Self Disclosure and Repayment: Employment of Excluded Party

May 19, 2014

One area it is relatively common to find compliance infractions involves the employment of individuals by a health care provider who may be listed on the list of parties who are excluded from federal health care programs. Most providers have integrated routine background checks and excluded party searches into their hiring program. Occasionally, an excluded individual may slip past, only to be discovered on a subsequent routine follow-up database search. It is recommended that providers search the OIG list on a monthly basis for all employees.

Payment may not be made under a federal health care program for items or services “furnished, ordered, or prescribed” by excluded individuals or entities. If a provider employs an excluded provider and receives reimbursement for his or her services, the reimbursement received will be an overpayment under federal law. Additionally, receipt of such reimbursement can involve civil monetary penalties.

If a provider discovers that an excluded individual has been employed, the usual course is to make a self disclosure to the federal government using existing self-disclosure protocols. In most cases, using the self-disclosure protocol will minimize the financial and other risks to the provider who employed the excluded individual. The decision and method of making the self disclosure are very important and require assistance from experienced legal counsel. This is not an area where providers should “go at it alone.”

When making a self disclosure, the provider is required to identify the total amounts claimed and paid by the federal health care programs for those items or services that were provided by the excluded individual. When the excluded individual generates specific billings attributable to his or her services, identifying the amount of overpayment is fairly straightforward. It is more difficult to identify the amount of overpayment when there is no specific billing attributable to the excluded provider.

Revised self-disclosure protocols which were issued by the Office of Inspector General acknowledge the difficulty that arises where there is no direct billing attributable to an excluded provider. Example of typical situations include services furnished by nurses, respiratory therapists, and billing and other administrative personnel, the damages amounts can be difficult to quantify.

In cases such as those identified above, the OIG suggests the provider utilize the total costs of employment or contracting the excluded party for the period of time during the exclusion to estimate the value of the items and services provided by that excluded individual. Total costs of employment are then multiplied by the percentage of revenues attributable to federal health care programs to determine the amount of costs that are properly allocated to federal health care programs.

In the general, the OIG will look at the resulting amount as a proxy for the amount of damages to the federal health care programs resulting from the employment of the excluded individual for purposes of working out a self disclosure settlement. Additional details are provided on the various elements that go into this calculation.

As in all cases involving self disclosure, the disclosing party should undertake a complete investigation of the situation prior to making a disclosure. The compliance file should be appropriately documented. Consideration should be given to whether the investigation should take place under the attorney-client privilege. These considerations are beyond the scope of this article as are the other details involved in the investigation process or the self-disclosure process.

Providers should be mindful of the fact that employment of an excluded party is a serious compliance situation. The issue should be handled judiciously. In most, if not all cases, self disclosure is the best route for providers to take when it is discovered that an employee has been excluded. The strategy for making the self disclosure and the approach taken by the provider will greatly impact the outcome.

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