Health Care Regulation and Compliance Alert for Facilities Accepting Federal Funding/Reimbursement

Date: October 19, 2006

It's a little known fact that can be costly for medical facilities, including Continuing Care Retirement Communities (CCRCs) - if you accept payment through a Federal health care program, you could be penalized for employing or contracting with excluded individuals or entities. 

The Balanced Budget Act of 1997 authorizes the Office of the Inspector General (OIG) to impose civil money penalties (CMP) against providers and entities that employ or contract with excluded individuals or entities to provide items or services that will be paid for by a Federal health care program.  This prohibition applies whether the reimbursement by a Federal health care program is based on itemized claims, cost reports, fee schedules, or a prospective payment system.

Penalties may even be imposed even if the excluded individual/entity does not provide direct care to patients or facility residents. The employer or contractor may be subject to possible CMP liability if services or items provided by the excluded party are "a necessary component of providing services to Federal program beneficiaries." [1] 

What could cause my facility to have a CMP liability?

·       Services performed by excluded nurses, technicians, or other excluded individuals (including administrative duties) if the services are reimbursed directly or indirectly by a Federal health care program;

·       Services performed by the facility at the direction or prescription of a resident's private physician, if that physician is excluded from participation;

·       Services performed by excluded ambulance drivers and other employees involved in providing transportation reimbursed by a Federal health care program;

·       Services performed by excluded social workers;

·       Administrative services by an excluded administrator, billing agent, accountant, claims processor or utilization reviewer that are related to and reimbursed by a Federal health care program;

·       Items or services provided to the residents or patients by an excluded individual who works for an entity that is a contractor of the facility and is paid by, a Federal health care program;

·       Items or equipment sold by an excluded manufacturer or supplier, used in the care or treatment of beneficiaries and reimbursed by a Federal health care program (this includes catering services, housekeeping and janitorial services, materials suppliers, etc.) [2]

What can my facility do to prevent a CMP?

·       Check the OIG List of Excluded Individuals/Entities on the OIG website prior to hiring or contracting with any individual or entity.

·       Include in your search those employees and contractors who have non-direct involvement in resident care but are necessary to providing items and services to Federal program beneficiaries.

·       Include a check of the Exclusion List as part of the credentials screening process of residents' private physicians.

·       Establish procedures that mandate periodic checks of the Exclusion List in order to determine the participation/exclusion status of current employees and contractors.

·       Establish procedures that require self-disclosure of exclusion status from employees and contracting entities. 

If you have any questions or concerns, contact Rose M. Matricciani at 410.347.9476 or

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This alert has been prepared for general information purposes

only and is not intended as specific legal advice.