By: David A. Zarett, Esq. and Lijia Sanchez, Esq.
Weiss Zarett Brofman Sonnenklar & Levy, P.C.

Effective January 6, 2017, the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services (HSS) issued a final rule that restructures its civil monetary penalty (CMP) regulations, shedding light on the agency’s review process in certain enforcement actions, particularly its evaluation of aggravating and mitigating circumstances.

In the new rule, the OIG clarified the regulatory scheme by creating violation-specific subparts for different CMPs, assessments or exclusions, including: (1) false and fraudulent claims, (2) anti-kickback and physician self-referral violations, (3) contracting organization misconduct, (4) Emergency Medical Treatment and Labor Act (EMTALA) violations, (5) Section 1140 of Social Security Act violations (prohibited use of words, letters, symbols, or emblems of HHS, CMS, Medicare or Medicaid in connection with marketing), (6) adverse action reporting and disclosure violations, (7) select agent program violations, (8) beneficiary inducement violations, (9) sale of Medicare supplemental policies, (10) drug price reporting, and (11) notifying a skilled nursing facility, and nursing facility, home health agency, or community care setting of a survey.

In addition, the new rule introduces a list of aggravating and mitigating circumstances the OIG considers in assessing CMPs and exclusions, in an effort to provide transparency to its decision-making process.  These include factors specific to each type of violation contained in the corresponding subpart and the following universally applicable factors:

  • The nature and circumstances of the violation;
  • The degree of culpability of the person against whom a CMP, assessment, or exclusion is proposed, including whether the person had actual knowledge, whether the person took appropriate and timely corrective action in response to the violation, which must include self-disclosure to OIG or CMS, as appropriate;
  • The history of prior offenses, including prior offenses of any direct or indirect owner, officer, or managing employee of an entity;
  • Other wrongful conduct. It is worth noting that the statute of limitations governing CMP proceedings does not apply to proof of other wrongful conduct as an aggravating circumstance; and
  • Such other matters as justice may require.

The OIG emphasizes, as demonstrated by the catch-all provision, that the above list of aggravating and mitigating factors is illustrative, rather than exclusive.  In assessing penalties, the OIG will conduct an analysis of all the facts and circumstances of a violation on a case-by-case basis, including the amount and substantiality of the mitigating or aggravating circumstances.  However, absent extraordinary mitigating circumstances, the aggregate amount of CMP will not be less than double the approximate amount of damages and costs sustained by the United States, or any State, as a result of the violation. The new rule expressly provides that the presence of any single aggravating circumstance may justify imposing a penalty and assessment at or close to the maximum even when one or more mitigating factors is present.

When determining the amount of any CMP, the OIG will also consider a person’s financial conditions, including the ability to reduce expenses or obtain financing to pay the proposed CMP.  The person must produce financial documentation, including audited financial statements, tax returns, and financial disclosure statements, as deemed necessary by the OIG.

The new rule also codifies the five new violations and corresponding penalties for false claims that the OIG has the authority to pursue under the Affordable Care Act (ACA):

  • Ordering or prescribing an item or service while the provider is being excluded from a federal health care program;
  • Knowingly making any false statement, omission, or misrepresentation of a material fact in any application or enrollment as a provider or a supplier under a federal health care program;
  • Knowing of an overpayment and failing to report and return the overpayment in accordance with the ACA;
  • Knowingly making a false record or statement material to a false or fraudulent claim for payment for items and services furnished under a federal health care program; and
  • Failing to grant timely access to records upon reasonable request, to the OIG, for the purpose of audits, investigations, evaluations, or other OIG statutory functions.

Other significant revisions include, but are not limited to, cross reference to the annual inflation adjustment of CMPs, including the initial catch up adjustments and the annual adjustments thereafter (the initial catch up adjustments can be found here) and removal of several mitigating factors to EMTALA violations (including patient voluntarily leaving the hospital).  With the increased stake and numerous technical revisions, providers and suppliers are encouraged to review the new final rule carefully and discuss their concerns with counsel.

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Weiss Zarett Brofman Sonnenklar & Levy, P.C. is a Long Island law firm providing a wide array of legal services to the members of the health care industry, including corporate and transactional matters, civil and administrative litigation, healthcare regulatory issues, bankruptcy and creditors' rights, and commercial real estate transactions.