Sanctions and penalties for hiring excluded individuals in healthcare 

Best practices to ensure an effective exclusion check   

By CJ Wolf, MD 

Do you know how many “excluded” individuals are on your payroll? Do your hiring managers and Human Resources colleagues know what to look for? 

The U.S. Department of Health and Human Services Office of Inspector General (OIG) has the authority to exclude individuals and entities from federally funded healthcare programs. These exclusions are generally related to criminal activity like fraud or healthcare-related misconduct. Excluded people are ineligible to perform services that are reimbursed by federal healthcare programs. 

Healthcare organizations that bill federal healthcare programs for work performed by excluded individuals can be fined for this practice, and the healthcare programs will not reimburse for services the excluded individuals provide. It’s incredibly important to know if your new hires or prospects are excluded. 

Overview of Exclusions from Federal Healthcare Programs 

There can be many reasons why OIG might exclude an individual including mandatory exclusions and permissive exclusions. 

Mandatory exclusions: When it comes to certain criminal convictions, the OIG is required by law to exclude participation in federal healthcare programs. The OIG must exclude individuals or entities who have been convicted of the following types of crimes: 

• Medicare or Medicaid fraud, as well as any other offenses related to the delivery of items or services under Medicare, Medicaid, SCHIP, or other state healthcare programs
• Patient abuse or neglect 
• Felony convictions for other healthcare-related fraud, theft, or other financial misconduct 
• Felony convictions relating to unlawful manufacture, distribution, prescription, or dispensing of controlled substances 

Permissive exclusions: The OIG has the discretion to exclude for many reasons. Some of these include: 

• Misdemeanor convictions related to healthcare fraud other than Medicare or a state health program, fraud in a program (other than a healthcare program) funded by any federal, state, or local government agency 
• Misdemeanor convictions relating to the unlawful manufacture, distribution, prescription, or dispensing of controlled substances 
• Suspension, revocation, or surrender of a license to provide healthcare for reasons bearing on professional competence, professional performance, or financial integrity 
• Provision of unnecessary or substandard services 
• Submission of false or fraudulent claims to a Federal healthcare program 
• Engaging in unlawful kickback arrangements 
• Defaulting on health education loan or scholarship obligations 
• Controlling a sanctioned entity as an owner, officer, or managing employee 

The OIG maintains a List of Excluded Individuals/Entities (LEIE). Anyone who hires an individual or entity on the LEIE may be subject to civil monetary penalties. To avoid this, healthcare organizations need to regularly check the LEIE to ensure newly hired and current employees are not on the list. There can be various repercussions for having employees or entities involved in the healthcare organization’s operations, but the main effect is that no payment will be made for items and services ordered or provided by a person or entity on the LEIE. 

Enforcement Actions for Hiring Excluded Individuals and Entities  

Compliance with these rules sounds like a straightforward process. You simply need to regularly check the LEIE against people and entities engaged with your organization. But it always seems like something falls through the cracks. Here are some enforcement examples and settlements associated with employing sanctioned individuals or entities. In each case the individual or entity was hired and in turn provided items or services that were then billed to federal healthcare programs. Notice the variety of position titles mentioned for the excluded individual(s): 

1. An Ohio recovery services company settled for $765,000 for allegedly hiring an excluded individual as an intake coordinator and site manager. 

2. A Pennsylvania human development company paid $405,000 for allegedly hiring an excluded individual as a program manager. 

3. A Rhode Island residential services company paid $325,000 for allegedly employing two excluded individuals, a direct support professional and a group home manager. 

4. An orthopedic practice in Chicago paid $150,000 for allegedly employing an excluded individual as an orthotic and laboratory technician. 

5. A support coordination company paid $129,000 for allegedly employing an excluded individual as a supports coordinator. 

6. A Puerto Rican hospital settled for $105,000 for allegedly hiring an excluded individual as a medical utilization director. 

7. A Missouri hospital paid $55,000 for allegedly employing an excluded individual as a mental health technician. 

8. An Illinois healthcare organization paid $38,000 for allegedly hiring an excluded individual as a charge nurse. 

9. A Texas home health services company paid $38,000 for allegedly employing an excluded individual as a personal care attendant. 

Considerations for Healthcare Compliance Officers: 

Most compliance programs have established a process for ensuring exclusion checks are occurring. But it is essential to audit or review the process periodically. Here are some key points to consider: 

• The OIG updates the LEIE monthly. A best practice in compliance for this area includes the organization performing their checks monthly so they don’t ever miss an updated LEIE. 
• Remember to include contracted entities and individuals. For example, if you use a temporary agency to supply nurses, the exclusion check process should include the individuals performing services on your organization’s behalf. Similarly, if you engage a third-party billing company to perform billing services, you need to ensure it is not an excluded entity or does not employ excluded individuals. 
• Include volunteers, trainees, and Board members if they are contributing to providing services that are potentially billed to federal healthcare programs. 
• Maintain a close relationship with Human Resources. Accuracy in a process for exclusion checks requires a level of certainty that all employees are included in the check.  
• Check state level lists as well. It is possible that a state’s Medicaid program has excluded an individual, but that individual’s name has not made it to the OIG’s LEIE list. 

Of course, the financial risk of fines and lack of reimbursement is only one reason to stay diligent about excluded individuals. Most of the reasons for exclusion are directly related to integrity and quality of care. Your patients will thank you for staying vigilant about your hiring practices and making sure that excluded individuals are not involved in their care. Including LEIE in your hiring, background check and onboarding processes can help you protect patients and revenue as you also reduce risk across the organization. 

CJ Wolf, MD, M.Ed is a healthcare compliance professional with over 22 years of experience in healthcare economics, revenue cycle, coding, billing, and healthcare compliance. He has worked for Intermountain Healthcare, the University of Texas MD Anderson Cancer Center, the University of Texas System, an international medical device company and a healthcare compliance software start up. Currently, Dr. Wolf teaches and provides private healthcare compliance and coding consulting services as well as training. He is a graduate of the University of Illinois at Chicago College of Medicine, earned a masters in education from the University of Texas at Brownsville and was magna cum laude as an undergraduate at Brigham Young University in Provo, UT. In addition to his educational background, Dr. Wolf holds current certifications in medical coding and billing (CPC, COC) and healthcare compliance, ethics, privacy and research (CHC, CCEP, CHPC, CHRC).

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