CMS enforcement arsenal expands to share OIG’s exclusion authority

How did CMS obtain exclusion authority?

During a recent press conference on US Department of Health and Human Services (HHS) antifraud initiatives, Secretary Robert F. Kennedy, Jr., announced that he was granting the Centers for Medicare & Medicaid Services (CMS) the authority to use the federal healthcare program exclusion authorities under the Social Security Act that had previously only been delegated to the HHS Office of the Inspector General (OIG).

Secretary Kennedy said that by “expanding the exclusion authority,” both “CMS and [OIG] will be able to use [the exclusion] authority to remove bad actors from federal health care programs and in many cases to permanently ban them from returning.”

The delegation appears to have taken immediate effect, with CMS Administrator Mehmet Oz stating that CMS will use its new power “judiciously” and HHS Inspector General March Bell praising the move as a “creative idea” that will “be a force multiplier.” The change will “create additional momentum, and it’s going to exclude additional bad actors,” Bell said.

What is exclusion?

The exclusion authorities, contained in Sections 1128, 1128A, and 1156 of the Social Security Act, provide grounds to remove an individual or entity from being eligible to participate in federal healthcare programs, including Medicare, Medicaid, TriCare, and other federal and state healthcare programs. There are several grounds for exclusion, such as certain types of felony or misdemeanor convictions or losing a license. Some of these grounds are referred to as “mandatory,” meaning that the act says “shall” exclude. Others are referred to as “permissive” meaning that the act says “may” exclude, leaving the agency with discretion.

One of the exclusion grounds is submission of false or fraudulent claims, called the Section 1128(b)(7) authority. This is the authority at issue in a False Claims Act (FCA) settlement where OIG provides a release of Section 1128(b)(7) in exchange for entering into a corporate integrity agreement or in acknowledgement of the defendant’s self-disclosure of the conduct resolved in the settlement. Exclusion releases can also be obtained when settling OIG self-disclosure protocol (SDP) matters. OIG also opines on the effect of exclusion and whether OIG would impose an exclusion when issuing advisory opinions.

Why is CMS obtaining exclusion authority noteworthy?

The announcement marks a significant expansion of CMS’s authority and adds another sword to the agency’s enforcement arsenal, which continues to expand in other meaningful ways under separate authorities, including provider enrollment and revocation tools. CMS has been more active in using its administrative authorities under Secretary Kennedy, imposing record numbers of Medicare revocations and payment suspensions.

Prior to this announcement, OIG has been the only agency delegated the ability to use the exclusion authorities. OIG has a long history, starting in 1997, of issuing guidance on how it interprets the effect of exclusion and how it makes decisions on using its Section 1128(b)(7) authority. OIG also issues the exclusion regulations at 42 CFR Part 1001 and regulations that govern the appeals process at 43 CFR Part 1005.

What could be the impact of joint CMS-OIG exclusion delegation?

At this time, there are no formal delegations, agency guidance, or statements clarifying how CMS will use its newfound exclusion authority or coordinate with OIG.

Specifically, the joint CMS-OIG exclusion delegation raises several questions about how the agencies will make joint exclusion decisions, particularly decisions about the Section 1128(b)(7) authority in FCA and SDP settlements. Historically, one would only need to interact with OIG (through attorneys in its Office of Counsel) on this issue to obtain OIG’s position on an exclusion. Now, it is unclear to what extent CMS will participate in these decisions, what the process will be for obtaining CMS’s position, and what criteria CMS will apply in making these decisions.

Some of the unanswered questions include:

• Will CMS now become a signatory to FCA and SDP settlements in order to obtain their Section 1128(b)(7) release? If so, will CMS now also provide a release of its other administrative authorities that historically have been reserved because CMS was not a party to the settlement?
• Will CMS develop its own positions on exclusion, develop its own integrity agreement, or become a party to OIG’s CIAs?
• How will CMS approach settlements that include factual admissions?
• What effect will OIG advisory opinions have on CMS? If OIG issues a favorable opinion stating that it would not impose sanctions (which include exclusion) on the requestor, is this opinion binding on CMS? The answer would appear to be “yes,” based on the current regulations governing advisory opinion requests, which state that “[a]n advisory opinion issued under this part will not bind or obligate any agency other than the Department.” 42 C.F.R. § 1008.59(b) (emphasis added). But how HHS will approach this matter going forward remains to be seen.
• Will CMS become involved, or provide a release, in OIG’s administrative cases under Section 1128A for civil monetary penalties? Exclusion is also a potential consequence under Section 1128A.
• How will CMS administer its new exclusion authority in ways to be a “force multiplier” on OIG? In what circumstances will CMS impose permissive exclusions where OIG has not in the past?
• Will CMS follow the same procedural steps as OIG in issuing exclusions, or the same process in determining the length of an exclusion?

Practically, this joint delegation development adds new uncertainty on these topics until OIG and CMS issue further clarifying guidance. At the moment, it is unclear whether CMS’s exclusion power as a “force multiplier” to OIG creates duplication of OIG’s current processes or significantly alters the industry’s longstanding understanding of the government’s decision-making on exclusion in a way that will impact negotiation dynamics, strategy, and expectations.

How to prepare for what’s next?

Given the drastic consequences exclusion from federal healthcare programs may have on individuals and entities, parties should actively monitor for further developments and any additional guidance from OIG and CMS as the agencies determine how this joint delegation will function. Additional guidance may be released in the Federal Register or via FAQs, additional press conferences, or other subregulatory guidance.

Until such guidance is provided, the regulated industry will have to wait and see how CMS uses (or declines to use) its exclusion authority in initial cases to better understand CMS’s position on the use of the exclusion power. Individuals and entities with pending settlement negotiations should work closely with counsel to raise these issues and obtain clarity in their matter, and to better inform their approach to resolution.

Please contact the authors of this article or your regular McDermott Will & Schulte healthcare regulatory counsel with any questions.