Analysis of Recent OIG Advisory Opinion on Employment of Excluded Individuals

The Department of Health and Human Services, Office of Inspector General (OIG) recently released a favorable advisory opinion, OIG Advisory Opinion No. 22-11 (the “Opinion”), analyzing the proposed employment of an individual excluded from Federal health care programs to perform marketing tasks related to Worker’s Compensation (WC) programs (the “Proposed Arrangement”). The Requestor, a group medical practice, inquired about whether the Proposed Arrangement would constitute grounds for sanctions under section 1128A(a)(6) of the Social Security Act (the “Act”), 42 U.S.C. § 1320a-7a(a)(6). The OIG concluded that although the proposed employment would present a meaningful compliance risk to Requestor, the OIG would not impose sanctions under the Act in connection with the Proposed Arrangement.

The Advisory Opinion. According to the facts presented, the Requestor is a medical group specializing in pain management. While the majority of Requestor’s patients’ treatments are covered by WC programs that are not Federal health care programs, Requestor also treats—and submits claims for items and services provided to—Federal health care program beneficiaries.

In 2016, a licensed chiropractor (the “Excluded Individual”) pleaded guilty to conspiracy in relation to receiving illegal kickbacks for referring WC patients to a certain hospital for spinal surgery. In April 2017, the Excluded Individual was suspended from participating in the State WC system as a physician, practitioner, or provider. In March 2019, Requestor hired the Excluded Individual as an administrative employee to perform services that related, at least in part, to Federal health care program beneficiaries. The State’s Medicaid program excluded the Excluded Individual in May 2019, and the OIG excluded the Excluded Individual in March 2021. Requestor placed the Excluded Individual on unpaid administrative leave in May 2021 and disclosed the individual’s employment to the OIG.

Under the Proposed Arrangement, Requestor would reestablish the Excluded Individual’s employment as a WC payor relations representative, marketing Requestor’s medical services to WC payors and attorneys working with individuals covered by WC payors. The Excluded Individual also would develop marketing materials, research potential contacts within the State WC industry, participate in WC industry groups, and provide information on WC to Requestor’s management. Requestor certified that the Excluded Individual would not provide marketing, billing, or any other services to Federal health care program beneficiaries or to any providers or suppliers who refer Federal health care program beneficiaries to Requestor. Further, the individual would have no contact with any Federal health care program beneficiaries and would not provide items or services, directly or indirectly, for which payment may be made by a Federal health care program. Requestor also certified that it would create a separate payroll division that would pool revenues derived from the reimbursement Requestor receives only from non-Federal health care program payors, and that the Excluded Individual’s salary, benefits, and expenses would be paid exclusively from this separate payroll.

The OIG concluded that the Proposed Arrangement would not implicate its civil monetary penalty authority at section 1128A(a)(6) of the Act. It relied on Requestor’s certifications that the Excluded Individual would not provide items or services directly or indirectly to Federal health care program beneficiaries and that Federal health care programs would not pay, directly or indirectly, for the Excluded Individual’s salary. The OIG also noted Requestor’s certification that the individual would be paid from segregated payroll funds derived only from the reimbursement from non-Federal health care program WC payors, but emphasized that “[a] provider need not maintain a separate account from which to pay the excluded person, as long as no claims are submitted to or payment is received from Federal health care programs for items or services that the excluded person provides and such items or services relate solely to non-Federal health care program patients.”

The OIG’s Opinion was not without caveats, however. The OIG cautioned that its Opinion: (1) did not address potential liability based on Requestor’s past employment of the Excluded Individual; and (2) offered no opinion on whether the Proposed Arrangement would implicate or violate the terms of the Excluded Individual’s suspension from participation in the State WC system. The OIG further cautioned that the Proposed Arrangement raised concerns from a compliance perspective, in that Requestor proposes to employ an individual convicted of receiving illegal kickbacks in exchange for the referral of WC patients in a marketing role designed to encourage WC payors and attorneys to refer their clients to Requestor for medical services. Nonetheless, because the employment of the Excluded Individual under the Proposed Arrangement would not involve the provision of items or services for which payment may be made under a Federal health care program, it therefore, would not implicate the OIG’s civil monetary penalty authority.

Analysis. Pursuant to 42 C.F.R. § 1001.1901, no payment may be made by Medicare, Medicaid, or any other Federal health care program for any item or service furnished by an excluded individual or entity during the period of exclusion. Accordingly, Federal health care programs do not pay for items or services furnished directly or indirectly by an excluded person, regardless of who bills for such items or services. To furnish “indirectly” means to provide items or services manufactured, distributed, or otherwise supplied by individuals or entities who do not directly submit claims to Medicare, Medicaid, or other Federal health care programs, but that provide items or services to providers, practitioners, or suppliers who submit claims to these programs for such items and services. 42 C.F.R. § 1000.10.

Advisory Opinion 22-11 is the latest of the OIG’s analyses addressing the employment of Excluded Individuals by health care providers that submit claims for payment to Federal health care programs. See, e.g. OIG Advisory Opinion No. 18-01¹ (concluding that an excluded participant could market company’s services to long-term pharmacies that might submit claims to Federal health care programs because the proposed marketing services were far removed from products provided to program beneficiaries); OIG Advisory Opinion No. 03-01² (concluding that excluded physician could perform certain attenuated business development functions for employer without sanction although the products of the employer would ultimately be paid for by the Medicare program through inclusion on hospital cost reports); OIG Advisory Opinion No. 01-16³ (concluding that employment of an excluded physician as a program developer at a health maintenance organization would not be subject to administrative sanctions).⁴ The OIG has also provided guidance relating to the prohibition against employing or contracting with excluded individuals and entities in its “Special Advisory Bulletin on the Effect of Exclusion from Participation in Federal Health Care Programs.”⁵

While this Opinion and others discussed herein only apply to the specific facts and proposed arrangement presented in each particular request and should not be relied upon as general policies, they offer informal guidance to health care providers about practices relating to the employment of individuals excluded from federal health care programs that could potentially result in the imposition of significant monetary penalties.

For more information on OIG Advisory Opinion No. 22-11 or other issues addressed herein, please contact Lisa Churvis.

[1] Available at https://oig.hhs.gov/documents/advisory-opinions/744/AO-18-01.pdf.
[2] Available at https://oig.hhs.gov/documents/advisory-opinions/744/AO-03-01.pdf.
[3] Available at https://oig.hhs.gov/documents/advisory-opinions/744/AO-01-16.pdf.
[4] See also OIG Advisory Opinion No. 19-05 (purchase of real estate from excluded person would not trigger sanctions), available at https://oig.hhs.gov/documents/advisory-opinions/762/AO-19-05.pdf; OIG Advisory Opinion No. 07-17 (concluding that excluded individual who surrendered to a family-controlled entity rights to an invention ultimately sold to health care providers who could bill Federal programs for it was not subject to sanctions) available at https://oig.hhs.gov/documents/advisory-opinions/762/AO-07-17.pdf.
[5] Available at https://oig.hhs.gov/exclusions/files/sab-05092013.pdf.