[Federal Register Volume 63, Number 170 (Wednesday, September 2, 1998)]
[Proposed Rules]
[Pages 46736-46744]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23463]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Office of Inspector General
42 CFR Parts 1001, 1002, and 1003
RIN 0991-AA95
Health Care Programs: Fraud and Abuse; Revised OIG Sanction
Authorities Resulting From Public Law 105-33
AGENCY: Office of Inspector General (OIG), HHS.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This rulemaking proposes revisions to the OIG's exclusion and
civil money penalty authorities set forth in 42 CFR parts 1001, 1002
and 1003, resulting from the Balanced Budget Act of 1997, Public Law
105-33. These proposed revisions are intended to protect and strengthen
Medicare and State health care programs by increasing the OIG's anti-
fraud and abuse authority through new or revised exclusion and civil
money penalty provisions.
DATES: To assure consideration, public comments must be delivered to
the address provided below by no later than 5 p.m. on November 2, 1998.
ADDRESSES: Please mail or deliver your written comments to the
following address: Office of Inspector General, Department of Health
and Human Services, Attention: OIG-30-P, Room 5246, Cohen Building 330
[[Page 46737]]
Independence Avenue, S.W., Washington, D.C. 20201.
Because of staffing and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. In commenting, please refer
to file code OIG-30-P.
FOR FURTHER INFORMATION CONTACT: Joel Schaer, (202) 619-0089, OIG
Regulations Officer.
SUPPLEMENTARY INFORMATION:
I. Background
A. The Health Insurance Portability and Accountability Act
The Health Insurance Portability and Accountability Act (HIPAA) of
1996, Public Law 104-191, was enacted on August 21, 1996 and set forth
a number of significant amendments to the OIG's exclusion and civil
money penalty (CMP) authorities. Among the various provisions related
to program exclusion authority, HIPAA: (1) expanded the OIG's minimum
5-year mandatory exclusion authority to cover any felony conviction
under Federal, State or local law relating to health care fraud, even
if governmental programs were not involved; (2) established minimum
periods of exclusion from 1 to 3 years for certain permissive
exclusions from Medicare and the State health care programs; and (3)
established a new permissive exclusion authority applicable to
individuals who have a majority ownership in, or have significant
control over the operations of, an entity that has been convicted of a
program-related offense. Proposed regulations addressing these revised
or expanded OIG exclusion authorities were published in the Federal
Register on September 8, 1997 (62 FR 47182).
In addition, HIPAA revised and strengthened the OIG's existing CMP
authorities, and extended the application of the CMP provisions beyond
those programs funded by the Department to include all Federal health
care programs. The revised or expanded CMP provisions resulting from
HIPAA are being addressed in a separate OIG proposed rulemaking.
B. The Balanced Budget Act of 1997
In conjunction with many of the HIPAA fraud and abuse authorities,
the Balanced Budget Act (BBA) of 1997, enacted on August 5, 1997,
contained a number of provisions designed to further preserve and
protect the integrity of Medicare, Medicaid and all other Federal
health care programs for current and future beneficiaries, and combat
fraudulent and abusive program activities. Specifically, the fraud and
abuse provisions of BBA serve to strengthen the OIG's exclusion and CMP
authorities with respect to Federal health care programs.
The new exclusion and CMP authorities under BBA are effective for
violations occurring on or after August 5, 1997. As the new statutory
provisions allow the Department some policy discretion in their
implementation, we are developing this proposed rulemaking and
soliciting public comments. The proposed regulation text changes
reflected in this rule are designed to address statutory revisions
resulting from BBA. As indicated above, revisions to 42 CFR chapter V
resulting from the HIPAA fraud and abuse provisions are being published
and addressed through separate proposed rulemakings. All final
regulation text changes resulting from the HIPAA and BBA fraud and
abuse proposed rules will be coordinated and collectively addressed in
a final rulemaking document that will amend OIG's exclusion and CMP
authorities.
II. Provisions of the Proposed Rule
A. Revised Exclusion Authorities Resulting from BBA
1. OIG Authority to Direct Exclusions From State Health Care Programs,
and to Extend the Application of OIG Exclusions to all Federal Health
Care Programs
Prior to the enactment of BBA, a program exclusion imposed by the
OIG was applicable to Medicare and State health care programs, as
defined in section 1128(h) of the Social Security Act (the Act). As
part of the fraud and abuse provisions set forth in HIPAA, section 231
of Public Law 104-191 amended the criminal and CMP provisions in
sections 1128A and 1128B of the Act to encompass acts occurring with
respect to a ``Federal health care program,'' as defined in section
1128B(f) of the Act.1 With the enactment of HIPAA, however,
this extension of coverage was not replicated with respect to the
Secretary's program exclusion authority as set forth in section 1128 of
the Act. In addition, prior to BBA, the OIG was authorized to impose
exclusions from participation in Medicare, but only to direct State
health care programs to impose parallel exclusions from State health
care programs such as Medicaid. The practical result of this bifurcated
exclusion implementation process was that States frequently failed to
implement exclusions in a timely or otherwise appropriate manner.
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\1\ Section 1128B(f) of the Act defines the term ``Federal
health care program'' to encompass any plan or program providing
health care benefits, whether directly through insurance or
otherwise, which is funded directly, in whole or in part, by the
United States Government (other than the Federal Employees Health
Benefits Program).
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To ensure that the OIG's program exclusion authority is consistent
with other sanction authorities set forth in sections 1128A and 1128B,
section 4331(c) of BBA specifically amended sections 1128(a) and (b) of
the Act to provide that the scope of an OIG exclusion extends beyond
Medicare and the State health care programs to all Federal health care
programs, as defined in section 1128B(f) of the Act, and to enable the
OIG to impose exclusions from all Federal health care programs
directly. As a result, we propose to add a definition for the term
``Federal health care program'' in Sec. 1001.2, and make conforming
revisions in Secs. 1001.1(a), 1001.1901, 1001.3003, 1001.3005 and
1002.2(a).
Section 1001.1901, Scope and effect of exclusion, would be amended
by revising paragraph (a) to reflect the revised scope of exclusions
under title XI of the Act. As indicated above, under section 4331(c) of
BBA, exclusions imposed by the OIG under title XI of the Act are now
directly to indicate the Secretary, through the OIG, would have the
authority to direct the imposition of exclusions from all Federal
health care programs. Section 1001.1901 would be amended to indicate
that the Secretary, through the OIG, now has the direct authority to
impose exclusions from all Federal health care programs. The reference
in this section to an exclusion's effect with respect to other Federal
agency procurement and nonprocurement programs and activities is being
deleted. The effect of an exclusion on such programs (other than
Federal health care programs) is specifically addressed in the Federal
Acquisition Regulation at 48 CFR 9.405 and the HHS Common Rule at 45
CFR part 76.
With regard to program agency notification, since all affected
agencies within the Department, as well as all Federal health care
programs outside of the Department, must now effectuate an OIG decision
to exclude an individual or entity, we intend to provide notice to
these program agencies regarding any action taken by the OIG. Since we
believe that it would not be practical to send program agencies an
individual notice on every case, we are proposing to inform all
affected agencies through the OIG's web site (http://www.dhhs.gov/
progorg/oig) every month. The OIG web site will also advise the public
of all individuals and entities excluded from program participation. We
are advising program
[[Page 46738]]
agencies to check the web site and to take action, as appropriate, to
exclude individuals and entities from their programs.
Broadening factors for the circumstances and length of exclusion--
We are also proposing to amend the mitigating and aggravating factors
for length of exclusion in Secs. 1001.201(b)(3)(iii)(A),
1001.301(b)(2)(ii) and (b)(3)(ii)(A), 1001.401(c)(2)(ii) and
(c)(3)(i)(A), 1001.1301(b)(2)(iii), 1001.1401(b)(1) and (b)(4), and
1001.1501(a)(3) to incorporate consideration of all Federal health care
programs, not just Medicare and the State health care programs, in
determining an appropriate period of exclusion. We believe that since
the OIG's authority to exclude individuals and entities has been
broadened under section 4331(c) of BBA to encompass all Federal health
care programs, it is reasonable for the OIG to consider the impact of
exclusion with respect to all of these health care programs.
Effect of exclusion on employment and the reimbursement of items
and services in the Federal health care programs--The effect of an
exclusion as a result of this authority remains the same as it had been
prior to the BBA expansion, i.e., with limited exceptions, no payment
may be made for any health care item or service furnished, ordered or
prescribed by an excluded individual. There is one significant
difference, however, that results from broadening the scope of an
exclusion to encompass all Federal health care programs. An individual
who was excluded from Medicare and the State health care programs prior
to BBA could be employed by another agency which funded a Federal
health care program, such as the Department of Defense (which funds the
CHAMPUS health care program). In addition, while other Federal agencies
were instructed to give government-wide affect to the OIG exclusion,
each agency retained some discretion as to whether it would debar that
individual or entity from its programs. Such Federal agencies no longer
have the discretion to permit excluded individuals and entities to
remain in their programs. With the expanded scope of the OIG's
exclusion authority, no agency which funds a Federal health care
program may reimburse excluded individuals for items and services they
provide, nor may any such agency pay the salaries or expenses of such
persons using Federal dollars. As a result, an agency which funds a
Federal health care program may only employ an excluded individual in
limited situations, where the program is able to pay the individual
with private grant funds or other non-Federal funding sources. In most
instances, the effect of an OIG exclusion will preclude the employment
of an excluded individual in any capacity by a Federal or State agency,
or other entity, where reimbursement is made by any Federal health care
program.
2. Permanent Exclusions for Individuals Convicted of 3 or More Health
Care Related Crimes, and 10 Year Exclusions for Individuals Convicted
of 2 Health Care Related Crimes
Prior to the enactment of BBA, section 1128(a) of the Act directed
the Secretary to impose mandatory exclusions of individuals and
entities from participation in the Medicare and State health care
programs upon conviction of certain criminal offenses, including
Medicare and Medicaid program-related crimes, patient abuse crimes,
health care fraud felonies and felonies relating to controlled
substances. While such mandatory exclusions were, in most cases, for a
minimum period of 5 years, no established mechanism was in place to
require a fixed exclusion period for repeat offenders.
As a result of the ability of some health care providers to re-
enter participation in the Federal and State health care programs after
a minimum exclusion period, section 4301 of BBA imposes a mandatory
exclusion of not less than 10-years on individuals who have been twice
convicted of mandatory exclusion offenses (including program-related
crimes, patient abuse, health care fraud and convictions relating to
controlled substances) under section 1128(a) of the Act. In addition, a
mandatory permanent program exclusion would also be imposed against
those individuals who have been convicted on 3 or more occasions for
conduct relating to a Federal health care program under section 1128(a)
of the Act. Accordingly, we propose to amend Sec. 1001.102 by adding a
new paragraph (d) to reflect these new mandatory lengths of exclusion.
An exclusion of not less than 10 years, in the case of a second
conviction, or a permanent exclusion, in the case of three or more
convictions, will be mandatory where the final conviction has occurred
on or after August 5, 1997--the date of enactment of BBA. We are also
proposing to add a new paragraph (b)(7) to Sec. 1001.102, the provision
governing the length of mandatory exclusions, to include as a new
aggravating factor consideration of whether prior criminal offenses
involved same or similar circumstances.
3. Exclusion of Entities Controlled by Family or Household Members of
Sanctioned Individuals
Under section 1128(b)(8) of Act, the OIG may exclude entities that
are owned at least 5 percent, or controlled, by an individual who has
been convicted of a health care related offense, or who has been
sanctioned by the OIG. This authority enables OIG to enforce its
exclusions by ensuring that health care companies operated by excluded
individuals, in addition to the individuals themselves, do not continue
doing business and receiving reimbursement from Government health care
programs. Some excluded health care providers, however, have been able
to circumvent the impact of a sanction by expediting transfers on paper
of their ownership and control interests in health care entities to a
family or household member. These individuals have thus been able to
retain silent control of health care businesses that participate in
Medicare, Medicaid and all other Federal health care programs despite
their exclusion from these same programs. To address this concern of
``paper transfers'' of ownership or control interest by excluded
individuals who still retain control of the health care business,
section 4303 of BBA amended section 1128(b)(8) of the Act by expanding
existing exclusion authority to include entities owned or controlled by
the family or household members of excluded individuals when the
transfer of ownership or control interest was made in anticipation of,
or following a conviction, assessment of a CMP, or exclusion.
We propose to amend Sec. 1001.1001(a)(1)(ii) to reflect this new
statutory authority. With regard to an individual excluded under
section 1128(b)(8) of the Act, and consistent with the statute,
Sec. 1001.1001(a)(2) would also be amended by adding definitions for
the terms ``Immediate family member'' and ``Member of household.''
B. Revised Civil Money Penalty Authorities Resulting from BBA
1. CMPs Against Institutional Health Care Providers That Employ or
Enter in Contracts for Medical Services With Excluded Individuals
The OIG has been made aware of situations where individuals who
have been excluded from Medicare or State health care program
participation have, nonetheless, been able to obtain (or retain)
employment, staff privileges or other affiliation with various health
care entities, and to render services that are ultimately paid for by
the programs.
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Providers, such as hospitals, that hire excluded practitioners have
often failed to investigate or query available sources such as the
National Practitioner Data Bank (NPDB) or the OIG's cumulative Sanction
Report on the internet (as discussed in section II.A.1. of this
preamble), that would have informed them of an individual's exclusion
status 2. While CMP authority has existed for health
maintenance organizations that employ or contract with excluded
individuals, there was no parallel CMP authority in situations where a
group medical practice, hospital, nursing home, home health agency,
hospice or other provider continues to bill the programs for services
rendered by excluded individuals.
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\2\ Under the Health Care Quality Improvement Act of 1986,
hospitals are required to query the National Practitioner Data Bank
when hiring or granting clinical privileges to a practitioner, and
must perform follow-up checks on all such practitioners every two
years.
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Section 4304(a) of BBA, amending section 1128A(a) of the Act, added
a new provision authorizing the imposition of a CMP against any
provider that submits, or causes to be submitted, claims for health
care items or services rendered by employees or other individuals under
contract, whom they know or should know have been excluded from
participation in the Federal health care programs. Accordingly,
paragraph (a)(2) of Sec. 1003.102 and paragraph (a) of Sec. 1003.103 of
the OIG regulations would be revised to implement this new CMP of up to
$10,000 against any entity that submits, or causes to be submitted,
claims for health care services rendered by employees or other
individuals under contract whom they know, or should know, have been
excluded from participation in the Federal health care programs.
In determining the appropriate amount of the penalty for each
violation, we propose to amend Sec. 1003.106(a)(1) to include the
following five criteria: (1) The degree of culpability of the
contracting provider; (2) whether the contracting provider knew or
should have known of the exclusion; (3) the harm to patients or any
Federal health care program which resulted or could have resulted from
the provision of care by a person or entity with which the contracting
provider is expressly prohibited from contracting under section
1128A(a)(6) of the Act; (4) the history of prior offenses by the
contracting provider or principals of the contracting provider,
including whether at any time prior to the determination of the current
violation(s) the contracting provider or any of its principals were
convicted of a criminal charge or were held liable for civil or
administrative sanctions in connection with a Federal, State or private
health care program; and (5) such other matters as justice may require.
2. New CMP for Failure to Report Information to the Healthcare
Integrity and Protection Data Bank
Section 1128E of the Act, as added by section 221 of HIPAA,
established a national health care fraud and abuse data collection
program, the Healthcare Integrity and Protection Data Bank (HIPDB), for
the reporting of final adverse actions against health care providers,
suppliers and practitioners. This authority mandated that private
health plans 3, as well as certain State and Federal
entities such as medical licensing boards, report information to the
national fraud and abuse data collection program concerning certain
final adverse actions taken against a health care provider, supplier or
practitioner. However, while the Health Care Quality Improvement Act of
1986, which established the NPDB, provided sanction authority against
those who do not report required information to the NPDB, the HIPAA
authority for the HIPDB set forth no parallel provision to induce
health care plans' compliance with the reporting requirements.
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\3\ Section 1128E of the Act defines the term ``health plan''
consistent with the definition set forth in section 1128C(c) of the
Act; that is, a plan or program that provides health benefits
whether directly, through insurance, or otherwise, and includes (1)
a policy of health insurance; (2) a contract of a service benefit
organization; and (3) a membership agreement with a health
maintenance organization or other prepaid health plan.
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Section 4331(d) of BBA added a provision to the health care fraud
and abuse data collection program to provide for the imposition of a
CMP against any health plan that fails to report information on an
adverse action required to be reported under this program. In
accordance with section 1128E(b)(6) of the Act, Sec. 1003.102(b)(5)
would be amended to add a new subparagraph addressing violations by any
health plan that fails to report information on an adverse action
required to be reported under this authority. In addition, a new
Sec. 1003.103(g) would be added to impose a CMP of not more than
$25,000 for each such adverse action not reported. In determining the
penalty amount for each occurrence, we are proposing five criteria for
consideration that would be set forth in an amended
Sec. 1003.106(a)(2): (1) the nature and circumstances of the failure to
report any adverse actions taken against a health care provider; (2)
the degree of culpability of the health plan in failing to provide
timely and complete data; (3) the materiality or significance of
omission of the information to be reported to the Data Bank; (4) any
prior history of the individual or plan with respect to these
occurrences; and (5) in general, other matters required by justice.
3. CMPs for Health Care Providers who Violate the Anti-Kickback Statute
Prior to the enactment of BBA, the only remedies available to the
Federal Government to combat kickback violations involving the Federal
health care programs were criminal penalties (section 1128B(b) of the
Act), and exclusion from participation in Medicare and the State health
care programs (section 1128(b)(7) of the Act) against individuals and
entities that offer or receive improper remuneration in return for the
referral of business paid for by Federal health care programs.
Enforcement in the kickback area has been constrained since the two
existing remedies were quite severe.
To create an alternative intermediate remedy, section 4304 of BBA
amended section 1128A(a) of the Act, specifically authorizing a CMP of
up to $50,000 and an assessment of up to three times the total amount
of the kickback for any violations of the anti-kickback statute. A new
Sec. 1003.102(b)(11) would be added to codify this new CMP authority.
Additionally, a new Sec. 1003.103(h) is being proposed in accordance
with section 4304 of BBA, setting forth $50,000 as the amount of
penalty to be imposed for each kickback violation under section
1128B(b) of the Act, and an assessment (reflected in a new paragraph
(b) in revised Sec. 1003.104) of up to 3 times the total amount of
remuneration offered, paid, solicited or received without regard to
whether a portion of such remuneration was offered, paid, solicited or
received for a lawful purpose.
4. Notification, Effectuation and Appeal Procedures
With respect to all 3 new proposed CMPs, violators of these
provisions would be subject to the same notification, effectuation and
appeal procedures as other CMP violations under section 1128A(a) of the
Act and 42 CFR part 1003 of the OIG regulations.
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C. Additional Technical and Other Revisions to 42 CFR Parts 1001 and
1003
1. Technical Revisions
A number of proposed technical revisions consistent with the policy
provisions resulting from BBA and these regulatory amendments are also
being set forth. Specifically, we propose to amend the authority
citation cites for parts 1001 and 1003, Secs. 1001.302 (Basis for
reinstatement), 1003.100 (Basis and purpose), and 1003.114 (Collateral
estoppel) to reflect the above-cited revisions being proposed in
accordance with revised OIG exclusion and CMP authorities.
In addition, we are revising Sec. 1003.109(a)(3) by deleting the
phrase ``the amount of the proposed penalty, assessment and the period
of proposed exclusion (where applicable).'' This language appears in
paragraph (a)(4) of this section, and appears inadvertently in
paragraph (a)(3).
2. Proposed Revision to OIG Exclusion Reinstatement Considerations
We are proposing to add two new elements to Sec. 1001.3002(b) that
would pertain to the OIG's review of an individual's or entity's
request for reinstatement in the Federal health care programs after the
individual's or entity's exclusion period. The first new proposed
element would address the OIG's expectation that excluded parties
adequately and promptly inform all their clients or patients of the
exclusion so that the clients or patients will have a clear
understanding that items and services provided by that individual or
entity will not be paid for under any Federal health care program.
Section 1001.1901(b) of the regulations authorizes Medicare
reimbursement to a beneficiary for the first claim submitted for an
item or service provided by the excluded party, at which time the
beneficiary is notified that future claims will be denied due to the
provider's excluded status. We do not believe that notification only
after the submission of a claim provides adequate protection for
program beneficiaries. By stating in regulations that the OIG, in
making its reinstatement decisions, will consider whether a provider
has adequately and promptly informed clients or patients of an
exclusion, we hope to offer an incentive for providers to give the
earliest possible notification to beneficiaries of any exclusion.
A second proposed reinstatement element would codify existing OIG
policy which, in making reinstatement decisions, considers whether the
individual or entity has, during the period of exclusion, submitted
claims or caused claims to be submitted, or payments to be made by any
Federal health care program for items or services the excluded party
furnished, ordered or prescribed, including health care administrative
services. Such conduct is impermissible and is a basis for a CMP under
section 1128A(a)(1)(D) of the Act. By setting forth this regulatory
clarification, we hope to make clear that the submission of claims for
payment to any Federal health care program during a provider's period
of exclusion will jeopardize the provider's chances for reinstatement
into the programs.
III. Regulatory Impact Statement
Executive Order 12866 and Regulatory Flexibility Act
The Office of Management and Budget (OMB) has reviewed this
proposed rule in accordance with the provisions of Executive Order
12866 and the Regulatory Flexibility Act (5 U.S.C. 601-612), and has
determined that it does not meet the criteria for a significant
regulatory action. Executive Order 12866 directs agencies to assess all
costs and benefits of available regulatory alternatives and, when
rulemaking is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health, safety distributive and equity effects). In addition, under the
Regulatory Flexibility Act, if a rule has a significant economic effect
on a substantial number of small entities the Secretary must
specifically consider the economic effect of a rule on small entities
and analyze regulatory options that could lessen the impact of the
rule.
As indicated above, the provisions set forth in this proposed
rulemaking implement new or revised OIG statutory requirements set
forth in Public Law 105-33. These provisions are designed both to
broaden the scope of the OIG's authority to exclude individuals and
entities from Medicare, Medicaid and all other Federal health care
programs, and strengthen current legal authorities pertaining to the
imposition of CMPs against individuals and entities engaged in
prohibited actions and activities. The proposed regulations would
implement the new statutory requirements by (1) expanding the
application of the OIG's exclusions to all Federal health care
programs; (2) implementing permanent exclusions for individuals
convicted of 3 or more offenses for which an exclusion can be imposed
under section 1128(a) of the Act, and 10 year exclusions for
individuals convicted of two or more such offenses; (3) allowing for
the exclusion of entities controlled by family or household members of
sanctioned individuals; and (4) establishing new CMPs in three specific
areas.
With regard to the OIG's new exclusion authorities, the process for
excluding individuals and entities who are convicted in accordance with
these new provisions remains essentially the same, even though the
types of convictions requiring mandatory exclusions have been
broadened. While there may be a resulting increase in the number of
mandatory and permissive exclusions imposed as a result of the expanded
scope of the OIG's exclusion authority, we do not believe these
increases will be significant. The clarification of exclusion authority
in Sec. 1001.1001 regarding a sanctioned individual's transfer of
ownership or control interest to a family or household member, for
example, should not result in a significant increase in exclusion
actions in accordance with section 1128(b)(8) of the Act since the
provision is likely to act as an effective deterrent against the
occurrence of such transfer arrangements. In addition, we do not
foresee significant increases resulting from the implementation of
section 4301 of BBA, and proposed regulations at Sec. 1001.102,
regarding the permanent exclusion of individuals convicted of 3 or more
health care related crimes. The authority for promulgating this
exclusion is clear cut, and should limit the total number of repeat
exclusions effectuated by the OIG against such fraudulent providers.
The proposed regulations addressing the new OIG CMPs also remain
consistent with the congressional intent of BBA and with the OIG's
existing CMP authority which allows for imposition of civil money
penalties against individuals and entities who commit fraud. These CMPs
are targeted to a limited group of individuals and entities; that is,
those institutional health care providers that employ or enter into
medical service contracts with excluded individuals, health care plans
that fail to report information to the Healthcare Integrity and
Protection Data Bank, and health care providers who violate the anti-
kickback statute.
As indicated, these proposed regulations are narrow in scope and
effect, comport with congressional and statutory intent, and strengthen
the Department's legal authorities against those who defraud or
otherwise act improperly against the Federal and State health care
programs. Since the vast majority of individuals, organizations and
entities involved in delivering health care do not engage in the
[[Page 46741]]
prohibited activities and practices described in this rulemaking, we
believe that the aggregate economic impact of these regulations will
not be economically significant. Since there is minimal economic effect
on the industry as a whole, there would be little likelihood of effect
on Federal or State expenditures to implement these regulations.
With regard to the effect of these proposed regulations on a
substantial number of small entities, the provisions are targeted
specifically to those individuals and entities who would defraud or
abuse the health care programs, rather than to the health care industry
as a whole. While some of the perpetrators of fraud effected by this
rule may be small entities, it is the nature of the violation and not
the size of the entity that will induce action on the part of the OIG.
In summary, we have concluded, and the Secretary certifies, that
since this proposed rule should not have a significant economic impact
on Federal, State or local economies and expenditures, nor have a
significant economic impact on a substantial number of small entities,
a regulatory flexibility analysis would not be required.
Paperwork Reduction Act
The provisions of these proposed regulations impose no new
reporting or recordkeeping requirements necessitating clearance by OMB.
IV. Public Inspection of Comments
Comments will be available for public inspection September 16, 1998
in Room 5518 of the Office of Inspector General at 330 Independence
Avenue, S.W., Washington, D.C., on Monday through Friday of each week
from 8:00 a.m. to 4:30 p.m., (202) 619-0089.
List of Subjects
42 CFR Part 1001
Administrative practice and procedure, Fraud, Health facilities,
Health professions, Medicaid, Medicare.
42 CFR Part 1002
Fraud, Grant programs--health, Health facilities, Health
professions, Medicaid, Reporting and recordkeeping.
42 CFR Part 1003
Administrative practice and procedure, Fraud, Grant programs--
health, Health facilities, Health professions, Maternal and child
health, Medicaid, Medicare, Penalties.
Accordingly, 42 Parts 1001, 1002 and 1003 would be amended as set
forth below:
PART 1001--[AMENDED]
A. Part 1001 would be amended as follows:
1. The authority citation for part 1001 would be revised to read as
follows:
Authority: 42 U.S.C. 1302, 1320a-7, 1320a-7b, 1395u(h),
1395u(j), 1395u(k), 1395y(d), 1395y(e), 1395cc(b)(2)(D), (E) and
(F), and 1395hh; and sec. 2455, Pub.L. 103-355, 108 Stat. 3327 (31
U.S.C. 6101 note).
2. Section 1001.1 would be amended by revising paragraph (a) to
read as follows:
Sec. 1001.1 Scope and purpose.
(a) The regulations in this part specify certain bases upon which
individuals and entities may, or in some cases must, be excluded from
participation in Medicare, Medicaid and all other Federal health care
programs. They also state the effect of exclusion, the factors that
will be considered in determining the length of any exclusion, the
provisions governing notices of exclusions, and the process by which an
excluded individual or entity may seek reinstatement into the programs.
* * * * *
3. Section 1001.2 would be amended by revising the definition for
the term Exclusion; and by adding a definition for the term Federal
health care program to read as follows:
Sec. 1001.2 Definitions.
* * * * *
Exclusion means that items and services furnished by a specified
individual or entity will not be reimbursed under Medicare, Medicaid
and all other Federal health care programs.
Federal health care program means any plan or program providing
health care benefits, whether directly through insurance or otherwise,
that is funded directly, in whole or part, by the United States
Government (other than the Federal Employees Health Benefits Program),
or any State health care program as defined in this section.
* * * * *
4. Section 1001.102 would be amended by revising paragraphs (b)(5)
and (b)(6); and by adding new paragraphs (b)(7) and (d) to read as
follows:
Sec. 1001.102 Length of exclusion.
* * * * *
(b) * * *
(5) The convicted individual or entity has a prior criminal, civil
or administrative sanction record;
(6) The individual or entity has at any time been overpaid a total
of $1,500 or more by Medicare, Medicaid or any other Federal health
care programs as a result of improper billings; or
(7) The individual or entity has previously been convicted of a
criminal offense involving the same or similar circumstances.
* * * * *
(d) In the case of an exclusion under this subpart, based on a
conviction occurring on or after August 5, 1997, an exclusion will be--
(1) For not less than 10 years if the individual has been convicted
on one other occasion of one or more offenses for which an exclusion
may be effected under section 1128(a) of the Act (The aggravating and
mitigating factors in paragraphs (b) and (c) of this section can be
used to impose a period of time in excess of the 10-year mandatory
exclusion); or
(2) Permanent if the individual has been convicted on two or more
other occasions of one or more offenses for which an exclusion may be
effected under section 1128(a) of the Act.
5. Section 1001.201 would be amended by revising paragraph
(b)(3)(iii)(A) to read as follows:
Sec. 1001.201 Conviction relating to program or health care fraud.
* * * * *
(b) Length of exclusion. * * *
(3) * * *
(iii) * * *
(A) Others being convicted or excluded from Medicare, Medicaid or
any of the other Federal health care programs, or
* * * * *
6. Section 1001.301 would be amended by revising paragraphs
(b)(2)(ii) and (b)(3)(ii)(A) to read as follows:
Sec. 1001.301 Conviction relating to obstruction of an investigation.
* * * * *
(b) Length of exclusion. * * *
(2) * * *
(ii) The interference or obstruction had a significant adverse
mental, physical or financial impact on program beneficiaries or other
individuals or on the Medicare, Medicaid or other Federal health care
programs;
* * * * *
(3) * * *
(ii) * * *
(A) Others being convicted or excluded from Medicare, Medicaid or
any of the other Federal health care programs, or
* * * * *
7. Section 1001.401 would be amended by revising paragraphs
(c)(2)(ii) and (c)(3)(i)(A) to read as follows:
[[Page 46742]]
Sec. 1001.401 Conviction relating to controlled substances.
* * * * *
(c) Length of exclusion. * * *
(2) * * *
(ii) The acts that resulted in the conviction or similar acts had a
significant adverse mental, physical or financial impact on program
beneficiaries or other individuals or the Medicare, Medicaid or other
Federal health care programs;
* * * * *
(3) * * *
(i) * * *
(A) Others being convicted or excluded from Medicare, Medicaid or
any of the other Federal health care programs, or
* * * * *
8. Section 1001.1001 would be amended by revising paragraph
(a)(1)(ii); and by amending paragraph (a)(2) by adding definitions for
the terms Immediate family member and Member of household to read as
follows:
Sec. 1001.1001 Exclusion of entities owned or controlled by a
sanctioned person.
(a) Circumstances for exclusion. * * *
(1) * * *
(ii) Such a person----
(A)(i) Has a direct or indirect ownership interest (or any
combination thereof) of 5 percent or more in the entity;
(ii) Is the owner of a whole or part interest in any mortgage, deed
of trust, note or other obligation secured (in whole or in part) by the
entity or any of the property assets thereof, in which whole or part
interest is equal to or exceeds 5 percent of the total property and
assets of the entity;
(iii) Is an officer or director of the entity, if the entity is
organized as a corporation;
(iv) Is partner in the entity, if the entity is organized as a
partnership;
(v) Is an agent of the entity; or
(vi) Is a managing employee, that is, an individual (including a
general manager, business manager, administrator or director) who
exercises operational or managerial control over the entity or part
thereof, or directly or indirectly conducts the day-to-day operations
of the entity or part thereof, or
(B) Was formerly described in paragraph (a)(1)(ii)(A) of this
section, but is no longer so described because of a transfer of
ownership or control interest to an immediate family member or a member
of the person's household as defined in paragraph (a)(2) of this
section, in anticipation of or following a conviction, assessment of a
CMP, or imposition of an exclusion.
(2) * * *
Immediate family member means, a person's husband or wife; natural
or adoptive parent; child or sibling; stepparent, stepchild,
stepbrother or stepsister; father-, mother-, daughter-, son-, brother-
or sister-in-law; grandparent or grandchild; or spouse of a grandparent
or grandchild. * * *
Member of household means, with respect to a person, any individual
with whom they are sharing a common abode as part of a single family
unit, including domestic employees and others who live together as a
family unit. A roomer or boarder is not considered a member of
household.
* * * * *
9. Section 1001.1301 would be amended by revising paragraph
(b)(2)(iii) to read as follows:
Sec. 1001.1301 Failure to grant immediate access.
* * * * *
(b) Length of exclusion. * * *
(2) * * *
(iii) The impact of the exclusion on Medicare, Medicaid or any of
the other Federal health care programs, beneficiaries or the public;
and
* * * * *
10. Section 1001.1401 would be amended by revising paragraphs
(b)(1) and (b)(4) to read as follows:
Sec. 1001.1401 Violations of PPS corrective action.
* * * * *
(b) Length of exclusion. * * *
(1) The impact of the hospital's failure to comply on Medicare,
Medicaid or any of the other Federal health care programs, program
beneficiaries or other individuals;
* * * * *
(4) The impact of the exclusion on Medicare, Medicaid or any of the
other Federal health care programs, beneficiaries or the public; and
* * * * *
11. Section 1001.1501 would be amended by revising paragraph (a)(3)
to read as follows:
Sec. 1001.1501 Default of health education loan or scholarship
obligations.
(a) Circumstance for exclusion. * * *
(3) The OIG will take into account access of beneficiaries to
physicians' services for which payment may be made under Medicare,
Medicaid or other Federal health care programs in determining whether
to impose an exclusion.
* * * * *
12. Section 1001.1901 would be amended by revising paragraphs (a),
(b)(1), introductory paragraph (c)(3) and (c)(4)(i) to read as follows:
Sec. 1001.1901 Scope and effect of exclusion.
(a) Scope of exclusion. Exclusions of individuals and entities
under this title will be from Medicare, Medicaid and any of the other
Federal health care programs, as defined in Sec. 1001.2 of this part.
(b) Effect of exclusion on excluded individuals and entities. (1)
Unless and until an individual or entity is reinstated into the
Medicare, Medicaid and other Federal health care programs in accordance
with subpart F of this part, no payment will be made by Medicare,
Medicaid or any of the other Federal health care programs for any item
or service furnished, on or after the effective date specified in the
notice period, by an excluded individual or entity, or 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.
* * * * *
(c) Exceptions to paragraph (b)(1) of this section. * * *
(3) Unless the Secretary determines that the health and safety of
beneficiaries receiving services under Medicare, Medicaid or any of the
other Federal health care programs warrants the exclusion taking effect
earlier, payment may be made under such program for up to 30 days after
the effective date of the exclusion for--
* * * * *
(4)(i) Notwithstanding the other provisions of this section,
payment may be made under Medicare, Medicaid or other Federal health
care programs for certain emergency items or services furnished by an
excluded individual or entity, or at the medical direction or on the
prescription of an excluded physician or other authorized individual
during the period of exclusion. To be payable, a claim for such
emergency items or services must be accompanied by a sworn statement of
the person furnishing the items or services specifying the nature of
the emergency and why the items or services could not have been
furnished by an individual or entity eligible to furnish or order such
items or services.
* * * * *
13. Section 1001.3002 would be amended by republishing introductory
paragraph (b), removing existing paragraph (b)(5) and adding new
paragraphs (b)(5) and (b)(6); and by revising paragraph (c)(1) to read
as follows:
[[Page 46743]]
Sec. 1001.3002 Basis for reinstatement.
* * * * *
(b) In making the reinstatement determination, the OIG will
consider--
* * * * *
(5) Whether the individual or entity, during the period of
exclusion, has adequately and promptly informed its clients or patients
that any items or services provided will not be reimbursable under any
Federal health care program; and
(6) Whether the individual or entity has, during the period of
exclusion, submitted claims, or caused claims to be submitted or
payment to be made by any Federal health care program, for items or
services the excluded party furnished, ordered or prescribed, including
health care administrative services.
(c) * * *
(1) Has properly reduced his or her ownership or control interest
in the entity below 5 percent;
* * * * *
14. Section 1001.3003 would be revised to read as follows:
Sec. 1001.3003 Approval of request for reinstatement.
(a) If the OIG grants a request for reinstatement, the OIG will--
(1) Give written notice to the excluded individual or entity
specifying the date of reinstatement;
(2) Notify HCFA of the date of the individual's or entity's
reinstatement;
(3) Notify appropriate Federal and State agencies that administer
health care programs that the individual or entity has been reinstated
into all Federal health care programs; and
(4) To the extent applicable, give notice to others that were
originally notified of the exclusion.
(b) A determination by the OIG to reinstate an individual or entity
has no effect if a Federal health care program has imposed a longer
period of exclusion under its own authorities.
15. Section 1001.3005 would be amended by revising paragraphs (a)
introductory text, (b) and (d) to read as follows:
Sec. 1001.3005 Reversed or vacated decisions.
(a) An individual or entity will be reinstated into Medicare,
Medicaid and other Federal health care programs retroactive to the
effective date of the exclusion when such exclusion is based on--
* * * * *
(b) If an individual or entity is reinstated in accordance with
paragraph (a) of this section, HCFA and other Federal health care
programs will make payment for services covered under such program that
were furnished or performed during the period of exclusion.
* * * * *
(d) An action taken by the OIG under this section will not require
any other Federal health care program to reinstate the individual or
entity if such program has imposed an exclusion under its own
authority.
PART 1002--[AMENDED]
B. Part 1002 would be amended as follows:
1. The authority citation for part 1002 would continue to read as
follows:
Authority: 42 U.S.C. 1302, 1320a-3, 1320a-5, 1320a-7,
1396(a)(4)(A), 1396(p)(1), 1396a(30), 1396a(39), 1396b(a)(6),
1396b(b)(3), 1396b(i)(2) and 1396b(q).
2. Section 1002.2 would be amended by revising paragraph (a) to
read as follows:
Sec. 1002.2 General authority.
(a) In addition to any other authority it may have, a State may
exclude an individual or entity from participation in the Medicaid
program for any reason for which the Secretary could exclude that
individual or entity from participation in the Medicare, Medicaid and
other Federal health care programs under sections 1128, 1128A or
1866(b)(2) of the Social Security Act.
* * * * *
PART 1003--[AMENDED]
C. Part 1003 would be amended as follows:
1. The authority citation for part 1003 would be revised to read as
follows:
Authority: 42 U.S.C. 1302, 1320-7, 1320a-7a, 1320a-7e, 1320b-10,
1395dd(d)(1), 1395mm, 1395nn(g), 1395ss(d), 1396b(m), 11131(c) and
11137(b)(2).
2. Section 1003.100 would be amended by revising paragraphs (a) and
(b)(1)(iv), (viii), (x), (xi) and by adding (b)(1)(xii) to read as
follows:
Sec. 1003.100 Basis and purpose.
(a) Basis. This part implements sections 1128(c), 1128A, 1128E,
1140, 1876(i)(6), 1877(g), 1882(d) and 1903(m)(5) of the Social
Security Act, and sections 421(c) and 427(b)(2) of Pub. L. 99-660 (42
U.S.C. 1320a-7, 1320a-7a, 1320a-7e, 1320a-7(c), 1320b(10), 1395mm,
1395ss(d), 1396(m), 11131(c) and 11137(b)(2)).
(b) Purpose. This part--
(1) * * *
(iv)(A) Fail to report information concerning medical malpractice
payments or who improperly disclose, use or permit access to
information reported under part B of title IV of Public Law 99-660, and
regulations specified in 45 CFR part 60, or
(B) Are health plans and fail to report information concerning
sanctions or other adverse actions imposed on providers as required to
be reported to the Healthcare Integrity and Protection Data Bank
(HIPDB) in accordance with section 1128E of the Act;
* * * * *
(viii) Have submitted, or caused to be submitted, certain
prohibited claims, including claims for services rendered by excluded
individuals employed by or otherwise under contract with such person,
under one or more Federal health care programs;
* * * * *
(x) Have collected amounts that they know or should know were
billed in violation of Sec. 411.353 of this title and have not refunded
the amounts collected on a timely basis;
(xi) Are physicians or entities that enter into an arrangement or
scheme that they know or should know has as a principal purpose the
assuring of referrals by the physician to a particular entity which, if
made directly, would violate the provisions of Sec. 411.353 of this
title; or
(xii) Violate the Federal health care programs' anti-kickback
statute as set forth in section 1128B of the Act.
* * * * *
3. Section 1003.102 would be amended by revising paragraphs (a)(2)
and (b)(5); and by adding a new paragraph (b)(11) to read as follows:
Sec. 1003.102 Basis for civil money penalties and assessments.
(a) * * *
(2) An item or service for which the person knew, or should have
known, that the claim was false or fraudulent, including a claim for
any item or service furnished by an excluded individual employed by or
otherwise under contract with that person;
* * * * *
(b) * * *
(5) Fails to report information concerning--
(i) A payment made under an insurance policy, self-insurance or
otherwise, for the benefit of a physician, dentist or other health care
practitioner in settlement of, or in satisfaction in whole or in part
of, a medical malpractice claim or action or a judgment against such a
physician, dentist or other practitioner in accordance with section 421
of Pub. L. 99-660 (42 U.S.C. 11131) and as required by regulations at
45 CFR part 60; or
[[Page 46744]]
(ii) An adverse action required to be reported to the Healthcare
Integrity and Protection Data Bank as established by section 221 of
Public Law 104-191 and set forth in section 1128E of the Act.
* * * * *
(11) Has violated section 1128B of the Act by unlawfully offering,
paying, soliciting or receiving remuneration in return for the referral
of business paid for by Medicare, Medicaid or other Federal health care
programs.
* * * * *
4. Section 1003.103 would be amended by revising paragraph (a); and
by adding new paragraphs (g) and (h) to read as follows:
Sec. 1003.103 Amount of penalty.
(a) Except as provided in paragraphs (b) and (d) through (h) of
this section, the OIG may impose a penalty of not more than $10,000 for
each item or service that is subject to a determination under
Sec. 1003.102.
* * * * *
(g) The OIG may impose a penalty of not more than $25,000 against a
health plan for failing to report information on an adverse action
required to be reported to the Healthcare Integrity and Protection Data
Bank in accordance with section 1128E of the Act and
Sec. 1003.102(b)(5)(ii) of this part.
(h) For each violation of Sec. 1003.102(b)(11) of this part, the
OIG may impose--
(1) A penalty of $50,000, and
(2) An assessment of up to 3 times the total amount of remuneration
offered, paid, solicited or received, as specified in Sec. 1003.104(b)
of this section.
5. Section 1003.104 would be revised to read as follows:
Sec. 1003.104 Amount of assessment.
(a) The OIG may impose an assessment, where authorized, in
accordance with Sec. 1003.102 (except for Sec. 1003.102(b)(11)), of not
more than three times the amount claimed for each item or service which
was a basis for the penalty. The assessment is in lieu of damages
sustained by the Department or a State because of that claim.
(b) In accordance with Sec. 1003.102(b)(11), the OIG may impose an
assessment of not more than three times the total amount of
remuneration offered, paid, solicited or received, without regard to
whether a portion of such remuneration was offered, paid, solicited or
received for a lawful purpose.
6. Section 1003.105 would be amended by revising the section
heading, introductory paragraph (a)(1) and paragraph (b)(1) to read as
follows:
Sec. 1003.105 Exclusion from participation in Medicare, Medicaid and
other Federal health care programs.
(a)(1) Except as set forth in paragraph (b) of this section, in
lieu of or in addition to any penalty or assessment, the OIG may
exclude from participation in Medicare, Medicaid and other Federal
health care programs the following persons for a period of time
determined under Sec. 1003.107--
* * * * *
(b)(1) (i) With respect to determinations under Sec. 1003.102(b)(2)
or (b)(3), a physician may not be excluded if the OIG determines that
he or she is the sole community physician or the sole source of
essential specialized services in a community.
(ii) With respect to determinations under Sec. 1003.102(b)(5)(ii)
of this part, no exclusion shall be imposed.
* * * * *
7. Section 1003.106 would be amended by redesignating existing
paragraph (a)(1)(vi) to read as new paragraph (a)(1)(ix); by adding new
paragraphs (a)(1)(vi), (a)(1)(vii) and (a)(1)(viii); and by revising
paragraphs (a)(1)(ii), (a)(1)(iii), (a)(1)(ix), (a)(2)(i), (a)(2)(ii)
and (a)(2)(iii) to read as follows:
Sec. 1003.106 Determinations regarding the amount of the penalty and
assessment.
(a) Amount of penalty.
(1) * * *
(ii) The degree of culpability of the contracting provider, or the
person submitting the claim or request for payment, or giving the
information;
(iii) The history of prior offenses of the contracting provider (or
principals of the contracting provider), or the person submitting the
claim or request for payment, or giving the information;
* * * * *
(vi) The amount of financial interest involved with respect to
Sec. 1003.102(b)(10);
(vii) Whether the contracting provider knew of the exclusion when
employing or otherwise contracting with an excluded individual or
entity in accordance with Sec. 1003.102(a)(2) of this part;
(viii) The harm to patients or any Federal or State health care
program which resulted or could have resulted from the provision of
care by a person or entity with which the contracting provider is
expressly prohibited from contracting under section 1128A(a)(6) of the
Act; and
(ix) Such other matters as justice may require.
(2) * * *
(i) The nature and circumstances of the failure to properly report
information, or the improper disclosure of information, as required;
(ii) The degree of culpability of the person in failing to provide
timely and complete data or in improperly disclosing, using or
permitting access to information, as appropriate;
(iii) The materiality, or significance of omission, of the
information to be reported, or the materiality of the improper
disclosure of, or use of, or access to information, as appropriate;
* * * * *
8. Section 1003.109 would be amended by revising introductory
paragraph (a) and paragraph (a)(3) to read as follows:
Sec. 1003.109 Notice of proposed determination.
(a) If the Inspector General proposes a penalty and, when
applicable, an assessment, or proposes to exclude a respondent from
participation in Medicare, Medicaid and any other Federal health care
program, as applicable, in accordance with this part, he or she must
deliver or send by certified mail, return receipt requested, to the
respondent, written notice of his or her intent to impose a penalty,
assessment and exclusion, as applicable. The notice includes--
* * * * *
(3) The reason why such claims, requests for payments or incidents
subject the respondent to a penalty, assessment and exclusion;
* * * * *
9. Section 1003.114 would be amended by revising paragraph (a) to
read as follows:
Sec. 1003.114 Collateral estoppel.
(a) Where a final determination pertaining to the respondent's
liability under Sec. 1003.102 has been rendered in any proceeding in
which the respondent was a party and had an opportunity to be heard,
the respondent shall be bound by such determination in any proceeding
under this part.
* * * * *
Dated: February 6, 1998.
June Gibbs Brown,
Inspector General, Department of Health and Human Services.
Approved: April 6, 1998.
Donna E. Shalala,
Secretary.
[FR Doc. 98-23463 Filed 8-28-98; 4:23 pm]
BILLING CODE 4150-04-P
