Health Care Programs: Fraud and Abuse; Revisions to the Office of Inspector General's Exclusion Authorities, 4100-4118 [2016-31390]

Agencies

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

[Federal Register Volume 82, Number 8 (Thursday, January 12, 2017)]
[Rules and Regulations]
[Pages 4100-4118]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-31390]



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Vol. 82

Thursday,

No. 8

January 12, 2017

Part V





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.





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

Federal Register / Vol. 82 , No. 8 / Thursday, January 12, 2017 / 
Rules and Regulations

[[Page 4100]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Inspector General

42 CFR Parts 1000, 1001, 1002, and 1006


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

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

ACTION: Final rule.

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SUMMARY: This final 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 final rule incorporates statutory changes, early 
reinstatement provisions, and policy changes, and clarifies existing 
regulatory provisions.

DATES: These regulations are effective on February 13, 2017.

FOR FURTHER INFORMATION CONTACT:  Patrice Drew, Office of Regulatory 
Affairs, 202-619-1368; Susan Gillin, Office of Counsel to the Inspector 
General, 202-619-1306.

SUPPLEMENTARY INFORMATION: 

I. Statutory Background

    The Affordable Care Act of 2010 (the Patient Protection and 
Affordable Care Act, Public Law 111-148, 124 Stat. 119 (2010), as 
amended by the Health Care and Education Reconciliation Act of 2010, 
Public Law 111-152, 124 Stat. 1029 (2010)) (ACA) expanded the 
Secretary's authority to exclude various individuals and entities from 
participation in Federal health care programs under section 1128 of the 
Social Security Act (Act). The Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA) amended the Secretary's authority 
to waive certain exclusions under section 1128 of the Act. The 
Secretary's authority under section 1128 of the Act has been delegated 
to the Department's Office of Inspector General. The changes in this 
Final Rule were proposed at 79 Federal Register 26810 (May 9, 2014).

II. Legal Authority

    The legal authority for this regulatory action is found in the Act, 
as amended by MMA and ACA. The legal authority for the proposed changes 
is listed by the parts of Title 42 of the Code of Federal Regulations 
(CFR) 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.

III. Summary of the Proposed Rule

    On May 9, 2014, we published a proposed rule (79 FR 26810) 
addressing new and revised exclusion authorities in accordance with ACA 
and MMA, as well as a number of proposed technical, policy, and 
clarifying changes to 42 CFR 1000, 1001, 1002, and 1006. We received 19 
comments on the May 9, 2014, proposed rule. Commenters included 
industry associations and organizations, beneficiary and other advocacy 
groups, and health insurance plans. The commenters generally supported 
our proposals. Set forth below is a brief summary of the regulatory 
provisions contained in that proposed rule.

Part 1000

    The proposed regulation made a number of technical changes to the 
definitions found in section 1000.10 of the regulations. These included 
changes to the definitions of ``Directly,'' ``Furnished,'' and 
``Indirectly'' that would more clearly incorporate newer payment 
methodologies into these definitions. The proposed regulation also 
moved numerous definitions from parts 1001 and 1003 into part 1000 to 
make them applicable to the entire subchapter and to consolidate the 
definitions in the subchapter. Lastly, it removed definitions that were 
specific to Medicare and Medicaid from sections 1000.20 and 1000.30 
because those definitions are not applicable to OIG's authorities.

Part 1001

    The proposed regulation reflected the expansion of OIG's exclusion 
authority in MMA and ACA and also proposed numerous technical and 
policy changes. First, ACA expanded the permissive exclusion authority 
found in section 1128(b)(2) of the Act to reach all individuals and 
entities who were convicted for the interference with or obstruction of 
both investigations and audits related to the use of funds received 
from a Federal health care program. Next, the proposal reflected an 
expansion of the permissive exclusion authority found in section 
1128(b)(11) of the Act. After ACA, section 1128(b)(11) of the Act 
provides for exclusion of any individual or entity furnishing, 
ordering, referring for furnishing, or certifying the need for items 
and services for which payment may be made under Medicare or Medicaid 
that fails to provide certain payment information to the Secretary 
(emphasis added). The change made by ACA to section 1128(b)(11) of the 
Act expanded the categories of individuals and entities that are 
subject to exclusion under this section to those who refer patients or 
certify the need for items or services they themselves do not provide.
    Third, ACA added a permissive exclusion authority at section 
1128(b)(16) of the Act for knowingly making or causing to be made any 
false statement, omission, or misrepresentation of 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. 
The proposed regulation corresponding to this authority, at Sec.  
1001.1751 (in the final rule as Sec.  1001.1552), proposed to describe 
the sources OIG will consider in determining whether section 
1128(b)(16) of the Act applies, including information from the Centers 
for Medicare and Medicaid Services, State Medicaid agencies, fiscal 
agents or contractors, private insurance companies, State or local 
licensing or certification authorities, and law enforcement agencies.
    Lastly, in Sec.  1001.1801 the proposal reflected the expansion of 
OIG's authority to grant waivers of certain exclusions in accordance 
with ACA and MMA. MMA amended the Act to allow waiver requests to come 
from administrators of Federal health care programs, rather than just 
State health care programs, and to apply OIG's waiver authority to 
sections 1128(a)(3) and (a)(4) of the Act as well as section 1128(a)(1) 
of the Act. ACA further amended section 1128 of the Act to allow an 
administrator to request a waiver if the administrator determines that 
the exclusion would impose a hardship on any beneficiary. The proposal 
reflected both MMA's and ACA's changes.
    The proposed regulation also included numerous changes that reflect 
OIG's policies and practices. We proposed to narrow the scope of 
providers excluded under sections 1128(a)(4) and (b)(3) for convictions 
related to controlled substances to those who were convicted for 
offenses that occurred during the time they were employed in the health 
care industry.

[[Page 4101]]

We also proposed to update the dollar amounts in the aggravating and 
mitigating factors that take financial harm into account to $15,000 
from $5,000 (and under Sec.  1001.701(d)(2)(iv), $1,500). We proposed 
to remove: (1) The aggravating factor related to the receipt of 
overpayments from Medicare or Medicaid; (2) all of the aggravating and 
mitigating factors for loss of health care licenses and Federal health 
care program sanctions; and (3) the mitigating factor found throughout 
the regulations related to whether alternative sources of health care 
are not available.
    We also proposed to add a process for early reinstatement where a 
health care license has been lost and has not been reinstated, which 
included numerous factors that OIG would consider under such a process. 
We proposed to include a provision at Sec.  1001.901(c) stating that no 
period of limitations exists with respect to exclusions under section 
1128(b)(7) of the Act. We proposed to add loan repayment programs as 
the bases for exclusions under section 1128(b)(14) of the Act. We 
proposed to expand the ``pay the first claim rule'' to Parts C and D of 
Medicare. We proposed to give individuals and entities excluded under 
new section 1128(b)(16) of the Act the right to an oral argument in 
front of an OIG official prior to exclusion, and we proposed to remove 
the requirement that OIG send a notice of intent to exclude in cases 
under section 1128(b)(7) of the Act.
    The proposed regulation also made numerous technical and clarifying 
changes. We proposed reorganizing Sec.  1001.1001 to clarify the 
authority and to move all the definitions in Sec.  1001.1001 to Sec.  
1001.2. This proposal would also create a new definition of ``ownership 
or control interest,'' which mirrors existing regulatory language at 
Sec.  1001.1001(a)(1)(ii). Next, we proposed separating the two 
concepts in the aggravating factor related to ``Other Offenses and 
Adverse Actions'' to clarify that the first portion relates to 
additional convictions, and the second portion relates to adverse 
actions by government agencies and boards.
    We also proposed revising the language requiring that individuals 
convicted of previous offenses be excluded for a longer minimum period 
to reflect the statutory language, which considers ``previous'' 
convictions instead of ``other'' convictions. We proposed to revise the 
language related to immediate access requirements to include technical 
clarifications and access to electronically stored documents under the 
Inspector General Reform Act of 2008.
    Lastly, we proposed a clarification to the regulation pertaining to 
exclusions under section 1128(b)(15) of the Act that would state that 
the length of an individual's exclusion under section 1128(b)(15) of 
the Act is the same length as the exclusion of an excluded entity on 
which the individual's exclusion is based.

Part 1002

    The proposed rule included several clarifying and technical 
changes, including clarifying Medicaid agencies' right to refuse to 
enter into a provider agreement because of a criminal conviction 
related to any Federal health care program, renumbering certain 
sections, changing headings, adding clarifying language to the section 
describing payment prohibitions, and clarifying circumstances for 
exclusion of managed care entities that are related to sanctioned 
entities.

Part 1006

    Consistent with ACA, the proposed regulation reflected OIG's new 
authority to issue testimonial subpoenas in investigations of potential 
cases involving the exclusions statute.

IV. Response to Comments and Summary of Revisions

    In response to the Notice of Proposed Rulemaking, OIG received 19 
filed public comments from various health care providers and 
organizations, professional medical societies and organizations, and 
other interested parties. In the next section below, we address the 
comments we received to particular proposals. The final rule makes 
certain non-substantive technical changes that were not included in the 
proposed rule. First, the final rule implements a reorganization of 
certain subparts of part 1001. Specifically, Sec.  1001.1051, which 
corresponds to the exclusion authority found at section 1128(b)(15) of 
the Act, is moved to new Sec.  1001.1551, after Sec.  1001.1501. The 
new exclusion authority in section 1128(b)(16), which was proposed at 
Sec.  1001.1751, is moved to new Sec.  1001.1552. These changes were 
made to put the regulatory authorities in the same order as the 
underlying exclusion authorities in section 1128 of the Act. Because of 
the non-substantive nature of these changes, we believe it is 
appropriate to include them in this final rule.
    Next, the final rule moves the definition of ``Federal health care 
program'' from Sec.  1001.2 to Sec.  1000.10. The final rule also 
modifies the definition slightly to mirror the statutory definition in 
section 1128B(f) of the Act. While these changes were not proposed, 
they are technical corrections only and do not change the meaning or 
effect of the regulations. The final rule's definition of Federal 
health care program mirrors the statutory definition of the phrase and 
varies only grammatically from the prior regulatory definition (we 
changed ``providing health care benefits'' to ``provides health 
benefits'' and, because we believe our regulatory definition 
unintentionally did not mirror the statutory definition, we changed it 
from ``whether directly through insurance or otherwise'' to ``whether 
directly, through insurance, or otherwise''). OIG has always 
interpreted this phrase according to the statutory definition at 
section 1128B(f) of the Act.
    The reason we are moving the definition of Federal health care 
program from part 1001 to part 1000 is to reflect the statute and OIG's 
existing regulatory interpretation that this definition applies 
throughout Chapter V of Title 42, wherever the term may appear. The 
term ``Federal health care program'' appears only in parts 1001 and 
1003. Part 1003 sometimes refers to the statutory definition (see Sec.  
1003.101), and sometimes does not (see Sec.  1003.102(a)(3), (a)(15)). 
The move clarifies that one definition, mirroring the statute, applies 
to both part 1001 and part 1003, but does not change the meaning of any 
provision in Chapter V.
    The final rule also spells out ``civil money penalties'' in Sec.  
1001.1001(a)(2), replacing an instance of the term ``CMPs.'' This 
change does not affect the substance of Sec.  1001.1001.

General Comments

Section 1001.901 and 951: Period of Limitations on Affirmative 
Exclusions
    Comments: Thirteen commenters objected to OIG's proposal to clarify 
that there is no time limitation to exclusions imposed under section 
1128(b)(7) of the Act. Some objected on legal grounds, arguing that 
even if a statute is silent regarding a period of limitations, courts 
have often applied some period of limitations and not deferred to an 
agency's interpretation of the period of limitations.
    Others highlighted that although the preamble discussed this 
proposal with respect to all exclusions under section 1128(b)(7) of the 
Act, the proposed regulatory text only included this language for 
exclusions pursued under 42 CFR 1001.901 and not for those pursued 
under 42 CFR 1001.951. Some commenters were concerned that the proposed 
clarification regarding the limitations period would create an 
administrative burden because they felt

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that providers would be required to indefinitely retain all 
documentation that could be relevant to OIG's authorities. Other 
commenters suggested that OIG should toll the limitations period for 
exclusion in individual cases rather than finalize the language as 
proposed.
    Response: The proposal stated that there is no time limitation on 
OIG's initiating an exclusion action under section 1128(b)(7) of the 
Act. As a result of the comments we received, OIG has decided not to 
finalize the rule as proposed and to instead codify a ten-year 
limitations period.
    The proposal was based on the plain language and purpose of section 
1128 of the Act and its interaction with the False Claims Act (FCA), 
the Federal Government's primary civil remedy for health care fraud. 
Section 1128, which includes no period of limitations, authorizes 
exclusions as prospective remedial actions to protect Federal health 
care programs and their beneficiaries from untrustworthy individuals 
and entities. Almost every Federal health care program fraud actionable 
under the FCA can also form the basis for exclusion under section 
1128(b)(7) of the Act. Because of the volume of health care FCA cases, 
most of which are qui tam matters initiated by private parties on 
behalf of the Government, most section 1128(b)(7) matters considered by 
OIG are related to FCA cases. The FCA allows for complaints to be filed 
up to 10 years after the conduct. The filing of the qui tam complaint 
stops the running of the FCA statute of limitations and allows the 
Government to investigate the FCA allegations without the risk of 
losing any civil claims based on time. OIG closely coordinates with DOJ 
and generally considers and resolves exclusions in conjunction with FCA 
settlements. Because many FCA cases are not resolved until many years 
after the claims at issue, any limitations period on section 1128(b)(7) 
exclusions may force OIG to either initiate administrative proceedings 
while the FCA matter is proceeding or lose the ability to protect the 
programs and beneficiaries through an exclusion. Litigating FCA and 
exclusion actions on parallel tracks wastes Government (both 
administrative and judicial) and private resources.
    We believe we should administer the section 1128(b)(7) exclusion 
authority in a way that protects the programs and beneficiaries while 
reducing the risk of wasting resources. We also recognize that older 
conduct is less relevant to current trustworthiness. We have balanced 
the commenters' concerns with our policy goal of protecting Federal 
health care programs and beneficiaries and OIG's experience 
administering the exclusion statute. We have chosen to adopt a 10-year 
limitations period for exclusions initiated under 42 CFR 1001.901 or 42 
CFR 1001.951.
    The 10-year limitations period addresses the commenters' concerns 
about administrative burden and courts' historical favoring of an 
enumerated limitations period. Providing for a 10-year limitations 
period for exclusion under section 1128(b)(7) of the Act will better 
align the resolution of FCA and section 1128(b)(7) remedies. The FCA 
allows the filing of an action up to 10 years after the conduct. Once 
an FCA action is filed by a qui tam relator or the Government, the FCA 
statute of limitations is tolled while the Government investigates the 
matter through any resulting litigation. Based on past experience, we 
expect to still confront situations in which FCA litigation is ongoing 
as we are forced to either initiate an exclusion or lose the ability to 
bring such an action; such situations will be less frequent with a 10-
year period than with a shorter period. The 10-year period is grounded 
in the FCA period of limitations, provides certainty to the industry, 
and better protects OIG's ability to protect the programs and 
individuals from untrustworthy persons identified in FCA cases or 
otherwise.
    When determining whether to seek exclusion of a defendant in an FCA 
case, OIG considers factors that cannot be determined until the case is 
resolved. In litigated FCA cases, OIG is in the best position to 
consider exclusion after there is a judgment, which will either provide 
a strong basis for exclusion (if the judgment is in favor of the 
Government) or make an exclusion case difficult or impossible (if the 
judgment is in favor of the defendant). When a case settles, OIG can 
consider all the relevant factors, including the defendant's 
willingness to agree to appropriate compliance terms, when determining 
whether to seek exclusion. A longer limitations period will better 
allow OIG to consider all of the relevant factors before making an 
exclusion decision and expand the number of cases in which resolution 
of an FCA matter will not occur after OIG's period of limitations has 
ended. The 10-year limitations period will also reduce the risk of OIG 
litigating an exclusion action while FCA litigation is pending. In 
OIG's experience, it is difficult for all parties when two sets of 
concurrent litigation are ongoing. A 10-year limitations period will 
allow for conservation of both Government and private resources in 
these instances.
    We believe that recent acts are more indicative of trustworthiness 
than acts in the distant past. However, in our experience, exclusion 
can be necessary to protect the Federal health care programs even when 
the conduct is up to 10 years old. We intend to exercise this authority 
to preserve our ability to protect the programs when it is 
impracticable for OIG to pursue exclusion closer in time to the 
fraudulent conduct. A 10-year limitations period balances the need to 
provide the defendant certainty and also allow OIG to adequately 
evaluate exclusion in light of the fraudulent conduct.
    As commenters noted, OIG provided notice of the relevant changes to 
exclusions under 1128(b)(7) of the Act but inadvertently provided only 
a text change for 42 CFR 1001.901. We have updated the final rule to 
add the relevant language to both 42 CFR 1001.901 and 42 CFR 1001.951. 
Commenters' concerns about the length of the limitations period in 42 
CFR 1001.901 are equally applicable to 42 CFR 1001.951, and we have 
considered those concerns in the context of both sections.
    Some commenters suggested that OIG toll its statute of limitations 
in situations where certain conduct would lead to exclusion but OIG has 
not learned of the conduct until years after the conduct. We have used 
tolling agreements in certain appropriate matters and will continue to 
do so where it is needed to preserve our ability to protect the Federal 
health care programs. However, we do not believe that OIG seeking a 
tolling agreement in specific cases is an efficient way to preserve 
OIG's authorities in these cases. As mentioned above, the Government's 
FCA remedies are tolled with the filing of a complaint. The complaint 
does not toll OIG's exclusion remedy. Given the volume of FCA 
complaints that are being investigated at any point in time, it would 
be inefficient for OIG to seek to negotiate a tolling agreement in each 
of these cases. In addition, a defendant who is litigating with the 
United States is unlikely to agree to toll OIG's authorities. A 
defendant's refusal to agree to toll the statute of limitations leaves 
OIG in the position of having to choose between (i) filing a concurrent 
action while the United States is in FCA litigation or (ii) losing the 
ability to protect the programs and beneficiaries through an exclusion. 
Therefore, we do not believe that seeking individual tolling agreements 
applicable to

[[Page 4103]]

exclusion authorities would be an effective or efficient way to address 
the protection of OIG's authorities in all cases.

Specific Comments

Section 1000.10: Definitions of ``Directly,'' ``Furnished,'' and 
``Indirectly''
    Comment: One commenter suggested that the proposed language would 
be confusing for providers. Specifically, the commenter noted that 
OIG's proposed change from ``submit claims to'' to ``request or receive 
payment from'' would confuse providers trying to avoid liability 
because of the uncertainty about what ``requesting'' or ``receiving'' 
payment means. As an example, the commenter cited capitation payment 
methodologies, which the commenter stated sometimes ``sever the direct 
link between the items/services that a payment is expected to cover and 
the items/services that the payment actually ends up covering.'' The 
commenter also stated that our reference to the False Claims Act was 
inappropriate.
    Response: We continue to believe that the regulations should be 
updated to more clearly reflect that Federal health care programs make 
payments through methods other than the submission of fee-for-service 
claims, and that individuals and entities who request or receive such 
payment, directly or indirectly, are subject to exclusion. The prior 
regulations discussed these concepts in the context of claims for items 
and services being submitted to Federal health care programs. The 
proposed definitions more clearly include situations in which payment 
is made by a Federal health care program without a traditional fee-for-
service claim, i.e., where the program makes payments through some 
other mechanism.
    We believe the plain meaning of the words ``request'' and 
``receive'' can be applied in this context without undue confusion. 
Funds are requested and received in many different forms from Federal 
health care programs, and the breadth of these terms is necessary to 
include current and potential future payment methodologies.
    The terms include payment methodologies that have been implemented 
in the years since the regulations were last amended. By way of example 
only, some new payment models involve Federal health care programs 
issuing shared savings payments or performance-based payments (e.g., 
reflecting quality improvements) to individuals and entities. These 
individuals and entities therefore may receive payments from Federal 
health care programs that are not tied exclusively to claims for 
specific services that were provided. In another example, in managed 
care or other models, capitated payments may be received by individuals 
and entities from managed care organizations or the Federal health care 
programs to pay for health care provided to Federal health care program 
beneficiaries, but the individuals and entities may not be submitting 
claims directly to the Federal health care programs for particular 
items and services. As a final example, diagnosis resource groups that 
are used to determine payments for inpatient Medicare stays may assume 
the use of medical devices in certain procedures, but the provider does 
not submit a claim requesting payment for the particular item used in 
the procedure.
    Over time, more Federal health care program payments for items and 
services furnished to its beneficiaries are not directly connected to 
submitted fee-for-service claims. The regulation should clearly 
encompass such circumstances within the reach of the exclusion remedy. 
In applying its authorities, OIG carefully considers all relevant facts 
and circumstances in each case before taking action.
    We referenced the False Claims Act's broad definition of ``claim'' 
to illustrate that other sections of the United States Code recognize 
that payment from the Federal Government is requested in many different 
ways. The statutory intent of recent amendments to that act apply its 
penalties without limitations imposed by changing payment 
methodologies. The FCA now extends to a broader category of payment 
methodologies and fraud schemes than it did prior to its amendment. 
Because the underlying conduct triggering an exclusion action is 
comparable to that pursued under the FCA, it would be incongruous to 
limit the exclusion statute's reach to outdated payment methodologies 
and not extend it to newer fraud schemes.
Section 1001.101 and 1001.401: Application of Certain Exclusions to 
Health Care Providers
    Comment: One commenter stressed that the temporal change proposed 
by OIG would not protect beneficiaries from individuals who left 
employment in the health care industry before committing an offense 
leading to conviction, and then re-entered the health care industry 
after their conviction.
    Response: We agree with the commenter that the proposed change 
would not cover individuals who left the health care industry before 
they committed an offense. Accordingly, we are not including the 
proposed change in the final rule.
Sections 1001.102(b)(1), 201(b)(2), 301(b)(2)(viii), and 701(d)(2)(iv): 
Financial Loss Aggravating Factors
    Comment: A commenter expressed concern that OIG's proposal to 
increase the financial loss aggravating factors used to determine the 
length of an exclusion from $5,000 and $1,500 to $15,000 does not 
sufficiently increase the loss amount. The commenter stated that this 
amount would encompass many, if not all, exclusions and, therefore, 
would not be useful in determining trustworthiness. The commenter 
suggested further increasing the financial loss amount to reflect that 
most health care fraud cases result in much greater losses than 
$15,000. Another commenter agreed with OIG that the financial loss 
aggravating factor should be increased to the proposed amount of 
$15,000.
    Response: We partially agree with the commenters with respect to 
the increase in financial loss aggravating factor. In the final rule, 
we have increased the amount of the financial loss aggravating factors 
listed at Sec. Sec.  1001.102(b)(1), 1001.201(b)(2)(i), 
1001.301(b)(2)(viii) to $50,000. We believe that this increase better 
reflects the threshold amount when a period of exclusion should be 
increased on the basis of our experience resolving health care fraud 
matters. Because exclusions under section 1128(b)(6) are not derivative 
of convictions and are focused on unnecessary or substandard care, we 
disagree that $15,000 is an insufficient amount of loss to trigger the 
financial loss aggravating factor under Sec.  1001.701(d)(2)(iv) and 
have finalized the proposal to increase that amount to $15,000.
    Comment: One commenter suggested that OIG retain the financial loss 
aggravating factors used to determine the length of an exclusion at 
$5,000 and $1,500 based on a concern that an increase in the amount of 
the aggravating factor could reduce exclusion periods for untrustworthy 
providers.
    Response: While we agree that any loss from health care fraud is 
troubling, the purpose of the aggravating factor is to provide for an 
additional period of exclusion for those cases that involve high losses 
relative to other cases. In order for it to be a meaningful tool, the 
financial loss aggravating factor used to determine the length of an 
exclusion must be a realistic marker for

[[Page 4104]]

differentiating conduct that is more serious because it involves a 
relatively significant amount of loss. In the current health care fraud 
environment, the $5,000 and $1,500 financial aggravating factor 
thresholds do not reflect unusual or relatively high losses. In order 
to best reflect the current trends in health care fraud cases, we 
believe that an increase in amount is appropriate.
Section 1001.102(c)(1): Mitigating Factor Relating to Misdemeanor 
Offenses and Loss to Government Programs
    Comment: One commenter supported OIG's proposal to raise the loss 
amount in this factor to $5,000.
    Response: We have finalized the rule as proposed.
Sections 1001.201, 301, 401, 501, 601, 701, 801, 951, 1101, 1201, 1601, 
and 1701: Alternative Sources Mitigating Factor
    Comment: Two commenters suggested OIG retain the mitigating factor 
of whether alternative source of the type of health care items of 
services furnished by the individual or entity being excluded are 
unavailable. One commenter stated that removal of this factor would 
impair access to care. Another commenter was concerned that OIG's 
consideration of this factor prior to determining whether to impose an 
exclusion, rather than as a mitigating factor, could cause confusion.
    Response: Exclusion of an individual or entity can have an impact 
on access to care as soon as an exclusion is effective. Therefore, it 
is more appropriate to consider whether exclusion will impact access to 
care in determining whether to impose a permissive exclusion rather 
than to determine the length of exclusion. In all permissive 
exclusions, OIG sends a notice of intent to exclude or a notice of 
proposal to exclude, giving the individual or entity the opportunity to 
present information about potential access to care issues. This 
opportunity to present information should clarify to individuals and 
entities that OIG will consider access to care issues before imposing 
an exclusion. OIG will continue to consider the issue of beneficiary 
access before excluding an individual or entity under OIG's permissive 
exclusion authorities.
Section 1001.301: Expanded Application of a Specific Permissive 
Exclusion Authority To Include Obstruction of Audits
    Comment: One commenter urged OIG not to put audits, which the 
commenter characterized as informal, on a par with investigations, 
which the commenter characterized as formal. The commenter suggested 
that the addition of audits to this permissive exclusion authority 
could cause providers to devote excessive time and funds to 
substantiate their compliance in audit situations, which could restrict 
access to care. Another commenter was pleased that OIG is expanding its 
permissive exclusion authority to include obstruction of audits and 
pointed out that obstructing an audit is as dishonest and untrustworthy 
as obstructing an investigation.
    Response: First, we note that the expansion of this authority is 
statutory and therefore OIG must expand the regulations to cover 
audits. Next, OIG continues to believe this regulation is necessary. 
Contrary to the commenter's characterizations, audits by governmental 
entities or contractors are formal in nature, similar to 
investigations. Compliance with audit processes and requests is 
integral to fraud prevention and detection by payors and by law 
enforcement. It is appropriate for providers to devote resources to 
compliance with such audits.
    Comment: Several commenters noted that it would be helpful for OIG 
to define ``audit'' in the regulations reflecting this statutory 
change. For example, one commenter questioned whether the Medicare 
survey and certification process qualifies as an audit.
    Response: The term ``audit'' has a general meaning that is clear 
based on dictionary definitions. Such definitions include the words 
``official,'' ``inspection,'' ``verification,'' and ``examination.'' We 
believe it is appropriate to apply the general, commonsense meaning to 
the word ``audit'' for the purpose of section 1128(b)(2) of the Act, 
and that a definition is not necessary in the regulatory text. To 
address the commenter's example, the Medicare survey and certification 
process is implemented for the purpose of inspecting facilities for 
compliance with Medicare health and safety standards. Where Government 
entities or contractors conduct an official inspection for the purpose 
of verifying compliance with Government program standards, we believe 
the term ``audit'' would include such actions for purposes of the 
exclusion authority at section 1128(b)(2) of the Act. Government 
entities, including OIG, often conduct ``inspections'' in which 
information is requested from members of the public for the purpose of 
evaluating compliance with the law. An ``examination'' by the Internal 
Revenue Service is synonymous with an ``audit'' by that agency. In this 
way, official inspections and examinations are similar to Government 
audits. A conviction for obstruction of a Government inspection or 
examination is an indication of a lack of trustworthiness and should 
not result in a disparate application of the exclusions statute (if the 
Government action relates to Federal health care programs). Further, 
the permissive nature of the exclusion authority at section 1128(b)(2) 
of the Act allows OIG to exercise discretion and analyze the facts and 
circumstances of each relevant conviction before using the authority.
Sections 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 did not receive comments on this proposal, which would have 
removed the aggravating and mitigating factors related to exclusions 
imposed under sections 1128(b)(4) and 1128(b)(5) of the Act. The 
reasoning for the proposal was that the lengths of these exclusions are 
consistent with the periods of suspension or exclusion by the licensing 
boards and health care programs. However, we have reconsidered this 
proposal and now believe that it is appropriate, in some cases, for OIG 
to impose longer or shorter periods of exclusion than the license 
suspension or revocation periods, or the health care program 
exclusions, based on aggravating and mitigating factors that may be 
present. For this reason, we are not including this proposal in the 
final rule.
Section 1001.501: Early Reinstatement
    Comment: Several commenters supported OIG's proposed early 
reinstatement regulation, because it would facilitate beneficiary 
access and promote employment of individuals who obtain a new license 
or seek employment in non-licensed positions.
    Response: We appreciate the comments.
    Comment: Several commenters urged OIG not to subject individuals 
seeking employment in unlicensed positions to a 5-year presumption 
against reinstatement. The commenters suggested that unlicensed 
individuals have a less direct role, and less authority, in furnishing 
or billing for items and services than licensed individuals.
    Response: We agree with the comments, and in the final rule we

[[Page 4105]]

change the presumption against reinstatement to 3 years for individuals 
without any health care licenses seeking reinstatement under Sec.  
1001.501. We apply one exception for cases in which the licensing board 
that took the action leading to the exclusion has assigned a term of 
years to the license revocation or suspension that is longer than 3 
years. This is because the intent behind early reinstatement is to 
address situations in which an individual may not be precluded by the 
licensing board from trying to re-obtain the lost license but is 
choosing (because of practicality, financial resources, lack of 
interest, etc.) not to attempt to regain the license. If the licensing 
board has affirmatively assigned a term of years that is longer than 3 
years, the individual will not be eligible for early reinstatement into 
the Federal health care programs until the term set by the licensing 
board has elapsed.
    While unlicensed individuals employed in health care settings can 
have a significant impact on the programs and beneficiaries, we believe 
that, if all the other factors weigh in favor of reinstatement, 3 years 
is a sufficient presumption given the 3-year benchmark exclusion period 
for some other permissive exclusions, including those based on criminal 
convictions.
    Comment: One commenter objected to OIG's inclusion of the proposed 
factor at 1001.501(c)(2)(viii) (the reason the individual is seeking 
reinstatement). The commenter stated that the factor is highly 
subjective and likely to lead to arbitrary application.
    Response: We agree with the comment. We believe it is more 
appropriate to consider the potential impact on Federal health care 
programs and beneficiaries of reinstatement. For the same reason, we 
have also removed the factor we proposed related to whether the 
individual is seeking employment in an unlicensed health care position.
    Comment: One commenter asked OIG to clarify the proposed factor at 
1001.501(c)(1)(vii) and (c)(2)(vii) (any ongoing investigations of the 
individual). The commenter suggested that this factor should be limited 
to investigations that pertain to OIG or Federal health care programs.
    Response: In order to best protect the Federal health care 
programs, OIG will consider a broad range of investigations even if 
those investigations do not directly impact the programs in order to 
properly assess the integrity and trustworthiness of individuals 
seeking reinstatement into the programs. Investigations by private 
insurers or third parties may have a direct bearing on OIG's assessment 
of trustworthiness even though they do not involve the Federal health 
care programs.
    Comment: One commenter asked that OIG provide more information 
regarding the relative weight to be given to each factor.
    Response: Consistent with other regulations in which OIG considers 
various factors, we believe it is appropriate for OIG to retain 
discretion in determining which factors are most relevant to any 
individual case, and to consider the relative weight of each factor. 
Similar to when OIG considers aggravating and mitigating factors to 
determine length of exclusion, OIG will look at the facts and 
circumstances individually to determine whether reinstatement is 
appropriate. In the proposed rule, we stated that we would consider 
``alternative approaches, and solicit comments on these and any 
additional factors that should be considered.'' In the interest of 
providing additional transparency regarding our assessment of factors, 
we have added a factor at Sec.  1001.501(c)(1)(ii) regarding whether 
the second licensure authority is in a State that is not the 
individual's primary place of practice. If a licensure board granting a 
license is not in the individual's primary place of practice, this 
would affect our assessment of the potential risks associated with 
reinstatement and the weight given to the second licensure. This factor 
is important in certain cases, based on our experience, in which a 
second licensing board may not take action simply because an individual 
does not practice in that State anymore. In such cases, reinstatement 
may not be appropriate based solely on the second licensing board's 
position.
    We proposed numerous factors related to OIG's consideration of the 
facts surrounding the action or lack of action by a second licensing 
authority, and this additional factor is consistent with these proposed 
factors. Moreover, OIG already has the discretion to consider the 
primary place of practice of an applicant based on other factors in the 
regulation, such as the benefits and risks to the programs of early 
reinstatement, evidence that the second licensing authority was aware 
of the circumstances surrounding the basis for the exclusion, and the 
circumstances that formed the basis for the exclusion. Therefore, the 
addition of this factor does not change what OIG is already able to 
consider under the regulations, but instead provides transparency for 
members of the public who may want to apply for early reinstatement.
    Comment: One commenter asked OIG to prevent early reinstatement of 
individuals who lost their licenses for reasons related to abuse or 
neglect.
    Response: We agree that it is important to protect beneficiaries 
from individuals who have lost their licenses due to reasons related to 
patient abuse or neglect. Therefore, in the final rule, early 
reinstatement will not be available to these individuals. Instead, 
individuals who have lost their health care licenses for reasons 
related to patient abuse and neglect will be required to obtain the 
license that they lost, in the State where they lost it, before OIG 
will consider a reinstatement application. While consideration of abuse 
or neglect could have been considered by OIG under other proposed 
factors, the final rule eliminates discretion in these cases. We 
believe this change to eliminate discretion is consistent with the 
inclusion of proposed factors related to the facts and circumstances of 
the underlying exclusion, the risks to Federal health care programs, 
and the resolution of underlying problems that led to the exclusion.
Section 1001.1001: Exclusion of Entities Owned or Controlled by a 
Sanctioned Person
    Comment: Section 1001.1001 allows OIG to exclude entities under 
certain circumstances, one of which is in a situation in which a person 
transfers his or her ownership or control interest to an immediate 
family member or a member of the person's household in anticipation of 
a conviction, civil monetary penalty (CMP), or exclusion. One commenter 
suggested that OIG allow for exceptions where (1) the excluded person 
was sanctioned on the basis of actions that did not involve the entity 
and where (2) the transfer was justified on the basis of business or 
legal considerations independent of exclusion.
    Response: We do not believe it is necessary to add exceptions to 
this permissive exclusion authority, because of the permissive nature 
of the authority. The statute's language allows OIG to carefully 
consider all relevant facts and circumstances in each individual case 
before imposing exclusion under section 1128(b)(8) of the Act.
Section 1001.1051 (in the Final Rule as Section 1001.1551): Exclusion 
of Individuals With Ownership or Control Interest in Sanctioned 
Entities
    Comment: Two commenters stated that the proposed language would 
have the effect of expanding the basis for exclusions under section 
1128(b)(15) beyond the statutory authority.

[[Page 4106]]

Specifically, the commenters argued that adding the words ``or had'' 
with respect to the relationship between the excluded entity and the 
individual being excluded would allow OIG to exclude individuals who 
terminated their relationships with a sanctioned entity before being 
excluded. One commenter also noted that the individual should not 
remain excluded after termination of the relationship with the entity.
    Response: The intent of this proposal was to clarify that an 
individual who has been excluded under section 1128(b)(15) of the Act 
will be excluded for the same period as the entity, regardless of 
whether the individual terminates his or her relationship with the 
entity after he or she has been excluded. We have modified the proposed 
language in the final rule to simply read ``[i]f the entity has been 
excluded, the length of the individual's exclusion will be for the same 
period as that of the sanctioned entity.'' OIG believes that the 
statute allows the length of an exclusion under section 1128(b)(15) to 
be for the same term as the exclusion of the sanctioned entity. The 
final regulatory language specifies that once an individual has been 
excluded under section 1128(b)(15), the exclusion will remain in effect 
for as long as the term of the entity's exclusion.
    Comment: One commenter argued that OIG should not make the period 
of exclusion consistent between the entity and the individual because 
the individual may not have the knowledge or participation level in the 
wrongdoing to warrant an exclusion that is the same length as the 
entity's exclusion.
    Response: We believe it is appropriate to determine the 
individual's exclusion length consistent with the entity's exclusion 
length. This is consistent with the statute, which creates this 
authority in order to protect the programs and beneficiaries from 
individuals that OIG deems to be untrustworthy. The determination of 
untrustworthiness is made based on the conduct of the entity and the 
individual's position with respect to the entity. The statute places 
responsibility for the conduct on the individuals in certain positions. 
OIG exercises its discretion under section 1128(b)(15) of the Act in 
accordance with factors we published in 2011 to ensure that the 
authority is used only when appropriate. As a result, when OIG has 
determined that an individual is untrustworthy based on the conduct of 
an entity, it is appropriate to exclude him or her for the same period 
for which the entity is excluded.
    Comment: Several commenters argued that OIG should not exclude 
individuals under section 1128(b)(15) of the Act unless specific 
findings are made regarding the individual's wrongdoing or knowledge of 
wrongdoing.
    Response: We believe that requiring specific findings outside of 
those listed in section 1128(b)(15) of the Act would be inconsistent 
with the clear language of the statute. The statute only requires 
evidence of knowledge to support the exclusion of individuals with an 
ownership or control interest in a sanctioned entity under section 
1128(b)(15)(A)(i). There is no requirement to demonstrate knowledge of 
wrongdoing in order to exclude officers or managing employees under 
section 1128(b)(15)(ii). OIG published factors in 2011 that are used in 
determining whether to exercise discretion under this section. Those 
factors consider, among other things, the seriousness of the 
misconduct, the individual's role in the misconduct, and the 
individual's actions in response to the misconduct. Because the statute 
articulates a broad permissive exclusion authority to be implemented by 
OIG under section 1128(b)(15) of the Act, we continue to believe that 
our subregulatory guidance on this topic is the appropriate mechanism 
for applying OIG's authority under section 1128(b)(15), and that 
regulations limiting the statutory authority are not appropriate.
Section 1001.1201: Broadened Scope of a Permissive Exclusion Authority
    Comment: Commenters suggested that the proposal to expand the 
authority to individuals who refer for furnishing or certify the need 
for services could result in providers being unfairly excluded. The 
commenters noted that as a referring provider an individual may not 
know whether a patient is a beneficiary of Federal health care 
programs.
    Response: While we understand that referring physicians may not 
know whether a patient is a Federal health care program beneficiary, 
this regulatory change is consistent with the change made to the 
statutory exclusion authority by section 6406(c) of ACA. Further, the 
exclusion is for a failure to supply payment information when requested 
by Federal health care programs and does not require a physician's 
knowledge of how the referred or certified services might be paid.
Section 1001.1301: Exclusion for Failure To Grant Immediate Access
    Comment: A commenter suggested that in order to protect those 
providing access to information, and their patients, OIG should 
implement privacy precautions that would apply to OIG and other 
agencies requesting electronic material under section 1128(b)(12) of 
the Act, and suggested that those precautions should mirror those found 
in the Health Insurance Portability and Accountability Act of 1996 
(HIPAA) applicable to business associates. The commenter also suggested 
that OIG perform due diligence on other authorized entities that may be 
requesting information under section 1128(b)(12) of the Act, and that 
OIG require entities and agencies with access to the data to compensate 
individuals and entities who are harmed by any unauthorized access or 
use of the requested information.
    Response: Although OIG is not subject to the HIPAA Privacy and 
Security Rules, existing Federal laws and directives provide similar 
protections for personally identifiable information (PII) in OIG's 
possession. OIG, like all Federal executive branch agencies, is 
required to protect PII from unauthorized disclosures by the Privacy 
Act and Office of Management and Budget (OMB) directives (for example, 
OMB Circular A-130 and OMB Memoranda M-06-15 and M-06-16 of June 23, 
2006). Additionally, HHS has requirements for the protection of PII and 
for reporting security breaches that OIG must follow in addition to 
OIG's internal policies and procedures.
    All Federal agencies, including OIG, are required by the Federal 
Information Security Management Act of 2002 (FISMA; 44 U.S.C. 3541 et 
seq.), and OMB Memoranda M-07-19 of May 22, 2007; M-07-19 of July 25, 
2007; and M-06-19 of July 12, 2006, to report all security incidents 
(suspected or confirmed) involving PII to the U.S. Computer Emergency 
Readiness Team (US-CERT), located within the Department of Homeland 
Security.
    Comment: A commenter asked OIG to clarify OIG's 24-hour deadline 
and what constitutes a compelling reason for failure to produce 
information within this deadline.
    Response: We believe that the regulations regarding immediate 
access requests are sufficiently clear to put individuals and entities 
on notice that they must comply with requests within 24 hours. In 
addition, the statute gives OIG authority to determine whether a 
failure to produce requested information is the result of a compelling 
reason, and the regulations that are in place at section 1001.1301 
reflect the broad intent of the statute.

[[Page 4107]]

Section 1001.1501: Default on Health Education Loans or Scholarship 
Obligations
    Comment: Several commenters argued that OIG should not expand its 
exclusion authority to loan repayment programs given the spike in loan 
defaults since 2008, as documented by the Department of Education. One 
commenter stated that OIG should not include Indian Health Service 
(IHS) scholarship and loan repayment programs in the proposed expansion 
of the loan default regulations, because it will make it more difficult 
for IHS providers to retain qualified staff.
    Response: Section 1128(b)(14) of the Act requires that IHS 
scholarships and loans be included in OIG's authority to exclude. 
Because IHS is a division of HHS, these are ``scholarship obligations 
or loans in connection with health professions education made or 
secured . . . by the Secretary.'' Exclusion has proven to be a 
successful remedy to incentivize individuals in loan default to repay 
the obligations owed to the Department. OIG's discretionary authority, 
including the change to include loan repayment programs, appropriately 
includes IHS scholarships and obligations.
Section 1001.1552 (Proposed as Section 1001.1751): Establishment of a 
New Permissive Exclusion Authority Pursuant to Section 1128(B)(16) of 
the Act
    Comment: One commenter requested that we define ``material'' as 
``having an actual influence on the decision to deny or approve 
applications for enrollment.''
    Response: We continue to believe that our proposed definition of 
``material,'' of ``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,'' is reasonable. The broad statutory 
language does not limit the application of this authority to cases in 
which the false statement in fact influenced the decision to deny or 
approve enrollment. The proposed definition is also consistent with the 
statutory definition of ``material'' in the False Claims Act (31 U.S.C. 
3729(b)), as applied with respect to the submission of false records 
and statements material to a false or fraudulent claim. In addition, 
the permissive nature of the authority allows OIG to consider all 
relevant facts and circumstances in each case before taking action.
    Comment: One commenter asked OIG to restrict the sources it will 
consider to an enumerated list for transparency and clarity.
    Response: The sources listed in the proposed regulation provide 
transparency for purposes of giving individuals and entities notice of 
the information OIG will consider. We believe it is also reasonable for 
OIG to retain the right to consider appropriate sources other than 
those listed, should they become relevant.
    Comment: One commenter asked OIG to restrict prior wrongdoing 
considered in determining the length of exclusion to wrongdoing related 
to health care and to disregard wrongdoing that is in the distant past.
    Response: The inclusion of this factor is consistent with OIG's 
considerations in other permissive exclusions (see Sec. Sec.  1001.601, 
.701, .1601, and .1701). In applying this factor, OIG will weigh the 
relevance of conduct that is aged or is unrelated to health care as 
appropriate.
    Comment: One commenter suggested that OIG require entities to 
develop safeguards to ensure quality, accuracy, and integrity, and to 
compensate individuals and entities harmed by the submission of 
inaccurate information.
    Response: The addition of this statutory authority should deter 
entities and individuals from misstating or falsifying information on 
enrollment applications, and incentivize providers to create safeguards 
to prevent fraud, waste, and abuse. We do not believe it is within the 
scope of the statute for OIG to require entities to compensate 
individuals and entities harmed by the submission of inaccurate 
information.
    Comment: One commenter stated that the terms ``knowingly'' and 
``material'' are subjective and can be applied inconsistently. The 
commenter asked that OIG state an objective standard that won't 
penalize providers who are trying to accurately respond on enrollment 
documents but make ``simple documentation errors.''
    Response: The words ``knowingly'' and ``material'' appear in the 
statute. We believe that the applicable definition adds clarity to the 
section. In addition, OIG will continue to evaluate the nature and 
circumstances of the conduct and exercise discretion in deciding 
whether to impose an exclusion. It is not OIG's intention to pursue 
exclusion under section 1128(b)(16) of the Act based on inadvertent 
errors and minor oversights.
    Comment: One commenter asked OIG to eliminate its consideration of 
the actual or potential repercussions of the false statement from the 
list of factors used to determine the length of exclusion, and instead 
use that factor to determine whether to exclude. Another commenter 
suggested OIG should publish a more specific list of factors to be 
considered in determining the periods of exclusion and objected to the 
factor considering actual or potential repercussions of the false 
statement as too vague, potentially arbitrary, and failing to provide 
sufficient notice and guidance for physicians. The commenter suggested 
alternative factors: The nature of the false statement, omission, or 
misrepresentation; the provider type involved; the enrollment risk tier 
assigned to the provider; whether the Federal health care program would 
have accepted the enrollment if the false statement had not occurred; 
the amount of control the provider was able to exercise over a third 
party assisting in the enrollment process; and whether the provider 
furnished medically necessary services to Federal health care program 
beneficiaries.
    Response: We continue to believe that the actual and potential 
impact of the false statement or omission is relevant to the length of 
the exclusion, and that the statutory language allows OIG to exclude 
under this permissive authority even where no repercussions resulted 
from a false statement. However, we agree that the proposed actual or 
potential repercussions factor is vague and that a more specific list 
of factors is appropriate. In the final rule, we replace the proposed 
factor ``[w]hat were the actual or potential repercussions of the false 
statement, omission, or misrepresentation of a material fact'' with two 
factors that more specifically describe what factors OIG will consider 
regarding the repercussions of the false statement. These factors in 
the final rule expand upon and clarify the proposed factor that the 
public commented upon. The factors are: The nature and circumstances of 
the false statement and whether and to what extent payments were 
requested or received from the Federal health care programs under the 
application, agreement, bid, or contract on which the false statement 
was made.
    The nature and circumstances of the false statement are facts that 
OIG would necessarily consider in determining whether the conduct had 
actual or potential repercussions. Under this new factor, OIG will 
consider, among other things, how, when, why, to whom, and by whom the 
statement was made.
    The second new factor, whether any payments were requested or 
received, similarly informs whether there were actual or potential 
repercussions of the conduct; if no payments were made, a shorter 
exclusion length may be appropriate.
    However, we do not agree that the commenter's other suggested 
factors are

[[Page 4108]]

appropriate. We do not believe that the type of provider or the 
enrollment risk tier should be relevant to OIG's determination of 
untrustworthiness and, thus, length of exclusion. Instead, OIG may 
consider whether exclusion of the relevant type of provider would 
impact Federal health care program beneficiaries' access to care in 
determining whether an entity or individual should be excluded. The 
commenter also suggested that we add a factor considering whether the 
program would have enrolled the applicant if the false statement had 
not been made. This potential factor considers whether the false 
statement was material to the program's decision to accept the 
application; if the application had contained the truth (for example, 
that a person had a former name that was not reported on the 
application) and the program would have nonetheless granted enrollment, 
then the fact that was subject to the false statement was likely not 
material to the program's decision. Because section 1128(b)(16) of the 
Act contains a requirement of materiality to exclude, this factor is 
relevant to whether OIG should exclude under section 1128(b)(16), but 
not for how long.
    We do not believe that the amount of control a provider had over a 
third party in the enrollment process is relevant to the length of the 
exclusion. Whether a provider had control over the actions of a third 
party engaged to assist in completing an enrollment application, 
agreement, bid, or contract to participate in a Federal health care 
program will inform the analysis of whether the false statement was 
made knowingly. OIG will carefully consider all the circumstances 
surrounding the false statement before taking action under section 
1128(b)(16).
    Lastly, we will not consider whether the provider furnished 
medically necessary services, because it is not relevant to the 
misconduct of making a false statement on an enrollment application. We 
instead focus on the egregiousness of the conduct, relevant past 
behavior, and the potential impact of the false statement.
    We provide the following list of factors, which closely track and 
respond to comments we received.
    (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) The nature and circumstances surrounding the false statement;
    (2) Whether and to what extent payments were requested or received 
from the Federal health care program under the application, agreement, 
bid, or contract on which the false statement, omission, or 
misrepresentation was made; and
    (3) Whether the individual or entity has a documented history of 
criminal, civil, or administrative wrongdoing.
Section 1001.1901(c): Scope and Effect of Exclusion
    Comment: One commenter stated that OIG's proposal to allow Medicare 
to pay claims submitted by an enrollee for items or services furnished 
by an excluded person is inconsistent with 42 CFR 423.12(c)(5) and (6). 
Those regulations require Medicare Part D sponsors and pharmacy benefit 
managers to deny claims for items from a pharmacy when the prescribing 
physician does not have an active and valid individual prescriber NPI, 
including if the prescribing physician is excluded.
    Response: The proposed change to section 1001.1901(c) was intended 
to update the regulations to conform with the current payment framework 
relevant to section 1862(e)(2) of the Act. We recognize that our 
proposal may not be operationally clear in light of the regulatory 
changes made under 42 CFR 423.12(c)(5) and (6). Therefore, we have not 
included the proposal in the final rule and intend to work with our 
partners in HHS to ensure that section 1862(e)(2) of the Act is 
implemented both on a regulatory and on an operational level.
    Comment: One commenter urged OIG not to expand the exception in 
section 1001.1901(c) to parts C and D. It appears that the commenter 
opposed an expansion of OIG's exclusion authority to parts C and D, 
rather than the expansion of the ``pay the first claim'' rule to parts 
C and D. The commenter reasoned that the expansion would restrict 
access to care and expand exclusion authorities.
    Response: The proposal was to expand a statutory exception to the 
general prohibition on payment for items or services ordered, 
prescribed, or provided by an excluded individual or entity, and would 
have expanded Part C and D beneficiary access to items and services 
where they had no reason to know that a provider had been excluded. 
Nevertheless, as described above, we have withdrawn the proposal 
because operation of the proposed changes would have been unclear given 
regulatory changes to part 423.
    Comment: Several commenters suggested that excluded providers could 
assist program enrollees in submitting claims so that they could more 
easily submit claims either online or at the excluded provider's 
facility by adding the following language to section 1001.1901(c)(1): 
``[i]n cases where the excluded individual or entity's submission of 
claims would invalidate payment for an emergency item or service or one 
that the enrollee cannot reasonably obtain from a non-excluded 
individual or entity, the provider may assist the enrollee in 
submitting the claim directly.''
    Response: This comment is outside our proposal and is not 
responsive to our solicitation for comments on how to protect Part D 
enrollees who cannot fill a prescription due to the exclusion of a 
physician. We are concerned that allowing an excluded provider to 
assist in the submission of claims by an enrollee creates risk for the 
program, as the excluded provider is still involved in billing for its 
services. Additionally, we believe that an emergency situation would be 
better covered under section 1001.1901(c)(5)(i). The intent of section 
1001.1901(c)(1) is to implement by regulation the statutory exception 
provided for in section 1862(e)(2) of the Act. There is already a 
statutory exception that covers emergency items and services in section 
1862(e) of the Act and a regulatory framework for emergency situations 
under section 1001.1901(c)(5)(i). We have decided to withdraw our 
proposal at this time.
    Comment: Several commenters suggested that the emergency exception 
to the prohibition on payment for items and services provided by an 
excluded individual be expanded outside emergency services and 
specifically that the payment prohibition exception apply to patients 
who have a geographic or financial inability to obtain medically 
necessary services from a non-excluded provider, or in other 
circumstances within the scope of a provider's professional judgment.
    Response: This comment is outside our proposal and is not 
responsive to our solicitation for comments on how to protect Part D 
enrollees who cannot fill a prescription due to a prescriber's 
exclusion. We understand the commenters' point that there may be 
difficulties for certain individuals to obtain care from non-excluded 
providers, including geographic barriers. Section 1862(e) of the Act 
does not allow for additional exceptions to address such circumstances. 
OIG will continue to consider access to care when deciding whether to 
impose permissive exclusions and/or to grant waivers under sections 
1128(c)(3)(B) of the Act and Sec.  1001.1801, where appropriate.
    Comment: One commenter suggested allowing the filling pharmacy to 
inform

[[Page 4109]]

the enrollee of the exclusion, fill the prescriptions presented, and 
bill Medicare Part D for those prescriptions on a one-time basis.
    Response: Because the pharmacy would be the entity submitting the 
claim, we believe that this suggestion falls beyond the scope of OIG's 
regulatory authority and would be better suited for consideration in 
the relevant payment rules.
    Comment: One commenter suggested requiring as a condition of 
participation that all providers and suppliers inform their patients of 
an exclusion and arrange for a transfer to a provider or supplier who 
is not excluded.
    Response: OIG does not have the authority to regulate conditions of 
participation. Although we have withdrawn our proposal, we will 
continue to work with our partners in HHS to ensure that enrollees are 
protected in the event that they need to fill a prescription written by 
an excluded provider.
Section 1001.2001: Notice of Intent To Exclude--Opportunity To Present 
Oral Argument in Cases Under Section 1128(b)(16)
    Comment: One commenter asked whether the Departmental Appeals Board 
(DAB) has capacity to hear appeals of exclusions under section 
1128(b)(16) of the Act.
    Response: The proposed opportunity is for an oral argument to an 
OIG official prior to exclusion, not an appeal before the DAB. OIG does 
have capacity to hear these oral arguments.
    Comment: One commenter requested that OIG also provide an 
opportunity for oral argument if it proposes to exclude an individual 
or entity under section 1128(b)(7) of the Act. The commenter argued 
that OIG must make factual findings or determinations in section 
1128(b)(7) cases that are similar to those under section 1128(b)(16) of 
the Act.
    Response: While we agree that OIG must make factual determinations 
in cases under each of these sections, the processes under these 
sections are different. Under sections 1128(b)(6) and 1128(b)(16), the 
exclusion goes into effect 20 days after receipt of OIG's Notice of 
Exclusion, issued under section 1001.2002, and before a hearing before 
an administrative law judge (ALJ). In section 1128(b)(7) cases, if 
appealed, the exclusion does not go into effect until after a 
determination by an ALJ. In such cases, the respondent may present its 
arguments to OIG in writing after receiving the Notice of Intent to 
Exclude. We believe this, coupled with an ALJ hearing, gives sufficient 
opportunity for argument in section 1128(b)(7) cases. In practice, OIG 
also contacts potential subjects of section 1128(b)(7) exclusions, 
often through ``pre-demand letters'' or other means, to give defendants 
the opportunity to respond to OIG before formal proceedings are 
initiated.
Section 1001.2001: Notice of Intent To Exclude--Exception for Section 
1128(b)(7) Cases
    Comment: One commenter stated that the proposal to eliminate the 
notice of intent to exclude when OIG has determined to exclude an 
individual or entity under sections 1128(b)(7), 1842(j)(1)(D)(4), or 
1842(k)(1) of the Act would deprive individuals of their right to 
receive notice and a meaningful opportunity to respond. The commenter 
also believed that this was particularly important considering OIG's 
reliance on U.S. mail to send these notices.
    Response: We continue to believe that the notice of proposal to 
exclude provides a sufficient opportunity for individuals and entities 
to receive and respond to OIG's proposals to exclude under section 
1128(b)(7) of the Act. In these cases, it is OIG's longstanding 
practice to contact and initiate discussions with potential subjects, 
often through a ``pre-demand letter,'' before initiating formal 
proceedings under part 1001. OIG's practices give potential respondents 
an opportunity to respond to OIG's concerns in advance of formal 
proceedings. The proposal also aligns OIG's processes under section 
1128(b)(7) of the Act with those under the Civil Monetary Penalties Law 
(CMPL), which is referenced by section 1128(b)(7) of the Act. That law 
and its implementing regulations do not require a notice of intent 
before OIG initiates formal proceedings. The final rule is consistent 
with the process required under the CMPL.
    We have made some clarifying changes in the final rule from the 
proposal. The regulations require that three notices be sent to 
potential defendants: a notice of intent to exclude under Sec.  
1001.2001, a notice of exclusion under Sec.  1001.2002, and a notice of 
proposal to exclude under Sec.  1001.2003. The final rule removes the 
requirements for both the notice of intent to exclude and the notice of 
exclusion.
    This change eliminates an ambiguity as to when an exclusion goes 
into effect under these notice requirements. Specifically, Sec.  
1001.2003(a) states that an exclusion under section 1128(b)(7) of the 
Act goes into effect 60 days after the receipt of the notice of 
proposal to exclude unless appealed. Section 1001.2003(b)(1), however, 
also requires OIG to send a notice of exclusion as described in Sec.  
1001.2002 if the individual or entity does not request a hearing within 
60 days. The regulations under Sec.  1001.2002 indicate that an 
exclusion will go into effect 20 days from the date of the notice of 
exclusion. Although our longstanding policy has been to read these 
regulations together so that the exclusion, if it was not appealed, 
goes into effect on the earlier of the two dates, the final rule 
clarifies the language to state that a proposed exclusion under section 
1128(b)(7) of the Act becomes effective, if not appealed, 60 days of 
the date of the Notice of Proposal to Exclude.
    In addition, as we stated in the proposed rule, it has been and 
remains OIG's practice and policy to send notices under part 1001 by 
regular mail.
Section 1001.2006: Notice of Exclusion by HHS
    Comment: One commenter noted that in the preamble OIG included a 
reference to a proposal to require indirect providers to notify their 
customers of their exclusion.
    Response: This proposal was not contained in the proposed 
regulation text. The reference to the proposal was included in error. 
As a result, the proposed changes to the headings in sections 
1001.2004, .2005, and .2006 are unnecessary. We withdraw the proposals 
to rename those headings.
Section 1001.3005: Withdrawal of Exclusion
    Comment: One commenter approved of OIG's proposal to clarify that 
OIG will withdraw exclusions that are derivative of convictions that 
are reversed or vacated on appeal. Another commenter suggested that OIG 
should withhold exclusions until appeals are exhausted in order to 
protect individuals and entities from unjust financial, reputational, 
and career damage that the commenter believes would be caused by an 
exclusion that is later withdrawn after a conviction is reversed or 
vacated on appeal.
    Response: Section 1128(a) of the Act requires OIG to exclude 
individuals and entities based on certain convictions, and section 
1128(b) of the Act grants OIG the authority to exclude based on other 
convictions. Section 1128(i)(1) of the Act specifically includes in the 
definition of ``conviction'' situations in which an appeal of the 
conviction is pending. As a result of this definition of conviction, 
OIG does not have the authority to delay the imposition of exclusions 
until after appeals are exhausted. In addition, timely exclusions of 
convicted providers, regardless of pending appeals, best

[[Page 4110]]

protects Federal health care program beneficiaries from untrustworthy 
providers. Based on our experience of excluding thousands of 
individuals and entities based on criminal convictions, very few of 
these convictions are reversed or vacated on appeal. The existing and 
proposed regulation makes it clear that should a conviction be reversed 
or vacated on appeal, OIG will withdraw the exclusion. The effect of a 
withdrawal is that reinstatement will be retroactive to the effective 
date of the exclusion. If the individual or entity provided items or 
services to beneficiaries of Federal health care programs while the 
appeal was pending, payment may be made by Federal health care programs 
for items and services provided during that period of time in 
accordance with the payor's policies.
    Comment: One commenter asked that HHS provide notice of withdrawn 
exclusions to State agencies, State licensing agencies, and the public.
    Response: As a matter of policy, OIG provides notice of withdrawals 
and reinstatements to the same State agencies that were notified of the 
exclusion. We do not believe it is necessary, or required by the law, 
for us to include this policy in the regulations. OIG's notification to 
the public is by monthly update to OIG's List of Excluded Individuals 
and Entities, or LEIE. OIG also works with providers to communicate 
with payors when issues arise as the result of a reinstatement.
Section 1006.1: Testimonial Subpoena Authority in Section 1128 Cases
    Comment: One commenter stated that OIG should only use the new 
testimonial subpoena authority where there is an objective, reasonable 
basis to believe that the conduct that has occurred warrants permissive 
exclusion.
    Response: The proposed changes to section 1006.1 were made to 
reflect statutory changes made in section 6402(e) of ACA. As always, 
OIG intends to use its testimonial subpoena authority only when it has 
the authority to do so and when appropriate to gather facts relevant to 
a possible administrative action.
    Comment: One commenter stated that OIG has sufficient subpoena 
authority and that there is no need to expand authority in this area.
    Response: The change made to the regulations reflects a statutory 
change, so we have finalized the provision as proposed.

V. Regulatory Impact Statement

    We have examined the impact of this final 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 final rule will implement new statutory provisions, including 
new exclusion authorities. It is also designed to clarify the intent of 
existing statutory requirements and promote transparency by publishing 
OIG policies. The vast majority of providers and Federal health care 
programs will be minimally impacted, if at all, by these revisions. The 
changes to the exclusion regulations will 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 formal proceedings for 
affirmative exclusion cases have been initiated. Thus, we believe that 
any aggregate economic effect of the exclusion regulatory provisions 
will 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 falls under the $100 million threshold. 
Accordingly, we believe that the likely aggregate economic effect of 
these regulations will 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 1 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 will be minimal. The rule directly impacts small entities that 
may be excluded by clarifying how OIG determines exclusion lengths, 
waivers, reinstatement, and affirmative exclusion. It also codifies 
exclusion authorities added to section 1128 of the Act by MMA and ACA, 
adding clarity for members of the health care community regarding the 
scope of OIG's actions. Because the rule adds transparency to OIG's 
process and implements exclusion authorities designed to protect 
Federal health care programs and their beneficiaries from untrustworthy 
individuals and entities, we believe any resulting impact will be a 
positive one on the health care community. In summary, we have 
concluded that this final rule will 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 1 year 
by State, local, or tribal governments, in the aggregate, or by the 
private sector, of $110 million or more. As indicated above, these 
proposed revisions comport with statutory amendments and clarify 
existing law. As a result, we believe that the regulations would not 
impose any mandates on State, local, or tribal governments or the 
private sector that will result in expenditures 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 final rule would 
not significantly affect the rights, roles, and responsibilities of 
State or local governments.

[[Page 4111]]

VI. Paperwork Reduction Act

    These 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 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 republishing the introductory text and 
by revising the definition of ``Directly'', ``Furnished'', 
``Indirectly'', ``QIO'', and ``Secretary'' and by adding the 
definitions of ``ALJ'', ``Exclusion'', ``Federal health care program'', 
``State'', and ``State health care program'' in alphabetical order to 
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 OIG.
    Federal health care program means any plan or program that provides 
health benefits, whether directly, through insurance, or otherwise, 
which is funded directly, in whole or in part, by the United States 
Government (other than the Federal Employees Health Benefits Program), 
or any State health care program as defined in this section.
* * * * *
    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 or 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 50 States, 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
4. 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
5. Section 1001.2 is amended by removing the definitions of 
``Exclusion'', ``Federal health care program'', ``OIG'', ``QIO'', and 
``State health care program'', and by adding introductory text and the 
definitions of ``Agent'', ``Immediate family member'', ``Indirect 
ownership interest'', ``Managing employee'', ``Member of household'', 
``Ownership interest'', and ``Ownership or control interest'' in 
alphabetical order to 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 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

[[Page 4112]]

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
6. Section 1001.101 is amended by revising paragraphs (d)(1) and (2) to 
read as follows:


Sec.  1001.101   Basis for liability.

* * * * *
    (d) * * *
    (1) Is, or has ever been, a health care practitioner, provider, or 
supplier or furnished or furnishes items or services;
    (2) Holds, or has held, 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, director, agent, or 
managing employee of such an entity; or
* * * * *

0
7. Section 1001.102 is amended as follows:
0
a. Revise paragraph (b)(1);
0
b. Remove paragraph (b)(7);
0
c. Redesignate paragraphs (b)(8) and (9) as paragraphs (b)(7) and (8);
0
d. Revise newly designated paragraphs (b)(7) and (8);
0
e. Add new paragraph (b)(9);
0
f. Revise paragraph (c)(1); and
0
g. Revise paragraph (d).
    The revisions to read as follows:


Sec.  1001.102   Length of exclusion.

* * * * *
    (b) * * *
    (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 $50,000 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) * * *
    (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) For 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
8. Section 1001.201 is amended as follows:
0
a. Revise paragraphs (b)(2)(i) and (vi);
0
b. Add paragraph (b)(2)(vii); and
0
c. Revise paragraphs (b)(3)(i) and (ii).
    The revisions and addition to read as follows:


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

* * * * *
    (b) * * *
    (2) * * *
    (i) The acts resulting in the conviction, or similar acts, caused 
or reasonably could have been expected to cause, a financial loss of 
$50,000 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 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) * * *
    (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, emotional, or physical condition, before or during the 
commission of the offense, that reduced the individual's culpability; 
or
* * * * *

0
9. Section 1001.301 is amended as follows:
0
a. Revise the section heading and paragraph (a);
0
b. Revise paragraphs (b)(1) and (b)(2)(i), (ii), and (vi);
0
c. Add paragraphs (b)(2)(vii) and (viii); and
0
d. Revise paragraph (b)(3)(i).
    The revisions and additions to 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. Sec.  1001.101 or 1001.201; or

[[Page 4113]]

    (2) The use of funds received, directly or indirectly, from any 
Federal health care program.
    (b) Length of exclusion. (1) An exclusion imposed in accordance 
with this section will be for a period of three years, unless 
aggravating or mitigating factors listed in paragraphs (b)(2) and (3) 
of this section form the basis for lengthening or shortening that 
period.
    (2) * * *
    (i) The interference or obstruction caused the expenditure of 
significant additional time or resources;
    (ii) The interference or obstruction had a significant adverse 
physical or mental impact on one or more program beneficiaries or other 
individuals;
* * * * *
    (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 $50,000 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) * * *
    (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
* * * * *

0
10. Section 1001.401 is amended as follows:
0
a. Revise paragraphs (a) introductory text, (a)(1) and (2);
0
b. Republish the heading of paragraph (c);
0
c. Revise paragraphs (c)(1), (c)(2) introductory text, (c)(2)(iv), and 
(v);
0
d. Add paragraph (c)(2)(vi); and
0
e. Revise paragraph (c)(3).
    The revisions and addition to 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, or has ever been, a health care practitioner, provider, or 
supplier or furnished or furnishes items or services;
    (2) Holds, or held, a direct or indirect ownership or control 
interest in an entity that furnished or furnishes items or services or 
is or has ever been an officer, director, agent, or managing employee 
of such an entity; or
* * * * *
    (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) Any of the following factors may be considered to be 
aggravating and to be a basis for lengthening the period of exclusion--
* * * * *
    (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: The 
individual's or entity's cooperation with Federal or State officials 
resulted in--
    (i) Others being convicted or excluded from Medicare, Medicaid, and 
any other Federal health care program;
    (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
11. Section 1001.501 is amended by revising paragraphs (b)(1), (3), and 
(4); and by 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.
* * * * *
    (3) Only if any of the aggravating factors listed in paragraph 
(b)(2) of this section justifies a longer exclusion may a mitigating 
factor be considered as a basis for reducing the period of exclusion to 
a period not less than that set forth in paragraph (b)(1) of this 
section. Only the following factor may be considered mitigating: The 
individual's or entity's cooperation with a State licensing authority 
resulted in--
    (i) The sanctioning of other individuals or entities, or
    (ii) Additional cases being investigated or reports being issued by 
the appropriate law enforcement agency identifying program 
vulnerabilities or weaknesses.
    (4) 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 
health care license or has decided to take no adverse action as to a 
currently held health care 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) Whether the second licensing authority is in a state that is 
not the individual's primary place of practice;

[[Page 4114]]

    (iii) Evidence that the second licensing authority was aware of the 
circumstances surrounding the action that formed the basis for the 
exclusion;
    (iv) 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;
    (v) The benefits to the Federal health care programs and program 
beneficiaries of early reinstatement;
    (vi) The risks to the Federal health care programs and program 
beneficiaries of early reinstatement;
    (vii) Any additional or pending license actions in any State;
    (viii) Any ongoing investigations involving the individual; and
    (ix) 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 this 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 paragraph 
(c)(2) of this section if the person has been excluded for less than 3 
years; however, if the revocation or suspension on which the exclusion 
is based was for a set period longer than 3 years, the presumption 
against early reinstatement will be coterminous with the period set by 
the licensing board;
    (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 any State;
    (vii) Any ongoing investigations involving the individual; and
    (viii) All the factors set forth in Sec.  1001.3002(b).
    (3) Notwithstanding paragraphs (c)(1) and (2) of this section, if 
an individual's license revocation or suspension was for reasons 
related to patient abuse or neglect, the OIG will not consider an 
application for early reinstatement.
    (4) 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
12. Section 1001.601 is amended by revising paragraphs (b)(3) and (4) 
to read as follows:


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

* * * * *
    (b) * * *
    (3) Only if any of the aggravating factors listed in paragraph 
(b)(2) of this section justifies a longer exclusion may a mitigating 
factor be considered as a basis for reducing the period of exclusion to 
a period not less than that set forth in paragraph (b)(1) of this 
section. Only the following factor may be considered mitigating: The 
individual's or entity's cooperation with Federal or State officials 
resulted in--
    (i) The sanctioning of other individuals or entities, or
    (ii) Additional cases being investigated or reports being issued by 
the appropriate law enforcement agency identifying program 
vulnerabilities or weaknesses.
    (4) If the individual or entity is eligible to apply for 
reinstatement in accordance with Sec.  1001.3001 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
13. Section 1001.701 is amended by republishing the headings for 
paragraphs (a) and (c); and by revising paragraphs (d)(2)(iv), and (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, or 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
14. Section 1001.801 is amended as follows:
0
a. Revise the paragraph (a) introductory text;
0
b. Remove paragraph (c)(3)(ii); and
0
c. Redesignate paragraph (c)(3)(iii) as new paragraph (c)(3)(ii).
    The revision to read as follows:


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

    (a) Circumstances for exclusion. The OIG may exclude an entity--
* * * * *

0
15. Section 1001.901 is amended by adding paragraph (c) to read as 
follows:


Sec.  1001.901   False or improper claims.

* * * * *
    (c) Limitations. The OIG may not impose an exclusion under this 
section more than 10 years after the date when an act which is 
described in section 1128A of the Act occurred.

0
16. Section 1001.951 is amended by revising paragraph (b)(2) and adding 
paragraph (c) 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 
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.
    (c) Limitations. The OIG may not impose an exclusion under this 
section more than 10 years after the date when an act which is 
described in section 1128B(b) of the Act occurred.

0
17. Section 1001.1001 is amended by revising paragraph (a) 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

[[Page 4115]]

    (iii) Has been excluded from participation in Medicare or any State 
health care program, 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, imposition of a civil money penalty or 
assessment under section 1128A of the Act, or imposition of an 
exclusion.
* * * * *


Sec.  1001.1051   [Redesignated Sec.  1001.1551]

0
18. Section 1001.1051 is redesignated as Sec.  1001.1551.

0
19. Section 1001.1101 is amended as follows:
0
a. Revise paragraph (b)(4);
0
b. Remove paragraph (b)(5); and
0
c. Redesignate paragraph (b)(6) as new paragraph (b)(5).
    The revisions read as follows:


Sec.  1001.1101   Failure to disclose certain information.

* * * * *
    (b) * * *
    (4) Any other facts that bear on the nature or seriousness of the 
conduct; and
* * * * *

0
20. Section 1001.1201 is amended as follows:
0
a. Revise paragraph (a) introductory text;
0
b. Revise paragraphs (b)(3) and (4); and
0
c. Remove paragraph (b)(5).
    The revisions to 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) * * *
    (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
21. 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--
    (i) 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, or
    (ii) 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 an 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
22. Section 1001.1501 is amended by revising paragraphs (a)(1), (a)(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.

0
23. Newly designated Sec.  1001.1551 is amended by revising paragraph 
(c)(1) to read as follows:


Sec.  1001.1551   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.
* * * * *

0
24. Section 1001.1552 is added to subpart C to read as follows:


Sec.  1001.1552   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, 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

[[Page 4116]]

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. 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) The nature and circumstances surrounding the false statement;
    (2) Whether and to what extent payments were requested or received 
from the Federal health care program under the application, agreement, 
bid, or contract on which the false statement, omission, or 
misrepresentation was made; and
    (3) Whether the individual or entity has a documented history of 
criminal, civil, or administrative wrongdoing.

0
25. Section 1001.1601 is amended as follows:
0
A. Republish paragraph (b)(1) introductory text;
0
B. Revise paragraphs (b)(1)(iii) and (iv); and
0
C. Remove paragraph (b)(1)(v).
    The republications and revisions to read as follows:


Sec.  1001.1601   Violations of the limitations on physician charges.

* * * * *
    (b) * * *
    (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
26. Section 1001.1701 is amended as follows:
0
A. Republish paragraph (c)(1) introductory text;
0
B. Revise paragraphs (c)(1)(iv) and (v); and
0
C. Remove paragraph (c)(1)(vi).
    The republications and revisions to read as follows:


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

* * * * *
    (c) * * *
    (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
27. Section 1001.1801 is amended by revising paragraphs (a) and (b) and 
removing paragraph (g) 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
28. Section 1001.1901 is amended by revising paragraph (b) 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.
* * * * *

0
29. Section 1001.2001 is amended by revising paragraphs (b) and (c) to 
read as follows:


Sec.  1001.2001   Notice of intent to exclude.

* * * * *
    (b) If the OIG intends to exclude an individual or entity under the 
provisions of Sec.  1001.701, Sec.  1001.801, or Sec.  1001.1552, 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, 
paragraph (a) of this section will not apply.
* * * * *

0
30. Section 1001.2003 is amended by revising paragraphs (a) and (b) to 
read as follows:

[[Page 4117]]

Sec.  1001.2003   Notice of proposal to exclude.

    (a) Except as provided in paragraph (c) of this section, if the OIG 
proposes to exclude an individual or entity in accordance with Sec.  
1001.901, Sec.  1001.951, Sec.  1001.1601, or Sec.  1001.1701, it will 
send a written notice of proposal to exclude to the affected individual 
or entity. The written notice will provide the same information set 
forth in Sec.  1001.2002(c). If an entity has a provider agreement 
under section 1866 of the Act, and the OIG also proposes to terminate 
that agreement in accordance with section 1866(b)(2)(C) of the Act, the 
notice will so indicate. The exclusion will be effective 60 days after 
the receipt of the notice (as defined in Sec.  1005.2 of this chapter) 
unless, within that period, the individual or entity files a written 
request for a hearing in accordance with part 1005 of this chapter. 
Such request must set forth--
    (1) The specific issues or statements in the notice with which the 
individual or entity disagrees;
    (2) The basis for that disagreement;
    (3) The defenses on which reliance is intended;
    (4) Any reasons why the proposed length of exclusion should be 
modified; and
    (5) Reasons why the health or safety of individuals receiving 
services under Medicare or any of the State health care programs does 
not warrant the exclusion going into effect prior to the completion of 
an administrative law judge (ALJ) proceeding in accordance with part 
1005 of this chapter.
    (b) If the individual or entity makes a timely written request for 
a hearing and the OIG has determined that the health or safety of 
individuals receiving services under Medicare or any of the State 
health care programs does not warrant immediate exclusion, an exclusion 
will only go into effect as of the date of the ALJ's decision, if the 
ALJ upholds the decision to exclude.
* * * * *

0
31. Section 1001.3001 is amended by revising paragraphs (a)(1) and (2) 
and by redesignating paragraphs (a)(3), (4), and (b) as paragraphs (b), 
(c), and (d), respectively, to 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), an 
excluded individual or entity (other than those excluded in accordance 
with Sec.  1001.1001 and Sec.  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
32. 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
33. 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--PROGRAM INTEGRITY--STATE-INITIATED EXCLUSIONS FROM 
MEDICAID

0
34. 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
35. 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.
    (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

[[Page 4118]]

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 Federal financial participation (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
36. Sections 1002.2 and 1002.3 are redesignated as Sec.  1002.3 and 
1002.4, respectively.

0
37. 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
38. 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
39. 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
40. Section 1002.100 is redesignated as Sec.  1002.5 in subpart A.


Sec.  1002.211   [Redesignated as Sec.  1002.6]

0
41. Section 1002.211 is redesignated as Sec.  1002.6 and transferred 
from subpart C to subpart A.

0
42. 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.  1001.1901(c)(3), (4) and (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
43. The subpart heading for subpart B is revised to read as follows:

Subpart B--State Exclusion of Certain Managed Care Entities

0
44. 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.  1001.1551 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.  1001.1551 of this chapter.
* * * * *

0
45. The subpart heading for subpart C is revised to read as follows:

Subpart C--Procedures for State-Initiated Exclusions

0
46. 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
47. Section 1002.211 is removed and reserved.

PART 1006--INVESTIGATIONAL INQUIRIES

0
48. 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
49. 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), 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).
* * * * *

Daniel R. Levinson,
Inspector General.
    Approved: August 4, 2016.
Sylvia M. Burwell,
Secretary.
[FR Doc. 2016-31390 Filed 1-11-17; 8:45 am]
 BILLING CODE 4152-01-P