Prevent Potential Liability to State and Federal Agencies for "Excluded Providers"

Specialty Pharmacy TimesMarch/April 2015
Volume 6
Issue 2

Health care and pharmacy practices must regularly verify that their employees are not excluded from participation in Medicare, Medicaid, or other federal health programs.

Health care and pharmacy practices must regularly verify that their employees are not excluded from participation in Medicare, Medicaid, or other federal health programs.

Since 1977, the Office of Inspector General (OIG) of the Department of Health and Human Services has possessed authority to exclude individuals and entities who have engaged in fraud or abuse from participation in Medicare, Medicaid, and other federal health care programs. The OIG also has the authority to impose civil money penalties (CMPs) on these entities for the same conduct. Under the CMP law, fraud or abuse—or more specifically, improper claims—includes claims for reimbursement submitted by individuals or entities that have been excluded from participation. In order to avoid liability, all health care providers must perform thorough searches of excluded providers, who are publicly listed in a government database, prior to and during employment of or contracting with any individual or entity.

An “excluded provider” is any individual or entity that provides or is involved in the provision of, or billing for, services or items that are reimbursable by federal and/or state health care programs but that have been excluded from participation in those programs. Excluded providers may include physicians, nurses, nurses’ aides, durable medical equipment companies, physical therapists, pharmacists, billing companies, administrative staff, and non-licensed persons involved in some aspect of the health care industry. As demonstrated by recent prosecutions, health care and pharmacy practices must actively and regularly verify that no employee or contractor is excluded from participation in federal health care programs.

Special advisory bulletins released by the OIG provide insight into provider obligations. On May 8, 2013, the OIG issued “Special Advisory Bulletin on the Effect of Exclusion from Participation in Federal Health Care Programs,” which describes the scope and effect of the legal prohibition on payment by federal health care programs for items or services furnished: (1) by an excluded person, or (2) at the medical direction or on the prescription of an excluded person. Therefore, in circumstances where a prescription is dispensed from a pharmacy in full accordance with the law, it may nevertheless be an improper claim if the prescription originated from an excluded provider. Further, the special advisory describes violative conduct and the resulting administrative sanctions OIG may pursue.

Additionally, states facing fiscal crises use recoupment from providers as a tool to raise revenue. In 2011, the New York Attorney General recouped nearly $250,000 in restitution to resolve a case involving a pharmacist suspended from practice and excluded from the Medicaid program who nevertheless dispensed prescriptions. The employing pharmacy pleaded guilty to defrauding the Medicaid program of approximately $187,500 as a result of the excluded pharmacist’s conduct.

Such enforcement activity is on the rise. Thus far in 2015, 4 separate entities have entered into settlement agreements with the OIG to resolve allegations that they employed individuals they knew or should have known had been excluded from participating in any federal health care programs. On January 23, 2015, the OIG announced a settlement agreement with a pharmacist in Minnesota in the amount of $96,259.57 to resolve allegations that he owned and managed a pharmacy participating in federal health care programs while he was excluded.

Additionally, under the CMP law, the OIG may impose a penalty and assessment against any individual or entity who has presented a claim for “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.” Fines can amount to as much as $10,000 for each improperly submitted claim and may be accompanied by a penalty of up to $25,000.

Frier Levitt has had occasion to represent various providers who were subjected to payment recoupment as a result of their interactions with excluded providers. In 1 circumstance, a pharmacy hired a pharmacist who possessed a valid license, but failed to disclose that she was excluded from the Medicare program. The pharmacy then faced recoupment of all of the fees received for every prescription filled by the excluded pharmacist. Notwithstanding the employee’s failure to disclose her status, it is the pharmacy’s obligation to perform thorough searches of exclusion databases in order to properly evaluate individuals prior to hiring them. Employers must also continue to monitor the status of their employees sporadically during the course of employment.

In order to avoid the costly penalties associated with engaging excluded providers, all entities must be proactive and develop a plan to properly research and assess the status of all prospective and current employees and contractors. It is appropriate and necessary to search the Federal List of Excluded Individuals and Entities database, published on the OIG website at, as well as any corresponding state databases, at the outset of this process. SPT

About the Authors

Jonathan E. Levitt, Esq, is cofounder of the boutique health care law firm Frier Levitt. He earned his JD at New York Law School.

Arielle T. Simkins, Esq, is an associate at Frier Levitt. She earned her JD at Seton Hall University School of Law.

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