Insight Beware Excluded Entities: Check the LEIE

Federal laws impose severe penalties for employing, contracting with, or billing for items or services ordered by persons excluded from participating in federal health care programs. Health care providers should check the List of Excluded Individuals and Entities (LEIE) before credentialing, hiring, or contracting with any individual or entity for items or services payable by government health care programs, and on a regular basis thereafter.

Laws Governing Excluded Entities. Federal statutes allow HHS to exclude individuals and entities from participating in federal health care programs if they have been convicted of fraud, abuse or certain other misconduct. (42 USC §§ 1320a-7 and 1320c-5). States are required to exclude from Medicaid any person who has been excluded by the federal government. (Id.). Once excluded, that individual may not submit claims to government health programs for any items or services furnished, ordered or prescribed by the excluded individual, and no government payment may be made for such items or services regardless of who bills for the items or services or the manner of federal payment. (42 CFR 1001.1902(b)). The laws extend beyond the excluded individual or entity to others who furnish items or services through or under direction of the excluded individual. Specifically, the law prohibits:

• Billing for items or services furnished or ordered by an excluded individual or entity. Providers or facilities who furnish items or services rendered, ordered, prescribed, or directed by an excluded individual or entity may not submit claims for such items or services to Medicare, Medicaid or other federal health care programs if the provider or facility “knew or had reason to know” of the exclusion. (42 CFR §§ 1001.1902(b)(1) and 1003.102(a)(3)). Limited exceptions exist for emergencies and certain other services. (Id. at § 1001.1902(b)(c)).
• Employing or contracting with excluded individual or entity. Providers and facilities may not employ, contract with, or arrange for an excluded individual or entity to provide items or services payable in whole or in part, directly or indirectly, by federal programs if such provider or facility knew or should have known of the exclusion. (42 CFR § 1003.102(a)(2)). As interpreted by the OIG, the prohibition extends beyond clinical personnel; it also applies to hiring, contracting, or arranging for excluded individuals or entities to perform administrative or managerial services relevant to items or services payable by government health programs even if the excluded employee, contractor or other person is not directly involved in patient care. The prohibition applies even if the excluded individual or entity providing the items or services is paid with non-federal funds, is paid by an unrelated party, or provides items or services on an unpaid basis. (Adv. Op. 03-01). Providers and facilities may not use federal program payments to pay an excluded individual’s salary, expenses, or fringe benefits, regardless of whether the individual provides direct patient care. (OIG Special Advisory Bulletin, The Effect of Exclusion from Participation in Federal Health Care Programs (9/99)). To avoid violating the exclusion laws, a provider or facility that employs or contracts with an excluded individual would have to establish that (1) it paid the excluded individual’s salary, expenses and benefits exclusively from private funds or from other non-federal funding sources, and (2) the services furnished by the excluded individual relate solely to non-federal program patients. (Id.; see also Adv. Op. 03-01). That is nearly impossible in most health care settings.

In short, the exclusion laws generally apply to any providers or facilities that participate in federal programs and have any dealings with excluded individuals or entities, including excluded practitioners, medical staff members, employees, contractors, office personnel, temporary agency personnel, locum tenens practitioners, volunteers, vendors, or suppliers.

Penalties. Per its 2011 Workplan, the OIG is actively pursuing claims against providers and other entities that violate the exclusion laws. Violations may result in the following:

• Loss of government payment for items or services provided in violation of the exclusion laws.
• Repayment of any government payments received in violation of the exclusion laws. Per the new Affordable Care Act, providers are required to report and repay overpayments within 60 days after identifying the overpayment. (Affordable Care Act § 6402). The knowing failure to make timely repayment is a violation of the False Claims Act, and may subject the defendant to civil fines of $5,500 to $11,000 per claim and three times the amount of the claim submitted. In addition, the defendant may be subject to a qui tam suit.
• Civil monetary penalties of $10,000 for each item or service provided by the excluded entity or individual for which payment is submitted to government payers, and an assessment of up to three times the amount claimed for such items or services. (42 CFR §§ 1001.1901(b)(3) and 1003.102(a)(2)-(3)).
• The entity that submits claims improperly may themselves be excluded from Medicare, Medicaid, and other government programs.

The penalties can add up rapidly. In December 2010, for example, a nursing facility paid $376,000 to settle claims that it employed seven excluded individuals. (See OIG Press Release here. The OIG may reduce penalties where an entity self-reports violations; however, even in those cases, the OIG still insists on a fairly standard repayment formula based on the excluded employee’s salary over the relevant time period and the percentage of Medicare payments compared to gross revenues. The result is that even innocent violations may result in penalties of tens of thousands if not hundreds of thousands of dollars.

“Knew or Had Reason to Know”: Checking the LEIE. In general, the exclusion provisions apply if the provider “knew or had reason to know” of the exclusion. (See 42 CFR § 1001.1901(b)(1)). CMS will generally notify providers if a claim has been submitted with the provider number of an excluded practitioner. In addition, the OIG maintains and updates on a monthly basis the LEIE, its database of excluded providers. Providers may access the LEIE here. Providers are generally presumed to have knowledge of information contained on the LEIE, and, therefore, providers should check the LEIE regularly. According to the OIG, “[p]roviders have an affirmative duty to check the program exclusion status of individuals and entities before entering into employment or contractual relationships, or run the risk of CMP liability if they fail to do so.” (OIG Special Advisory Bulletin, The Effect of Exclusion from Participation in Federal Health Care Programs (9/99)). In addition, the OIG has suggested that providers check the LEIE “routinely (e.g., at least annually)” for “employees, contractors and medical and clinical staff members.” (OIG Supplemental Compliance Program Guidance for Hospitals, 70 FR 4876 (1/31/05), emphasis added). More recently, CMS sent a letter to all state Medicaid directors in which CMS stated that providers “should search the [LEIE] monthly” to determine if employees and contractors have been excluded and “immediately report to [states] any exclusion information discovered.” (Letter from H. Kuhn, Deputy Administrator, Center for Medicaid and State Operations (1/16/09), emphasis added).

Practical Suggestions. Given the penalties and recent government warnings, providers should do the following to protect against liability for doing business with an excluded individual or entity:

• Check the LEIE before hiring employees; contracting with practitioners, vendors or suppliers; credentialing physicians and other practitioners; or engaging temporary staff, locum tenens personnel, volunteers, or other workforce members. LEIE checks should be part of the normal HR, credentialing, and contracting processes. Print the screen from the LEIE and retain it in the relevant HR, credentialing, or contracting file to confirm you searched the LEIE.
• Check the LEIE on a regular basis thereafter. If possible, check the LEIE monthly. For large organizations, it may be possible to download the LEIE and run an electronic search against employees, contractors, vendors and medical staff. If you cannot check monthly, then check the LEIE as frequently as possible. The more often you check it, the safer you will be and the lower the potential penalties if an excluded entity does show up in your organization.
• When checking the LEIE, beware of name changes. To the extent possible, cross check the LEIE with social security numbers, birthdates, or other data.
• Include questions in your applications and terms in your contracts that require the applicant, provider, employee, or contractor to confirm that they are not excluded. Require that they notify you immediately if they are excluded from federal programs.
• Ensure your relevant agreements, contracts, bylaws, and policies condition any relationship on the party’s ability to participate in federal programs. Ensure temp agencies and locum tenens companies have performed an adequate background check that includes an LEIE search, then double-check the results. Require the applicant, provider, employee, or contractor to notify you immediately if they are excluded from federal programs. Ensure that your bylaws, contracts and other agreements allow you to immediately terminate the relationship in the event of program exclusion. Consider requiring the applicant, provider, employee or contractor to defend, indemnify, and hold you harmless from any costs or damages incurred due to program exclusion.
• If you discover that you have an excluded provider, you should carefully consider your options. Per the ACA, entities generally have an obligation to report and repay overpayments within 60 days. The timing, method and manner of self-disclosure may impact the penalties and repayment obligation that may be imposed. You may want to consult with an experienced health law attorney.

Conclusion. The chances may be relatively small that you will deal with an excluded individual; however, the government’s recent fraud and abuse initiatives make it increasingly likely. Given the severe consequences that may follow, it is better to be safe than sorry. Check the LEIE regularly, and respond promptly to any potential issue. For more information, see the OIG’s Exclusion Program website here.

If you have questions about these or other legal issues, please contact a member of our Health Law group call 208.344.6000.