Employee Hiring and Retention: Watching Out for Excluded Employees

Ericka L. Adler, JD, LL.M


December 12, 2022

I recently worked on a sales transaction involving a large physician practice. Like all transactions, there is a significant review of the practice's compliance with federal and state laws.

In this instance, one issue that arose during diligence was the practice's policy for checking new and existing employees and contractors against the US Department of Health and Human Services' Office of Inspector General (OIG) List of Excluded Individuals and Entities (LEIE).

Although the practice regularly conducted criminal background and reference checks on all new hires, it was completely unaware of the LEIE's existence or any ongoing requirement to review the LEIE.

Unfortunately, lack of familiarity with the LEIE is not uncommon among independent physician practices and can have significant consequences for these practices and other healthcare organizations.

The LEIE is a government-maintained database, found here, and is updated monthly. The list contains the names of individuals and entities that are excluded from participation in federal programs and generally prohibited from receiving federal funds, such as Medicare and Medicaid dollars. The prohibition can be for a variety of reasons, including fraud crimes under a federal or state healthcare program, patient abuse and neglect and other types of felonies or financial improprieties.

The list also includes, but is not limited to, individuals with convictions and penalties related to drug crimes; license actions related to professional competence; kickback arrangements; defaulting on health education loan or scholarship obligations; being in control of a sanctioned entity (ie, owner managing employee) and other types of infractions. "Mandatory" exclusions generally result from convictions for program fraud, drug offenses, and patient abuse. Other infractions are considered "permissive" and may or may not result in an individual or entity being added to the LEIE, such as licensure suspension or revocation (which is one of the top reasons for individuals to be added to the LEIE).

An explanation for permissive vs mandatory exclusions can be found as follows: mandatory (42 U.S. Code § 1320a–7) and permissive [42 U.S. Code § 1320a-7(b)]. Most states also maintain their own exclusion lists which can overlap with the LEIE, but which also should be checked regularly to assure compliance. There are also other similar databases depending on the type of business in which a practice is involved, which should be confirmed with legal counsel for applicability.

Under the law, no federal healthcare payments can be made to a person or entity for an items or service furnished by an excluded person (or at their direction). Excluded persons are not just physicians and healthcare personnel. They include those persons or entities that might furnish administrative and management services for a clinician or practice that bills a healthcare program, or someone in an executive or leadership role (eg, chief executive officer, chief financial officer, general counsel, office manager, etc.).

Excluded individuals also cannot provide other types of administrative and management services, such as health information technology services and support, strategic planning, billing and accounting, staff training, and human resources, unless completely unrelated to federal healthcare programs.

While many physician practices will screen physicians and mid-levels on the LEIE (and even include language in employment agreements addressing exclusion), practices may not realize that their billing staff, practice managers, and other administrative staff should also be screened in a similar manner. Practices and other healthcare entities that discover they have employed an individual on the LEIE should promptly talk to legal counsel about the repercussions and legal options available.

Information about the impact of an exclusion and how to self-disclose using the government's protocol can also be helpful. The actual consequence for employing (or allowing ownership of a practice by) an individual on the LEIE can be significant.

In general, this can include denial of reimbursement for all items or services billed by the practice or entity while the excluded individual was an involved; repayment of all amounts received for items or services during the period of time such individual was involved; civil monetary penalties of $10,000 for each item or service provided by the excluded entity or individual for which payment is submitted to government payers (and penalties of three times the amount claimed for such items or services). In addition, the practice itself can be excluded for having improperly submitted claims to a federal program while having employed or otherwise engaged with an excluded individual.

To best protect your healthcare business, it is essential to screen all employees and contractors at the time of hiring and on a monthly basis thereafter. Because it can take months for some exclusions to appear on the OIG LEIE, this constant checking is recommended.

Practices should also independently check the state Medicaid exclusion list for the states in which they operate. Because so many people have similar names, practice should be careful to investigate any positive results before taking action. Finally, practices should also confirm that any contractors or vendors rendering services to the practice also confirm upon hire (and regularly thereafter) that neither they, nor their employees or contractors, are excluded. It also is ideal to include this requirement in any written contract between the parties.

A medical practice or other healthcare entity's failure to satisfy basic compliance requirements can have significant financial and legal repercussions. If your practice is uncertain of the requirements it is mandated to follow under federal or state law, there is no time like the present to become better informed and to start off 2023 with new policies in place.

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About Ericka Adler
Ericka L. Adler, JD, LL.M, is a shareholder and health law practice group manager for Chicago-based law firm Roetzel. She has nearly 25 years representing individual providers, physician groups, and other healthcare entities, focusing on regulatory and transactional healthcare law. Adler is also skilled in compliance counseling, handling mergers, sales and acquisitions of healthcare entities, and has deep experience with Stark, Anti-Kickback Statute, and other challenges facing healthcare professionals.

She also works with providers in HIPAA, fraud and abuse, billing audits, government investigations, and contract disputes.

Visit Ericka's blog and podcast.

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