3 Common OIG Screening Errors and How to Avoid Them (42 CFR § 1001.1901)

Exclusion screening is one of the most critical compliance safeguards for small healthcare practices, yet it is also one of the most frequently mishandled. Under 42 CFR § 1001.1901, federal healthcare programs may not pay for items or services furnished, ordered, or prescribed by excluded individuals or entities. When excluded individuals are involved in federally reimbursed services, associated claims are not payable and may trigger enforcement action.

This article examines three common exclusion screening errors, explains the regulatory framework governing the effect of exclusion, presents a real-world case study, provides a self-audit checklist, and outlines practical steps small practices can use to reduce compliance risk.

Small medical practices often operate under staffing constraints and financial pressure. Compliance activities such as exclusion screening may receive less attention than patient care or billing operations. However, failures in exclusion screening can expose practices to significant repayment obligations and regulatory scrutiny.

The Office of Inspector General (OIG) maintains the List of Excluded Individuals and Entities (LEIE). Providers that bill federal healthcare programs must be aware of whether individuals involved in claim-related activities are excluded. Exclusion-related risk is not limited to physicians or clinical staff; administrative employees, contractors, and vendors may also affect payment eligibility.

Regulatory Overview

42 CFR § 1001.1901 – Effect of Exclusion

42 CFR § 1001.1901 establishes the scope and effect of exclusion from participation in federal healthcare programs. The regulation provides that:

• Exclusion applies to Medicare, Medicaid, and all other federal healthcare programs.

• No payment may be made for items or services furnished by an excluded individual or entity after the effective date of exclusion.

• Payment is also prohibited for items or services furnished at the medical direction of, or on the prescription of, an excluded individual when the furnishing party knew or had reason to know of the exclusion.

• Excluded individuals may not submit claims or take assignment of claims during the exclusion period.

The regulation governs payment eligibility, not screening frequency or documentation methods.

Enforcement Authority

When non-payable claims are submitted or exclusion-related violations occur, enforcement authority arises under 42 CFR Part 1003, the Civil Monetary Penalties Law. Potential consequences may include:

• Civil monetary penalties

• Assessments based on improper claims

• Repayment obligations

• Additional oversight or monitoring requirements

Error 1: One-Time Screening Only

Many practices screen staff at hire but do not conduct periodic re-screening. Because exclusion status can change over time, relying solely on initial checks creates compliance gaps.

Impact:
If an individual becomes excluded after hire and continues to participate in claim-related activities, associated claims may become non-payable.

Error 2: Failure to Document Screening Results

Some practices perform screening activities but fail to retain documentation. During audits, undocumented screening is typically treated as if it never occurred.

Impact:
Without dated, detailed records, practices may be unable to demonstrate diligence in preventing non-payable claims.

Error 3: Overlooking Non-Clinical Roles

Practices sometimes assume that exclusion screening applies only to licensed providers. Administrative staff, billing personnel, contractors, and vendors may still be connected to federally reimbursed services.

Impact:
Claims may be affected when excluded individuals perform administrative or management functions tied to billing or service delivery.

A family medicine clinic hired a part-time receptionist who assisted with scheduling and billing support. The clinic screened the individual at hire but did not conduct further reviews.

Two years later, the receptionist was added to the OIG LEIE following a state Medicaid fraud conviction. During a Medicaid audit, investigators determined that the receptionist had participated in claim-related activities after exclusion.

Because the clinic could not demonstrate ongoing screening or documentation, claims associated with the individual were reviewed and repayment obligations followed, along with additional enforcement scrutiny.

Lesson Learned

Periodic review and documentation are essential to demonstrating reasonable diligence and limiting compliance exposure.

1. Identify Covered Individuals
   Determine which staff, contractors, and vendors are involved in furnishing, ordering, prescribing, or billing items or services paid by federal programs.

2. Perform Screening Activities
   Review exclusion information for identified individuals.

3. Document Results
   Record dates, reviewer information, and outcomes for each review.

4. Address Potential Matches
   Document investigation steps and final determinations.

5. Retain Records
   Store documentation consistently for future audits or reviews.

Common Pitfalls and How to Avoid Them

Relying on Informal Checks

Informal or undocumented reviews provide little evidentiary value.

Ignoring Administrative Functions

Administrative roles may still affect payment eligibility.

Inconsistent Retention

Lost or incomplete records weaken compliance defenses.

• Use standardized log formats

• Integrate screening into onboarding workflows

• Centralize documentation storage

• Periodically review logs for completeness and accuracy

These practices help ensure screening efforts remain consistent and defensible.

Exclusion screening is most effective when embedded into routine operations. Leadership involvement, clear accountability, and regular review reinforce the importance of accurate documentation and compliance awareness across all roles.

Under 42 CFR § 1001.1901, federal healthcare programs may not pay for items or services furnished, ordered, or prescribed by excluded individuals or entities. Screening errors such as one-time checks, poor documentation, and overlooking non-clinical roles can expose small practices to repayment obligations and enforcement action.

By identifying common errors, maintaining documentation, and integrating screening into everyday workflows, small practices can reduce compliance risk and demonstrate reasonable diligence.

Compliance should be a living process. By leveraging a regulatory tool, your practice can maintain real-time oversight of requirements, identify vulnerabilities before they escalate, and demonstrate to both patients and payers that compliance is built into your culture.

• U.S. Department of Health & Human Services, Office of Inspector General. 42 CFR 1001.1901 – Effect of Exclusion.

• U.S. Department of Health & Human Services, Office of Inspector General. List of Excluded Individuals and Entities (LEIE).

• U.S. Department of Health & Human Services, Office of Inspector General. Special Advisory Bulletin on the Effect of Exclusion from Participation in Federal Health Care Programs.

• Centers for Medicare & Medicaid Services. Medicare Program Integrity Manual.

• Federal Register. 42 CFR Part 1003 – Civil Money Penalties.

• U.S. Department of Health & Human Services. HIPAA Administrative Simplification Regulations, Documentation Retention (45 CFR 164.530(j)(2))