What is the Length of A Mandatory Exclusion?

The Department of Health and Human Services (HHS), Office of Inspector General (OIG) is responsible for overseeing the financial and program integrity of more than 100 HHS programs, one of which is the Medicare program.  As you would imagine, the Medicare program is quite costly.  At the present time, it represents approximately 15% of the total annual Federal budget.  When coupled with Medicaid and the Children’s Health Insurance Program (CHIP) costs, these health insurance programs collectively account for nearly 26% of the overall budget.  One of the ways that the OIG protects these programs from waste, fraud and abuse is through the exercise of the agency’s exclusion authority.  Depending on the facts of each case, the OIG may be mandatorily required to exclude certain individuals and entities from participating in Medicare and other Federal health benefit programs.  In other cases, where mandatory exclusion is not required, the OIG may exercise permissive exclusion authority.[1] This article focuses on the minimum length of a mandatory exclusion action and examines the extent which the OIG seeks to impose a period of exclusion longer than the minimum period proscribed by statute. 

I.  The Length of a Mandatory Exclusion Action Will be Not Less than Five Years:

With limited exceptions,[2] if an individual or entity is convicted[3] of a criminal offense that meets the criteria set out in Section 1128(a) of the Social Security Act, the OIG is required by law to exclude the party for a period of not less than five years.[4]^{, [5]} The length of a mandatory exclusion action varies, depending on the basis for exclusion.  The chart below outlines each of the applicable mandatory exclusion provisions where the OIG is obligated to exclude a party from participating in the Medicare program and other Federal health care programs.

Mandatory Exclusion Provisions
Social Security Act Section	42 U.S.C. Section	Summary Description
1128(a)(1)	42 U.S.C. § 1320a-7(a)(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. Minimum Period of Exclusion:  5 Years
1128(a)(2)	42 U.S.C. § 1320a-7(a)(2)	Conviction Relating to Patient Abuse. Any individual or entity that has been convicted, under Federal or State law, of a criminal offense relating to neglect or abuse of patients in connection with the delivery of a health care item or service.  Minimum Period of Exclusion:  5 Years
1128(a)(3)	42 U.S.C. § 1320a-7(a)(3)	Felony Conviction Relating to Health Care Fraud. Any individual or entity that has been convicted for an offense which occurred after August 21, 1996, under Federal or State law, in connection with the delivery of a health care item or service or with respect to any act or omission in a health care program (other than those specifically described in paragraph (1)) operated by or financed in whole or in part by any Federal, State, or local government agency, of a criminal offense consisting of a felony relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct. Minimum Period of Exclusion:  5 Years
1128(a)(4)	42 U.S.C. § 1320a-7(a)(4)	Felony Conviction Relating to a Controlled Substance.  Any individual or entity that has been convicted for an offense which occurred after August 21, 1996, under Federal or State law, of a criminal offense consisting of a felony relating to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance. Minimum Period of Exclusion:  5 Years
1128(c)(3)(G)(i)	42 U.S.C. § 1320a-7(c)(3)(G)(i)	Conviction of Two Mandatory Exclusion Offenses.  Minimum Period of Exclusion:  10 Years
1128(c)(3)(G)(ii)	42 U.S.C. § 1320a-7(c)(3)(G)(ii)	Conviction on Three or More Occasions of Mandatory Exclusion Offenses. Minimum Period of Exclusion:  Permanent Exclusion
1892	42 U.S.C. § 1395ccc(a)(2)(C)(ii)	Failure to Meet its Obligations Under the Physician Shortage Area Scholarship Program or repay Health Education Assistance Loans (HEAL).  Minimum Period of Exclusion:  Indefinite – Until the loan or service obligation is met or an acceptable repayment agre ement is reached.

Absent the issuance of a waiver, the OIG has no discretion — it must exclude a party for the minimum period of time proscribed by law.  While the OIG typically imposes the minimum period of exclusion permitted, the length of a mandatory OIG exclusion action may vary.  The OIG has the authority to exclude an individual or entity for a longer period if the facts warrant such an action.

II.  Case Examples Where the Length of a Mandatory Exclusion Action Imposed by the OIG Far Exceeded the Minimum Period Required by Law:

As the cases below reflect, depending on the facts in each case, the OIG may seek to impose a much longer period of exclusion than the five-year minimum period required by law in certain criminal conviction cases.

• Physician (Psychiatrist) and Owner of Community Mental Health Center.  Excluded for 48 Years.  In this case, the defendant psychiatrist pleaded guilty to one count of Conspiracy to Commit Health Care Fraud and was sentenced to 86 months in prison for his role in a $200 million fraud case. The case involved the provision of partial hospitalization program services. 
• Home Health Agency Owner. Excluded for 50 Years.  In this case, the owner of an Ohio-based home health agency was convicted and sentenced to 10 years in prison for her role in an $8 million healthcare fraud conspiracy. The government alleged that she and other participants provided forged documents and fraudulent forms to bill for services that were not rendered.
• Pharmacy Owner. Excluded for 75 Years. In this case, the owner of a Mississippi pharmacy was convicted of Conspiracy to Commit Health Care Fraud and was sentenced to 10 years in prison.  The government alleged that the pharmacy owner “participated in a scheme to defraud Tricare by formulating compounded medications that did not fit the individualized needs of patients but instead were formulated to obtain maximum reimbursement from Tricare.”

In each of the cases outlined above, the length of a mandatory exclusion action imposed by the OIG far exceeded the length of time each defendant was sentenced to prison.  This point has been routinely raised in arguments at appeal by an excluded party seeking to have to have the OIG’s period of exclusion reduced. The Departmental Appeals Board (DAB) has repeatedly found this argument unpersuasive.  As the DAB noted in one such case, the objectives of a criminal sentencing and an administrative action are very different.[6]   Commenting on the purpose of taking an exclusion action, more than 30 years ago the DAB wrote:

“The primary purpose of an exclusionary sanction is remedial, not punitive. When the OIG imposes an exclusion under section 1128 of the Act, it is simply carrying out Congress’ intent to protect the Medicare and Medicaid programs from individuals or entities who have already been tried and convicted of a criminal offense.” [7]

In a similar vein, excluded parties have also argued that the imposition of a lengthy exclusion period amounted to “Double Jeopardy,” and therefore constituted a violation of the defendant’s Fifth Amendment rights under the Constitution.  As you will recall, the Double Jeopardy Clause in the Fifth Amendment states, in part:

“No person shall . . . be subject for the same offense to be twice put in jeopardy of life or limb . . . . “

The Double Jeopardy Clause is intended to protect citizens from being tried more than once for essentially the same offense.  When raising a Double Jeopardy argument in the appeal of an action arising out of a criminal conviction, an excluded individual is essentially arguing that since he or she has already been convicted, sentenced to a period of incarceration and / or assessed a fine, the imposition of an exclusion action constitutes a second punishment for the same offense.  This argument was addressed by the U.S. Supreme Court in the case of Hudson v. United States, 522 U.S. 93 (1997).  As the Court held in the Hudson case, the Double Jeopardy Clause does not:

“. . . prohibit the imposition of any additional sanction that could ‘in common parlance,’ be described as punishment.”[8]
Instead, as the Court wrote, the Double Jeopardy Clause:
“protects only against the imposition of multiple criminal punishments for the same offense.” [9]

III.  When Can Aggravating Factors be Considered by the OIG?

As set out under 42 C.F.R. § 1001.102(b), there are nine separate aggravating factors that may be considered by the OIG as a basis for extending the length of a mandatory exclusion action.  These nine aggravating factors include the following:

• Factor #1: Financial loss to a government program of $50,000 or more.   If the conduct or acts that resulted in a conviction caused OR were intended to cause a financial loss to a government program (such as Medicare) of $50,000 or more (regardless of whether restitution has been made). 42 C.F.R. § 1001.102(b)(1).
• Factor #2: The acts that resulted in a conviction were committed over a period of a year of more. Essentially, under this factor, the OIG will consider whether the bad conduct was a limited, one-time event or if it was part of a long-term course of conduct that occurred over a period of a year or more. 42 C.F.R. § 1001.102(b)(2).
• Factor #3: The acts that resulted in a conviction had a significant adverse physical, mental or financial impact on one or more beneficiaries or other individuals. As this factor reflects, to the extent that the defendant’s conduct harmed one or more health plan patients or other individuals, the OIG will consider such conduct to be an aggravating factor. 42 C.F.R. § 1001.102(b)(3).
• Factor #4: Convictions involving patient abuse and neglect. Under this factor, if a conviction involved patient abuse or neglect, the OIG will consider: (1) whether the action that resulted in the conviction was premeditated; (2) was part of a continuing pattern of behavior, or (3) consisted of non-consensual sexual acts. 42 C.F.R. § 1001.102(b)(4).
• Factor #5: The sentence imposed by the court included incarceration.  Under this factor, the OIG will look at whether the sentence imposed in connection with a conviction included a period of “incarceration.”  Notably, the term “incarceration” is intended to include any type of confinement: (1) imprisonment, with or without later supervised release; (2) community confinement in a halfway house; (3) house arrest; or (4) home detention.[10]  42 C.F.R. § 1001.102(b)(5).
• Factor #6: The convicted party has a
  prior criminal, civil or administrative sanction record.  Under this factor, the OIG will look at the defendant’s overall record with regard to gauge whether the individual or entity has a track record of prior problematic conduct.  42 C.F.R. § 1001.102(b)(6).
• Factor 7: The individual or entity has previously been convicted of a criminal offense involving the same or similar circumstances. Not surprisingly, this aggravating factor is rarely cited by the OIG as a basis for lengthening a party’s period of exclusion.  In any event, a previous conviction involving the same or similar circumstances arguably shows that the defendant is a recidivist and has not shown the ability to rehabilitate. 42 C.F.R. § 1001.102(b)(7).
• Factor #8: The individual or entity has been convicted of other offenses besides those that formed the basis for the exclusion.  As with Factor #7, this aggravating factor has not been relied on heavily by the OIG.  To the extent that a defendant has been convicted of other offenses in addition to the ones that resulted in the defendant’s exclusion, this may be an indication that a defendant’s wrongful conduct was more extensive and / or harmful to the public.  42 C.F.R. § 1001.102(b)(8).
• Factor #9: The individual or entity has been the subject of any other adverse action by any Federal, State or local government agency or board if the adverse action is based on the same set of circumstances that serves as the basis for the imposition of the exclusion.  When a licensed health care professional has been convicted of a crime that gives rise to a mandatory exclusion action, it isn’t uncommon to find that a State Licensure Board has also taken disciplinary action against the individual.   When this occurs, the OIG often cites this as an aggravating factor.  42 C.F.R. § 102(b)(9).

IV.  Can Mitigating Factors be Considered by the OIG?

To the extent that the OIG decides to apply one or more of the aggravating factors outlined above when determining the period of exclusion to be imposed, it may also consider the mitigating factors set out under 42 C.F.R. § 1001.102(c)(1)-(3).[11]  If the OIG imposes only the mandatory minimum period of exclusion, these mitigating factors cannot be used to try and further reduce an individual’s period of exclusion below the minimum period proscribed by law.

V.  Can You Appeal an Exclusion Action?

Yes, you can appeal an exclusion action as long as you properly comply with applicable timeliness and other regulatory requirements.  Having said that, it is important to keep in mind that the right to appeal an exclusion action is limited to only two issues.  First, an individual or entity may appeal the basis for the imposition of the exclusion action.  In other words, the excluded party may try and argue that the conviction relied on by the OIG was not for an offense that requires the party’s mandatory exclusion from participating in Federal health care programs.  When challenging the basis for the exclusion action, an individual or entity may unsuccessfully try and attack one of more aspects of the underlying conviction.  As set out under 42 C.F.R. § 1001.2007(d):

“(d) When the exclusion is based on the existence of a criminal conviction or a civil judgment imposing liability by Federal, State  or local court, a determination by another Government agency, or any other prior determination where the facts were adjudicated and a final decision was made, the basis for the underlying conviction, civil judgment or determination is not reviewable and the individual or entity may not collaterally attack it either on substantive or procedural grounds in this appeal”. 

Second, you may appeal the length of the exclusion, to the extent that it is unreasonable. To appeal the length of an exclusion action, an excluded individual may file for a hearing before an Administrative Law Judge (ALJ).[12]  When considering the length of an exclusion action, an ALJ will determine whether the period assessed by the OIG was reasonable, given the evidence presented and in consideration of any aggravating or mitigating factors considered by the OIG.

To the extent that a party is dissatisfied with an ALJ’s decision, the individual or entity may file an appeal with the DAB. When reviewing an ALJ’s decision, the standard of review applied by the DAB is limited by statute to “whether the initial decision is supported by substantial evidence on the whole record. The standard of review on a disputed issue of law is whether the initial decision is erroneous.” 42 C.F.R. § 1005.21(h).
If an individual or entity is dissatisfied with a DAB final decision, the aggrieved party must file petition for judicial review must be filed within 60 days after the DAB serves the party a copy of the decision.  When appealing a DAB decision, a petition for judicial review challenging the final action must be filed with the U.S. Court of Appeals.[13]
As a final point with respect to appeals, please keep in mind that there are strict filing deadlines and procedural requirements that must be followed if you intend to appeal the imposition of an exclusion action.  We strongly recommend that you engage qualified health care legal counsel to represent you in this process so that your appeal is both timely and effectively presents your arguments. 

VI.  Can the OIG Impose a Harsher Period of Extension in Your Case than it has in Similar Cases?

If you take the time to review a significant sample of the exclusion actions taken by the OIG, you will undoubtedly find cases involving similar facts where the length of exclusion period imposed varies widely from case to case.  An aggrieved party may even argue that such disparate treatment constitutes a violation of an individual’s rights under the Constitution.[14]  Such arguments have met with somewhat mixed results. In the case of Paul D. Goldenheim, M.D., et al., DAB No. 2268, at 29 (2009):[15]

“[c]omparisons with other cases are not controlling and of limited utility given that aggravating and mitigating factors ‘must be evaluated based on the circumstances of a particular case’ . . ., which can vary widely.”

In contrast to the position taken in the Goldenheim case, in a 2017 case, the DAB noted that when assessing a period of exclusion, case-to-case comparisons “can inform whether a period of exclusion falls within a reasonable range.” [16]

VII.  Implications of the Length of an Exclusion Action on Your Screening Efforts:

Unfortunately, there is a lot of misinformation out there regarding the length of an exclusion action and the steps that must be taken to be taken off of the OIG’s List of Excluded Individuals and Entities (LEIE).  Points to remember include, but are not limited to the following:

• Mandatory exclusion actions based on a conviction for one of the enumerated offenses set out in the statute should not be presumed to be the five year minimum period required by law.
• Depending on the OIG’s assessment of the facts in a case and the aggravating factors presented, a mandatory period of exclusion may last from five years to the lifetime of an individual or entity.
• After the length of an exclusion action has elapsed, an individual or entity is not automatically removed from the OIG’s exclusion list An excluded party must affirmatively apply to be removed from the.   The OIG retains the right to review an excluded party’s application and may, or may not, agree to an applicant’s request.
• Despite the fact that an excluded party may believe that he or she has been taken off of the OIG LEIE, the responsibility to conduct regular, ongoing screens of all employees, vendors, contractors and agents rests with a participating provider or supplier. All Federal and State exclusion databases must be checked every 30 days.

Questions?  We can help.  Call the sanction professionals at Exclusion Screening for any questions you may have regarding your screening and reporting obligations.  For a complimentary consultation, give us a call.  We can be reached at:  (800) 294-0952.

[1] For a scholarly discussion of the OIG’s mandatory exclusion obligations and its permissive exclusion authorities, we recommend you review Paul Weidenfeld’s article “A Provider’s Guide to Exclusions.”

[2] For a discussion of these limited exceptions, we recommend you review our article titled “I Have a Confirmed Exclusion — What are my Options?”

[3] As set out under 42 C.F.R. § 1001.2 – Definitions, the term “Convicted” means:

(a) A judgment of conviction has been entered against an individual or entity by a Federal, State or local court, regardless of whether:

(1) There is a post-trial motion or an appeal pending, or

(2) The judgment of conviction or other record relating to the criminal conduct has been expunged or otherwise removed;

(b) A Federal, State or local court has made a finding of guilt against an individual or entity;

(c) A Federal, State or local court has accepted a plea of guilty or nolo contendere by an individual or entity; or

(d) An individual or entity has entered into participation in a first offender, deferred adjudication or other program or arrangement where judgment of conviction has been withheld.

[4] As set out under Section 1128(c)(3)(B) of the Social Security Act:

“(B) Subject to subparagraph (G), in the case of an exclusion under subsection (a), the minimum period of exclusion shall be not less than five years, except that, upon the request of the administrator of a Federal health care program (as defined in section 1128B(f)) who determines that the exclusion would impose a hardship on beneficiaries (as defined in section 1128A(i)(5) of that program, the Secretary may, after consulting with the Inspector General of the Department of Health and Human Services, waive the exclusion under subsection (a)(1), (a)(3), or (a)(4) with respect to that program in the case of an individual or entity that is the sole community physician or sole source of essential specialized services in a community. The Secretary’s decision whether to waive the exclusion shall not be reviewable.”

[5] See also 42 CFR §§ 1001.102 and 1001.101(a).
[6] As the decision in the case of Henry L. Gupton v. The Inspector General, DAB No.2058, at 7 (2007) notes:

“The goals of criminal law generally involve punishment and rehabilitation of the offender, possibly deterrence of future misconduct by the same or other persons, and various public policy goals,” whereas “[e]xclusions imposed by the I.G. . . . are civil sanctions, designed to protect the beneficiaries of health care programs and the federal fisc, and are thus remedial in nature rather than primarily punitive or deterrent.”

[7] Dewayne Franzen vs. The Inspector General, DAB No. 90-37, at 11 (1990).
[8] Hudson v. United States, 522 U.S. 93, 98-99 (1997), quoting United States ex rel. Marcus v. Hess, 317 U.S. 537 (1943).
[9] Hudson v. United States, 522 U.S. at 99.
[10] The term “incarceration” is broadly defined in 42 C.F.R. § 1001.2 Definitions.  Also see 63 Fed. Reg. 46,686 (September 2, 1998).
[11] As 42 C.F.R. § 1001.102(c)(1)-(3) sets out:

(c) Only if any of the aggravating factors set forth in paragraph (b) of this section justifies an exclusion longer than 5 years, may mitigating factors be considered as a basis for reducing the period of exclusion to no less than 5 years. Only the following factors may be considered mitigating –

(1) In the case of an exclusion under § 1001.101(a), whether the individual or entity was convicted of three or fewer misdemeanor offenses and the entire amount of financial loss (both actual loss and intended loss) to Medicare or any other Federal, State, or local governmental health care program due to the acts that resulted in the conviction, and similar acts, is less than $5,000;

(2) The record in the criminal proceedings, including sentencing documents, demonstrates that the court determined that the individual had a mental, emotional or physical condition before or during the commission of the offense that reduced the individual’s culpability; or

(3) The individual’s or entity’s cooperation with Federal or State officials resulted in –

(i) Others being convicted or excluded from Medicare, Medicaid and all other Federal health care programs,

(ii) Additional cases being investigated or reports being issued by the appropriate law enforcement agency identifying program vulnerabilities or weaknesses, or

(iii) The imposition against anyone of a civil money penalty or assessment under Part 1003 of this chapter.”

[12] See 42 C.F.R. § 1001.2007 – Appeal of Exclusions.
[13] See 42 C.F.R. § 1005.21(k).

[14] The Fourt
eenth Amendment of the Constitution which provides for an individual’s equal protection under the law applies to State and Local governments.  The Federal government’s obligation to provide equal protection is covered by the Fifth Amendment to the Constitution.  See Bolling v. Sharpe, 347 U.S. 497 (1954).

[15] Paul D. Goldenheim, M.D., et al. v. The Inspector General, DAB No. 2268, at 29 (2009) (quoting 57 Fed. Reg. 3298, 3314 (Jan. 29, 1992)), rev’d and remanded, Friedman, et al. v. Sebelius, 686 F.3d 813 (D.C. Cir. 2012) (upholding the legal basis for the exclusion but remanding for further consideration of the length of the exclusion).

[16] Hussein Awada, M.D. v. The Inspector General, DAB No. 2788, at 10 (2017).
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