federal health care programs. Should know means that a person, with respect to the information: Acts in deliberate ignorance of the truth or falsity of the information; or; Acts in reckless disregard of the truth or falsity of the information.

18 OIG Position Regarding Provider Obligations 18 Providers and contracting entities have an affirmative duty to check the program exclusion status of individuals and entities prior to entering into employment or contractual relationships, or run the risk of CMP liability if they fail to do so. Providers have an affirmative duty to periodically check the monthly updates of the OIG s LEIE to determine the participation/exclusion status of current employees and contractors.

19 Reinstatement to Participate in Federal Health Care Programs Excluded individual or entity needs to file an application with OIG; Within the discretion of the OIG to grant/deny; No administrative or judicial appeal rights if reinstatement is denied; Basis for denial of reinstatement billing for excluded person s services while excluded. 19

20 New OIG Initiative Responsible Corporate Officer Doctrine Exclusion of an individual who: Has ownership or control interest in a sanctioned entity and who knew or should have known about the underlying actions that were the basis for the entity s sanction, or Is an officer or managing employee in a sanctioned entity USC 1320a-7(b)(15); section 1128(b)(15) of the SSA

21 Standard of Knowledge 21 To exclude an owner or investor, the OIG must demonstrate that the individual either knew of the improper conduct or acted in deliberate ignorance or reckless disregard of the truth or falsity of certain information. To exclude an officer or managing employee, the OIG does not have to establish any level of knowledge in order to support an exclusion.

22 OIG Policy Regarding the Exclusion of Owners, Officers, and Managing Employees of Sanctioned Entities 22 By excluding the individuals who are responsible for the fraud, either directly or because of their positions of responsibility in the company that engaged in fraud, we can influence corporate behavior without putting patient access to care at risk. When there is evidence that an executive knew or should have known of the organization s underlying criminal misconduct, OIG will operate with a presumption in favor of exclusion of that executive. Moving forward, we intend to use this essential fraud-fighting tool in a broader range of circumstances. Testimony of Inspector General Daniel Levinson, March 9, 2011.

23 Recent Case: 23 Drug manufacturer Ethex Corporation pled guilty to felony criminal charges after it failed to inform the FDA about manufacturing problems resulting in production of oversized tablets of prescription drugs. The company was excluded by the OIG under the mandatory exclusion authority based on its conviction. OIG excluded the owner and CEO of the company for 20 years under section 1128(b)(15) of the SSA based on his role in managing the sanctioned company.

24 Proposed New Exclusion Authority Strengthening Medicare Anti-Fraud Measures Act of 2011 (H.R. 675) Expand permissive exclusion authority of OIG to individuals and entities affiliated with sanctioned entities An entity is considered to be affiliated with another entity if 24 One of the entities is a person with an ownership or control interest in the other entity There is a person with an ownership or control interest in both entities There is a person who is an officer or managing employee of both entities

25 GSA Excluded Parties List System (EPLS) Federal Acquisition Streamlining Act of 1994: Government-wide debarment and suspension system for parties debarred, suspended or excluded from any federal procurement and non-procurement programs Debarred individuals or entities are excluded from contracts with and grants from all executive branch agencies OIG and CMS encourage screening against the GSA EPLS 25

26 CMS Regulation To obtain/maintain active enrollment status, providers may not employ or contract with individuals/entities excluded from participation in any federal health care program or debarred by the GSA from any other executive branch program or activity. (42 CFR ) 26

27 CMS State Medicaid Director Letters June 12, State Medicaid Directors should check their enrolled providers for exclusions on a monthly basis January 16, 2009 States should advise providers upon enrollment and reenrollment of their obligation to screen all employees and contractors against the OIG LEIE monthly. States should explicitly require providers to agree to comply with this obligation as a condition of enrollment. Medicaid payments are prohibited for all items/services furnished by excluded persons and entities

28 Relationship State - OIG State Medicaid agencies must notify OIG whenever they take action related to participation in the Medicaid program 28 OIG reported in Aug 2008 that about 2/3 of providers with final actions imposed by state agencies in 2004 and 2005 were not found in the OIG exclusions data base State Medicaid Agency Referrals to Inspector General Exclusions Program, OEI

29 State Exclusions Defined by state statute and regulation Many States have developed their own State Medicaid Exclusion Lists 29 Alabama Kentucky New York Arkansas Maine Ohio California Maryland Pennsylvania Connecticut Michigan South Carolina Florida Mississippi Texas Idaho Illinois Nebraska New Jersey

30 Affordable Care Act Reciprocity among State exclusion lists? 30 Starting January 1, 2011, under Section 6501 PPACA State Medicaid agencies are to exclude individuals or entities from participation in the State Medicaid program when the individual or entity has been terminated from participation in Medicare or any other State Medicaid plan.

31 OIG Work Plan 2011 : State Requirement We will review Medicaid payments to providers and suppliers to determine the extent to which payments were for services provided during periods of termination or exclusion from the Medicaid program. (OAS; W ; W ; various reviews; expected issue date: FY 2011; work in progress) February 2011: Iowa and Missouri were found to have inadequate controls to prevent Medicaid payments for services or items furnished by excluded providers or entities 31

32 Provider Compliance Expectations Check exclusion lists! 32 Who should check? HR or Compliance Officer, also all contractors should be required to check their employees and contractors Who? For employees, contractors, referral sources whose functions are a necessary component of providing items and services to federal program beneficiaries -> follow the money: if the individual/entity is compensated in full or in part, directly or indirectly, with Medicare/Medicaid funds, they have to be checked

33 Provider Compliance Expectations Check exclusion lists When? Prior to hiring/contracting and regularly thereafter (see OIG, CMS and State guidance) Which one? OIG LEIE, GSA and State(s) How? Manually vs. automated Single vs. batch search Direct vs. fuzzy match 33

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35 Provider Compliance Expectations If provider is on excluded list: 35 Verify (DOB, Address, SSN, etc.) Potential employee/contractor: Do not contract or hire Current employee/contractor: Take remedial steps Identify potential overpayments Repay overpayments within 60 days of identification Keep records to evidence screening efforts as part of an effective Compliance Program Indicate when screening conducted Indicate source data and last date updated

36 Take Home Message Sanction screening is a critical part of an effective CP and a lack of such screening can lead to legal and financial liability CMP, treble damages, extension of existing exclusion or new exclusion, False Claims Act More frequent screenings of more lists required Need cost-effective solution to ensure compliance 36 Conduct Checks Frequently!

37 Questions? 37 Thomas Herrmann, JD (703) Deborah Rubbens Hutchison, JD, LL.M (703)