Employers must check its employees, contractors and vendors to see if an individual or organization is excluded from participating in federal and/or state programs. While there are a variety of exclusion programs at the federal and state level affecting individuals, entities, contractors and others related and unrelated to healthcare services, this post will address exclusion by the U.S. Department of Health and Human Services, Office of Inspector General (the “OIG”), a well-known entity that excludes individuals or entities from participation in federal healthcare programs. 42 U.S.C. § 1320a-7.

Who Gets Excluded?

The OIG is required by law to exclude individuals and entities from participation in all federal healthcare programs convicted of fraud, including:

(i) Medicare, Medicaid or state healthcare program fraud, as well as other offenses related to healthcare fraud;

(ii) patient abuse or neglect;

(iii) felony convictions for other healthcare fraud, theft, or other financial misconduct; and

(iv) felony convictions relating to the unlawful manufacture, distribution, prescription, or dispensing of controlled substances.

OIG has the discretion to exclude individuals and entities on a number of grounds, including:

(i) misdemeanor convictions related to healthcare fraud, theft or other financial misconduct, other than Medicare or a state health program;

(ii) fraud in a program (other than a healthcare program) funded by any federal, state or local government agency;

(iii) misdemeanor convictions relating to controlled substances;

(iv) suspension, revocation, or surrender of a license to provide healthcare for reasons bearing on professional competence, professional performance, or financial integrity;

(v) exclusion or suspension under federal or state healthcare program for professional performance, professional competence and financial integrity;

(vi) providing medically unnecessary or substandard services;

(vii) submission of false or fraudulent claims to a federal healthcare program;

(viii) engaging in unlawful kickback arrangements; and

(ix) controlling a sanctioned entity as an owner, officer, or managing employee.

What Is the Impact of an Exclusion?

The effect of an OIG exclusion is to broadly prohibit excluded parties from participation in federal healthcare programs, including Medicare, TRICARE and state healthcare programs (e.g., Medicaid or the Children’s Health Insurance Program (CHIP)). The “prohibition” extends to all claims for items or services covered by federal healthcare programs and are furnished, either directly or indirectly, by an excluded individual or entity, or at the direction or on the prescription of an excluded person.

The laws extend beyond the excluded individual to third parties. Generally, third parties may not bill for items or services furnished or ordered by an excluded person or entity. Additionally, providers may not employ, contract with, or arrange for an excluded individual or entity to provide items or services payable in whole or in part, directly or indirectly, by federal programs if such provider knew or should have known of the exclusion. While not barred from hiring an excluded individual, providers must avoid violating the exclusion laws. Thus, a provider or facility that employs or contracts with an excluded individual should be able to establish that: (1) federal healthcare programs do not pay, directly or indirectly, for the items or services being provided by the excluded individual, or (2) that the excluded individual furnished items or services solely to non-federal healthcare program beneficiaries. This may be difficult to establish in most healthcare settings.


If an individual or entity employs or contracts with an excluded individual, it may face a variety of civil and criminal penalties. This includes denial of payment for items or services provided in violation of the exclusion laws, and repayment of amounts improperly received in violation of the exclusion laws. Under the Affordable Care Act, providers must generally report and repay overpayments within 60 days or risk False Claims Act penalties, which include fines of $5,500 to $11,000 per claim, treble damages and program exclusion. 31 USC § 3729; 42 USC § 1320a-7k(d). Entities also risk being subject to 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 an assessment of up to three times the amount claimed for such items or services. 42 C.F.R. §§ 1001.1901(b)(3) and 1003.102(a)(2)-(3).

In addition to federal penalties, violators may also be subject to state exclusions, payment holds, recoupment and overpayment recoveries, damages and penalties, and may be required to submit extensive documentation in order to apply for eventual reinstatement. Significant reputational damage can also result from OIG or state investigations related to employing or contracting with an excluded entity. The OIG regularly publishes notifications of enforcement actions and settlements, and such actions are frequently covered in major media and healthcare industry publications.  

How to Check for Excluded Individuals or Entities

The OIG List of Excluded Individuals and Entities (“LEIE”) is an online and downloadable database list that is updated once per month. The list contains the names, addresses, NPI numbers and business details of individuals and organizations that have been excluded from participating in federal healthcare programs.

To avoid potential liability, entities should check the LEIE prior to employing or contracting with persons and periodically check the LEIE to determine the exclusion status of current employees and contractors. Because OIG updates the LEIE monthly, screening employees and contractors each month best minimizes the potential for overpayment and CMP liability. Note that the exclusion law generally applies if the provider “knew or had reason to know” of the exclusion, and therefore, the employer or provider bears the burden of checking for excluded individuals. 42 C.F.R. § 1001.1901(b)(1).   

Reddy’s Rule #4

To reduce risks: (1) regularly check employees or contractors in OIG’s LEIE database; (2) when performing checks, be aware of name changes, and (3) require any applicant, provider, employee or contractor to notify their employer immediately if they are excluded from state or federal programs.

Be well.