What to Do If You Have a Confirmed Exclusion

Finding out that an employee, vendor, contractor, or volunteer has a confirmed exclusion is a serious compliance emergency. Since Federal healthcare programs absolutely will not pay for any item or service furnished directly or indirectly by an excluded party, your organization faces major financial and legal risks.

Here is a simplified guide on the options and steps you must take to address this problem. For a more detailed guide visit our other article I Have a Confirmed Exclusion What are my Options.

Step 1: Stop the Bleeding (Immediate Action)

The first priority is halting the violation immediately to minimize overpayment and Civil Money Penalty (CMP) exposure.

1. End the Relationship Immediately
   • Remove the excluded party right away. This is the best action a practice can take to minimize liability risks.
   • Exclusions are serious administrative actions, often based on fraud, patient abuse, or drug convictions, posing a direct risk to your organization and its patients.
2. Contact a Lawyer
   • Immediately consult with healthcare counsel to determine the best legal strategy for proceeding.
3. Preserve Documentation
   • Keep records of how the problem was discovered and all corrective actions you take.

Step 2: Determine the Damage

Every exclusion case is unique, so you need to investigate the specifics to figure out your exact financial exposure.

Ask yourself these nine critical questions:

1. Is the excluded party a new employee or a long-time employee? (This determines the length of the violation.)
2. What exactly does the person do? (Are they a direct biller, like a physician, or support staff, like a coder or IT specialist?).
3. Are they direct billers to Federal or State healthcare programs? (If yes, liability is extremely high—every claim is tainted).
4. Do they indirectly provide services? (This includes management, administrative, IT, support, nursing, claims processing, and surgical support—the payment ban is absolute).
5. Can they be completely walled off from all Federal and State payers? (If not, you risk future liability).
6. How long have you been screening? (Did this happen because screening failed, or did the person just get excluded recently?)
7. Was the exclusion discovered by a third party, like a staffing agency? (Remember: Delegating screening does not delegate liability for overpayments or CMPs).

Step 3: Resolve the Legal Mess

Hiring an excluded individual triggers three major areas of liability: Overpayments, Civil Money Penalties (CMPs), and potential False Claims Act (FCA) liability.

A. Repay the Overpayments

Since Federal programs won’t pay for services furnished by excluded parties, any money received for those services is an overpayment that must be repaid. Failing to report and return overpayments in a timely and proper manner can result in FCA liability.

B. Use the OIG Self-Disclosure Protocol (SDP)

The SDP is the specific procedure established by the OIG to resolve exclusion violations and settle all three types of liabilities (Overpayments, CMPs, and FCA exposure) without requiring you to enter into an expensive and time-consuming integrity agreement.

Scenario	Liability Calculation (Proxy for Single Damages)
Excluded Party is a Direct Biller (e.g., Physician)	Every single claim made by this person is an overpayment and is subject to CMPs. You are strongly advised to seek counsel immediately.
Excluded Party Provides Indirect Services (e.g., Coder, Nurse Aide, Administrator)	The OIG provides a formula to calculate the “loss” (proxy damage) for services not separately billed: 1. Calculate the total employment costs (including salary, benefits, and taxes) for the exclusion period. 2. Multiply that total cost by your Federal and State payer mix.

C. Civil Money Penalty (CMP) Risk

If you fail to resolve the issue, the OIG can impose staggering CMPs. For instance, employing or contracting with an excluded individual can result in penalties up to $24,164 for each item or service provided or furnished by that individual.

Step 4: Ongoing Employment (The Risky Exceptions)

If you determine that the exclusion offense (which can be as “less serious” as failing to pay back a loan, or as serious as patient abuse) does not warrant termination, there are complex options to keep the person employed. These are difficult to implement and sustain.

1. Walled Off from Federal Programs (The Safest Way)

• A participating provider may employ an excluded person only if that person is completely walled off from providing any items or services that are payable, directly or indirectly, by Federal healthcare programs.
• The work must be “wholly unrelated to Federal Health Care Programs”.
• Warning: Maintaining this separation permanently is very challenging, as staff changes or shifts in responsibilities can easily lead to a violation.

2. Seek a Waiver (Very Rare)

• A waiver permits payment by Federal healthcare programs for certain services.
• Waivers cannot be requested by the provider or the excluded party. They must be requested by the administrator of a Federal healthcare program.
• For mandatory exclusions, the administrator must confirm that the individual is the sole community physician or the sole source of essential specialized services, and that the exclusion would impose a hardship on beneficiaries.
• Waivers are never granted if the exclusion was based on patient neglect or abuse.

3. Seek an Advisory Opinion (Expensive and Unproductive)

• You may request an Advisory Opinion from the OIG regarding the proposed employment of an excluded individual.
• This option is generally expensive and likely to be unproductive, typically reserved for “one-off” arrangements where the financial relationship between the provider and the excluded individual is “extremely tenuous”.

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Final Thoughts: How to Avoid This Next Time

Providers are presumed to know if their employees, vendors, or contractors are on any exclusion list, and failure to screen is not an excuse.

The best practice for avoiding exclusion violations is implementing a robust screening program:

• When to Screen: Screen upon hire and monthly thereafter. The OIG has unequivocally stated that monthly screening “best minimizes potential overpayment and CMP liability”.
• Who to Screen: Screen all employees, vendors, and contractors who furnish any item or service payable directly or indirectly by a Federal health care program. This includes owners, directors, agents, and managers.
• Which Lists to Screen: Screen at the bare minimum the OIG’s List of Excluded Individuals and Entities (LEIE), the General Services Administration/System for Award Management (GSA/SAM), and all available State exclusion lists (currently 42 or 43 states plus the District of Columbia maintain separate sanction lists).

We can be reached at (800) 561-0798, or contact us to discuss your exclusion screening needs and a free assessment.