The enforcement of penalties for employing or contracting with individuals or businesses that are excluded from federal health care programs or federal contracts is on an upswing at both the federal and state levels. Reports of significant violations of the rules still occur, so the renewed interest in enforcement is paying off at a time when governments need additional sources of revenue.
The likelihood of enforcement activity on this issue subsiding soon is pretty low, and all health care providers should implement systems that are designed to prevent exposure to excluded parties.

OIG Authority

Generally, excluded parties in the health care context are persons or businesses that have either been excluded from participation in federal health care programs or excluded from participation in federal contracts. The U.S. Department of Health and Human Services Office of Inspector General (OIG) has the authority to exclude individuals and entities from Medicare, Medicaid, and any other program funded directly or indirectly by the federal government.
Medicare and Medicaid providers found to be contracting with excluded parties can be subject to significant penalties and recovery of funds. If an item or service is provided at the medical direction or on the prescription of a physician or other authorized individual who is excluded from participation in federal health care program, that item or service is not reimbursable if the provider acting upon the excluded individual physician’s direction or prescription knew or had reason to know of the exclusion.

Civil Money Penalties Apply

In addition to denying payment and recovering funds, the federal civil money penalties (CMP) law imposes fines on providers that seek reimbursement for health care services or items provided at a time during which the health care provider was on the exclusion list. Up to $10,000 in monetary penalties, plus an amount of up to three times the amount claimed for each item or service, are allowed under the CMP law. What’s more, officers and managing employees of an excluded provider that submit claims for reimbursement are subject to the same monetary penalties, as are individuals and entities with a direct or indirect ownership or control interest in the excluded provider, if such individuals or entities knew or had reason to know of the action constituting the basis for the exclusion.
All long term and post-acute care providers must ensure that all of their employees and every individual or entity that the provider contracts with in order to provide services or supplies is not excluded from participation in Medicare or Medicaid.

Fines Can Multiply

It is worth noting that an individual or entity submitting claims for items or services by or at the discretion on an excluded individual or entity can be found liable for monetary penalties up to $10,000 per item or service claimed or “caused to be” claimed, plus treble damages and be subject to possible exclusion.
In addition, there is also the possibility of liability under the Federal False Claims Act, either through the claims of a whistleblower or other provision of the law.
The Centers for Medicare & Medicaid Services (CMS) generally has the authority to deny or revoke Medicare enrollment or billing privileges for individuals or entities that are doing business with individuals or entities that are listed on the List of Excluded Individuals and Entities or the Excluded Parties List System as debarred, suspended, or otherwise excluded from federal programs.
CMS can revoke Medicare certification or billing privileges of providers if owners, managing employees, authorized or delegated officials, medical directors, supervising physicians, or health care personnel furnishing Medicare reimbursable services are excluded, debarred, or suspended from a federal health care program.
Ari Markenson is of counsel with Benesch, Friedlander, Coplan, & Aronoff in its White Plains, N.Y., office. He can be reached at (914) 682-6822 or amarken Sara Bunke Evans is an associate with Benesch, Friedlander, Coplan, & Aronoff in Columbus, Ohio. She can be reached at (614) 223-9349 or