On January 11, 2017, the U.S. Department of Health and Human Services Office of Inspector General (“OIG”) issued a final rule explaining new policies for excluding individuals and entities from participation in federal health care programs.  The final rule reflects amendments to the agency’s exclusion authorities made by the Affordable Care Act in 2010 and the Medicare Modernization Act in 2003.

The new regulation follows the two final rules that the agency issued on December 6, 2016 with respect to the Anti-Kickback Statute and Civil Monetary Penalties and in the face of requests from House and Senate Republicans to refrain from issuing any new regulations in the final days of the Obama administration.

The final rule presents many notable changes to the exclusion regulations.  First, the OIG announced that exclusions will only apply to misconduct from the past ten years.  Thus, the OIG may not revoke billing privileges as punishment for all wrongdoing, no matter how old.  Through this change, the OIG responded to the strong opposition it received against an unlimited statute of limitations.  Commenters pointed out that failing to provide a set time limit would leave providers subject to exclusion long after the underlying violation was resolved.  By setting the ten-year period, the OIG also acknowledged the “courts’ historical favoring of an enumerated limitations period.”

The final rule also establishes an early reinstatement process for providers that were excluded after losing their health care licenses for reasons including lapses in professional competence, professional performance, or financial integrity.  Previously, these providers could not be reinstated until the lost license was restored.  Under the final rule, however, the providers may apply for early reinstatement if they obtain or are permitted to retain a healthcare license in another state or retain a different healthcare license in the same state, or if they do not have a valid healthcare license but can demonstrate that they would no longer pose a threat to federal healthcare programs.  While providers who apply for early reinstatement must overcome a presumption against reinstatement that applies to the first three years after the loss of licensure, the three-year period is down from five years as suggested in the proposed rule.

The OIG also increased the amount that federal healthcare programs would have to lose in order for the loss to be considered an aggravating factor in determining how long the exclusion should last.  While in the proposed rule, the OIG suggested that the loss to federal healthcare programs would have to be no more than $15,000 in order to become an aggravating factor, the final rule set the amount at $50,000 in several scenarios.  This change addressed comments stating that $15,000 was too small an amount to warrant more severe punishment.  The final rule also removed a mitigating factor relating to the availability of alternative healthcare services furnished by the excluded provider (i.e., the fact that the patient’s access to care would be significantly harmed by exclusion of the provider no longer serves as a mitigating factor).  The patient’s access to care will still be considered in determining whether exclusion is appropriate, but it will be an “all-or-nothing” factor, rather than one that reduces the duration of exclusion.

Finally, the rule allows the OIG to exclude individuals who hold ownership or control interests in excluded entities.  It also allows exclusion of anyone convicted of a crime in connection with obstruction of certain investigations or audits.

Due to the timing of the issuance of this final rule, its long-term impact under the new administration is yet to be determined.  For example, while the final rule establishes new policies for excluding individuals and entities from participation in federal health care programs, it also amends definitions to clarify that a person or entity has “furnished” an item or service when the person or entity submits a claim or requests or receives payment.  While the clarification was merely intended to address “situations in which payment is made by a Federal health care program without a traditional fee-for-service claim, i.e., where the program makes payments through some other mechanism,” it’s possible that the agency may cite the revised definitions to further broaden it exclusion authorities.