Failing to Screen for Excluded Providers Raises Practice Risk

When hiring providers and other professionals to work in your medical practice, it’s essential to find out as much as possible about those individuals before hiring. I always recommend that my practice clients conduct background checks, drug testing, a search of social media, and an extensive review of recommendations from former employers, when possible.  In some states, certain pre-hire investigations (i.e. criminal background checks, license verification, etc.) may also be required. One particular concern for practices looking to hire, is whether a candidate is an excluded federal healthcare provider.

In 1999, the HHS Office of Inspector General (OIG) issued a Special Advisory Bulletin entitled “Effect of Exclusion from Participation in Federal Health Care Programs.” In this bulletin, the OIG warned healthcare providers to avoid the hiring of individuals excluded from federal healthcare programs. From that point forward, the OIG provided limited additional guidance and interpretation on the subject. May 8, 2013, however, the OIG issued an update superseding and replacing the 1999 bulletin. This most recent bulletin not only reminds healthcare providers of the importance of determining whether potential and current employees and contractors have been excluded from healthcare programs, but seemingly expands on the scope of such exclusion.

As most physicians are aware, no payment may be made by a federal healthcare program to their practice, directly or indirectly, for any item or service that has been: (1) furnished by an excluded entity or individual; or (2) directed or prescribed by an excluded physician. Most physicians would be surprised to learn that the use of federal payments received by the practice to cover an excluded individual’s salary or benefits, regardless of the role that individual plays in the practice, is also prohibited. This exclusion applies even when such individuals are assigned the indirect roles of preparing surgical trays, reviewing treatment plans, or filling prescriptions for drugs that are billed to a federal healthcare program. Additionally, the OIG bulletin is quite clear that excluded individuals cannot hold administrative roles, such as CEO, general counsel, or director of human resources. Additionally, the OIG indicates that an excluded provider may not provide any administrative/management services, such as billing, accounting or staff training.

The OIG does clarify, however, that excluded individuals may provide services to entities that receive federal healthcare funds if the individual is not providing services to individuals covered by a federal healthcare program, directly or indirectly. However, practices that attempt to isolate excluded individuals in their practice roles may find it challenging to find a place for the excluded individual in the practice. The penalties for employing or contracting with a person the practice knows or should know is excluded can include civil monetary penalties of up to $10,000 for each item or service furnished for which a federal program is billed, and additional fines of up to three times the amount claimed. Program exclusion is also possible, as well as criminal prosecutions and civil actions.

Although the OIG notes that there is no specific legal requirement that a practice must take active steps to determine that a provider is excluded, given the practice is charged with information it “should know,” failure to determine an exclusion may be imprudent. For medical practices looking to avoid hiring excluded individuals, a screening program is the safest approach, particularly as it relates to individuals whose services are payable by a federal healthcare program (both employees and contractors). A search of excluded providers can be performed upon hiring and periodically thereafter using the OIG’s List of Excluded Individuals and Entities (LEIE). It’s also recommended that any such searches be retained and become part of the individual’s personnel file. If a practice does determine that it has hired a provider that has been excluded, it should contact counsel to discuss reporting the exclusion to the OIG using the OIG’s self-disclosure protocol.

There are many reasons to be careful who your practice hires. Make sure you have a vigorous process in place for finding the most important aspects of a prospective provider’s professional background and practice history. A little effort initially will ensure you have the best healthcare providers working for you.