AMARILLO, TX – The following is Part Three of a three part series addressing exclusion from federal health care programs. Part One addressed the OIG’s exclusion authority. Part Two addressed the procedure that the OIG follows in excluding an individual following a criminal plea. Part Three addresses possible options available to the owner of a DME supplier who has been excluded.
Owner’s Shares Placed in a Blind Trust
The OIG has the discretion to allow the owner to place his shares in a blind trust. The OIG published an Updated Special Advisory Bulletin on the Effect of Exclusion from Participation in Federal Health Care Programs on May 8, 2013, in which it states an excluded person may own a provider, but may not furnish administrative and management services:
Although this authority to exclude is not mandatory and OIG exercises it at its discretion, any provider owned in part (5 percent or more) by an excluded person is potentially subject to exclusion. In addition, an excluded individual may be subject to CMPL liability if he or she has an ownership or control interest in a provider participating in Medicare or State health care programs or if he or she is an officer or a managing employee of such an entity. Further, the provider may not seek Federal health care program payment for any services, including the administrative and management services described above, furnished by the excluded owner. As a practical matter, this means that an excluded person may own a provider, but may not provide any items or services, including administrative and management services, that are payable by Federal health care programs. If an excluded owner does, for example, participate in billing activities or management of the business, both the owner and the provider will risk CMPL liability.
If the owner does place his shares in a blind trust, it will be imperative that he has no executive or leadership role (e.g., chief executive officer, chief financial officer, director of human resources) and that he does not provide any other types of administrative and management services (e.g., strategic planning, billing and accounting, staff training, and human resources).
Owner’s Shares Transferred to a Relative
The OIG has the discretion to allow the owner to transfer his shares to a relative. The regulations setting forth the OIG’s exclusion authority also address the transfer of ownership from an individual to a family member. 42 U.S.C. § 1320a-7(b)(8) grants the Secretary permissive authority to exclude the following:
Entities controlled by a sanctioned individual
Any entity with respect to which the Secretary determines that a person—
(i) who has a direct or indirect ownership or control interest of 5 percent or more in the entity or with an ownership or control interest . . . in that entity,
(ii) who is an officer, director, agent, or managing employee . . . of that entity; or
(iii) who was described in clause (i) but is no longer so described because of a transfer of ownership or control interest, in anticipation of (or following) a conviction, assessment, or exclusion described in subparagraph (B) against the person, to an immediate family member . . . or a member of the household of the person . . . who continues to maintain an interest described in such clause—
is a person—
(i) who has been convicted of any offense described in subsection (a) of this section or in paragraph (1), (2), or (3) of this subsection;
(ii) against whom a civil monetary penalty has been assessed under section 1320a–7a or 1320a–8 of this title; or
(iii) who has been excluded from participation under a program under subchapter XVIII of this chapter or under a State health care program.
The OIG may consider a successor owner to be less of a risk to federal health care programs. When determining whether to bring a permissive exclusion action against the supplier, or to require the supplier to sign a Corporate Integrity Agreement (“CIA”), the OIG considers whether the successor owner:
(1) purchased the entity after the fraudulent conduct occurred;
(2) has an existing compliance program;
(3) does not have a prior history of wrongdoing or fraud settlements with the United States;
(4) took appropriate steps to address the predecessor’s misconduct and reduce the risk of future misconduct; and
(5) can demonstrate other facts and circumstances as relevant to each unique situation.
As noted above, the transfer of the owner’s ownership interest in the DME supplier to a relative can subject the supplier to exclusion from health care programs because of the owner’s exclusion. However, the exclusion authority under Section 1320a-7(b)(8) is permissive, not mandatory; therefore, the OIG has the right to determine that it is unnecessary to exclude the DME supplier from federal health care programs.
Regarding the factors the OIG considers when deciding whether to bring a permissive exclusion action against the DME supplier, or to require the suppler to enter into a CIA, it is possible that the OIG will consider the owner’s relative to be less of a risk to federal health care programs if he/she does not have a prior history of wrongdoing or fraud. That coupled with other factors such as having a compliance program, taking steps to ensure the same misconduct is not repeated, and other supportive facts, may lead the OIG to conclude that it is not necessary to exclude the supplier from federal health care programs due to the relative’s ownership of the supplier. If the OIG has reservations, it is possible it may determine another remedy is more appropriate such as heightened monitoring or requiring the supplier to enter into a CIA.
Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, PC, a law firm based in Amarillo, Tex. He represents pharmacies, infusion companies, HME companies and other health care providers throughout the United States. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization, and can be reached at (806) 345-6320 or firstname.lastname@example.org.
 Updated Special Advisory Bulletin on the Effect of Exclusion from Participation in Federal Health Care Programs, Office of the Inspector Gen., U.S. Dep’t of Health & Human Servs, (May 8, 2013) https://oig.hhs.gov/exclusions/files/sab-05092013.pdf.
 42 U.S.C. § 1320a-7(b)(8) (emphasis added).
 Criteria for Implementing Section 1128(b)(7) Exclusion Authority, Office of the Inspector Gen., U.S. Dep’t of Health & Human Servs, (Apr. 18, 2016), https://oig.hhs.gov/exclusions/files/1128b7exclusion-criteria.pdf.