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Baker Hostetler attorneys B. Scott McBride and Summer D. Swallow authored a January 2011 article in the Health Care Fraud Report, BNA Insights. Titled “The Kiss of Death: OIG’s Exclusion Authority,” the article explains the federal government's latest actions to strengthen its permissive exclusion authority—with a focus toward individual accountability in its fraud and abuse enforcement activities.

“One of the Department of Health and Human Services Office of Inspector General's [OIG’s] most powerful measures in its fight against fraud and abuse is its ability to exclude companies or individuals from participation in federal health care programs,” the article explained. “The OIG's exclusion authority yields the agency significant leverage in negotiations with alleged offenders, being that exclusion for many health care providers can effectively be a death sentence as Medicare and Medicaid are chief revenue sources for many providers.”

The authors also stated, “Although the OIG has not aggressively exercised its permissive exclusion authority, it recently indicated through new guidance and legislative initiative that it intends to make more frequent use of such authority. The OIG says it does not intend to pursue such extreme measures. Rather, the OIG notes that if an officer or managing employee knew or should have known of the conduct, the OIG will operate with a presumption in favor of exclusion.”

The article details a series of questions that the OIG will use in determining whether exclusion can be overcome:

• What were the circumstances of the misconduct?
• What was the seriousness of the offense?
• What was the individual's role in the sanctioned entity?
• What were the individual's actions in response to the misconduct and information about the entity?

The authors say that the OIG will consider the following factors, among others, in determining exclusion:

1. Whether beneficiaries were harmed;
2. The extent of any financial harm to federal health care programs;
3. Whether the misconduct is an isolated incident or represents a pattern of wrongdoing;
4. If the entity previously has had any similar problems with the government;
5. The individual's role and responsibility in the entity, including such person's position and relationship to the misconduct; and
6. The size of the entity and its corporate structure.

The article also offers background on exclusions:

• The Health Insurance Portability and Accountability Act of 1996 (HIPAA), which expanded the already existing Medicare and Medicaid exclusions. The exclusion provisions of HIPAA included (1) broadening the OIG's mandatory exclusion authority; (2) establishing minimum exclusion periods for certain discretionary exclusions; and (3) establishing a discretionary exclusion authority applicable to owners, officers and managers of sanctioned entities. In 1998, the OIG issued a final rule that implements the exclusion authorities set forth in HIPAA; and
• The Patient Protection and Affordable Care Act (PPACA), where Congress established new grounds for permissive exclusion from federal health care programs for an individual or entity convicted of obstructing an audit related to a criminal offense relating to fraud. On March 23, 2010, PPACA granted the OIG the authority to exclude any person or entity that makes false statements or misrepresents a material fact on an application, agreement, bid or contract to participate or enroll as a provider or supplier for federal health care programs.

The authors acknowledge that recent signals from the OIG indicate that the government intends to hold individuals in a position to influence a corporation found to have violated the law personally responsible for such corporation's wrongdoing. They affirm that the OIG states that one purpose of the guidance is to positively influence individuals’ future behavior and compliance with federal health care program requirements by holding individuals accountable for misconduct within entities in which they are in positions of responsibility. They also say that the OIG is attempting to close off an existing loophole that allows executives to leave companies accused of fraud prior to conviction and thereby escape exclusion from federal health care programs.

The article concludes that exclusion for an individual may be a career death sentence and it would likely prevent individuals from employment in any capacity by any entity that receives reimbursements, directly or indirectly, from any federal health care program. As individual focus intensifies, it would certainly be advisable for individuals and entities to reassess the strength of their compliance programs and their level of involvement in compliance efforts.