Medicare / Medicaid Providers Beware: A Nolo Contendere Plea to a Non-Health Care Crime Can Still Result in Exclusion from Medicare

The last two years have been rough for everyone, and it has been particularly difficult for health care providers and suppliers.  For example, the rapid spread of the Covid Omicron variant not only threatened to overwhelm a health care system that was already stretched to its limits, it also made it tougher than ever for Medicare and Medicaid providers to fill both skilled and non-skilled health care staff vacancies. Providers prone to high turnover, such as nursing homes, community care facilities, home health agencies and hospitals, were especially hard hit, but many health care employers had to dive deep into their applicant pools to identify and recruit qualified individuals and it is more important than ever that providers ensure that all new hires (along with their current staff members) have not been excluded from participation in any federal or state health benefit programs.

Exclusion Basics:

One of the most severe administrative sanctions available under the Social Security Act stems from the authority of the OIG to “exclude” individuals and entities from participating in federal health care programs. The purpose of an OIG exclusion action is to protect beneficiaries and safeguard the financial integrity of the Medicare Trust Fund, and the OIG can seek to exclude certain individuals and entities from participating in Federal health care programs under either mandatory and permissive exclusion authorities.[1]

• Mandatory vs. Permissive Exclusion Actions. 

There are two types of OIG exclusions – “mandatory” and “permissive.”  Mandatory exclusions are administrative actions that are imposed for defrauding a federal health benefit program,[2] 2) abusing or neglecting a patient,[3] committing health care fraud[4], and/or committing certain felonies involving controlled substances.[5] Exclusions predicated on these convictions must be imposed for a minimum of five years, and they are often imposed for a much longer period of time. Permissive Exclusions, unlike mandatory ones, can be imposed at the discretion of the OIG if it finds that an offense or improper conduct warrants exclusion.[6] While there are currently eighteen bases that the OIG can seek to exercise its permissive exclusion authority,[7] most permissive exclusion actions are based on disciplinary actions taken by a licensing authority (approximately 70%), and against individuals connected to the nursing profession. Physicians accounted for just 9% of the permissive exclusions and business owners only accounted for 3%.[8]

• Impact of Being Excluded from Medicare or Medicaid.

The impact of an OIG administrative exclusion action is quite broad intended to prohibit all participation by excluded individuals and entities from all federal health care programs. This is accomplished by imposing a “payment prohibition” that extends to all items or services furnished, either directly or indirectly, by an excluded individual or entity, or at the medical direction or on the prescription of an excluded person.⁹ As a result, participating providers and suppliers are prohibited from receiving any federal health benefit plan reimbursement that is associated with the employment or contracting with an excluded individual or party.  Even if a non-excluded provider actually submits a claim, it is still subject to the payment prohibition if it was furnished, either directly or indirectly by an excluded entity.

The collateral consequences of employing or contracting with an excluded individual by a Medicare or Medicaid billing employer can be enormous.  If an excluded party contributes to the submission of a claim, either directly or indirectly, that is subsequently submitted to a Federal or State health care benefit programs, the claims are tainted and the provider risks potential overpayment liability, the imposition of Civil Monetary Penalties (CMPs) and possibly even liability under the Federal False Claims Act.[9] Screening the exclusion status of employees is a provider’s first line defense to avoid these risks as it is the single best way for a provider to avoid the risks associated with improperly employing or contracting with an excluded individual.

• What is a Plea of “Nolo Contendere”?

As set out under Rule 3.170 of the Florida Rules of Criminal Procedure, a defendant in a Florida criminal case may enter one of several types of plea.  Rule 3.170 states, in part:

(a) Types of Plea; Court’s Discretion. A defendant may plead not guilty, guilty, or, with the consent of the court, nolo contendere. . .[10]

Simply put, a defendant has three choices in a criminal case: plead not guilty and contest the charges; plead guilty and admit to violations of law and agree to accept responsibility; and plead nolo Contendere (sometimes referred to as a “no contest “) which allows one to agree  to accept responsibility for the charges without making an admission. Nolo Contendere pleas are available in most jurisdictions; they typically occur as part of a negotiated resolution and often require the concurrence of the Judge.

The principal advantages of being permitted to enter a plea of nolo contendere are that the person isn’t required to admit guilt.  This, for some, is an element to any criminal resolution.  A related benefit of a “nolo” please is that the plea cannot be used in a civil proceeding. These are important benefits, but a plea of “nolo contendere” also comes with some significant limitations. For example, a defendant must concede on the record that there is sufficient evidence in the matter for a prosecutor to obtain a conviction. In addition, the restriction on using the plea is not universal and it can used in administrative proceedings such as those involving exclusions.

Unfortunately, this important limitation that isn’t always understood by lawyers who don’t regularly handle health care matters or who fail to consult an experienced health care lawyer when negotiating a resolution of a criminal matter. A recent case demonstrates one of the many legal issues that must be considered when a provider is considering an otherwise favorable nolo contendere plea agreement in a health care related case and an overview of the facts in the case is set out below.

How a “Nolo Contendere” Plea Can Impact a Provider’s Exclusion Status

• Case Facts.

A Florida Medicaid provider sold her facility to an individual who was seeking to be enrolled but was not yet an authorized Medicaid participating provider at the time of the purchase.  Time lagged, and the seller agreed to continue billing the claims for reimbursement from her facility under her billing number as if she was actual provider of the Medicaid services rendered, when in fact, she had not performed any of the services after the sale. This, of course, was improper.

The matter was investigated by the Medicaid Fraud Control Unit and the seller was charged with a single count of Medicaid fraud. The charge was later amended to “unauthorized access of a computer system” (the amendment didn’t include a detailed discussion of the underlying Medicaid issues), and a negotiated resolution was reached.  The Medicaid fraud charge was dropped, the seller entered a nolo Contendere plea to the single charge of unauthorized access of a computer system, and the seller was sentenced to five years of probation and ordered to pay restitution.  At that point, everyone thought the matter was DONE. But it wasn’t.

• Overview of OIG’s Exclusion Action in This Case.

Based on the case facts outlined above, the OIG moved forward and sought to exclude the seller from participating in federal health benefit programs.  The OIG argued that the exclusion action was mandatory under §1128(a)(1) of the Social Security Act.[1]

This requirement is further codified at 42 U.S.C. §1320a-7(a)(1), which reads as follows:

“(a) Mandatory exclusion

The Secretary shall exclude the following individuals and entities from participation in any Federal health care program (as defined in section 1320a-7b(f) of this title): 1.

1. Conviction of program-related crimes

Any individual or entity that has been convicted of a criminal offense related to the delivery of an item or service under subchapter XVIII or under any State health care program.”[2]

Although there is a requirement of a “conviction” under most mandatory exclusion provisions, convictions are broadly defined and specifically include nolo Contendere pleas, deferred adjudications and dispositions under first offender programs in any “State, Federal or Local Court. In fact, it has even been held that a deferred prosecution agreement in a local state court for misdemeanor theft was a sufficient basis for the imposition of a mandatory exclusion.[3] It is also noted that state agencies are required to notify the OIG of any criminal convictions in state or local courts convictions if they involve an entity that receives Medicaid reimbursements and are related to the delivery of health care items or services under the program.[4]

Based on the conduct presented and the nolo Contendere plea taken, the OIG excluded the seller for a period of five years.  The seller appealed the OIG’s exclusion action.

• Holding by the Administrative Law Judge.

On appeal before an Administrative Law Judge (ALJ), the seller argued that her mandatory exclusion was based on a nolo Contendere plea to the act of unlawful use of computer, contending that the plea was not a criminal conviction for purposes of Section 1123(a)(1) of the Social Security Act.[5] The court disagreed.

As the ALJ noted, the seller’s nolo Contendere plea (based on her unauthorized access to a computer system), was part of the Amended Information, which included a charge of Medicaid fraud.  As the ALJ wrote, “The essence of Petitioner’s crime thus was unauthorized claims for Medicaid items and services.” The ALJ therefore affirmed the OIG’s decision to exclude the seller for a period of five years.

Independently verifying the exclusion status of a prospective employee is especially important because it is not unusual for an applicant who has entered a plea of nolo contendere[1] (no-contest) in non-health care criminal charge to fully realize its consequences and that he or she may still have been the subject to a federal exclusion by the Department of Health and Human Resources (HHS), Office of Inspector General (OIG) or to a State exclusion. This article will examine the possible impact of a such a plea on an individual’s exclusion status, and their subsequent eligibility to be employed by a Medicare or Medicaid health care provider.

Lessons from this Case.

Participating providers in one or more federal health care programs have an affirmative obligation to ensure that none of their employees, agents, vendors and contractors have been excluded from participation.  Unfortunately, you cannot rely on any statements or assertions by an individual or entity that no federal or state exclusion action is in effect. Frankly, an individual may sincerely not understand the gravity of a plea he or she has taken in a criminal case.  All too often, we have seen criminal counsel negotiate a plea bargain in a criminal case that appears to be very favorable, but which fails to appreciate the collateral impact it may have on the individual’s right to participate in the Medicare or Medicaid program OR to even work for a provider that accepts Medicare or Medicaid OR to be able to participate in many private insurance plans.  Our recommendation – always consult an experienced health care lawyer on exclusion related issues and problems.  You will be glad you did.

Need help meeting your statutory obligations to screen? The experienced screening professionals at Exclusion Screening can help you accomplish your screening requirements. Give us a call at: 1 (800) 294-0952 for a free consultation.

[1] “In a criminal proceeding, a defendant may enter a plea of nolo contendere, in which the defendant does not accept or deny responsibility for the charges but agrees to accept punishment.” Nolo contendre, Wex Definitions Team, Legal Information Institute [LII], Cornell U L. School (last updated July 2020), https://www.law.cornell.edu/wex/nolo_contendere.
[2] The authority to exclude was granted to the Secretary of the Department of Health and Human services in the Civil Money Penalties Law (Public Law 97-35, 1981 (as codified at section 1128A of the SSA). The Secretary delegated it to its Office of Inspector General in 1988 (53 Fed. Reg. 12,993 (April 20, 1988)).
[3] See 42 U.S.C.  1320a-7(a)(1).
[4] See 42 U.S.C.  1320a-7(a)(2).
[5] See 42 U.S.C.  1320a-7(a)(3).
[6] See 42 U.S.C.  1320a-7(a)(4).
[7] 42 U.S.C. §1156 of the Social Security Act (SSA).
[8] Id.; 42 U.S.C. §§ 1128(b)(1)-(17).
[9] These calculations are based on exclusions imposed between 2013 – 2017 as contained in the OIG’s LEIE.
[10] Secretary of the Department of Health and Human services in the Civil Money Penalties Law (Public Law 97-35, 1981 (as codified at section 1128A of the SSA). The Secretary delegated it to its Office of Inspector General in 1988 (53 Fed. Reg. 12,993 (April 20, 1988)).
[11] https://floridarules.net/florida-rules-of-criminal-procedure/
[12] §1128(a)(1) of the Social Security Act is further codified at 42 U.S.C. §1320a-7(a)(1), titled Conviction of Program Related Crimes.
[13] https://www.law.cornell.edu/uscode/text/42/1320a-7
[14] Department of Health and Human Service, Departmental Appeals Board Civil Remedies Division, Okwilagwe v. The Inspector General, Docket No. C-13-322, Decision No. CR2920, September 6, 2013.
[15] 42 C.F.R. §1002.230.
[16] Id. at **1-