OIG backs off on lowest cost’ provider exclusions

Providers have just scored a rare victory against the OIG. In the face of numerous protests, OIG has backed away from excluding providers for not offering Medicare the lowest price.

A proposed OIG rule, intended to implement portions of the HIPAA legislation, would have permitted exclusion of providers that charged Medicare "substantially in excess" of what they charged other customers. That provoked an outcry from providers who feared they could be sanctioned for discounted arrangements with HMOs.

"This would have destroyed any chance of offering flexible pricing," says attorney Bill Sarraille, JD, of Arent Fox in Washington, DC. OIG has scotched the provision from a package of final rules, published in the Sept. 2 Federal Register, that expand the agency’s power to exclude providers.

But if OIG has closed one avenue to exclusion, it’s opened another. Now, manufacturers and distributors who don’t file Medicare or Medicaid claims face the ultimate sanction. OIG had previously maintained that while it had the authority to exclude manufacturers and distributors who didn’t submit claims, it wouldn’t do so for logistical reasons. "We have now concluded that such exclusions should be undertaken, when warranted by the conduct of such entities, notwithstanding the administrative burdens," the agency says.

And because OIG can penalize anyone who deals with an excluded company, providers will have to check and keep checking who’s on OIG’s excluded list, which is posted monthly on the agency’s site on the World Wide Web (http://www.hhs.gov/progorg/oig/cumsan/cumsanc.html). "The government is going to take the position that because the lists are public, it’s your responsibility to look at them," Sarraille predicts.

However, the federal watch dogs did hedge a little. "We wouldn’t expect that manufacturers would often be convicted and subject to a mandatory exclusion," the agency says. Indeed, OIG spokeswoman Judy Holtz claims the agency has never taken such an action.

Because excluding a manufacturer might hurt customers, OIG says it’s "committed to exercising this sanction authority carefully and prudently, and acting only where the excluded provider’s product can be clearly identified."

Waivers will be given, for example, to a pharmaceutical company that makes a unique drug. Still, anyone who submits claims that involve items made by an excluded indirect provider is subject to a Civil Monetary Penalty. But OIG will only come down on those who "knew or should have known" they were submitting those claims. Plus, providers will be allowed to bill for products up to 30 days after the effective date of the manufacturer’s exclusion, and up to 60 days until October 1999.

The new set of rules, which takes effect Oct. 2, also:

- Lengthens exclusions. OIG will now use any adverse actions by any federal, state or local agency or board when deciding the length of exclusions. These aggravating factors include drug dealing and tax evasion, though the agency says the aggravating offense should be related in some way to the cause of the exclusion.

- Blocks voluntary withdrawals. Providers under investigation by state agencies can’t avoid OIG exclusion by withdrawing from the state program. OIG now makes clear that if a state agency serves a provider with a written notice of charges or allegations, the matter must be reported to OIG for an exclusionary review regardless of whether the provider withdraws from the state program.

- Rewards cooperation. Any excluded party whose cooperation results in additional investigations will get consideration when the length of exclusion is determined.

- Penalizes officers and managing employees. OIG is sticking by its plan to exclude the officers and managing employees of excluded companies, as well as any owners. "It appears that Congress believed that any person serving as an officer or managing employee of the entity is presumed to have specific knowledge of the actions constituting the basis for the exclusion," OIG says.

- Eliminates personal hearings. Excluded people will no longer have an automatic opportunity for a personal hearing with OIG. Instead, they must submit a written request for an oral hearing.

OIG did back down from barring requests for reinstatement until the exclusionary period is over. Regulators agreed with critics that the time needed to process the request would extend the exclusionary period beyond the specified time. However, OIG cautions that merely obtaining a provider number does not reinstate anyone.