The OIG defines "Indirect Providers" as those individuals or entities who provide items and services to health care providers, practitioners or suppliers without billing the Federal Programs. Generally, Indirect Providers include individuals and entities that manufacture or supply certain medical equipment and supplies to direct providers for use in their practice. The direct providers subsequently bill the Federal Programs for these items and services. Under the OIG's final rule, Indirect Providers who are deemed unfit to participate in Federal Programs may be excluded, and the direct providers will not receive any reimbursement for the items or services supplied by such individuals and entities. Moreover, direct providers who continue to contract with excluded Indirect Providers will be subject to a new civil money penalty imposed by the OIG.
As one can imagine, the OIG's final rule has caused great concern among Indirect Providers as well as health care providers, practitioners, and suppliers. Several individuals submitted written comments to the OIG and argued that the agency lacked authority to penalize individuals or entities that do not participate directly in the Federal Programs. However, the OIG asserts that several statures implicitly provide the OIG with such authority. As an example, the OIG cited a provision in the Social Security Act, which authorizes the agency to exclude administrators of health care institutions from the Federal Programs. As another example, the OIG referred to the Balanced Budget Act of 1997 in which Congress enacted a civil money penalty to deter providers from doing business with excluded individuals or entities, regardless of whether they submit claims to Federal Programs. The OIG concluded that these types of provisions relating to exclusion of individuals who do not submit bills to Federal Programs implicitly authorize the OIG to exclude Indirect Providers. Despite the OIG's assertions, the statutory authority for exclusions of Indirect Providers is still questionable. Therefore, concerned Indirect Providers may seek to challenge this alleged "implicit authority" in the federal courts.
Critics have also expressed concern that limiting the number of available or appropriate equipment or supplies through exclusion of Indirect Providers could have anti-competitive effects and may even result in beneficiaries being denied services or supplies. The OIG responded by stating that it has previously excluded many Indirect Providers such as nurses, home health aides, and laboratory technicians from the Federal Programs. According to the OIG, beneficiaries have not been denied services or supplies as a result of such exclusions. The OIG stated that untrustworthy individuals and entities must be excluded from the Federal Programs when warranted, regardless of whether they submit claims for reimbursement to the Federal Programs.
Perhaps the most powerful impact of this final rule will be felt by direct providers because Federal Programs will not reimburse them for any item or service supplied by an excluded Indirect Provider. Also, the OIG intends to impose a civil money penalty against direct providers who arrange or contract with any indirect provider whom they " know or should know" is excluded from the Federal Programs. The OIG stated specifically that direct providers must keep themselves apprised of all exclusions to ensure that their claims are reimbursable and to ensure that they are not subject to a civil money penalty for contracting with or employing an individual or entity that is excluded. Thus, direct providers not only must monitor and ensure their own compliance with the maze of Medicare regulations, they now have to incur additional costs to remain apprised of current program exclusions so that they will not face reimbursement denials and civil money penalties.