CMS just gained a new enforcement tool that healthcare providers cannot afford to ignore. For years, the HHS Office of Inspector General (“OIG”) has been the agency most closely associated with exclusion from federal healthcare programs. CMS, meanwhile, has relied on tools such as Medicare enrollment revocations, payment suspensions, and enrollment denials. That division is now changing. CMS has been granted authority to use the federal exclusion provisions historically exercised by OIG, giving the agency another powerful way to respond to alleged misconduct. The change may have significant consequences for physicians, pharmacies, healthcare organizations, and other providers participating in Medicare and Medicaid.
Exclusion is one of the most serious sanctions available under federal healthcare law. Under Sections 1128 and 1156 of the Social Security Act, an individual or entity may be excluded from participating in federal healthcare programs. Once excluded, a provider generally cannot receive payment from federal healthcare programs for items or services furnished, ordered, or prescribed by the excluded party. Historically, OIG has been responsible for exercising these exclusion authorities. CMS has instead used its own program-integrity tools, including enrollment denials, revocations, and payment suspensions. CMS’s expanded authority blurs that distinction. The agency can now potentially move beyond restricting a provider’s Medicare enrollment and pursue exclusion from federal healthcare programs. Providers facing an investigation or False Claims Act (“FCA”) matter have traditionally looked to OIG when assessing potential exclusion. OIG may agree not to exclude a provider as part of a resolution, including through an exclusion release. CMS can now enter this area as well. This raises a key question: Will an OIG resolution fully protect a provider from exclusion, or could CMS take separate action based on the same conduct? The same concern applies to voluntary disclosures. Providers should therefore address exclusion risk early when negotiating a settlement or making a disclosure.
Several important questions remain unanswered. CMS and OIG have not yet provided detailed guidance on how they will coordinate their exclusion authority, divide cases, or whether CMS will follow OIG’s existing procedures. The stakes are significant. Exclusion is more than a Medicare enrollment sanction. It can affect participation in federal healthcare programs and have broader consequences for a provider’s business and professional relationships. It is also unclear whether CMS will follow OIG’s existing administrative appeals process or establish its own procedures.
What Providers Should Do Now
Providers facing an audit, investigation, payment suspension, enrollment action, FCA matter, voluntary disclosure, or settlement discussion should evaluate exclusion exposure alongside other potential penalties. Providers should also continue screening employees and contractors against OIG’s List of Excluded Individuals/Entities (“LEIE”), as relationships with excluded individuals or entities can create additional federal healthcare program exposure. Most importantly, exclusion should be addressed when negotiating resolutions with federal agencies. The expansion of CMS’s authority means that an enrollment issue may no longer be merely an enrollment issue, making exclusion risk an important part of any federal healthcare enforcement strategy. Given the significant consequences of exclusion, providers should closely monitor further guidance from OIG and CMS as the agencies begin to implement this expanded authority. Until the agencies provide greater clarity, providers with pending investigations or settlement negotiations should work with counsel to assess potential exclusion exposure, raise the issue during resolution discussions, and consider appropriate protections as part of any settlement or other resolution.
