Medicare and State Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General's Exclusion Authorities, 26809-26828 [2014-10390]

Agencies

• DEPARTMENT OF HEALTH AND HUMAN SERVICES
• Office of Inspector General

[Federal Register Volume 79, Number 90 (Friday, May 9, 2014)]
[Proposed Rules]
[Pages 26809-26828]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-10390]



[[Page 26809]]

Vol. 79

Friday,

No. 90

May 9, 2014

Part II





 Department of Health and Human Services





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Office of Inspector General





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42 CFR Parts 1000, 1001, 1002, et al.





Medicare and State Health Care Programs: Fraud and Abuse; Revisions to 
the Office of Inspector General's Exclusion Authorities; Proposed Rule

Federal Register / Vol. 79 , No. 90 / Friday, May 9, 2014 / Proposed 
Rules

[[Page 26810]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Inspector General

42 CFR Parts 1000, 1001, 1002, and 1006

RIN 0936-AA05


Medicare and State Health Care Programs: Fraud and Abuse; 
Revisions to the Office of Inspector General's Exclusion Authorities

AGENCY: Office of Inspector General (OIG), HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule amends the regulations relating to 
exclusion authorities under the authority of the Office of Inspector 
General (OIG) of the Department of Health and Human Services (HHS or 
the Department). The proposed rule would incorporate statutory changes, 
propose early reinstatement procedures, and clarify existing regulatory 
provisions.

DATES: To ensure consideration, comments must be delivered to the 
address provided below by no later than 5 p.m. Eastern Standard Time on 
July 8, 2014.

ADDRESSES: In commenting, please reference file code OIG-403-P2. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission. However, you may submit comments using 
one of three ways (no duplicates, please):
    1. Electronically. You may submit electronically through the 
Federal eRulemaking Portal at https://www.regulations.gov. (Attachments 
should be in Microsoft Word, if possible.)
    2. By regular, express, or overnight mail. You may mail your 
printed or written submissions to the following address: Patrice Drew, 
Office of Inspector General, Department of Health and Human Services, 
Attention: OIG-403-P2, Cohen Building, 330 Independence Avenue SW., 
Room 5541C, Washington, DC 20201.

Please allow sufficient time for mailed comments to be received before 
the close of the comment period.

    3. By hand or courier. You may deliver, by hand or courier, before 
the close of the comment period, your printed or written comments to: 
Patrice Drew, Office of Inspector General, Department of Health and 
Human Services, Attention: OIG-403-P2, Cohen Building, 330 Independence 
Avenue SW., Room 5541C, Washington, DC 20201.

Because access to the interior of the Cohen Building is not readily 
available to persons without Federal Government identification, 
commenters are encouraged to schedule their delivery with one of our 
staff members at (202) 619-1368.
    Inspection of Public Comments: All comments received before the end 
of the comment period will be posted on https://www.regulations.gov for 
public viewing. Hard copies will also be available for public 
inspection at the Office of Inspector General, Department of Health and 
Human Services, Cohen Building, 330 Independence Avenue SW., 
Washington, DC 20201, Monday through Friday from 9:30 a.m. to 4 p.m. To 
schedule an appointment to view public comments, phone (202) 619-1368.

FOR FURTHER INFORMATION CONTACT: Susan Gillin, (202) 619-0335, Office 
of Counsel to the Inspector General.

SUPPLEMENTARY INFORMATION:

Executive Summary

I. Purpose of the Regulatory Action

A. Need For Regulatory Action

    The Affordable Care Act of 2010 (Patient Protection and Affordable 
Care Act, Pub. L. 111-148, 124 Stat. 119 (2010), as amended by the 
Health Care and Education Reconciliation Act of 2010, Pub. L. 111-152, 
124 Stat. 1029 (2010), hereafter ACA) significantly expanded OIG's 
authority to protect Federal health care programs from fraud and abuse. 
OIG proposes to update its regulations to codify the changes made by 
ACA in the regulations. At the same time, OIG proposes updates pursuant 
to the Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (MMA) and other statutory authorities, as well as technical 
changes to clarify and update the regulations.

B. Legal Authority

    The legal authority, laid out later in the preamble, for this 
regulatory action is found in the Social Security Act (the Act), as 
amended by ACA. The legal authority for the proposed changes is listed 
by the parts of Title 42 of the Code of Federal Regulations that we 
propose to modify:
    1000: 42 U.S.C. 1302 and 1395hh.
    1001: 42 U.S.C. 1302; 1320a-7; 1320a-7b; 1395u(j); 1395u(k); 1395w-
104(e)(6); 1395y(d); 1395y(e); 1395cc(b)(2)(D), (E), and (F); 1395hh; 
1842(j)(1)(D)(iv); 1842(k)(1), and sec. 2455, Public Law 103-355, 108 
Stat. 3327 (31 U.S.C. 6101 note).
    1002: 42 U.S.C. 1302, 1320a-3, 1320a-5, 1320a-7, 1396(a)(4)(A), 
1396a(p), 1396a(a)(39), 1396a(a)(41), and 1396b(i)(2).
    1006: 42 U.S.C. 405(d), 405(e), 1302, 1320a-7, and 1320a-7a.

II. Summary of Major Provisions

A. Exclusion Authorities

    We propose changes to the exclusion regulations at 42 CFR part 1001 
to codify authorities under the MMA and ACA and make technical changes 
to existing regulations. Specifically, section 949 of MMA and section 
6402(k) of ACA amended section 1128(c)(3)(B) of the Act to expand OIG's 
waiver authorities. Also, ACA provided that exclusion may be imposed 
for:
     Conviction of an offense in connection with Obstruction of 
an audit;
     Failure to supply payment information (ACA expanded this 
provision to apply to individuals who ``order, refer for furnishing, or 
certify the need for'' items or services for which payment may be made 
under Medicare or any State health care program); and
     Making, or causing to be made, any false statement, 
omission, or misrepresentation of a material fact in applications to 
participate as a provider of services or supplier under a Federal 
health care program.

ACA also established a new authority at section 1128(f)(4) of the Act 
for OIG to issue testimonial subpoenas in investigations of exclusion 
cases under section 1128 of the Act.

    In addition to the changes under the ACA, and pursuant to section 
1128(g)(1) of the Act, we propose a modification to the reinstatement 
rules for individuals excluded as a result of losing their licenses to 
allow them to rejoin the programs earlier when appropriate.

III. Costs and Benefits

    There are no significant costs associated with the proposed 
regulatory revisions that would impose any mandates on State, local, or 
tribal governments or the private sector.

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   Social Security Act citation          United States Code citation
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205...............................  42 U.S.C. 405.
1102..............................  42 U.S.C. 1302.
1124..............................  42 U.S.C. 1320a-3
1126..............................  42 U.S.C. 1320a-5.
1128..............................  42 U.S.C. 1320a-7.
1128A.............................  42 U.S.C. 1320a-7a.
1128B.............................  42 U.S.C. 1320a-7b.
1128C.............................  42 U.S.C. 1320a-7c.
1128E.............................  42 U.S.C. 1320a-7e.
1128J.............................  42 U.S.C. 1320a-7k.
1140..............................  42 U.S.C. 1320b-10.
1814..............................  42 U.S.C. 1395f.
1833..............................  42 U.S.C. 1395l.

[[Page 26811]]

 
1835..............................  42 U.S.C. 1395n.
1842..............................  42 U.S.C. 1395u.
1851..............................  42 U.S.C. 1395w-21.
1852..............................  42 U.S.C. 1395w-22.
1857..............................  42 U.S.C. 1395w-27.
1860D-12..........................  42 U.S.C. 1395w-112.
1860D-14A.........................  42 U.S.C. 1395w-114A.
1861..............................  42 U.S.C. 1395x.
1862..............................  42 U.S.C. 1395y.
1866..............................  42 U.S.C. 1395cc.
1867..............................  42 U.S.C. 1395dd.
1876..............................  42 U.S.C. 1395mm.
1877..............................  42 U.S.C. 1395nn.
1882..............................  42 U.S.C. 1395ss.
1886..............................  42 U.S.C. 1395ww.
1892..............................  42 U.S.C. 1395ccc.
1902..............................  42 U.S.C. 1396a.
1903..............................  42 U.S.C. 1396b.
1915..............................  42 U.S.C. 1396n.
1927..............................  42 U.S.C. 1396r-8.
1929..............................  42 U.S.C. 1396t.
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I. Background

A. Exclusion Authority

    OIG's exclusion authorities are intended to protect the Federal 
health care programs and their beneficiaries from untrustworthy health 
care providers, i.e., individuals and entities who pose a risk to 
program beneficiaries or to the integrity of these programs. These 
authorities encompass both mandatory exclusions (section 1128(a) of the 
Act) and permissive exclusions (section 1128(b) of the Act). The 
mandatory exclusion authorities require OIG to exclude from Federal 
health care program participation any individual or entity convicted of 
a ``program-related'' crime; a crime related to patient abuse or 
neglect; or certain felonies related to health care delivery, 
governmental health care programs, or controlled substances. Mandatory 
exclusions are for a period of at least 5 years. The permissive 
authorities do not require the imposition of an exclusion, and may 
either be (1) ``derivative'' exclusions that are based on actions 
previously taken by a court or other law enforcement or regulatory 
agency or (2) ``affirmative'' exclusions that are based on OIG-
initiated determinations of misconduct, e.g., poor quality of care, 
kickbacks, or submission of false claims to a Federal health care 
program. While there is no 5-year minimum term for permissive 
exclusions, some permissive authorities have varying minimum or 
benchmark exclusion terms.
    Over the years, several statutory and regulatory provisions have 
amended or further clarified OIG's exclusion authorities. Specifically, 
in 1996, provisions within the Health Insurance Portability and 
Accountability Act of 1996 (HIPAA) revised or expanded OIG's 
authorities to (1) mandate a 5-year minimum exclusion period for felony 
convictions relating to health care fraud, even if governmental 
programs were not involved, and for certain felony convictions relating 
to controlled substances; (2) establish minimum or benchmark periods of 
exclusion from 1 to 3 years for certain permissive exclusions; and (3) 
establish a new permissive exclusion authority applicable to 
individuals who have an ownership interest in, or have control over, 
the operations of an entity that has been convicted of a program-
related offense. The Balanced Budget Act (BBA) of 1997 further amended 
OIG's exclusion authorities by (1) extending the scope of an OIG 
exclusion beyond Medicare and State health care programs to all Federal 
health care programs; (2) establishing permanent exclusions for persons 
convicted of three or more health care-related crimes and 10-year 
exclusions for persons convicted of two health care-related crimes; and 
(3) allowing for the exclusion of entities owned or controlled by a 
family or household member of an excluded individual when a transfer of 
ownership was made in anticipation of, or following, a conviction. On 
March 18, 2002, OIG also published several revisions and technical 
corrections to 42 CFR part 1001 with respect to, among other things, 
(1) the reinstatement procedures relating to exclusions resulting from 
a default on health education or scholarship obligations made or 
secured by the Secretary and (2) expansion of the scope of exclusion to 
all Federal health care programs.
1. Changes Made by MMA
    MMA amended OIG's authority to waive mandatory exclusions in 
several ways. First, section 949 of MMA amended section 1128(c)(3)(B) 
of the Act by expanding the waiver provision of the Act to allow waiver 
requests for individuals excluded under either of the two mandatory 
exclusion authorities that were added in HIPAA, sections 1128(a)(3) and 
(a)(4) of the Act. Second, prior to MMA, a waiver request could be made 
only by the administrator of a State agency for a waiver of the State 
health care program. Section 949 of MMA expanded the mandatory 
exclusion waiver provision by permitting the administrator of any 
Federal health care program to request a waiver for the respective 
Federal health care program. Third, MMA added a provision requiring the 
requesting Federal health care program administrator to determine 
whether the exclusion would impose a hardship on Medicare 
beneficiaries, in addition to the existing requirement that the 
requesting administrator determine whether the individual or entity for 
whom the waiver was requested be the sole community physician or sole 
source of essential specialized services in a community.
2. Changes Made by ACA
    Section 6402(k) of ACA further amended the Act's waiver provisions 
to permit the administrator of a Federal health care program to request 
a waiver if the administrator determines that exclusion would impose a 
hardship on any beneficiary or beneficiaries eligible to receive items 
or services under a Federal health care program, which broadened the 
waiver request beyond only Medicare beneficiaries as provided in MMA.
    In addition, section 6408(c) of ACA amended section 1128(b)(2) of 
the Act by expanding the application of the permissive exclusion 
authority to include individuals convicted of an offense in connection 
with the obstruction of an audit. Section 6406(c) of ACA broadened the 
scope of the permissive exclusion authority found in section 
1128(b)(11) of the Act to apply to individuals who not only furnish but 
also ``order, refer for furnishing, or certify the need for'' items or 
services for which payment may be made under Medicare or any State 
health care program and fail to provide payment information. Section 
6402(d) of ACA established a new permissive exclusion authority under 
section 1128(b)(16) of the Act applicable to any individual or entity 
that knowingly makes, or causes to be made, any false statement, 
omission, or misrepresentation of a material fact in any application, 
agreement, bid, or contract to participate or enroll as a provider of 
services or supplier under a Federal health care program. Finally, 
section 6402(e) of ACA established a new authority at section 
1128(f)(4) of the Act for OIG to issue testimonial subpoenas in 
investigations of exclusion cases under section 1128 of the Act.
    We propose changes to the OIG regulations at 42 CFR parts 1001 and 
1006 to reflect the revised provisions set forth in MMA and ACA.
3. Proposed Policy Changes and Clarifying Changes
    We propose a number of changes to the regulations to correct 
omissions from previous regulatory issuances, to update certain dollar 
figures related to aggravating factors, and to clarify existing 
regulatory provisions. We also propose several policy changes. These

[[Page 26812]]

include proposals to: (1) Create early reinstatement procedures for 
exclusions pursuant to the loss of a health care license; (2) expand 
the ``pay the first claim rule'' in Sec.  1001.1901(c) so that it would 
apply to Medicare Parts C and D; and (3) clarify that no statute of 
limitations period applies to exclusions imposed under section 
1128(b)(7) of the Act.
    Part 1002 provides direction to State Medicaid agencies when they 
exercise their program integrity responsibilities by independently 
initiating exclusion actions. The regulatory provisions place certain 
requirements on State agencies when they undertake such exclusions--
requirements that are substantially consistent with OIG procedures and 
are designed to ensure adequate due process. The proposed revisions to 
part 1002 consist of minimal reorganization, several new headings to 
clarify the applicability of certain provisions, language to clarify 
existing Federal requirements, and a listing of the statutory 
underpinnings of the provisions in part 1002.

II. Provisions of the Proposed Rule

A. Exclusion Authorities

    We propose changes to the OIG regulations at 42 CFR parts 1000, 
1001, 1002, and 1006.
1. Changes to Part 1000
1000.10 Definitions of ``Directly,'' ``Furnished,'' and ``Indirectly''
    We propose a number of technical revisions to the definitions of 
``directly'' and ``indirectly'' as used in the definition of 
``furnished.'' First, we propose adding the word ``supply'' to the 
definitions of ``directly'' and ``indirectly'' because the definition 
of ``furnished'' includes both the provision and supply of items and 
services.
    Next, we propose to remove the phrase ``submit claims to'' and 
replace it with ``request or receive payment from'' immediately 
preceding ``Federal health care programs'' in the definitions of 
``directly'' and ``indirectly.'' We would replace the phrase for 
clarity's sake, and the revised wording would be consistent with the 
False Claims Act's broad definition of ``claim'' (31 U.S.C. 3729(b)). 
This proposed change would appropriately encompass all current and 
future payment methodologies.
    We further propose removing the redundant sentence within the 
definition of ``indirectly'' stating that the word ``indirectly'' does 
not include the direct submission of claims by another individual or 
entity because that clarification is already present within the 
definition of ``directly.''
    In addition, OIG has always interpreted the definition of 
``indirectly'' at 42 CFR 1000.10, regarding furnishing items or 
services, to cover any employee or contractor of a provider that 
receives payment from any Federal health care program related to such 
items or services. Therefore, we propose adding the word ``provided'' 
(with conforming technical edits) within the first part of the 
definition of ``indirectly'' to read as follows: ``Indirectly, as used 
in the definition of `furnished' in this section, means the provision 
or supply of items and services manufactured, distributed, supplied, or 
otherwise provided by individuals or entities.''
    We propose to move the definitions of ``ALJ,'' ``Exclusion,'' 
``State,'' and ``State health care program'' from parts 1001 and 1003 
to part 1000. The proposed definitions of ``ALJ'' and ``State'' are 
currently found in part 1003. The proposed definitions of ``Exclusion'' 
and ``State health care program'' are currently found in part 1001. The 
proposed definition of ``State health care program'' includes minor 
revisions to the definition currently found in part 1001 to include 
Title XXI, the Children's Health Insurance Program. The BBA added Title 
XXI to the statutory definition of ``State health care program'' under 
section 1128(h) of the Act. We also propose minor revisions to the 
current part 1000 definitions of ``QIO'' and ``Secretary'' because we 
are removing those definitions from parts 1001 and 1003, respectively.
    Lastly, we propose making a technical revision to the definition of 
``furnished.'' The current definition includes part of the definition 
of ``indirectly.'' This is both redundant and somewhat confusing. 
Therefore, we propose to streamline the definition of ``furnished'' by 
removing this language.
1000.20 and 1000.30 Definitions Pertaining to Medicare and Medicaid
    We propose removing the definitions currently found at Sec. Sec.  
1000.20 and 1000.30 from part 1000. These definitions are not, and have 
never been, applicable to the OIG regulations in 42 CFR chapter V. 
These programmatic definitions, which apply to Medicare and Medicaid 
(Titles XVIII and XIX of the Act), were originally included in chapter 
V for ease of reference, not because they defined terms in chapter V. 
They are no longer useful, even as a reference source, because 
exclusions imposed under chapter V are from all Federal health care 
programs, not only from Medicare and State health care programs as was 
the case until 1996. Definitions specific to Medicare are at 42 CFR 
400.202, and definitions specific to Medicaid are at 42 CFR 400.203. We 
are retaining the definitions at Sec.  1000.10 that continue to apply 
to the regulations in chapter V, which were created pursuant to OIG's 
authorities under Title XI of the Act.
2. Changes to Part 1001
1001.2 Definition of ``Ownership or Control Interest''
    We propose moving the definition of ``ownership or control 
interest'' and its related definitions, including the definition of 
``managing employee,'' to the definitions section at Sec.  1001.2. 
Currently, the definitions are at Sec.  1001.1001, the regulation 
section related to exclusion of entities owned or controlled by a 
sanctioned person.
    In addition, because we have proposed that the definition of 
``ownership or control interest'' and its related definitions apply to 
all of part 1001, we would remove references to the statutory 
definition of these terms. Therefore, with respect to ``ownership or 
control interest,'' we propose removing the phrase ``as defined in 
section 1124(a)(3) of the Act'' from Sec. Sec.  1001.101(d) and 
1001.401(a). With respect to ``managing employee,'' we also propose 
removing the phrase ``as defined in section 1126(b) of the Act'' from 
Sec. Sec.  1001.101(d), 1001.401(a), and 1001.1051(a).
    We also propose to remove the definitions of ``Exclusion,'' 
``OIG,'' ``QIO,'' and ``State health care program.'' As discussed 
above, we propose to move the definitions of ``Exclusion'' and ``State 
health care program'' from part 1001 to part 1000. We propose to remove 
the definitions of ``OIG'' and ``QIO'' from part 1001 because those 
definitions are included in part 1000.
1001.101 and 1001.401 Application of Certain Exclusions to Health Care 
Providers
    At Sec. Sec.  1001.101(d) and 1001.401(a)(1), respectively, we 
currently restrict the imposition of mandatory exclusions under section 
1128(a)(4) of the Act and permissive exclusions under section 
1128(b)(3) of the Act by limiting the applicability of these provisions 
to those individuals or entities that: (1) Are, or have ever been, 
health care practitioners, providers, or suppliers; (2) hold or held 
ownership or control interests, or are or have been officers, 
directors, or managing employees, in health care entities; or (3) are 
or have ever been employed in any capacity in the health care industry. 
To continue to protect the programs and their beneficiaries, but not 
expend OIG's

[[Page 26813]]

limited resources to unnecessarily exclude people who do not 
participate in Federal health care programs, we propose to further 
narrow the application of sections 1128(a)(4) and 1128(b)(3) of the Act 
to reference the time of the offense. Under our proposal, those 
individuals subject to exclusion would be either (1) current health 
care practitioners, providers, suppliers, those who furnish items or 
services, owners, managing employees, or those who are employed in any 
capacity in the health care industry; or (2) individuals who were 
health care practitioners, providers, suppliers, those who furnished 
items or services, owners, managing employees, or those who were 
employed in any capacity in the health care industry at the time of the 
offense.
1001.102(b)(1), 201(b)(2), and 701(d)(2)(iv) Financial Loss Aggravating 
Factors
    With respect to the length of an exclusion, Sec. Sec.  
1001.102(b)(1) and 1001.201(b)(2)(i) list, as an aggravating factor, 
whether the acts resulting in the conviction, or similar acts, caused 
or were intended to cause, a financial loss of $5,000 or more. The 
regulations related to certain affirmative exclusions at Sec.  
1001.701(d)(2)(iv) reference a financial loss of $1,500 or more. These 
provisions were last updated in 2002 and 1998, respectively. To update 
the regulations, we propose increasing the aggravating factor to 
$15,000. We believe this updated amount is an appropriate threshold 
that is consistent with rationale behind the original amount and 
provides a realistic marker for determining whether someone is 
untrustworthy. In addition, we propose a grammatical correction by 
removing the word ``that'' from the first sentence. Finally, we propose 
substituting the term ``entire'' for ``total'' to be consistent 
throughout the regulations. Thus, the provision would state: ``The acts 
resulting in the conviction or similar acts, caused, or were intended 
to cause, a financial loss to a Government program or to one or more 
entities of $15,000 or more. (The entire amount of financial loss will 
be considered, including any amounts resulting from similar acts not 
adjudicated, regardless of whether full or partial restitution has been 
made).''
1001.102(b)(7) Aggravating Factor Related to Overpayments
    We propose removing the aggravating factor relating to an 
individual or entity being overpaid by Medicare, Medicaid, or other 
Federal health care programs as a result of improper billings at Sec.  
1001.102(b)(7) because it is duplicative of Sec.  1001.102(b)(1), which 
provides for an increase in the exclusion period for causing a 
financial loss to a Government program. In general, being overpaid by 
Federal health care programs for improper billings is substantially the 
same as causing a loss to a Government program. Therefore, we propose 
removing this aggravating factor. This change will require a 
renumbering of the remaining aggravating factors.
1001.102(b)(9), 1001.201(b)(2)(vi), 1001.301(b)(2)(vi), and 
1001.401(c)(2)(v) Other Offenses and Adverse Actions
    The aggravating factor set forth for various exclusion authorities 
at Sec. Sec.  1001.102(b)(9), 1001.201(b)(2)(vi), 1001.301(b)(2)(vi), 
and 1001.401(c)(2)(v), which considers other offenses besides those 
that form the basis for the exclusions, involves two separate concepts: 
Convictions for offenses other than the one resulting in exclusion and 
adverse actions by governmental entities other than the one resulting 
in exclusion. Therefore, we propose separating this factor into two 
separate aggravating factors, renumbering them accordingly, and putting 
them both in the present perfect tense to more accurately reflect the 
purpose of the aggravating factor. Accordingly, new Sec. Sec.  
1001.102(b)(8), 1001.201(b)(2)(vi), 1001.301(b)(2)(vi), and 
1001.401(c)(2)(v) would read: ``Whether the individual or entity has 
been convicted of other offenses besides those that formed the basis 
for the exclusion,'' and new Sec. Sec.  1001.102(b)(9), 
1001.201(b)(2)(vii), 1001.301(b)(2)(vii), and 1001.401(c)(2)(vi) would 
read: ``Whether the individual or entity has been the subject of any 
other adverse action by any Federal, State or local government agency 
or board, if the adverse action is based on the same set of 
circumstances that serves as the basis for the imposition of the 
exclusion.''
1001.102(c)(1) Mitigating Factor Relating to Misdemeanor Offenses and 
Loss to Government Programs
    We propose updating this mitigating factor, which considers whether 
an individual or entity was convicted of three or fewer misdemeanor 
offenses and caused losses to Medicare or any other governmental health 
program of less than $1,500. First, we propose to clarify that this 
factor applies only to section 1128(a)(1) of the Act. This factor does 
not apply to section 1128(a)(2) of the Act because section 1128(a)(2) 
pertains to patient abuse and neglect, and financial loss is 
irrelevant. In addition, this mitigating factor does not apply to 
sections 1128(a)(3) and (4) because each of these exclusions requires a 
felony conviction. Finally, we propose to increase the loss amount to 
$5,000. We believe this updated amount is an appropriate threshold that 
is consistent with rationale behind the original amount.
1001.102(d) Effect of Additional Previous Convictions on Term of 
Exclusion
    We propose correcting an inconsistency between the regulatory and 
statutory language with respect to section 1128(c)(3)(G) of the Act 
relating to increased minimum exclusion periods for repeat offenders. 
The statute requires a minimum 10-year period of exclusion for 
individuals who have been convicted on one previous occasion of one or 
more offenses for which an exclusion may be effected under section 
1128(a) of the Act (whether or not an exclusion was ever imposed) and 
permanent exclusion for individuals convicted on two or more previous 
occasions. However, the current regulation at Sec.  1001.102(d) 
provides for a minimum 10-year period of exclusion for individuals who 
have been convicted on one other occasion of one or more offenses for 
which an exclusion may be effected under section 1128(a) of the Act and 
permanent exclusion for individuals convicted on two or more other 
occasions. We propose replacing the word ``other'' with ``previous'' to 
be consistent with the statute and to clarify that if an individual has 
been previously convicted of an offense that would have mandated 
exclusion, regardless of whether the individual had been excluded 
previously, section 1128(c)(3)(G) of the Act requires OIG to exclude 
for a minimum 10-year period or permanently if the individual has been 
convicted on two or more previous occasions.
1001.201, 1001.301, 1001.401, 1001.501, 1001.601, 1001.701, 1001.801, 
1001.951, 1001.1101, 1001.1201, 1001.1601, and 1001.1701 Mitigating 
Factor Relating to Alternative Sources
    We propose removing the mitigating factor for determining the 
length of exclusion under various permissive exclusion authorities that 
considers whether alternative sources of the type of health care items 
or services furnished by the individual are not available. On the basis 
of our experience, we believe that this factor could be considered by 
OIG in determining whether a permissive exclusion should be imposed and 
whether a waiver is appropriate, but does not relate to the length of

[[Page 26814]]

exclusion. Therefore, we propose removing this factor.
1001.201(b)(3)(i) Mitigating Factor Relating to Other Offenses and Loss 
to Government Programs
    As in Sec.  1001.102(c)(1), we propose updating the mitigating 
factor relating to permissive exclusions by increasing the threshold 
financial loss amount OIG will consider as a mitigating factor under 
Sec.  1001.201(b)(3)(i) to $5,000.
1001.301 Expanded Application of a Specific Permissive Exclusion 
Authority
    Prior to ACA, section 1128(b)(2) of the Act permitted the Secretary 
to exclude any individual or entity that had been convicted of an 
offense in connection with the obstruction of an investigation into any 
criminal offense described under any of the mandatory exclusion 
authorities or under the permissive exclusion authority related to 
health care fraud or fraud in a governmental program. However, if an 
individual or entity was convicted of an offense in connection with the 
obstruction of an audit, the Secretary did not have a basis to exclude 
the individual or entity under section 1128(b)(2) of the Act. Section 
6408(c) of ACA expanded the authority by allowing the Secretary to 
exclude an individual or entity that has been convicted of an offense 
in connection with the obstruction of an investigation or audit related 
to any criminal offense under the mandatory provisions of the exclusion 
statute; under the permissive provision related to health care fraud or 
fraud in a governmental program; or in cases when the investigation or 
audit related to the use of Federal health care program funds received, 
directly or indirectly. This new provision under ACA applies to acts 
committed on or after January 1, 2010.
    Accordingly, we propose to revise Sec.  1001.301 to reflect the 
changes in ACA by adding ``or audit'' to the title. In addition, we 
propose to add a new paragraph reflecting the changes made by section 
6408 of ACA.
    In addition, we propose adding the financial loss aggravating 
factor under the permissive exclusion authority related to obstruction 
of investigations and audits as permitted under section 1128(c)(3)(D) 
of the Act. The financial loss factor is considered by OIG under most 
of the mandatory exclusion authorities and other permissive exclusion 
authorities. Adding this aggravating factor would allow OIG to increase 
the period of exclusion if the acts, or similar acts, that resulted in 
the obstruction conviction caused a financial loss of $15,000 or more.
1001.401 Correction of a Cross-Reference for Aggravating and Mitigating 
Factors
    We propose correcting a cross-reference within the regulatory 
language at Sec.  1001.401(c). Specifically, Sec.  1001.401(c) 
mistakenly states: ``The aggravating or mitigating factors listed in 
paragraphs (b)(2) and (b)(3) of this section,'' when it should state 
``the aggravating or mitigating factors listed in paragraphs (c)(2) and 
(c)(3) of this section.''
1001.501 and 1001.601 Aggravating and Mitigating Factors Relating to 
Exclusions Based on the Loss of a Health Care License or Suspension or 
Exclusion by a Federal or State Health Care Program
    We propose removing all the aggravating and mitigating factors 
found at Sec. Sec.  1001.501(b) and 601(b), which permit OIG to 
lengthen periods of exclusion based on the loss of an individual's or 
entity's health care license and exclusion or suspension from a Federal 
or State health care program. Because exclusions under sections 
1128(b)(4) and (b)(5) of the Act are derivative of a licensing board 
action or Federal or State health care program action, respectively, 
OIG generally imposes exclusions under these sections for the same 
period as that of the licensing board's or agency's action. As a 
result, individuals are generally eligible for reinstatement once they 
regain their health care licenses or are allowed to participate in the 
Federal or State health care program. Our proposed removal of these 
aggravating and mitigating factors would make the regulations 
consistent with OIG's general practice under these sections. In 
addition, because exclusions under Sec.  1001.601 are based on actions 
by either a Federal or a State health care program, we would clarify 
Sec.  1001.601(b) by adding references to Federal health care programs. 
Therefore, we propose to revise Sec. Sec.  1001.501(b) and 1001.601(b) 
accordingly.
1001.501 Early Reinstatement
    For several reasons, we are considering instituting a process for 
early reinstatement for individuals excluded under section 1128(b)(4) 
of the Act. OIG has discretionary authority to exclude individuals or 
entities under section 1128(b) of the Act. Specifically, section 
1128(b)(4) of the Act permits OIG to exclude individuals from 
participation in all Federal health care programs because of the loss 
of their health care licenses for reasons bearing on their professional 
competence, professional performance, or financial integrity.
    Prior to the enactment of section 1128(c)(3)(E) of the Act, the 
regulations allowed for reinstatement when an individual who had been 
excluded under section 1128(b)(4) of the Act due to the loss of a 
health care license in one State fully and accurately disclosed the 
circumstances surrounding this action to a licensing authority of a 
different State and when that State granted the individual or entity a 
new license or took no significant adverse action as to a currently 
held license. However, upon the enactment of section 1128(c)(3)(E) of 
the Act in 1997, this provision was removed from the regulations. Thus, 
under current regulations, an individual excluded under section 
1128(b)(4) of the Act is not eligible to be reinstated to Federal 
health care programs until the license that was originally lost, in the 
same State where it was lost, has been restored.
    Section 1128(g) of the Act allows an excluded individual to apply 
for reinstatement in the manner specified by the Secretary in 
regulations and at the minimum period of exclusion provided under 
paragraph (c)(3) and ``at such other times as the Secretary may 
provide.'' Moreover, courts have held that the purpose and effect of 
the exclusion period is remedial and is intended to protect the Federal 
health care programs from fraud and abuse and to protect citizens who 
rely on the integrity of program participants.
    OIG excludes a significant number of individuals under section 
1128(b)(4) of the Act. Many of these individuals either lose their 
licenses permanently, move to another State and obtain a license there, 
or do not intend to seek reinstatement of their health care license. 
Under current regulations, the excluded individuals may never become 
eligible for reinstatement even though the exclusion may no longer be 
necessary to protect patients or the programs. For example, we have 
seen many cases in which a medical board permanently revoked a 
physician's license, making that physician permanently ineligible for 
reinstatement. This permanent ineligibility exists under current 
regulations even though another State or another licensing board 
subsequently granted the physician a license. In addition, we regularly 
are contacted by individuals who have changed professions and never 
intend to regain their original licenses but for whom the exclusion is 
a permanent obstacle to practicing a new health-care related 
profession.

[[Page 26815]]

    In contrast, OIG is required to exclude individuals or entities 
convicted of certain health-care-related offenses under section 1128(a) 
of the Act for a minimum of 5 years. Absent any aggravating factors, 
exclusions under the mandatory provisions of the Act require only a 5-
year period of exclusion. Many permissive exclusions under section 
1128(b)(4) of the Act result in permanent exclusions, even though the 
individuals were never charged with or convicted of criminal offenses. 
To serve the remedial purpose and intent of the statute, we are 
considering an alternative reinstatement process.
    For special instances, such as when OIG imposes a permissive 
exclusion on the basis of a licensing board action and subsequently 
determines that the individual poses little or no threat to patients or 
the programs and when license reinstatement by the original licensing 
board is extremely unlikely, OIG is considering a process for ``early 
reinstatement'' pursuant to OIG's authority under section 1128(g) of 
the Act and the discretion inherent in the permissive exclusion 
provisions in section 1128(b) of the Act. Thus, we propose to amend the 
regulations to allow for early reinstatement, and to include a list of 
factors OIG will consider in determining whether early reinstatement is 
appropriate. Specifically, we would add a section entitled ``(c) Early 
Reinstatement,'' which would have two subparts. The first subpart would 
allow an excluded individual to request early reinstatement if, after 
fully and accurately disclosing the circumstances surrounding the 
original license action that formed the basis for the exclusion, the 
individual obtained a health care license, was allowed to retain a 
health care license in another State, or retained a different health 
care license in the same State. The second subpart would allow an 
excluded individual to request early reinstatement if he or she did not 
have a valid health care license of any kind provided that the 
individual could demonstrate that he or she would no longer pose a 
threat to Federal health care programs and their beneficiaries. In 
proposed Sec.  1001.501, we state a number of factors OIG would 
consider in making this determination. We are also considering 
alternative approaches, and solicit comments on these and any 
additional factors that should be considered. For example, we are 
considering applying the same 3-year benchmark exclusion period that 
applies to other permissive exclusions under sections 1128(b)(1), (2), 
and (3) of the Act for exclusions under section 1128(b)(4) of the Act. 
The excluded individual would be eligible to apply for reinstatement 
when the 3-year period ends or when the individual regains his or her 
health care license, whichever comes first. We solicit comments on 
whether this approach would appropriately protect Federal health care 
programs and their beneficiaries.
1001.701, 1001.801, and 1001.1701 Correction of Subsection Headings
    Throughout the regulations, the paragraph headings are italicized. 
However, in Sec. Sec.  1001.701, 1001.801, and 1001.1701, paragraph 
headings were not italicized. We therefore propose to correct this 
omission. For example, paragraph heading (a) in all three sections 
would now be italicized and read as: ``(a) Circumstance for 
exclusion.''
1001.901(c) Period of Limitations on Affirmative Exclusions
    To address questions regarding whether a limitations period applies 
to exclusions imposed under section 1128 of the Act, we propose adding 
paragraph (c) to Sec.  1001.901, which would provide that there is no 
time limitation to exclusions imposed under this authority, even when 
the exclusion is based on violations of another statute that might have 
a specific limitations period. In 2002, we issued a final rule stating 
that we had proposed a regulation stating that there would be no time 
limitation on OIG's imposition of a program exclusion, that we had 
received comments on this proposal, and that the comments led us not to 
finalize the proposed regulation. See 67 FR 11928, 11929 (March 18, 
2002).
    We believe strong policy and legal justifications support our 
interpretation that there is no limitations period applicable to 
exclusions imposed under section 1128(b)(7) of the Act. The 2002 
comments raised concerns that (1) if an exclusion is based on a 
violation of another statute, the individual or entity could be 
excluded for conduct that occurred years before and that does not bear 
on the person's current trustworthiness or integrity and (2) after the 
passage of significant time, evidence becomes difficult or impossible 
to gather. However, it is significant that no limitations period is 
specified in section 1128 of the Act. In addition, we do not believe 
that the reference in section 1128(b)(7) of the Act to other sections 
of the Act means that a limitations period applicable to another 
section of the Act should be incorporated into section 1128(b)(7). The 
referenced sections, which describe acts for which CMPs and criminal 
prosecutions may be pursued, do not include periods of limitations. 
Instead, section 1128A(c) sets forth a period of limitations for CMP 
actions and states that the ``Secretary may not initiate an action 
under this section'' more than 6 years after the underlying conduct. 
The criminal actions in section 1128B of the Act are limited by a 
period of limitations applicable to Federal noncapital criminal cases 
in 18 U.S.C. 3282.
    We agree that, as a general matter, recent acts are more indicative 
of current trustworthiness than acts that took place in the distant 
past. Nevertheless, we believe that conduct that is more than 6 years 
old may sometimes form a proper basis to conclude that a person should 
be excluded. The age of the conduct is a factor in determining the 
weight the conduct should be afforded, not whether the exclusion should 
be imposed at all. We do not believe the passage of time will prejudice 
the person subject to exclusion. For example, exclusions under section 
1128(b)(7) of the Act often arise in the context of related civil False 
Claims Act proceedings, because the elements of the False Claims Act 
are essentially identical to false claims provisions of section 1128A. 
Many False Claims Act cases are resolved through settlement or 
litigation significantly later than 6 years after the underlying 
conduct. In most cases, the OIG determines whether to seek an exclusion 
only when the settlement terms are set or there is a judgment. In most 
cases, the settlement resolves both False Claims Act and section 
1128(b)(7) liability simultaneously in one settlement agreement. When 
determining whether to seek an exclusion under section 1128(b)(7), the 
OIG considers whether the provider has agreed to pay appropriate 
restitution, fines, or penalties and whether it will agree to 
appropriate compliance measures. See 62 Federal Register 67392 
(December 24, 1997). Until a settlement agreement is reached, the OIG 
cannot know whether the provider will agree to make such payments or 
subject itself to appropriate compliance measures. Therefore, in most 
cases it makes sense for the OIG to decide whether to impose an 
exclusion based on the facts and circumstances at the time of the 
potential settlement. If the case does not settle and there is 
litigation under the False Claims Act, the OIG generally waits to see 
what the civil findings are before determining whether to seek an 
exclusion.

[[Page 26816]]

    If section 1128(b)(7) is subject to a six year statute of 
limitations, then the OIG will often be forced to file exclusion 
actions prematurely. In False Claims Act cases where the conduct is 6 
years old, the OIG may need to file a notice of proposed exclusion in 
order to toll the statute of limitations. Such an action would need to 
be taken without the benefit of knowing whether the defendant would 
agree to a settlement including appropriate payment and compliance 
measures. It may result in the exclusion of providers who otherwise 
might be deemed by the OIG to be trustworthy enough to participate in 
the programs. The filing of exclusion actions while False Claims Act 
cases are still pending would require the OIG, the defendant, and the 
DAB to devote resources to cases that would otherwise settle. Further, 
the filing of exclusion actions during the pendency of a False Claims 
Act investigation or settlement discussion may disrupt the civil case. 
Therefore, we believe that in such cases, it is appropriate for us to 
consider exclusion based on conduct that is more than 6 years old.
1001.1001 Exclusion of Entities Owned or Controlled by a Sanctioned 
Person
    As described above, we propose to move all the definitions in Sec.  
1001.1001 to Sec.  1001.2 to create a definition of ``ownership or 
control interest'' that applies to both the exclusions and CMP 
regulations. As a result of this removal, we propose to remove 
Sec. Sec.  1001.1001(a)(1)(ii)(A) and (B) and revise paragraph (a)(2) 
to read as follows: ``(2) Such a person has a direct or indirect 
ownership or control interest in the entity or formerly held an 
ownership or control interest in the entity, but no longer holds an 
ownership or control interest because of a transfer of the interest to 
an immediate family member or a member of the person's household in 
anticipation of or following a conviction, assessment of a CMP, or 
imposition of an exclusion.''
1001.1051 Exclusion of Individuals With Ownership or Control Interest 
in Sanctioned Entities
    With regard to exclusions imposed under section 1128(b)(15) of the 
Act, we propose clarifying the circumstances pertaining to the length 
of exclusion imposed on individuals with ownership or control interests 
in sanctioned entities to make the regulations more consistent with the 
statute. Specifically, we propose amending Sec.  1001.1051(c)(1) to 
state that the length of the individual's exclusion will be for the 
same period as that of the sanctioned entity with which the individual 
has or had the prohibited relationship. We believe this proposed 
clarification would be consistent with the intent of the statute, which 
allows OIG to exclude individuals who have ownership or control 
interests in sanctioned entities. The proposed change would clarify 
that if an individual terminated the relationship with the sanctioned 
entity after it has been excluded, the individual would nonetheless 
remain excluded for the same period that the sanctioned entity is 
excluded.
1001.1201 Broadened Scope of a Permissive Exclusion Authority
    Section 1128(b)(11) of the Act permits OIG to exclude an individual 
or entity ``furnishing items or services for which payment may be 
made'' under Medicare or a State health care program that fails to 
supply certain payment information as required by the Secretary or the 
State agency. Section 6406(c) of ACA broadened the scope of the 
permissive exclusion under section 1128(b)(11) of the Act by revising 
the first phrase as follows: ``Any individual or entity furnishing, 
ordering, referring for furnishing, or certifying the need for items or 
services. . . .'' Accordingly, we would amend Sec.  1001.1201 by adding 
the phrase ``orders, refers for furnishing, or certifies the need for'' 
after ``furnishes.''
1001.1301 Exclusion for Failure To Grant Immediate Access
    We propose several technical changes to this section. First, we 
clarify that OIG may request access to materials other than paper 
documents, such as electronically stored data, including any tangible 
thing upon which data is stored. This change conforms to clarifications 
made to the Inspector General's authorities in section 9 of the 
Inspector General Reform Act of 2008, Public Law 110-409. Second, we 
propose several technical changes to make the terms used in the 
regulation more consistent.
1001.1501 Exclusion for Default on Health Education Assistance Loans 
(HEAL Loans)
    We propose to amend this section in two ways. First, it has come to 
OIG's attention that a significant amount of the health education-
related financial assistance available to physicians, dentists, nurses, 
and other health care professionals from HHS is in the form of loan 
repayment programs (LRP). Under these programs, some of which are 
administered by the Indian Health Service, the National Health Service 
Corps, and the National Institutes of Health (NIH), a health care 
professional agrees to the service obligations required by the LRP in 
return for the repayment by the program of outstanding loan obligations 
incurred by the individual in connection with his or her health 
education. Although section 1128(b)(14) does not specifically refer to 
loan repayment programs, we have concluded that these programs fall 
within the scope of the statute. They are essentially a type of 
scholarship awarded by HHS after an individual's health education is 
completed rather than in advance, a scholarship in the form of loan 
repayment rather than an upfront payment of tuition. We believe that 
this interpretation is consistent with the broad language of the 
statute and with congressional intent in enacting section 1128(b)(14), 
which was to provide HHS with a significant remedy when those who have 
received health education assistance from an HHS program default on 
their repayment obligations. To clarify that section 1128(b)(14) also 
applies to those who default on LRP obligations, we propose to amend 
the regulation to specifically reference them.
    In addition, we propose a technical amendment to this regulatory 
provision. The regulations currently reference the Public Health 
Service (PHS) as the organization responsible for determining whether 
an individual is in default on his or her loans or scholarship 
obligations. However, other HHS organizations, such as the Indian 
Health Service and NIH, also administer health education loans, 
scholarship programs, and loan repayment programs. Therefore, we 
propose amending the regulation to make it consistent with the broad 
language of the statute by replacing ``PHS'' with ``the administrator 
of the health education loan, scholarship, or loan repayment program,'' 
where applicable.
1001.1751 Establishment of a New Permissive Exclusion Authority
    Section 6402(d) of ACA granted a new permissive exclusion authority 
to the Secretary under section 1128(b) of the Act. Under the newly 
enacted section 1128(b)(16) of the Act, the Secretary may exclude any 
individual or entity that knowingly makes or causes to be made any 
false statement, omission, or misrepresentation of a material fact in 
any application, agreement, bid, or contract to participate or enroll 
as a provider of services or supplier under a Federal health care 
program. Accordingly, we propose adding a new section at Sec.  
1001.1751 entitled ``Making false statements or misrepresentation of 
material facts.'' Under this proposal, we would determine whether to 
impose an

[[Page 26817]]

exclusion under this section on the basis of information from various 
sources, including, but not limited to, the Centers for Medicare & 
Medicaid Services (CMS), Medicaid State agencies, fiscal agents or 
contractors, private insurance companies, State or local licensing or 
certification authorities, and law enforcement agencies. In determining 
the period of exclusion, we propose to consider what the repercussions 
of the false statement are and whether the individual or entity has a 
documented history of criminal, civil, or administrative wrongdoing.
1001.1801 Expansion of Waiver Provisions in MMA and ACA
    Prior to MMA, OIG could consider waiver requests made under section 
1128(c)(3)(B) of the Act and Sec.  1001.1801 of the regulations for 
exclusions imposed under section 1128(a)(1) of the Act if the Secretary 
determined that the individual or entity was the sole community 
physician or sole source of essential specialized services in a 
community. Congress originally limited the possibility of waiver to 
those excluded under section 1128(a)(1) because the only other 
mandatory exclusion authority was section 1128(a)(2), which applied to 
convictions related to patient abuse or neglect. The legislative 
history indicates that Congress did not intend for exclusions imposed 
under section 1128(a)(2) to be waived.
    HIPAA added sections 1128(a)(3) and (a)(4) of the Act, two new 5-
year mandatory exclusion authorities. Section 949 of MMA updated the 
waiver provision of the Act to allow waiver requests for exclusions 
under sections 1128(a)(3) and 1128(a)(4) of the Act. In addition, 
section 949 of MMA permitted the administrator of a Federal health care 
program who determines that the exclusion would impose a hardship on a 
Medicare beneficiary to request a waiver. Section 6402(k) of ACA 
amended this hardship provision to permit the administrator of a 
Federal health care program to request a waiver if the administrator 
determines that exclusion would impose a hardship on any beneficiary 
eligible to receive items or services under a Federal health care 
program, thus removing MMA's requirement that an exclusion could be 
waived only if it imposed a hardship on Medicare beneficiaries.
    The regulations have not been revised since before the enactment of 
MMA. In accordance with section 949 of MMA and section 6402(k) of ACA, 
we propose to revise Sec.  1001.1801 to reflect these changes. With 
respect to individuals authorized to make a waiver request, we would 
remove references to the administrator of State health care programs 
and replace them with the administrator of ``Federal health care 
programs.'' In addition, we would amend Sec.  1001.1801 to reflect the 
statutory change in MMA, which allows waiver requests to be made on 
behalf of individuals or entities excluded under sections 1128(a)(1), 
(a)(3), or (a)(4) of the Act. Lastly, we would amend Sec.  1001.1801 to 
reflect that a Federal health care program administrator may request a 
waiver if the administrator determined that the exclusion would impose 
a hardship on any beneficiaries. Finally, we propose removing Sec.  
1001.1801(g) as it is no longer applicable.
1001.1901 Scope and Effect of Exclusion
    Section 1862(e)(1) of the Act (42 U.S.C. 1395y(e)(1)) states that 
``[n]o payment may be made under this title with respect to any item or 
service . . . furnished--(A) by an individual or entity during the 
period when such individual or entity is excluded . . . from 
participation in the program under this title; or (B) at the medical 
direction or on the prescription of a physician during the period when 
he is excluded . . . from participation in the program under this title 
and when the person furnishing such item or service knew or had reason 
to know of the exclusion (after a reasonable time period after notice 
has been furnished to the person).'' We propose to renumber Sec.  
1001.1901(b) to more closely track the numbering of section 1862(e)(1) 
of the Act.
    We also propose to amend Sec.  1001.1901(c) to make it more 
consistent with section 1862(e)(2) of the Act. Section 1862(e)(2) 
authorizes CMS to pay claims submitted by a Medicare enrollee, if 
otherwise payable, when the items or services are furnished by an 
excluded individual if the enrollee does not know or have reason to 
know of the exclusion. The statute requires Medicare to notify the 
enrollee and not to pay claims after a reasonable time after such 
notification. By its terms, the statute applies this exception to 
``individual[s] eligible for benefits under this title.'' The current 
regulation, Sec.  1001.1901(c), limits this payment exception to 
enrollees in Medicare Part B. This is most likely because at the time 
the regulation was promulgated, Parts C and D of Medicare had not been 
enacted and because enrollees do not submit claims under Medicare Part 
A. We propose to amend the regulation to make it applicable to 
enrollees in Parts C and D, as well as Part B.
    While the statute was designed to provide some protection to 
Medicare enrollees who received items or services from a physician not 
knowing that the physician was excluded, we realize that the practical 
reach of the statute is quite limited since enrollees rarely submit 
claims directly to Medicare. Instead, claims are normally submitted by 
providers or suppliers, who then receive reimbursement directly from 
Medicare contractors. We are aware that Part D enrollees have at times 
been unable to refill prescriptions written by an excluded physician 
when the enrollee was unaware of the exclusion. However, since the 
pharmacy, not the enrollee, is submitting the claim for reimbursement 
to the Medicare Part D plan sponsor, we believe that section 
1862(e)(1)(B) bars Medicare payments to the pharmacy for items 
prescribed by an excluded physician after a reasonable time period 
after notice to the pharmacy of the physician's exclusion. This 
statutory prohibition appears to apply regardless of whether the 
enrollee is aware of the exclusion. We realize that there are times 
when an enrollee whose prescription was written by a physician who was 
subsequently excluded may urgently need a prescription refill (for 
example, for blood pressure medication or insulin) and may be unable to 
see another physician quickly. We are concerned that in some cases, the 
resulting delay in getting medication could pose a risk to the 
enrollee's health. For this reason, we are soliciting comments on how, 
within the law, we could craft a regulation that would protect the 
enrollees in this limited circumstance.
1001.2001(b) Opportunity To Present Oral Argument
    We propose allowing individuals or entities whom OIG proposes to 
exclude under the newly enacted section 1128(b)(16) of the Act to 
request an opportunity to present oral argument to an OIG official 
prior to imposition of the exclusion. This process is currently 
available to individuals who are considered for exclusion under section 
1128(b)(6) of the Act and is set forth at Sec.  1001.2001(b). Section 
1128(b)(16) of the Act is similar to section 1128(b)(6) of the Act in 
that it requires OIG to make factual findings or determinations; 
therefore, we propose to also allow these individuals and entities to 
present oral argument. For this reason, we propose to amend Sec.  
1001.2001(b) to add a reference to Sec.  1001.1751, the proposed 
regulation section for section 1128(b)(16) of the Act.

[[Page 26818]]

1001.2001-1001.2003 Notice of Intent To Exclude and Notice of Exclusion
    Under the current regulations, when OIG proposes to exclude an 
individual or entity under sections 1128(b)(7), 1842(j)(1)(D)(iv) (42 
U.S.C. 1395u(j)(1)(D)(iv)), or 1842(k)(1) of the Act, OIG is required 
to send both a written notice of its intent to exclude under Sec.  
1001.2001 and a notice of proposal under Sec.  1001.2003. The notice of 
intent to exclude and the notice of proposed exclusion both allow the 
individual or entity to respond to OIG with written argument concerning 
whether the exclusion is warranted before the exclusion goes into 
effect. Because the notice of proposed exclusion allows the individual 
or entity to request a hearing with an ALJ, we believe it would be 
sufficient in these cases for OIG to issue only a notice of proposed 
exclusion. As a result, we propose modifying Sec.  1001.2001 to 
eliminate the requirement that OIG send a written notice of intent to 
exclude prior to sending a notice of proposal to exclude. 
Correspondingly, we would add Sec. Sec.  1001.901, 1001.951, 1001.1601, 
and 1001.1701, the applicable regulation sections pertaining to these 
exclusions, to the list of exceptions to the notice of intent to 
exclude in Sec.  1001.2001(c).
    In addition, consistent with longstanding practice, OIG will 
continue to mail the notices of intent to exclude and all other notices 
relating to the imposition of exclusion via first-class mail.
    Section 1001.2001 currently uses the word ``proposes'' in 
connection with the notice of intent to exclude. We propose clarifying 
the language in Sec.  1001.2001 to make it clear that the notice of 
intent to exclude under that paragraph is different from the notice of 
proposal to exclude under Sec.  1001.2003 by replacing the word 
proposes with the word intends.
    Finally, we propose to begin sending notices of intent to exclude 
individuals pursuant to section 1128(b)(14) of the Act. Section 
1128(b)(14) provides that in determining whether to exclude a 
physician, OIG will consider access of beneficiaries to physician 
services. Thus, to allow physicians the opportunity to provide 
information about beneficiary access to physician services before the 
proposed exclusion goes into effect, we propose removing the reference 
to Sec.  1001.1501, the applicable regulation section pertaining to 
exclusions under section 1128(b)(14) of the Act, from the list of 
exceptions in Sec.  1001.2001(c).
    As a result of these changes, Sec.  1001.2001(c) would read as 
follows: ``(c) Exception. If OIG proposes to exclude an individual or 
entity under the provisions of Sec. Sec.  1001.901, 1001.951, 
1001.1301, 1001.1401, 1001.1601, or 1001.1701 of this part, paragraph 
(a) will not apply.''
1001.2004-1001.2006 Notice of Exclusion by HHS
    We propose clarifying that HHS will notify State agencies, State 
licensing agencies, and the public about the exclusion actions it 
takes. In light of the following proposed revision requiring indirect 
providers, such as companies that manufacture or distribute 
pharmaceuticals or devices, to notify their customers of their 
exclusion, we propose clarifying that Sec. Sec.  1001.2004 through 
1001.2006 pertain to notice by HHS. Therefore, we propose renaming the 
headings to include the phrase ``Notice . . . by HHS.''
1001.3001 Reinstatement Procedures
    Earlier in the preamble, we discussed our proposal to add, at Sec.  
1001.501(b) and Sec.  1001.501(c), early reinstatement procedures for 
individuals excluded under section 1128(b)(4) of the Act. We therefore 
propose to add references to these regulation sections to the 
reinstatement procedures at Sec.  1001.3001(a)(1) to accurately reflect 
all reinstatement procedures. Lastly, we propose renumbering Sec.  
1001.3001. Currently, subparagraphs (3) and (4) are placed under 
paragraph (a), which relates to timing of reinstatement, but 
subparagraphs (3) and (4) relate to method of request. We propose 
redesignating current subparagraphs (3) and (4) as new paragraphs (b) 
and (c) and redesignating the current paragraph (b) as paragraph (d).
1001.3002 Criteria for Reinstatement
    We propose to clarify that the factors OIG will consider for a 
reinstatement determination, set forth at Sec.  1001.3002(b), will be 
considered under Sec.  1001.3002(a). We propose to add the following 
underlined language to Sec.  1001.3002(b): ``In making the 
reinstatement determination described in paragraph (a) of this section, 
OIG will consider. . . .'' In addition, we propose amending the current 
language in Sec.  1001.3002(b)(6) and renumbering it as Sec.  
1001.3002(b)(5) to clarify that even when an individual or entity has 
received a program provider number while excluded, OIG, in deciding 
whether to reinstate the individual or entity, may consider the fact 
that the individual or entity submitted claims or caused claims to be 
submitted while excluded.
1001.3005 Withdrawal of Exclusion
    We propose clarifying that OIG will withdraw exclusions that are 
derivative of convictions that are later reversed or vacated on appeal. 
The reinstatement procedures currently provide for reinstatement in 
such situations, but our proposed change to Sec.  1001.3005(a) would 
make clear that these reinstatements would be the result of OIG's 
withdrawal of the exclusion.
3. Changes to Part 1002
1002.1 Scope and Purpose
    We propose to revise the list of authorities currently at Sec.  
1002.1 to clarify the statutory basis and scope of these regulations. 
In addition, we propose to add a new Sec.  1002.2 to identify related 
Federal regulations that establish disclosure requirements for 
providers and State agencies and exclusion requirements for managed 
care organizations. This would require a renumbering of the current 
Sec. Sec.  1002.2 and 1002.3 as Sec. Sec.  1002.3 and 1002.4, 
respectively. Finally, we propose to simplify the description of 
Federal health care programs in Sec.  1002.3(a) by removing the 
reference to Medicare and Medicaid, because both programs are included 
in the definition of ``Federal health care program.''
1002.4 Disclosure by Providers and State Medicaid Agencies
    We propose to renumber Sec.  1002.3 as Sec.  1002.4 and amend it to 
clarify that the Medicaid agency may refuse to enter into or renew a 
provider agreement because of a criminal conviction related to any 
Federal health care program listed at section 1128 of the Act, not just 
to Medicare, Medicaid, or Title XX programs.
1002.5 State Plan Requirement
    We propose to move the provisions currently found in Sec.  1002.100 
to a new section, Sec.  1002.5.
1002.6 Payment Prohibitions
    We propose to move the provisions currently found in Sec.  1002.211 
to a new section, Sec.  1002.6, and to rename the new section ``Payment 
Prohibitions,'' which more accurately describes its contents.
1002.6(a) Conforming Change To Mirror Scope and Effect of Exclusion 
Section
    We propose to amend new Sec.  1002.6(a) to clarify that payment is 
prohibited for items or services furnished at the medical direction or 
on the prescription of an excluded physician or other

[[Page 26819]]

authorized individual. This revision conforms more closely to the 
language in revised Sec.  1001.1901(b) defining the scope and effect of 
exclusion.

Subpart B--Rename as ``State Exclusion of Certain Managed Care 
Entities''

    We propose to rename Subpart B of part 1002 (currently ``Mandatory 
Exclusion'') as ``State Exclusion of Certain Managed Care Entities'' to 
clarify that it pertains only to State exclusion of certain managed 
care entities and not more broadly to mandatory exclusions in general.
1002.203 Mandatory Exclusion
    We propose to clarify that Federal regulations require States to 
exclude managed care organizations or entities that have ownership or 
control interests that could subject them to Federal exclusion by OIG. 
We also propose to update Sec.  1002.203 by replacing the term ``HMO'' 
with the term ``managed care organization'' to more closely conform to 
the language of the Act at section 1902(p)(2) (42 U.S.C. 1396a(p)(2)). 
The BBA changed the terminology in Title XIX, using the term ``managed 
care organization'' to refer to entities previously labeled ``health 
maintenance organizations''(HMOs).

Subpart C--Rename as ``Procedures for State-Initiated Exclusions''

    We propose to rename Subpart C (currently ``Permissive 
Exclusions'') as ``Procedures for State-Initiated Exclusions'' to 
clarify that it pertains to procedures for State-initiated exclusions.
4. Changes to Part 1006
1006.1 Testimonial Subpoena Authority in Section 1128 Cases
    Section 6402(e) of ACA granted the Secretary testimonial subpoena 
authority in investigations of section 1128 cases at section 1128(f)(4) 
of the Act. Prior to the enactment of ACA, OIG's testimonial subpoena 
authority was limited to cases in which OIG was pursuing CMPs under 
section 1128A of the Act. The expanded testimonial subpoena authority 
gives OIG an additional investigative tool under section 1128 of the 
Act for pursuing exclusions for conduct such as submitting improper 
claims.
    In accordance with section 6402(e) of ACA, we propose to revise 
Sec.  1006.1 of these proposed regulations to include a reference to 
the newly enacted section 1128(f)(4) of the Act and add ``section 
1128'' to Sec.  1006.1(b) to reflect that OIG may issue testimonial 
subpoenas in investigations of potential cases involving the exclusion 
statute.

III. Regulatory Impact Statement

    We have examined the impact of this proposed rule as required by 
Executive Order 12866, the Regulatory Flexibility Act (RFA) of 1980, 
the Unfunded Mandates Reform Act of 1995, and Executive Order 13132.

Executive Order Nos. 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulations are necessary, to select regulatory approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety effects; distributive impacts; and equity). 
Executive Order 13563 is supplemental to and reaffirms the principles, 
structures, and definitions governing regulatory review as established 
in Executive Order 12866. A regulatory impact analysis must be prepared 
for major rules with economically significant effects, i.e., $100 
million or more in any given year. This is not a major rule as defined 
at 5 U.S.C. 804(2); it is not economically significant because it does 
not reach that economic threshold.
    This proposed rule is designed to propose implementation of new 
statutory provisions, including new exclusion authorities. It is also 
designed to clarify the intent of existing statutory requirements. The 
vast majority of providers and Federal health care programs would be 
minimally impacted, if at all, by these proposed revisions.
    The proposed changes to the exclusion regulations would have little 
economic impact. On average, OIG excludes approximately 3,500 health 
care providers per year. Historically, fewer than 10 waivers of 
exclusion have been granted in any given year, and fewer than two falls 
affirmative exclusion cases are filed in court. Thus, we believe that 
any aggregate economic effect of the proposed exclusion regulatory 
provisions would be minimal. Additionally, over the past 3 fiscal 
years, OIG has on average returned approximately $16.6 million per year 
to the Medicare Trust Fund. This return under the $100 million 
threshold.
    Accordingly, we believe that the likely aggregate economic effect 
of these regulations would be significantly less than $100 million.

Regulatory Flexibility Act

    The RFA and the Small Business Regulatory Enforcement and Fairness 
Act of 1996, which amended the RFA, require agencies to analyze options 
for regulatory relief of small businesses. For purposes of the RFA, 
small entities include small businesses, nonprofit organizations, and 
Government agencies. Most providers are considered small entities by 
having revenues of $5 million to $25 million or less in any one year. 
For purposes of the RFA, most physicians and suppliers are considered 
small entities.
    The aggregate economic impact of the exclusion provisions on small 
entities would be minimal, directly affecting only those limited number 
of excluded individuals and entities that are sole community physicians 
or sole sources of essential specialized services in the community. We 
believe any resulting impact would be a positive one on the health care 
community.
    In summary, we have concluded that this proposed rule should not 
have a significant impact on the operations of a substantial number of 
small providers and that a regulatory flexibility analysis is not 
required for this rulemaking.

Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law 
104-4, requires that agencies assess anticipated costs and benefits 
before issuing any rule that may result in expenditures in any one year 
by State, local, or tribal Governments, in the aggregate, or by the 
private sector, of $110 million. As indicated above, these proposed 
revisions comport with statutory amendments and clarify existing law. 
As a result, we believe that there would be no significant costs 
associated with these proposed revisions that would impose any mandates 
on State, local, or tribal Governments or the private sector, that will 
result in an expenditure of $110 million or more (adjusted for 
inflation) per year and that a full analysis under the Unfunded 
Mandates Reform Act is not necessary.

Executive Order 13132

    Executive Order 13132, Federalism, establishes certain requirements 
that an agency must meet when it promulgates a rule that imposes 
substantial direct requirements or costs on State and local 
Governments, preempts State law, or otherwise has Federalism 
implications. In reviewing this rule under the threshold criteria of 
Executive Order 13132, we have determined that this proposed rule would 
not significantly

[[Page 26820]]

affect the rights, roles, and responsibilities of State or local 
Governments.

IV. Paperwork Reduction Act

    These proposed changes to Parts 1000, 1001, 1002 and 1006 impose no 
new reporting requirements or collections of information. Therefore, a 
Paperwork Reduction Act review is not required.

List of Subjects

42 CFR Part 1000

    Administrative practice and procedure, Grant programs--health, 
Health facilities, Health professions, Medicaid, Medicare.

42 CFR Part 1001

    Administrative practice and procedure, Fraud, Grant programs--
health, Health facilities, Health professions, Maternal and child 
health, Medicaid, Medicare.

42 CFR Part 1002

    Fraud, Grant programs--health, Health facilities, Health 
professions, Medicaid, Reporting and recordkeeping.

42 CFR Part 1006

    Administrative practice and procedure, Fraud, Investigations, 
Penalties.

    Accordingly, 42 CFR parts 1000, 1001, 1002, and 1006 are proposed 
to be amended as set forth below:

PART 1000--INTRODUCTION: GENERAL DEFINITIONS

0
1. The authority citation for part 1000 continues to read as follows:

    Authority: 42 U.S.C. 1320 and 1395hh.

0
2. Section 1000.10 is amended by:
0
a. Republishing the introductory text
0
b. Adding a definition of ``ALJ'';
0
c. Revising the definition of ``Directly'';
0
d. Adding a definition of ``Exclusion'';
0
e. Revising the definitions of ``Furnished'', ``Indirectly'', ``QIO'', 
and ``Secretary''; and
0
f. Adding definitions of ``State'' and ``State health care program''.
    The additions and revisions read as follows:


Sec.  1000.10  General definitions.

    In this chapter, unless the context indicates otherwise--
* * * * *
    ALJ means an Administrative Law Judge.
* * * * *
    Directly, as used in the definition of ``furnished'' in this 
section, means the provision or supply of items and services by 
individuals or entities (including items and services provided or 
supplied by them, but manufactured, ordered, or prescribed by another 
individual or entity) who request or receive payment from Medicare, 
Medicaid, or other Federal health care programs.
* * * * *
    Exclusion means that items and services furnished, ordered, or 
prescribed by a specified individual or entity will not be reimbursed 
under Medicare, Medicaid, or any other Federal health care programs 
until the individual or entity is reinstated by the OIG.
* * * * *
    Furnished refers to items or services provided or supplied, 
directly or indirectly, by any individual or entity.
* * * * *
    Indirectly, as used in the definition of ``furnished'' in this 
section, means the provision or supply of items and services 
manufactured, distributed, supplied, or otherwise provided by 
individuals or entities that do not directly request or receive payment 
from Medicare, Medicaid, or other Federal health care programs, but 
that provide items and services to providers, practitioners, or 
suppliers who request or receive payment from these programs for such 
items and services.
* * * * *
    QIO means a quality improvement organization as that term is used 
in section 1152 of the Act (42 U.S.C. 1320c-1) and its implementing 
regulations.
    Secretary means the Secretary of the Department or his or her 
designees.
* * * * *
    State includes the District of Columbia, Puerto Rico, the Virgin 
Islands, Guam, American Samoa, the Northern Mariana Islands, and the 
Trust Territory of the Pacific Islands.
    State health care program means:
    (1) A State plan approved under Title XIX of the Act (Medicaid),
    (2) Any program receiving funds under Title V of the Act or from an 
allotment to a State under such title (Maternal and Child Health 
Services Block Grant program),
    (3) Any program receiving funds under subtitle A of Title XX of the 
Act or from any allotment to a State under such subtitle (Block Grants 
to States for Social Services), or
    (4) A State child health plan approved under Title XXI (Children's 
Health Insurance Program).
* * * * *


Sec. Sec.  1000.20 and 1000.30  [Removed]

0
3. Sections 1000.20 and 1000.30 are removed.

PART 1001--PROGRAM INTEGRITY--MEDICARE AND STATE HEALTH CARE 
PROGRAMS

0
5. The authority citation for part 1001 is revised to read as follows:

    Authority: 42 U.S.C. 1302; 1320a-7; 1320a-7b; 1395u(j); 
1395u(k); 1395w-104(e)(6), 1395y(d); 1395y(e); 1395cc(b)(2)(D), (E), 
and (F); 1395hh; 1842(j)(1)(D)(iv), 1842(k)(1), and sec. 2455, Pub. 
L. 103-355, 108 Stat. 3327 (31 U.S.C. 6101 note).

0
6. Section 1001.2 is amended by:
0
a. Adding introductory text;
0
b. Adding a definition of ``Agent'';
0
c. Redesignating paragraphs (a) and (b) under ``Controlled substance'' 
as paragraphs (1) and (2), paragraphs (a) through (d) under 
``Convicted'' as paragraphs (1) through (4) (and (a)(1) and (2) as 
(1)(i) and (ii));
0
d. Removing the definition of ``Exclusion'';
0
e. Adding definitions of ``Immediate family member'', ``Indirect 
ownership interest'', ``Managing employee'', ``Member of household'';
0
f. Removing the definition of ``OIG'';
0
g. Adding definitions of ``Ownership interest'' and ``Ownership or 
control interest''; and
0
h. Removing the definitions of ``QIO'' and ``State health care 
program''.
    The additions read as follows:


Sec.  1001.2  Definitions.

    For purposes of this part:
    Agent means any person who has express or implied authority to 
obligate or act on behalf of an entity.
* * * * *
    Immediate family member means a person's husband or wife; natural 
or adoptive parent; child or sibling; stepparent, stepchild, 
stepbrother or stepsister; father-, mother-, daughter-, son-, brother- 
or sister-in-law; grandparent or grandchild; or spouse of a grandparent 
or grandchild.
* * * * *
    Indirect ownership interest includes an ownership interest through 
any other entities that ultimately have an ownership interest in the 
entity in issue. (For example, an individual has a 10-percent ownership 
interest in the entity at issue if he or she has a 20-percent ownership 
interest in a corporation that wholly owns a subsidiary that is a 50-
percent owner of the entity in issue.)
    Managing employee means an individual (including a general manager, 
business manager, administrator or director) who exercises

[[Page 26821]]

operational or managerial control over the entity or part thereof or 
directly or indirectly conducts the day-to-day operations of the entity 
or part thereof.
    Member of household means, with respect to a person, any individual 
with whom the person is sharing a common abode as part of a single 
family unit, including domestic employees and others who live together 
as a family unit. A roomer or boarder is not considered a member of 
household.
* * * * *
    Ownership interest means an interest in:
    (1) The capital, the stock, or the profits of the entity, or
    (2) Any mortgage, deed, trust or note, or other obligation secured 
in whole or in part by the property or assets of the entity.
    Ownership or control interest means, with respect to an entity, a 
person who
    (1) Has a direct or an indirect ownership interest (or any 
combination thereof) of 5 percent or more in the entity,
    (2) Is the owner of a whole or part interest in any mortgage, deed 
of trust, note, or other obligation secured (in whole or in part) by 
the entity or any of the property assets thereof, if such interest is 
equal to or exceeds 5 percent of the total property and assets of the 
entity;
    (3) Is an officer or a director of the entity;
    (4) Is a partner in the entity if the entity is organized as a 
partnership;
    (5) Is an agent of the entity; or
    (6) Is a managing employee of the entity.
* * * * *
0
7. Section 1001.101 is amended by republishing the introductory text 
and by revising paragraph (d) to read as follows:


Sec.  1001.101  Basis for liability.

    The OIG will exclude any individual or entity that--
* * * * *
    (d) Has been convicted, under Federal or State law, of a felony 
that occurred after August 21, 1996, relating to the unlawful 
manufacture, distribution, prescription or dispensing of a controlled 
substance, as defined under Federal or State law. This applies to any 
individual or entity that--
    (1) Is now, or was at the time of the offense, a health care 
practitioner, provider, or supplier or furnished or furnishes items or 
services;
    (2) Holds, or held at the time of the offense, a direct or an 
indirect ownership or control interest in an entity that furnished or 
furnishes items or services or is, or has ever been, an officer, a 
director, an agent or a managing employee of such an entity; or
    (3) Is now, or was at the time of the offense, employed in any 
capacity in the health care industry.
0
8. Section 1001.102 is amended by:
0
a. Republishing paragraph (b) introductory text;
0
b. Revising paragraph (b)(1);
0
c. Removing paragraph (b)(7);
0
d. Redesignating paragraph (b)(8) as paragraph (b)(7);
0
e. Redesignating paragraph (b)(9) and paragraph (b)(8) and revising it;
0
f. Adding new paragraph (b)(9);
0
g. Republishing paragraph (c) introductory text;
0
h. Revising paragraph (c)(1); and
0
i. Revising paragraph (d).
    The revisions read as follows:


Sec.  1001.102  Length of exclusion.

* * * * *
    (b) Any of the following factors may be considered to be 
aggravating and a basis for lengthening the period of exclusion--
    (1) The acts resulting in the conviction, or similar acts, caused, 
or were intended to cause, a financial loss to a government agency or 
program or to one or more other entities of $15,000 or more. (The 
entire amount of financial loss to such government agencies or programs 
or to other entities, including any amounts resulting from similar acts 
not adjudicated, will be considered regardless of whether full or 
partial restitution has been made);
* * * * *
    (7) The individual or entity has previously been convicted of a 
criminal offense involving the same or similar circumstances;
    (8) The individual or entity has been convicted of other offenses 
besides those that formed the basis for the exclusion; or
    (9) The individual or entity has been the subject of any other 
adverse action by any Federal, State or local government agency or 
board if the adverse action is based on the same set of circumstances 
that serves as the basis for the imposition of the exclusion.
* * * * *
    (c) Only if any of the aggravating factors set forth in paragraph 
(b) of this section justifies an exclusion longer than 5 years, may 
mitigating factors be considered as a basis for reducing the period of 
exclusion to no less than 5 years. Only the following factors may be 
considered mitigating--
    (1) In the case of an exclusion under Sec.  1001.101(a), whether 
the individual or entity was convicted of three or fewer misdemeanor 
offenses and the entire amount of financial loss (both actual loss and 
intended loss) to Medicare or any other Federal, State, or local 
governmental health care program due to the acts that resulted in the 
conviction, and similar acts, is less than $5,000;
* * * * *
    (d) In the case of an exclusion under this subpart, based on a 
conviction occurring on or after August 5, 1997, an exclusion will be--
    (1) Not less than 10 years if the individual has been convicted on 
one previous occasion of one or more offenses for which an exclusion 
may be effected under section 1128(a) of the Act. (The aggravating and 
mitigating factors in paragraphs (b) and (c) of this section can be 
used to impose a period of time in excess of the 10-year mandatory 
exclusion) or
    (2) Permanent if the individual has been convicted on two or more 
previous occasions of one or more offenses for which an exclusion may 
be effected under section 1128(a) of the Act.
0
9. Section 1001.201 is amended by:
0
a. Republishing paragraph (b)(1) introductory text;
0
b. Revising paragraphs (b)(2)(i) and (vi);
0
c. Adding paragraph (b)(2)(vii);
0
d. Republishing paragraph (b)(3) introductory text;
0
e. Revising paragraphs (b)(3)(i) through (iii); and
0
f. Removing paragraph (b)(3)(iv).
    The revisions and addition read as follows:


Sec.  1001.201  Conviction relating to program or health care fraud.

* * * * *
    (b) Length of exclusion. (1) An exclusion imposed in accordance 
with this section will be for a period of 3 years, unless aggravating 
or mitigating factors listed in paragraphs (b)(2) and (b)(3) of this 
section form a basis for lengthening or shortening that period.
    (2) Any of the following factors may be considered to be 
aggravating and a basis for lengthening the period of exclusion--
    (i) The acts resulting in the conviction, or similar acts, caused 
or reasonably could have been expected to cause, a financial loss of 
$15,000 or more to a government agency or program or to one or more 
other entities or had a significant financial impact on program 
beneficiaries or other individuals. (The entire amount of financial 
loss will be considered, including any amounts resulting from similar 
acts not adjudicated, regardless

[[Page 26822]]

of whether full or partial restitution has been made);
* * * * *
    (vi) Whether the individual or entity has been convicted of other 
offenses besides those that formed the basis for the exclusion; or
    (vii) Whether the individual or entity has been the subject of any 
other adverse action by any Federal, State, or local government agency 
or board if the adverse action is based on the same set of 
circumstances that serves as the basis for the imposition of the 
exclusion.
    (3) Only the following factors may be considered as mitigating and 
a basis for reducing the period of exclusion--
    (i) The individual or entity was convicted of three or fewer 
offenses, and the entire amount of financial loss (both actual loss and 
reasonably expected loss) to a government agency or program or to other 
individuals or entities due to the acts that resulted in the conviction 
and similar acts is less than $5,000;
    (ii) The record in the criminal proceedings, including sentencing 
documents, demonstrates that the court determined that the individual 
had a mental, an emotional, or a physical condition, before or during 
the commission of the offense, that reduced the individual's 
culpability; or
    (iii) The individual's or entity's cooperation with Federal or 
State officials resulted in--
    (A) Others being convicted or excluded from Medicare, Medicaid, or 
any other Federal health care program;
    (B) Additional cases being investigated or reports being issued by 
the appropriate law enforcement agency identifying program 
vulnerabilities or weaknesses; or
    (C) The imposition of a civil money penalty against others.
0
10. Section 1001.301 is amended by:
0
a. Revising the section heading
0
b. Revising paragraph (a);
0
c. Republishing paragraphs (b)(1) and (2);
0
d. Revising paragraphs (b)(2)(i), (ii), and (vi);
0
e. Adding paragraphs (b)(2)(vii) and (viii);
0
f. Republishing the paragraph (b)(3) introductory text;
0
g. Revising paragraphs (b)(3)(i) and (ii); and
0
h. Removing (b)(3)(iii).
    The revisions and addition read as follows:


Sec.  1001.301  Conviction relating to obstruction of an investigation 
or audit.

    (a) Circumstance for exclusion. The OIG may exclude an individual 
or entity that has been convicted, under Federal or State law, in 
connection with the interference with or obstruction of any 
investigation or audit related to:
    (1) Any offense described in Sec.  1001.101 or Sec.  1001.201; or
    (2) The use of funds received, directly or indirectly, from any 
Federal health care program (as defined in section 1128(B)(f) of the 
Act).
    (b) Length of exclusion. (1) An exclusion imposed in accordance 
with this section will be for a period of 3 years, unless aggravating 
or mitigating factors listed in paragraphs (b)(2) and (b)(3) of this 
section form the basis for lengthening or shortening that period.
    (2) Any of the following factors may be considered to be 
aggravating and a basis for lengthening the period of exclusion--
    (i) The interference or obstruction caused the expenditure of 
significant additional time or resources;
    (ii) The interference or obstruction had a significant adverse 
mental, physical or financial impact on program beneficiaries or other 
individuals or on the Medicare, Medicaid or other Federal health care 
programs;
* * * * *
    (vi) Whether the individual or entity has been convicted of other 
offenses besides those that formed the basis for the exclusion;
    (vii) Whether the individual or entity has been the subject of any 
other adverse action by any Federal, State or local government agency 
or board if the adverse action is based on the same set of 
circumstances that serves as the basis for the imposition of the 
exclusion; or
    (viii) The acts resulting in the conviction, or similar acts, 
caused, or reasonably could have been expected to cause, a financial 
loss of $15,000 or more to a government agency or program or to one or 
more other entities or had a significant financial impact on program 
beneficiaries or other individuals. (The entire amount of financial 
loss or intended loss identified in the investigation or audit will be 
considered, including any amounts resulting from similar acts not 
adjudicated, regardless of whether full or partial restitution has been 
made).
    (3) Only the following factors may be considered to be mitigating 
and a basis for reducing the period of exclusion--
    (i) The record of the criminal proceedings, including sentencing 
documents, demonstrates that the court determined that the individual 
had a mental, emotional, or physical condition, before or during the 
commission of the offense, that reduced the individual's culpability or
    (ii) The individual's or entity's cooperation with Federal or State 
officials resulted in--
    (A) Others being convicted or excluded from Medicare, Medicaid and 
all other Federal health care programs;
    (B) Additional cases being investigated or reports being issued by 
the appropriate law enforcement agency identifying program 
vulnerabilities or weaknesses; or
    (C) The imposition of a civil money penalty against others.
0
11. Section 1001.401 is amended by:
0
a. Revising paragraph (a);
0
b. Revising paragraphs (c) introductory text and (c)(2)(iv) and (v);
0
c. Adding paragraph (c)(2)(vi); and
0
d. Revising paragraph (c)(3).
    The revisions and addition read as follows:


Sec.  1001.401  Conviction relating to controlled substances.

    (a) Circumstance for exclusion. The OIG may exclude an individual 
or entity convicted under Federal or State law of a misdemeanor 
relating to the unlawful manufacture, distribution, prescription, or 
dispensing of a controlled substance, as defined under Federal or State 
law. This section applies to any individual or entity that--
    (1) Is now, or was at the time of the offense, a health care 
practitioner, provider, or supplier or furnished or furnishes items or 
services;
    (2) Holds, or held at the time of offense, a direct or indirect 
ownership or control interest in an entity that is a health care 
provider or supplier; or
    (3) Is now, or was at the time of the offense, employed in any 
capacity in the health care industry.
* * * * *
    (c) Length of exclusion. (1) An exclusion imposed in accordance 
with this section will be for a period of 3 years unless aggravating or 
mitigating factors listed in paragraphs (c)(2) and (3) of this section 
form a basis for lengthening or shortening that period.
    (2) * * *
    (iv) Whether the individual or entity has a documented history of 
criminal, civil, or administrative wrongdoing;
    (v) Whether the individual or entity has been convicted of other 
offenses besides those that formed the basis for the exclusion; or
    (vi) Whether the individual or entity has been the subject of any 
other adverse action by any Federal, State or local government agency 
or board if the adverse action is based on the same set of 
circumstances that serves as the basis for the imposition of the 
exclusion.
    (3) Only the following factor may be considered to be mitigating 
and to be a basis for shortening the period of exclusion--Whether the 
individual's or entity's cooperation with Federal or State officials 
resulted in--

[[Page 26823]]

    (i) Others being convicted or excluded from Medicare, Medicaid and 
all other Federal health care programs;
    (ii) Additional cases being investigated or reports being issued by 
the appropriate law enforcement agency identifying program 
vulnerabilities or weaknesses; or
    (iii) The imposition of a civil money penalty against others.
0
12. Section 1001.501 is amended by revising paragraphs (b)(1) and (2) 
and adding paragraph (c) to read as follows:


Sec.  1001.501  License revocation or suspension.

* * * * *
    (b) * * *
    (1) Except as provided in paragraph (b)(2) of this section, an 
exclusion imposed in accordance with this section will not be for a 
period of time less than the period during which an individual's or 
entity's license is revoked, suspended, or otherwise not in effect as a 
result of, or in connection with, a State licensing agency action.
    (2) When an individual or entity has been excluded under this 
section, the OIG will consider a request for reinstatement in 
accordance with Sec.  1001.3001 if:
    (i) The individual or entity obtains the license in the State where 
the license was originally revoked, suspended, surrendered, or 
otherwise lost or
    (ii) The individual meets the conditions for early reinstatement 
set forth in paragraph (c) of this section.
    (c) Consideration of early reinstatement. (1) If an individual or 
entity that is excluded in accordance with this section fully and 
accurately discloses the circumstances surrounding the action that 
formed the basis for the exclusion to a licensing authority of a 
different State or to a different licensing authority in the same State 
and that licensing authority grants the individual or entity a new 
license or has decided to take no adverse action as to a currently held 
license, the OIG will consider a request for early reinstatement. The 
OIG will consider the following factors in determining whether a 
request for early reinstatement under this paragraph (c)(1) will be 
granted:
    (i) The circumstances that formed the basis for the exclusion;
    (ii) Evidence that the second licensing authority was aware of the 
circumstances surrounding the action that formed the basis for the 
exclusion;
    (iii) Whether the individual has demonstrated that he or she has 
satisfactorily resolved any underlying problem that caused or 
contributed to the basis for the initial licensing action;
    (iv) The benefits to the Federal health care programs and program 
beneficiaries of early reinstatement;
    (v) The risks to the Federal health care programs and program 
beneficiaries of early reinstatement;
    (vi) Any additional or pending license actions in the same State or 
in any other State;
    (vii) Any ongoing investigations involving the individual; and
    (viii) All the factors set forth in Sec.  1001.3002(b).
    (2) If an exclusion has been imposed under this section and the 
individual does not have a valid health care license of any kind in any 
State, that individual may request the OIG to consider whether he or 
she may be eligible for early reinstatement. The OIG will consider the 
following factors in determining whether a request for early 
reinstatement under paragraph (c)(2) will be granted:
    (i) The length of time the individual has been excluded. The OIG 
will apply a presumption against early reinstatement under this 
paragraph (c)(2) if the person has been excluded for less than 5 years;
    (ii) The circumstances that formed the basis for the exclusion;
    (iii) Whether the individual has demonstrated that he or she has 
satisfactorily resolved any underlying problem that caused or 
contributed to the basis for the initial licensing action;
    (iv) The benefits to the Federal health care programs and program 
beneficiaries of early reinstatement;
    (v) The risks to the Federal health care programs and program 
beneficiaries of early reinstatement;
    (vi) Any additional or pending license actions in the same State or 
in any other State;
    (vii) Any ongoing investigations involving the individual;
    (viii) The reasons the individual is seeking reinstatement;
    (ix) Whether the individual is seeking, or intends to seek, 
employment in an unlicensed health care position; and
    (x) All the factors set forth in 1001.3002(b).
    (3) Except for Sec.  1001.3002(a)(1)(i), all the provisions of 
Subpart F (Sec. Sec.  1001.3001 through 1001.3005) apply to early 
reinstatements under this section.
0
13. Section 1001.601 is amended by revising paragraph (b)(2) to read as 
follows:


Sec.  1001.601  Exclusion or suspension under a Federal or State health 
care program.

* * * * *
    (b) * * *
    (2) If the individual or entity is eligible to apply for 
reinstatement in accordance with Sec.  1001.3001 of this part and the 
sole reason why the State or Federal health care program denied 
reinstatement to that program is the existing exclusion imposed by the 
OIG as a result of the original State or Federal health care program 
action, the OIG will consider a request for reinstatement.
* * * * *
0
14. Section 1001.701 is amended by revising the headings for paragraphs 
(a) and (c) and revising paragraphs (d)(2)(iv) and (d)(3) to read as 
follows:


Sec.  1001.701  Excessive claims or furnishing of unnecessary or 
substandard items and services.

    (a) Circumstance for exclusion. * * *
* * * * *
    (c) Exceptions. * * *
    (d) * * *
    (2) * * *
    (iv) The violation resulted in financial loss to Medicare, Medicaid 
and any other Federal health care program of $15,000 or more; or
* * * * *
    (3) Only the following factor may be considered mitigating and a 
basis for reducing the period of exclusion--Whether there were few 
violations and they occurred over a short period of time.
0
15. Section 1001.801 is amended by revising the heading for paragraph 
(a), removing paragraph (c)(3)(ii), and redesignating paragraph 
(c)(3)(iii) as paragraph (c)(3)(ii).
    The revision reads as follows:


Sec.  1001.801  Failure of HMOs and CMPs to furnish medically necessary 
items and services.

    (a) Circumstance for exclusion. * * *
* * * * *
0
16. Section 1001.901 is amended by adding paragraph (c) to read as 
follows:


Sec.  1001.901  False or improper claims.

* * * * *
    (c) An exclusion under this section is neither time barred nor 
subject to any statute of limitations period, even when the exclusion 
is based on violations of another statute that may have a specified 
limitations period.
0
17. Section 1001.951 is amended by revising paragraph (b)(2) to read as 
follows:


Sec.  1001.951  Fraud and kickback and other prohibited activities.

* * * * *
    (b) * * *
    (2) It will be considered a mitigating factor if--
    (i) The individual had a documented mental, emotional, or physical

[[Page 26824]]

condition before or during the commission of the prohibited act(s) that 
reduced the individual's culpability for the acts in question; or
    (ii) The individual's or entity's cooperation with Federal or State 
officials resulted in the--
    (A) Sanctioning of other individuals or entities, or
    (B) Imposition of a civil money penalty against others.
0
18. Section 1001.1001 is amended by revising paragraph (a) introductory 
text, (a)(1), and (a)(2) to read as follows:


Sec.  1001.1001  Exclusion of entities owned or controlled by a 
sanctioned person.

    (a) Circumstance for exclusion. The OIG may exclude an entity:
    (1) If a person with a relationship with such entity--
    (i) Has been convicted of a criminal offense as described in 
sections 1128(a) and 1128(b) (1), (2), or (3) of the Act;
    (ii) Has had civil money penalties or assessments imposed under 
section 1128A of the Act; or
    (iii) Has been excluded from participation in Medicare or any of 
the State health care programs and
    (2) Such a person has a direct or indirect ownership or control 
interest in the entity, or formerly held an ownership or control 
interest in the entity, but no longer holds an ownership or control 
interest because of a transfer of the interest to an immediate family 
member or a member of the person's household in anticipation of or 
following a conviction, assessment of a CMP, or imposition of an 
exclusion.
* * * * *
0
19. Section 1001.1051 is amended by revising paragraph (c)(1) to read 
as follows:


Sec.  1001.1051  Exclusion of individuals with ownership or control 
interest in sanctioned entities.

* * * * *
    (c) * * *
    (1) If the entity has been excluded, the length of the individual's 
exclusion will be for the same period as that of the sanctioned entity 
with which the individual has or had the prohibited relationship.
* * * * *
0
20. Section 1001.1101 is amended by republishing paragraph (b) 
introductory text, revising paragraph (b)(4), removing paragraph 
(b)(5), and redesignating paragraph (b)(6) as paragraph (b)(5).
    The revision reads as follows:


Sec.  1001.1101  Failure to disclose certain information.

* * * * *
    (b) Length of exclusion. The following factors will be considered 
in determining the length of an exclusion under this section--
* * * * *
    (4) Any other facts that bear on the nature or seriousness of the 
conduct; and
* * * * *
0
21. Section 1001.1201 is amended by revising paragraph (a) introductory 
text, republishing paragraph (b) introductory text, revising paragraphs 
(b)(3) and (4), and removing paragraph (b)(5).
    The revisions read as follows:


Sec.  1001.1201  Failure to provide payment information.

    (a) Circumstance for exclusion. The OIG may exclude any individual 
or entity that furnishes, orders, refers for furnishing, or certifies 
the need for items or services for which payment may be made under 
Medicare or any of the State health care programs and that:
* * * * *
    (b) Length of exclusion. The following factors will be considered 
in determining the length of an exclusion under this section--
* * * * *
    (3) The amount of the payments at issue; and
    (4) Whether the individual or entity has a documented history of 
criminal, civil, or administrative wrongdoing (The lack of any prior 
record is to be considered neutral).
* * * * *
0
22. Section 1001.1301 is amended by revising paragraphs (a)(1)(iii) and 
(a)(3) to read as follows:


Sec.  1001.1301  Failure to Grant Immediate Access

    (a) * * *
    (1) * * *
    (iii) The OIG for reviewing records, documents, and other material 
or data in any medium (including electronically stored information and 
any tangible thing) necessary to the OIG's statutory functions; or
* * * * *
    (3) For purposes of paragraphs (a)(1)(iii) and (a)(1)(iv) of this 
section, the term-
    Failure to grant immediate access means:
    (A) The failure to produce or make available for inspection and 
copying the requested material upon reasonable request, or to provide a 
compelling reason why they cannot be produced, within 24 hours of such 
request, except when the OIG or State Medicaid Fraud Control Unit 
(MFCU) reasonably believes that the requested material is about to be 
altered or destroyed, and
    (B) When the OIG or MFCU has reason to believe that the requested 
material is about to be altered or destroyed, the failure to provide 
access to the requested material at the time the request is made.
    Reasonable request means a written request, signed by a designated 
representative of the OIG or MFCU and made by a properly identified 
agent of the OIG or a MFCU during reasonable business hours, where 
there is information to suggest that the person has violated statutory 
or regulatory requirements under Titles V, XI, XVIII, XIX, or XX of the 
Act. The request will include a statement of the authority for the 
request, the person's rights in responding to the request, the 
definition of ``reasonable request'' and ``failure to grant immediate 
access'' under part 1001, and the effective date, length, and scope and 
effect of the exclusion that would be imposed for failure to comply 
with the request, and the earliest date that a request for 
reinstatement would be considered.
* * * * *
0
23. Section 1001.1501 is amended by revising paragraphs (a)(1) and (2) 
and (b) to read as follows:


Sec.  1001.1501  Default of health education loan or scholarship 
obligations.

    (a) * * *
    (1) Except as provided in paragraph (a)(4) of this section, the OIG 
may exclude any individual that the administrator of the health 
education loan, scholarship, or loan repayment program determines is in 
default on repayments of scholarship obligations or loans, or the 
obligations of any loan repayment program, in connection with health 
professions education made or secured in whole or in part by the 
Secretary.
    (2) Before imposing an exclusion in accordance with paragraph 
(a)(1) of this section, the OIG must determine that the administrator 
of the health education loan, scholarship, or loan repayment program 
has taken all reasonable administrative steps to secure repayment of 
the loans or obligations. When an individual has been offered a 
Medicare offset arrangement as required by section 1892 of the Act, the 
OIG will find that all reasonable steps have been taken.
* * * * *
    (b) Length of exclusion. The individual will be excluded until the 
administrator of the health education loan, scholarship, or loan 
repayment program notifies the OIG that the default has been cured or 
that there is no longer an outstanding debt. Upon such notice, the OIG 
will inform the individual of his or her right to apply for 
reinstatement.

[[Page 26825]]

0
21. Section 1001.1601 is amended by republishing paragraph (b)(1) 
introductory text, revising paragraphs (b)(1)(iii) and (iv), and 
removing paragraph (b)(1)(v).
    The revisions read as follows:


Sec.  1001.1601  Violations of the limitations on physician charges.

    (b) Length of exclusion. (1) In determining the length of an 
exclusion in accordance with this section, the OIG will consider the 
following factors--
* * * * *
    (iii) The amount of the charges that were in excess of the maximum 
allowable charges; and
    (iv) Whether the physician has a documented history of criminal, 
civil, or administrative wrongdoing (the lack of any prior record is to 
be considered neutral).
* * * * *
0
25. Section 1001.1701 is amended by republishing paragraph (c)(1) 
introductory text, revising paragraphs (c)(1)(iv) and (v), and removing 
paragraph (c)(1)(vi).
    The revisions read as follows:


Sec.  1001.1701  Billing for services of assistant at surgery during 
cataract operations.

* * * * *
    (c) Length of exclusion. (1) In determining the length of an 
exclusion in accordance with this section, the OIG will consider the 
following factors--
* * * * *
    (iv) Whether approval for the use of an assistant was requested 
from the QIO or carrier; and
    (v) Whether the physician has a documented history of criminal, 
civil, or administrative wrongdoing (the lack of any prior record is to 
be considered neutral).
* * * * *
0
26. Section 1001.1751 is added to subpart C to read as follows:


Sec.  1001.1751  Making false statements or misrepresentation of 
material facts.

    (a) Circumstance for exclusion. The OIG may exclude any individual 
or entity that it determines has knowingly made or caused to be made 
any false statement, omission, or misrepresentation of a material fact 
in any application, agreement, bid, or contract to participate or 
enroll as a provider of services or supplier under a Federal health 
care program (as defined in section 1128B(f)), including Medicare 
Advantage organizations under part C of Medicare, prescription drug 
plan sponsors under part D of Medicare, Medicaid managed care 
organizations, and entities that apply to participate as providers of 
services or suppliers in such managed care organizations and such 
plans.
    (b) Definition of ``material.'' For purposes of this section, the 
term ``material'' means having a natural tendency to influence or be 
capable of influencing the decision to approve or deny the request to 
participate or enroll as a provider of services or supplier under a 
Federal health care program.
    (c) Sources of information. The OIG's determination under paragraph 
(a) of this section will be made on the basis of information from the 
following sources:
    (1) CMS;
    (2) Medicaid State agencies;
    (3) Fiscal agents or contractors, or private insurance companies;
    (4) Law enforcement agencies;
    (5) State or local licensing or certification authorities;
    (6) State or local professional societies; or
    (7) Any other sources deemed appropriate by the OIG.
    (d) Length of exclusion. In determining the length of an exclusion 
imposed in accordance with this section, the OIG will consider the 
following factors--
    (1) What were the actual or potential repercussions of the false 
statement, omission, or misrepresentation of a material fact and
    (2) Whether the individual or entity has a documented history of 
criminal, civil, or administrative wrongdoing.
0
24. Section 1001.1801 is amended by revising paragraphs (a) and (b) and 
by removing paragraph (g).
    The revisions read as follows:


Sec.  1001.1801  Waivers of exclusions.

    (a) The OIG has the authority to grant or deny a request from the 
administrator of a Federal health care program (as defined in section 
1128B(f) of the Act) that an exclusion from that program be waived with 
respect to an individual or entity, except that no waiver may be 
granted with respect to an exclusion under Sec.  1001.101(b). The 
request must be in writing and from an individual directly responsible 
for administering the Federal health care program.
    (b) With respect to exclusions under Sec.  1001.101(a), (c), or 
(d), a request from a Federal health care program for a waiver of the 
exclusion will be considered only if the Federal health care program 
administrator determines that:
    (1) The individual or entity is the sole community physician or the 
sole source of essential specialized services in a community; and
    (2) The exclusion would impose a hardship on beneficiaries (as 
defined in section 1128A(i)(5) of the Act) of that program.
* * * * *
0
25. Section 1001.1901 is amended by revising paragraphs (b), (c) 
introductory text, (c)(1), (c)(2), and (c)(4) to read as follows:


Sec.  1001.1901  Scope and effect of exclusion.

* * * * *
    (b) Effect of exclusion on excluded individuals and entities. (1) 
Unless and until an individual or entity is reinstated into the 
Medicare, Medicaid, and other Federal health care programs in 
accordance with subpart F of this part, no payment will be made by 
Medicare, including Medicare Advantage and Prescription Drug Plans, 
Medicaid, or any other Federal health care program for any item or 
service furnished, on or after the effective date specified in the 
notice--
    (i) By an excluded individual or entity; or
    (ii) At the medical direction or on the prescription of a physician 
or an authorized individual who is excluded when the person furnishing 
such item or service knew, or had reason to know, of the exclusion.
    (2) This section applies regardless of whether an individual or 
entity has obtained a program provider number or equivalent, either as 
an individual or as a member of a group, prior to being reinstated.
    (3) An excluded individual or entity may not take assignment of an 
enrollee's claim on or after the effective date of exclusion.
    (4) An excluded individual or entity that submits, or causes to be 
submitted, claims for items or services furnished during the exclusion 
period is subject to civil money penalty liability under section 
1128A(a)(1)(D) of the Act and criminal liability under section 
1128B(a)(3) of the Act and other provisions. In addition, submitting 
claims, or causing claims to be submitted or payments to be made, for 
items or services furnished, ordered, or prescribed, including 
administrative and management services or salary, may serve as the 
basis for denying reinstatement to the programs.
    (c) Exceptions to paragraph (b) of this section. (1) If a Medicare 
enrollee submits an otherwise payable claim for items or services 
furnished by an excluded individual or entity, or under the medical 
direction or on the prescription of an excluded physician or authorized 
individual, after the effective date of exclusion, CMS, a Medicare 
Advantage Plan, or a Prescription Drug Plan will pay such claim 
submitted by

[[Page 26826]]

the enrollee and will immediately notify the enrollee of the exclusion.
    (2) CMS, Medicare Advantage Plans, and Prescription Drug Plans will 
not pay an enrollee for items or services furnished by an excluded 
individual or entity, or under the medical direction or on the 
prescription of an excluded physician or other authorized individual, 
more than 15 days after the date on the notice to the enrollee.
* * * * *
    (4) CMS will not pay any claims submitted by a supplier for items 
or services ordered or prescribed by an excluded provider for dates of 
service 15 days or more after the notice of the provider's exclusion 
was mailed to the supplier.
* * * * *
0
29. Section 1001.2001 is amended by revising paragraphs (a), (b), and 
(c) to read as follows:


Sec.  1001.2001  Notice of intent to exclude.

    (a) Except as provided in paragraph (c) of this section, if the OIG 
intends to exclude an individual or entity in accordance with subpart C 
or this part, or in accordance with subpart B of this part where the 
exclusion is for a period exceeding five years, it will send a written 
notice of its intent, the basis for the proposed exclusion and the 
potential effect of exclusion. Within 30 days of receipt of notice, 
which can be deemed to be 5 days after the date on the notice, the 
individual or entity may submit documentary evidence and written 
argument concerning whether the exclusion is warranted and any related 
issues.
    (b) If the OIG intends to exclude an individual or entity under the 
provisions of Sec.  1001.701, Sec.  1001.801, or Sec.  1001.1751, in 
conjunction with the submission of documentary evidence and written 
argument, an individual or entity may request an opportunity to present 
oral argument to an OIG official.
    (c) Exception. If the OIG intends to exclude an individual or 
entity under the provisions of Sec.  1001.901, Sec.  1001.951, Sec.  
1001.1301, Sec.  1001.1401, Sec.  1001.1601, or Sec.  1001.1701 of this 
part, paragraph (a) of this section will not apply.
* * * * *
0
30. Section 1001.2004 is amended by revising the section heading to 
read as follows:


1001.2004  Notice to State agencies by HHS.

* * * * *
0
31. Section 1001.2005 is amended by revising the section heading to 
read as follows:


1001.2005  Notice to State licensing agencies by HHS.

* * * * *
0
32. Section 1001.2006 is amended by revising the section heading to 
read as follows:


1001.2006  Notice to others regarding exclusion by HHS.

* * * * *
0
33. Section 1001.3001 is amended by revising paragraphs (a)(1) and (2) 
and redesignating paragraphs (a)(3), (a)(4), and (b) as paragraphs (b), 
(c), and (d), respectively.
    The revisions read as follows:


Sec.  1001.3001  Timing and method of request for reinstatement.

    (a)(1) Except as provided in paragraph (a)(2) of this section or in 
Sec.  1001.501(b)(2), Sec.  1001.501(c), or Sec.  1001.601(b)(4) of 
this part, an excluded individual or entity (other than those excluded 
in accordance with Sec. Sec.  1001.1001 and 1001.1501) may submit a 
written request for reinstatement to the OIG only after the date 
specified in the notice of exclusion. Obtaining a program provider 
number or equivalent does not reinstate eligibility.
    (2) An entity excluded under Sec.  1001.1001 may apply for 
reinstatement prior to the date specified in the notice of exclusion by 
submitting a written request for reinstatement that includes 
documentation demonstrating that the standards set forth in Sec.  
1001.3002(c) have been met.
* * * * *
0
34. Section 1001.3002 is amended by revising paragraphs (a), (b), and 
(c) introductory text to read as follows:


Sec.  1001.3002  Basis for reinstatement.

    (a) The OIG will authorize reinstatement if it determines that--
    (1) The period of exclusion has expired;
    (2) There are reasonable assurances that the types of actions that 
formed the basis for the original exclusion have not recurred and will 
not recur; and
    (3) There is no additional basis under sections 1128(a) or (b) or 
1128A of the Act for continuation of the exclusion.
    (b) In making the reinstatement determination described in 
paragraph (a) of this section, the OIG will consider--
    (1) Conduct of the individual or entity occurring prior to the date 
of the notice of exclusion, if not known to the OIG at the time of the 
exclusion;
    (2) Conduct of the individual or entity after the date of the 
notice of exclusion;
    (3) Whether all fines and all debts due and owing (including 
overpayments) to any Federal, State, or local government that relate to 
Medicare, Medicaid, and all other Federal health care programs have 
been paid or satisfactory arrangements have been made to fulfill 
obligations;
    (4) Whether CMS has determined that the individual or entity 
complies with, or has made satisfactory arrangements to fulfill, all 
the applicable conditions of participation or supplier conditions for 
coverage under the statutes and regulations;
    (5) Whether the individual or entity has, during the period of 
exclusion, submitted claims, or caused claims to be submitted or 
payment to be made by any Federal health care program, for items or 
services the excluded party furnished, ordered, or prescribed, 
including health care administrative services. This section applies 
regardless of whether an individual or entity has obtained a program 
provider number or equivalent, either as an individual or as a member 
of a group, prior to being reinstated; and
    (c) If the OIG determines that the criteria in paragraphs (a)(2) 
and (3) of this section have been met, an entity excluded in accordance 
with Sec.  1001.1001 will be reinstated upon a determination by the OIG 
that the individual whose conviction, exclusion, or civil money penalty 
was the basis for the entity's exclusion--
* * * * *
0
35. Section 1001.3005 is amended by revising the section heading and 
paragraph (a) introductory text to read as follows:


Sec.  1001.3005  Withdrawal of exclusion for reversed or vacated 
decisions.

    (a) An exclusion will be withdrawn and an individual or entity will 
be reinstated into Medicare, Medicaid, and other Federal health care 
programs retroactive to the effective date of the exclusion when such 
exclusion is based on--
* * * * *

PART 1002--[AMENDED]

0
36. The authority citation for part 1002 is revised to read as follows:

    Authority: 42 U.S.C. 1302, 1320a-3, 1320a-5, 1320a-7, 
1396(a)(4)(A), 1396a(p), 1396a(a)(39), 1396a(a)(41), and 
1396b(i)(2).

0
37. Section 1002.1 is revised to read as follows:

Sec.  1002.1  Basis and scope.

    (a) Statutory basis. This part implements sections 1902(a)(4), 
1902(a)(39), 1902(a)(41), 1902(p), 1903(i)(2), 1124, 1126, and 1128 of 
the Act.

[[Page 26827]]

    (1) Under authority of section 1902(a)(4) of the Act, this part 
sets forth methods of administration and procedures the State agency 
must follow to exclude a provider from participation in the State 
Medicaid program. State-initiated exclusion from Medicaid may lead to 
OIG exclusion from all Federal health care programs.
    (2) Under authority of sections 1124 and 1126 of the Act, this part 
requires the Medicaid agency to obtain and disclose to the OIG certain 
provider ownership and control information, along with actions taken on 
a provider's application to participate in the program.
    (3) Under authority of sections 1902(a)(41) and 1128 of the Act, 
this part requires the State agency to notify the OIG of sanctions and 
other actions the State takes to limit a provider's participation in 
Medicaid.
    (4) Section 1902(p) of the Act permits the State to exclude an 
individual or entity from Medicaid for any reason the Secretary can 
exclude and requires the State to exclude certain managed care entities 
that could be excluded by the OIG.
    (5) Sections 1902(a)(39) and 1903(i)(2) of the Act prohibit State 
payments to providers and deny FFP in State expenditures for items or 
services furnished by an individual or entity that has been excluded by 
the OIG from participation in Federal health care programs.
    (b) Scope. This part specifies certain bases upon which the State 
may, or in some cases must, exclude an individual or entity from 
participation in the Medicaid program and the administrative procedures 
the State must follow to do so. These regulations specifically address 
the authority of State agencies to exclude on their own initiative, 
regardless of whether the OIG has excluded an individual or entity 
under part 1001 of this chapter. In addition, this part delineates the 
States' obligation to obtain certain information from Medicaid 
providers and to inform the OIG of information received and actions 
taken.


Sec. Sec.  1002.2 and 1002.3  [Redesignated as Sec. Sec.  1002.3 and 
1002.4]

0
38. Sections 1002.2 and 1002.3 are redesignated as Sec.  1002.3 and 
1002.4, respectively.
0
39. A new Sec.  1002.2 is added to read as follows:


Sec.  1002.2  Other applicable regulations.

    (a) Part 455, subpart B, of this title sets forth requirements for 
disclosure of ownership and control information to the State Medicaid 
agency by providers and fiscal agents.
    (b) Part 438, subpart J, of this title sets forth payment and 
exclusion requirements specific to Medicaid managed care organizations.
0
40. Newly designated Sec.  1002.3 is amended by revising paragraph (a) 
to read as follows:


Sec.  1002.3  General authority.

    (a) In addition to any other authority it may have, a State may 
exclude an individual or entity from participation in the Medicaid 
program for any reason for which the Secretary could exclude that 
individual or entity from participation in Federal health care programs 
under sections 1128, 1128A or 1866(b)(2) of the Act.
* * * * *
0
41. Newly designated Sec.  1002.4 is amended by revising paragraph 
(c)(1) to read as follows:


Sec.  1002.4  Disclosure by providers and State Medicaid agencies.

* * * * *
    (c) * * *
    (1) The Medicaid agency may refuse to enter into or renew an 
agreement with a provider if any person who has an ownership or control 
interest, or who is an agent or managing employee of the provider, in 
the provider has been convicted of a criminal offense related to that 
person's involvement in any program established under Medicare, 
Medicaid, Title V, Title XX, or Title XXI of the Act.
* * * * *


Sec.  1002.100  [Redesignated as Sec.  1002.5]

0
42. Section 1002.100 is redesignated as Sec.  1002.5 in subpart A.


Sec.  1002.211  [Redesignated as Sec.  1002.6]

0
43. Section 1002.211 is redesignated as Sec.  1002.6 in subpart A.
0
44. Newly designated Sec.  1002.6 is revised to read as follows:


Sec.  1002.6  Payment prohibitions.

    (a) Denial of payment by State agencies. Except as provided for in 
Sec. Sec.  1001.1901(c)(3), (c)(4), and (c)(5)(i) of this chapter, no 
payment may be made by the State agency for any item or service 
furnished on or after the effective date specified in the notice:
    (1) by an individual or entity excluded by the OIG or
    (2) at the medical direction or on the prescription of a physician 
or other authorized individual who is excluded by the OIG when a person 
furnishing such item or service knew, or had reason to know, of the 
exclusion.
    (b) Denial of Federal financial participation (FFP). FFP is not 
available for any item or service for which the State agency is 
required to deny payment under paragraph (a) of this section. FFP will 
be available for items and services furnished after the excluded 
individual or entity is reinstated in the Medicaid program.
0
45. The subpart heading for subpart B is revised to read as follows:

Subpart B--State Exclusion of Certain Managed Care Entities

0
46. Section 1002.203 is amended by revising the section heading and 
paragraph (a) to read as follows:


Sec.  1002.203  State exclusion of certain managed care entities.

    (a) The State agency, in order to receive FFP, must provide that it 
will exclude from participation any managed care organization (as 
defined in section 1903(m) of the Act), or entity furnishing services 
under a waiver approved under section 1915(b)(1) of the Act, if such 
organization or entity--
    (1) Has a prohibited ownership or control relationship with any 
individual or entity that could subject the managed care organization 
or entity to exclusion under Sec.  1001.1001 or Sec.  1001.1051 of this 
chapter or
    (2) Has, directly or indirectly, a substantial contractual 
relationship with an individual or entity that could be excluded under 
Sec.  1001.1001 or Sec.  1001.1051 of this chapter.
* * * * *
0
47. The subpart heading for subpart C is revised to read as follows:

Subpart C--Procedures for State-Initiated Exclusions

0
48. Section 1002.210 is amended by revising the section heading to read 
as follows:


Sec.  1002.210  General authority.

* * * * *


Sec.  1002.211  [Removed and Reserved]

0
49. Section 1002.211 is removed and reserved.

PART 1006--[AMENDED]

0
50. The authority citation for part 1006 is revised to read as follows:

    Authority: 42 U.S.C. 405(d), 405(e), 1302, 1320a-7, and 1320a-
7a.

0
51. Section 1006.1 is amended by revising paragraphs (a) and (b) to 
read as follows:


Sec.  1006.1  Scope.

    (a) The provisions in this part govern subpoenas issued by the 
Inspector General, or his or her delegates, in accordance with sections 
205(d),

[[Page 26828]]

1128A(j), and 1128(f)(4) of the Act and require the attendance and 
testimony of witnesses and the production of any other evidence at an 
investigational inquiry.
    (b) Such subpoenas may be issued in investigations under section 
1128 or 1128A of the Act or under any other section of the Act that 
incorporates the provisions of sections 1128(f)(4) or 1128A(j).
* * * * *

    Dated: January 7, 2014.
Daniel R. Levinson,
Inspector General.
    Approved: January 16, 2014.
Kathleen Sebelius,
Secretary.
[FR Doc. 2014-10390 Filed 5-8-14; 8:45 am]
BILLING CODE 4152-01-P