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Testimony on Medicaid Exclusions by June Gibbs Brown
Inspector General
U.S. Department of Health and Human Services

Before the House Committee on Government Reform and Oversight, Subcommittee on Human Resources and Intergovernmental Affairs
February , 1997


Good Morning, Mr. Chairman and members of the Subcommittee. I am June Gibbs Brown, Inspector General of the U.S. Department of Health and Human Services. I am-pleased to be here because, for the first time in several years, the OIG is in a position to deal effectively with Medicaid exclusion leads. My testimony will address your questions -- specifically, the length of time it takes to exclude providers from Medicare that States have already excluded from Medicaid; the form and usefulness of information provided to States on exclusion cases; and the effectiveness of permissive exclusions.

I would like to state at the outset that many of the problems cited by GAO are valid despite the progress we have made in this area. The OIG expects to exclude about 1,500 providers by the end of this fiscal year. As of July 3 1, we had implemented 1,23 7 exclusions, of which 463 were mandatory and 774 were permissive. We are proud of the fact that fewer than one percent of OIG-imposed exclusions have ever been overturned on appeal.

My staff and I met with GAO representatives on several occasions in recent weeks to discuss their observations and recommendations, and we are in general agreement with them. In May of this year when we got our Fiscal Year 1996 budget, we began implementing a program to shore up our effectiveness on exclusions. We call it Project WEED. In addition, the OIG field offices now maintain a data base on all incoming exclusion leads. We developed Project Weed last November as a strategy to deal with exclusion leads. We began implementation shortly after our funding stabilized. I will explain more about this project later in my testimony.

Support from the Congress

Since your June 1995 hearing on administrative sanctions, your staff and ours have met on several occasions to develop proposals to enhance our ability to get dishonest providers out of the programs. These proposals were reflected in the bills you sponsored along with Congressman Schiff. We particularly urge you to continue to pursue the provision requiring Medicare contractors and State Medicaid agencies to be fiscally liable for payments they make to excluded providers. I would also like to mention that we met with Congressman Towns' staff and appreciate his support on these issues as well.

The recent passage and signing of the Health Insurance Portability and Accountability Act of 1996 (Public Law 104-19 1) provides more resources and stronger authorities for the OIG. Therefore, we are now in a position to make greater progress in excluding bad providers and in precluding inappropriate payment to them.

The Operational Environment

I would like to describe the operational environment in which exclusion leads are processed and some of the challenges we face. We are giving priority attention to GAO's concern about tracking incoming exclusion leads. The current lack of uniformity evolved out of a complex operational environment in which exclusion leads, not only from the State Medicaid agencies, but from many other sources in each of the 50 States, flow into 8 OIG field offices. The staff time available to develop these leads has been minimal at best; and, at one point in the past, work on certain permissive exclusion leads had to be suspended.

Budget constraints in 1992, prior to MY appointment, caused the OIG to reevaluate priorities. Limited funding caused the office to realign field office configurations, removing the OIG presence from some States. At that time, the OIG reviewed the exclusion authorities and decided that OIG resources could be put to better use by not acting on cases where State licensing boards or other Federal State health care programs had already revoked or suspended licenses or participation privileges and the practitioner continued to live in the State that took the action. The OIG believed the State action protected patients since unlicensed physicians could not treat Medicare or Medicaid patients.

When I became Inspector General in November 1993, 1 rescinded that directive and ordered that all categories of exclusion leads be screened and processed. We also began expanding the methods by which we report exclusion actions to governmental and private entities and the public. For example, exclusion listings are now available on the Internet. I also asked my staff to increase educational outreach to reporting entities on the type of documentation we need in order to take action on a case at the national level.

Some recent outreach examples include participation in the Twelfth Annual Conference of the National Association of Surveillance Officials and presentations before the New Mexico Medicaid Fraud Control Unit training conference, a joint endeavor across the Medicaid program agencies within that State, as well as extensive sanction training conducted in the New York and Boston regional offices for all Medicare contractors within their jurisdiction.

At present, for each of the 50 States and U.S. Territories, there are individual State agencies overseeing the Medicaid programs, separate Medicaid Fraud Control Units, multiple Medicare contractors processing claims for services provided to Part A and Part B beneficiaries and railroad retirees, Medicare Fraud Control Units, multiple licensing boards, titles V and XX State agencies, as well as Federal and State health care agencies too numerous to categorize. All of these agencies funnel conviction, disciplinary and "lead" information into our field offices. Attached is a chart showing the flow of these multi-source leads through our field offices for development and then into headquarters for appropriate action.

Although there are newer technologies, such as accessible databases, that enable the Federal and State health care agencies and the public and private sectors to communicate in a faster and more meaningful fashion, the problem still remains that many agencies and entities are reporting to our office in traditional and less efficient ways.

I want to emphasize that the OIG has always pursued quality of care cases. Where the patient population was subject to known jeopardy, OIG policy has been to take whatever action is within its scope of authority to bar providers from national programs.

The scope of authority for licensing board actions and other State and Federal program actions (section 1128(b)(4) and (b)(5)) is a key element here. The OIG sometimes cannot act upon referrals because disciplinary actions taken by licensing authorities or other Federal or State agencies may not meet Federal statutory requirements. That is why the OIG treats such reports from other sources as "leads" for potential action. Once it is established that these leads have merit and the potential exists for exclusions to be substantiated, then our field offices ire able to act upon the information.

The OIG does not have the authority to act on a national level on a "moral turpitude" finding by the State, on a practitioner's failure to renew his or her license, or on items that are not related to the delivery of a health care item or service, like spousal abuse, vehicular manslaughter, drunken-driving, or failure to make child support payments. Thus, not every referral made to our offices is actionable by the OIG.

This office can act upon violations involving professional performance, professional competence, or financial integrity. However, even when the State's actions do meet our criteria by being related to professional performance, professional competence, or financial integrity. there may be other reasons why we cannot take an exclusion action. For instance, we may only exclude an individual or entity that has been suspended or excluded from participation, or "otherwise sanctioned" in a final action in which the State took a disciplinary action. Interim actions such as probation, fines, or continuing education do not equate to final actions if the subject can continue to practice medicine while meeting the State's restrictions.

The OIG retains the discretionary ability to act upon these cases under the authorities contained in sections 1128(b)(6) and 1156 of the Social Security Act. However, both of these procedures are extremely prolonged and labor intensive. The OIG has devoted the necessary resources to such cases, particularly if they affect quality of care; and they are very time consuming and expensive. Let me give you one example.

  • In February 1992, the OIG excluded a California oncologist for 10 years under section 1128(b)(6)(B) because the OIG determined that he had rendered over 3,900 excessive, substandard, unnecessary, and potentially risky services to seven Medicare beneficiaries over a six- year period of time. Subsequent to that exclusion, the peer review organization (PRO) submitted two separate recommendations that this same doctor be excluded under section 1156 because he had failed to comply substantially with his obligations in the care of six Medicare beneficiaries with 10 hospital admissions. This care was found to have included, among other violations, inappropriate blood transfusion, inappropriate treatment for sepsis, and failure to detect the development of a decubitus ulcer while the patient was under medical care during a prolonged hospitalization. In August 1992, the OIG acted on the PRO's recommendation and excluded the doctor for another 10 years to run concurrently with the first exclusion. After a lengthy and extremely costly hearing, the administrative law judge upheld the OIG's exclusion actions and determined that the exclusion should be permanent.

Although the State licensing authority and various payer agencies had been investigating this physician for many years without successful result, the OIG took the lead in implementing disciplinary action. However, once the exclusion was in place, the licensing board did revoke the doctor's license. Then it stayed the revocation and put the license on probation. The stay has since been lifted but if the OIG had not devoted its investigative power, resources, and financial backing to excluding this physician, the Medicare/Medicaid patient population would have continued to be at grave risk during the four years that the licensing board took to get to an exclusionable point in it's process.

Communication-The Key to Success

When an exclusion is imposed, the OIG makes every effort to publicize it. We send individual notification letters with the subject's personal identifier information (i.e., social security number, date of birth, unique physician identification number (UPIN), program provider number, license number, etc.) to all of the State agencies, Medicare contractors, licensing board, and any known employer in the State where the subject practices medicine. We also send copies of the exclusion notice to the subject's attorney (if known), the Public Health Service, Department of Justice, U.S. Attorney, and any peer review organization that may be deemed appropriate.

Monthly, we notify payer agencies of the exclusions being implemented; specific notice is provided to the Health Care Financing Administration (HCFA) for its use in notifying all Medicare and Medicaid agencies via its monthly listing (HCFA Publication 69). In order to protect beneficiaries from financial liability, the Medicare contractors notify the beneficiaries when claims are submitted for services rendered by an excluded party. The contractor will pay the first claim submitted by the beneficiary and inform the beneficiary that no more services are reimbursable because of the provider's exclusion status.

We also notify payer agencies administering the Block Grants to States for Social Services (title XX) and Maternal and Child Health Service Block Grants (title V) and send a separate notice to the Federation of State Medical Boards; Office of Civilian Health and Medical Program of the Uniformed Services, Department of Labor, Social Security Administration, Veterans Affairs, and General Services Administration (GSA).

The Federal Debarment List (which precludes excluded providers from participating in Government-wide procurement and non-procurement contracts) is updated through exclusion information that the OIG provides to the GSA. It does not include identification numbers.

The OIG notifies the general public of exclusion actions through the Federal Register which is available in hard copy and through the Internet. In addition, cumulative reports of all exclusions in effect are published approximately twice a year and are routinely released to recipients of the HCFA monthly reports (Publication 69), payer agencies, and on a request-specific basis, to all other interested parties. We remove providers from the cumulative list only if and when they are reinstated. Since its last printing in February 1996, the OIG has distributed more than 750 hard copies and released more than 330 diskettes containing the cumulative sanction report. These copies are in addition to the routine distribution that HCFA makes to all of the Medicare contractors and each of the Medicaid State agencies.

Since early 1996, the cumulative sanction report has been provided on IGnet which is an Internet resource of more than 60 Federal Offices of Inspector General. IGnet also gives the public access to the OIG's audit, inspection, semi-annual reports, and other related documents. The user can download the cumulative report as a database file that can be sorted or as a desktop published file that looks like the printed version and is selectively printable. Recently, we added the 'update" exclusion information published monthly in the Federal Register to the same IGnet site. Thus, IGnet contains the names of all of the OIG exclusions currently, in effect and is available to anyone with World Wide Web access. Information about accessing this Web page is attached.

Although many users are beginning to go directly to the Internet for exclusion data, the OIG also receives and responds to calls originating from the General public, Medicare contractors and State fiscal agents, other Federal and State agencies, credentialing agencies, licensing boards, HMOs, hospitals, and other members of the health care industry. For the first six months of this fiscal year, the OIG responded to 11,317 written requests and 3,640 telephone requests for exclusion information on specific health care providers, mostly medical doctors. We project that more than 25,000 responses to requests will be made before the end of this fiscal year.

There are various other databases and methods for reporting many types of disciplinary or malpractice actions involving a multitude of health care providers. These include the Federation of State Medical Boards Data Bank, the National Practitioner Data Bank, and certain requirements of the Joint Commission on the Accreditation of Healthcare Organizations. The OIG has been working with the Public Health Service and the Health Care Financing Administration to have exclusion data input to the National Practitioner Data Bank so hospitals and licensing boards, in the course of conducting their required responsibilities and routine business, can obtain the current exclusion status of all physicians and dentists in the United States .

Pursuant to the Health Care Quality Improvement Act of 1986, The National Practitioner Data Bank collects information on physicians and dentists concerning malpractice payments, clinical privilege actions, and adverse licensure actions taken by hospitals, insurance companies, licensing boards, and professional societies. This information is then available to all hospitals, licensing boards, and professional societies. If the Medicare provider information is included in the files, OIG sanction information will reach the desired audience and substantially cut down on the number of excluded practitioners who continue to receive inappropriate program payment through hospital cost reports because hospitals are required by law to query all new employees and all current employees on a biannual basis. An interagency agreement is in final clearance, and we expect that the exclusion information will become available to data bank users in Fiscal Year 1997.

While the existing databases are helpful tools, there has been no comprehensive database for the mandatory reporting of "final adverse actions" such as criminal convictions, civil judgements, settlements, administrative exclusions, and disciplinary actions imposed against health care providers.

The new Adverse Action Data Bank to be established under the Health Insurance Portability and Accountability Act of 1996 will facilitate broader communication across the entire spectrum of public and private health care organizations. It authorizes the collection and dissemination of information on any final adverse action taken against any health care provider, supplier, or practitioner. In conjunction with the Department of Justice, the OIG is charged with overseeing this endeavor. We will be a prime contributor to and user of this data bank, while overseeing its structure, procedures, and regulations.

Further, the OIG has been working with the National Registry, which is the HCFA contractor responsible for maintaining the Medicare files on the Unique Physician Identification Number (UPIN), to update its historical exclusion data base to include the UPIN with the subject's personal identifier information. Once assigned, that number is carried on all exclusion notification letters sent to payer agencies and Medicare contractors and is included on all OIG sanction reports. Including these numbers allows the Medicare contractors to more readily identify excluded physicians and lessens the chance that physicians who move from State to State or who use more than one provider number (e.g., group numbers and/or multiple location numbers) can obtain Medicare reimbursement.

We look forward to the day that HCFA assigns unique identification numbers for all health care providers. The availability of such information should make all our jobs easier by broadening the scope of the notification process and by substantially reducing the opportunities for inappropriate program payments and recidivism.

We are convinced that this level of communication has a far- reaching effect on excluded providers. It tells payer agencies that all program reimbursement must cease; it alerts employers that the subject has been shown to be untrustworthy and has a history of disciplinary actions; it puts third party payers and licensing board authorities on notice that a sanction has been imposed and the reasons for it; and, it provides an opportunity for the ongoing exchange of information between Federal, State, and private components dedicated to policing the health care industry. Public Law 104-191 now requires unique numbers for all providers and will allow for a more manageable, efficient, and effective system.

Coordination with the Congress

The OIG testifies before this subcommittee regularly and has made recommendations for the development of a uniform provider agreement, for the use of unique physician identification numbers, and for extending the scope and penalties of the exclusion process itself.

Mr. Chairman, you and Congressman Schiff, your subcommittee, and the committee supported our proposal to have the Medicare contractors and Medicaid State agency made liable for and restoring any inappropriately spent program funds that were caused by their failure to implement exclusions timely and accurately. We thank you for that, and we continue to believe that unless these agencies are made financially liable for their mistakes, there is little incentive for doing the job properly. We ask for your continued support in this endeavor.

We are pleased that many of our recommendations on the application of certain health anti-fraud and abuse sanctions have been considered and included in recent statutory changes. Such changes include expanding sanction authorities to cover all Federal health care plans and establishing statutory authority for minimum periods of exclusion for certain individuals and entities subject to permissive exclusion from Medicare and the State health care programs.

Project WEED

Finally, I would like to describe an initiative I mentioned earlier. We developed Project WEED last November to increase the number and quality of exclusion cases being developed by our field offices. After our budget stabilized, we began this endeavor to ensure that we do the best we can with available resources. The project ensures, through staff training and improved guidelines, that the documents and information necessary to process these cases are being gathered and developed in a timely, consistent, and effective manner.

Eight senior program analysts in our investigations field offices are assigned to the project. Sanction training and an overview of the project goals were provided to the analysts in July. During July and August this team identified over 900 potential mandatory sanctions that had not been forwarded to our office. These leads are currently being pursued. Eleven additional personnel are scheduled to receive extensive sanctions training the week of September 9, 1996.

We know that it is important that the OIG have continuity in the exclusion process. It is also important that the States provide the OIG with the information necessary to make an appropriate exclusion decision. We have learned through our exclusion experience that inconsistencies have developed. This information was also documented in the GAO review. Through the Project Weed initiative, we will resolve the inconsistencies by proper and timely OIG staff training. In addition, we are initiating an outreach effort to State Medicaid agencies to ensure that all required information is forwarded to the OIG.

Thanks to the recently enacted Health Insurance Portability and Accountability Act of 1996, we are fully confident about the future. This new law provides additional budget and manpower allocations to the OIG, strengthens our existing exclusion authorities, requires unique provider numbers, and expands our abilities to impact other Federal, State, and local health care programs.

Attached for the record is general information about available sanction authorities and the exclusion process.



Administrative Sanctions
Authorities and General Information
Sanction Authorities

Title XI of the Social Security Act provides a wide range of authorities to exclude individuals and entities from participating in the Medicare, Medicaid, Maternal and Child Health Services Block Grant and Block Grants to States for Social Services programs (titles XVIII, XIX, V and XX of the Act respectively). By exercising the exclusion authorities, the OIG helps fulfill the Secretary's primary obligation to protect the health and safety of patients receiving care as well as to protect the fiscal integrity of the programs.

The Secretary has delegated 42 administrative authorities to the OIG. The most significant in terms of priority and workload are found in section 1128(a) of the Act which sets forth mandated enforcement provisions and are closely allied with the criminal provisions of the law. This section requires the OIG to exclude any individuals or entities for a minimum period of 5 years if they are convicted of a program-related crime or of any type of patient abuse or neglect.

The recently signed Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191) expands this mandatory provision to include all felony convictions related to health care fraud in any program operated or financed by any Federal, State and local government agency or any felony conviction related to controlled substances.

This new law also provided authority to exclude individuals with ownership or control interest in excluded entities. In contrast, sections 1128(a) and 1128(b) of the Act permit, rather than require, the exclusion of individuals or entities if the OIG determines the action to be warranted. At its discretion, the OIG takes permissive exclusion actions on misdemeanor convictions for non-HHS health care violations like fraud, theft, financial misconduct; for controlled substance violations; for license suspensions and revocations; for sanctions imposed by other health agencies; for the rendering excessive or unnecessary services; and, for entities owned or operated by excluded individuals.

Coupled with our mandatory exclusion authorities are the Civil Monetary Penalty Law (CMPL) provisions which allow the OIG to administratively impose penalties on persons who make false or improper claims for payments under the Medicare, Medicaid , and other State health care programs. In the past we have has the authority to impose a CMP of "not more than $2,000", an assessment of not more than twice the amount claimed" for each item or service presented as false or improper claims, and impose a permissive exclusion of the provider from program participation.

The Health Insurance Portability and Accountability Act of 1996 extends the current CMP authority to all Federal health care programs and provides for penalties of up to $10,000 per line item or service, three times the amount of each false claim, and $ 10.000 for each day a prohibited relationship occurs.

Further, the OIG can exclude health care providers and practitioners who have defrauded or abused the programs or its beneficiaries. The OIG may also exclude based on a recommendation received from a peer review organization because an individual or entity failed to meet their legal obligations to provide only care that is medically necessary, meeting professionally recognized standards, and is properly documented. The new law removed an earlier requirement for a finding of unwillingness or inability to comply with the provider's raised the monetary penalty amount to $100,000 per violation, and established a minimum one-year period of exclusion.

Finally, the OIG can exclude health care providers who have failed to repay or to enter into an agreement to repay a health education assistance loan. These exclusions are mandatory under section 1892, and the OIG couples that mandatory authority with section 1128(b)(14) to ensure that the exclusion extends to the other programs. These exclusions remain in effect until the debts are completely repaid.

In FY 1995, the OIG obtained more than $296 million in civil monetary and false claim act penalties and assessments and implemented 1,478 administrative exclusions. Of these, 504 were section 1128(a) mandatory exclusions, with the remaining 974 resulting from the permissive authorities delegated under the various provisions of section 1128(b) of the Social Security Act.

Despite disruptions in workflow caused by both Federal furloughs during FY 1996, the OIG expects to implement about 1,500 exclusions by the end of this Fiscal year. As of July 31, 1996, we had implemented 1,237 exclusions, of which 463 were mandatory and 774 were permissive.

Alternatives to Exclusions

As an alternative to excluding an individual or entity from program participation, the OIG may impose a number of civil monetary penalties for a variety of fraud or abuse violations including fraud, billing or charging violations, patient and beneficiary protection issues, circumvention of regulatory requirements, patient "dumping", physician protection, and improper disclosure of information.

The OIG or Department of Justice may determine that a case cannot be easily prosecuted and that the taxpayers are better served by settling the case rather than expending the OIG's limited resources to further investigate it. When a decision is made to settle a case with a monetary penalty, various safeguards are included in the settlement agreement. Since most of the settlements involve payments over a period of time, the safeguards include not discharging the debt if the individual files for bankruptcy, excluding the individual or entity if they default on the settlement, and recently, if the settlement is with an entity, establishing and maintaining a voluntary compliance program.

Compliance programs are designed to prevent the recurrence of the improper billing practices that prompted the civil monetary penalty settlement. Corporate compliance programs are quite specific in terms of actions a company must take to remain in the Medicare and Medicaid programs. The OIG institutes appropriate safeguards, and sharply reduces the likelihood for continued improper activity before deciding to enter into a compliance agreement rather than to exclude. Currently, there are approximately 40 to 50 compliance plans in effect; and it is anticipated that, with the tremendous reception that this program has been given by the health care industry, the caseload will more than double in the next fiscal year.

Effect of an Exclusion

Once an exclusion takes effect, program payment may not be made for items or services furnished, ordered, or prescribed by the excluded individual or entity. Additionally, no Federal or State health care program funds can be used to pay any salary or fringe benefits, including administrative or management services, related to the delivery of a health care item or service rendered to a program patient by an excluded individual or entity.

The OIG may exclude any health care entity (such as a hospital or clinical laboratory) if an excluded individual has a direct or indirect ownership or control interest of 5 percent or more in it, or is an officer, director, agent, or managing employee of that entity. This is true whether or not the excluded persons are compensated for their services. Violating this prohibition could result in criminal prosecution by the Department of Justice, and/or the imposition of civil monetary penalties against the excluded individual/entity or the employer by the OIG. (Note: Emergency items or services, under certain conditions, may be paid for by Medicare.

The exclusion notice to the subject defines the effect of' the exclusion and the subject's appeal rights. If the exclusion was taken under the Civil Monetary Penalty Law authorities or because of kickback violations, the excluded party may request a hearing before an Administrative Law Judge (ALJ) and receive a decision before the OIG implements the exclusion. In all other cases, the exclusion is in effect while awaiting the hearing and its outcome. Appeals of ALJ decisions are decided by the Departmental Appeals Board. The subject may then appeal the administrative decision to the district court. Very significantly, less than 0.34 percent of all OIG-implemented exclusions have been reversed on appeal.

The OIG is required to give government-wide effect to all exclusions it imposes. The Federal Acquisition Streamlining Act of 1994 mandates and expands the government-wide effect of all debarments, suspensions, and other exclusionary actions to Federal procurement, as well as non-procurement programs. Thus, all OIG imposed exclusions must be effectuated not only for all Departmental programs, but also for all other Executive Branch procurement and non- procurement programs and activities. This means, for example, that a health care provider excluded from Medicare, Medicaid, and other State health care programs will be unable to continue participating in the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) program administered by the Department of Defense or in the Federal Employee Health Benefits Program administered by the Office of Personnel Management.

Reinstatement to the Programs

Reinstatement to Medicare, Medicaid, and the other State health care programs is not an automatic process. The exclusion notice issued to a health care provider specifies that, at the conclusion of the period of exclusion, the provider has the right to apply for reinstatement under the provisions of the statute and the regulations.

The OIG will terminate an exclusion and reinstate the provider only if we determine that, during the period of exclusion, the subject has not committed an act for which a civil monetary penalty could be assessed or has not committed an act which would result in an additional exclusion be imposed.

Further, the OIG must determine that there are reasonable assurances that the types of actions which caused the original exclusion have not and will not recur.

If the OIG determines that the subject's request for Medicare reinstatement should be approved, we notify the subject and other appropriate parties including the Health Care Financing Administration, Medicare contractors, and the State agencies. The State health care programs may reinstate the subject into their programs upon receipt of the notice from the OIG, unless reinstatement is not available under State law or the State health care program had established a longer period of exclusion under its own authorities and procedures.


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