When an Underlying Misdemeanor or Felony Conviction is Expunged, Does That Extinguish an Exclusion Action?

When an Underlying Misdemeanor or Felony Conviction is Expunged, Does That Extinguish an Exclusion Action?
When an Underlying Misdemeanor or Felony Conviction is Expunged, Does That Extinguish an Exclusion Action?

(October 25, 2021): Medicare and Medicaid providers / suppliers are prohibited from employing individuals who have been excluded from participation in Federal health care benefits programs. Similarly, participating providers and suppliers are also obligated to ensure that any business affiliates (such as vendors, contractors and agents) have not been excluded from participation.  This article examines whether an individual convicted of a qualifying misdemeanor or felony who has been excluded is eligible to be hired if his or her felony conviction is later expunged from the criminal record.

I.  Exclusion Basics:

The Department of Health and Human Services (HHS), Office of Inspector General (OIG) has been the proverbial “tip of the spear” with respect to protecting Medicare, Medicaid and more than 100 other programs from waste, fraud and abuse.  During Fiscal Year 2020 alone, the OIG provided law enforcement oversight of more than $2.2 trillion in spending by HHS. One of the primary ways that the OIG protects patients and safeguards the financial integrity of the Medicare and Medicaid programs is through the agency’s exclusion of certain individuals and entities from participation in Federal health care programs.[1]

II. Mandatory vs. Permissive Exclusion Actions:

The OIG’s exclusion authority falls into two categories — “Mandatory Exclusions” and “Permissive Exclusions.”

Mandatory Exclusions — Mandatory exclusion actions are identified in Sections 42 U.S.C. §§ 1128(a)(1) – (4) of the Social Security Act (SSA).[2] If an individual or entity is convicted of certain program-related crimes, patient abuse, health care fraud or a controlled substance felony, the OIG is required by law to exclude the party from participation in Federal health care programs.[3] Conduct that requires the OIG to mandatorily exclude an individual or entity from participation in Federal health care benefit programs falls within the following categories:
(1) Conviction of program-related crimes — Any individual or entity that has been convicted of a criminal offense related to the delivery of an item or service under title XVIII or under any State health care program.

Comments: Notably, a covered conviction under 42 U.S.C. §1128(a)(1) would include either a misdemeanor or a felony, as long as it is related to the delivery of an item or service under the Medicare, Medicaid or another State health care program (such as the Children’s Health Insurance Program).

 (2) Conviction relating to patient abuse — Any individual or entity that has been convicted, under Federal or State law, of a criminal offense relating to neglect or abuse of patients in connection with the delivery of a health care item or service.

Comments:   Any conviction (including both a felony and a misdemeanor) related to the “neglect or abuse of patients” in connection with the delivery of a health care item or service requires that the OIG exclude the convicted individual or entity from participation. It is important to note that this basis for exclusion is not limited to patients covered under Federal and State health care benefit programs.    

(3) Felony conviction relating to health care fraud — Any individual or entity that has been convicted for an offense which occurred after the date of the enactment of the Health Insurance Portability and Accountability Act of 1996[4], under Federal or State law, in connection with the delivery of a health care item or service or with respect to any act or omission in a health care program (other than those specifically described in paragraph (1)) operated by or financed in whole or in part by any Federal, State, or local government agency, of a criminal offense consisting of a felony relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct.

Comments:   Unlike 42 USC §§1128(a)(1) and (2), this provision requires that the conviction be related to health care fraud, theft, embezzlement and other forms of financial misconduct AND that the conviction is a felony connected to the delivery of a Federal or State health care program. 

(4) Felony conviction relating to controlled substance — Any individual or entity that has been convicted for an offense which occurred after the date of the enactment of the Health Insurance Portability and Accountability Act of 1996, under Federal or State law, of a criminal offense consisting of a felony relating to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance.

Comments:   Under 42 USC §§1128(a)(4), an individual must be convicted of a felony under Federal or State law and that the conviction be related to the unlawful manufacture, distribution, prescription, or dispensing of a controlled substance.
 
Permissive Exclusions — Permissive exclusion actions are discretionary and can be imposed by the OIG for a broad range of offenses and improper conduct. There are currently eighteen different bases upon which the OIG may choose to exercise its permissive exclusion authority. These authorities are outlined in 42 U.S.C. §§ 1128(b)(1)-(17) and 42 U.S.C. §1156 of the SSA. Of the 18 permissive bases for exclusion, two of the statutory provisions (42 U.S.C. §§ 1128(b)(1) and (2)) involve an individual’s conviction of fraud or relating to obstruction of an investigation or audit.

In summary, depending on the specific facts in a case, if an individual is convicted of a covered felony or misdemeanor, the OIG may be required (or may exercise the discretion) to exclude a convicted individual from participating in Federal health care benefits programs.
In some instances, an individual convicted of a misdemeanor or felony who has subsequently been excluded by the OIG has subsequently gone in and succeeded in having his or her conviction expunged from the record.

III.  What is an Expungement Action?

An “expungement” is the “[p]rocess by which record of criminal conviction is destroyed or sealed from the State or Federal repository.”[5]  Simply put, an expungement action seeks to erase a criminal conviction from an individual’s criminal record.

In the United States, practically all expungement actions involve State court convictions and it is important to remember that the requirements for an expungement will vary from State to State.  Each State, for example, has its own laws about whose records are eligible for expungement, which offenses may be expunged, and the procedures that must be followed.  They will also have their own definitions and processes regarding the handling and management of records under an expungement order.  Expungement orders from Federal courts, on the other hand, are limited and extremely rare,[6] and there is no Federal statute governing its application at the Federal level.

IV.  If an Individual’s Conviction is Expunged, Can a Medicare / Medicaid Participating Provider Employ the Individual?

Despite the fact that an individual may succeed in getting an underlying conviction expunged, an excluded individual will still be barred from participating in Federal health care programs for the entire period of exclusion imposed by the OIG.

As set out under 42 U.S. Code § 1320a–7(i)(1), the definition of a “conviction” includes situations where an individual has succeeded in getting a judgment of conviction relating to criminal conduct expunged.  
(i) Convicted Defined — For purposes of subsections (a) and (b), an individual or entity is considered to have been “convicted” of a criminal offense—
(1) when a judgment of conviction has been entered against the individual or entity by a Federal, State, or local court, regardless of whether there is an appeal pending or whether the judgment of conviction or other record relating to criminal conduct has been expunged;
(2) when there has been a finding of guilt against the individual or entity by a Federal, State, or local court;
(3) when a plea of guilty or nolo contendere by the individual or entity has been accepted by a Federal, State, or local court; or
(4) when the individual or entity has entered into participation in a first offender, deferred adjudication, or other arrangement or program where judgment of conviction has been withheld.  (emphasis added).

As an employer, you may encounter situations where an individual will argue that since his or her conviction was expunged, any associated period of exclusion was no longer in effect. As discussed above, such a contention is incorrect. 

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[1] Among its various provisions, the Medicare-Medicaid Anti-Fraud and Abuse Amendments of 1977, Public Law 95-142, mandated that physicians and other health care providers convicted of certain program-related crimes be excluded from participated in the Medicare and Medicaid programs.  The authority to exclude was granted to the Secretary of the Department of Health and Human services in the Civil Money Penalties Law (Public Law 97-35, 1981 (as codified at section 1128A of the SSA). The Secretary delegated it to its Office of Inspector General in 1988 (53 Fed. Reg. 12,993 (April 20, 1988)).  Since this time, a number of further enhancements and expansions of OIG’s exclusion authorities have taken place. 
[3] The term “federal health care programs” is defined under Section 1128B(f) of the Social Security Act as: 
  • any plan or program that provides health benefits, whether directly, through insurance or otherwise, which is funded directly, in whole or in part, by the United States Government (other than the health insurance program under chapter 89 of title 5, United States Code); or
  • any State health care program, as defined in section 1128(h). 42 U.S.C. § 1320a-7b(f).
[4] August 21, 1996 [P.L. 104-191; 110 Stat.1936].
[5] Black’s Law Dictionary, p. 582 (6th ed. 1999).
[6] One exception involves convictions for minor drug offenses.  Under 18 U.S.C. 3607(c), “If the case against a person found guilty of an offense under section 404 of the Controlled Substances Act (21 U.S.C. 844) is the subject of a disposition under subsection (a), and the person was less than twenty-one years old at the time of the offense, the court shall enter an expungement order upon the application of such person. The expungement order shall direct that there be expunged from all official records, except the nonpublic records referred to in subsection (b), all references to his arrest for the offense, the institution of criminal proceedings against him, and the results thereof.”