Common OIG Violations Found in Practices Just Like Yours (42 CFR § 1001.1901)
Executive Summary
The Office of Inspector General (OIG) enforces federal healthcare program integrity requirements to protect Medicare, Medicaid, and other federal healthcare programs. Under 42 CFR § 1001.1901, federal healthcare programs may not pay for items or services furnished, ordered, or prescribed by excluded individuals or entities. For small practices, violations are often unintentional but can still result in significant financial exposure, including repayment of non-payable claims and potential civil monetary penalties assessed under 42 CFR Part 1003.
This article outlines common OIG violations frequently identified in small healthcare practices, explains the governing regulatory framework, presents a real-world enforcement scenario, and provides structured self-audit tools and best practices to help practices reduce compliance risk.
Introduction
Small healthcare practices face unique operational challenges. Limited administrative staff, budget constraints, and competing clinical priorities often cause compliance tasks to receive less attention than direct patient care. Despite these constraints, OIG oversight applies equally to organizations of all sizes.
Many OIG violations uncovered in small practices stem from misunderstandings of regulatory requirements rather than deliberate misconduct. Common issues include failure to screen staff against the OIG List of Excluded Individuals and Entities (LEIE), delayed return of identified overpayments, and insufficient documentation to support billed services. Regulators do not distinguish between intentional and unintentional violations when determining whether claims are payable.
Understanding the most frequent OIG violations allows practice owners to anticipate risk and implement practical safeguards before enforcement actions occur.
Regulatory Breakdown
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.
This prohibition applies broadly to both clinical and non-clinical roles when the individual’s work is connected to federally reimbursed services.
Enforcement Under 42 CFR Part 1003
When non-payable claims are submitted or exclusion-related violations occur, enforcement authority arises under 42 CFR Part 1003, the Civil Monetary Penalties Law. Depending on the facts and circumstances, consequences may include:
-
Civil monetary penalties assessed per violation
-
Assessments based on the value of improper claims
-
Repayment of overpayments
-
Additional monitoring or oversight requirements
Penalty amounts and assessments are case-specific and are not fixed by § 1001.1901 itself.
Why Violations Occur in Small Practices
OIG enforcement actions against small practices frequently involve similar root causes:
-
Failure to conduct ongoing exclusion screening
-
Reliance on incomplete or informal documentation
-
Lack of processes to identify and return overpayments promptly
-
Assumptions that non-clinical staff do not affect claim eligibility
These gaps expose practices to avoidable compliance risk.
Case Study: Exclusion Screening Failure
A small physical therapy clinic screened a billing assistant at hire but did not perform periodic re-screening. Eighteen months later, a Medicaid audit revealed that the assistant had been added to the OIG LEIE during employment.
Because the assistant processed claims tied to federal healthcare programs, claims associated with their work were reviewed under 42 CFR § 1001.1901. The clinic was required to repay identified overpayments and faced additional enforcement scrutiny under 42 CFR Part 1003.
Key Lesson
Exclusion screening is not a one-time activity. Ongoing, documented screening is critical to demonstrating reasonable diligence.
Self-Audit Checklist: Common OIG Risk Areas
-
Exclusion Screening
Screen all employees, contractors, and vendors connected to claims. -
Documentation Retention
Retain screening logs, repayment records, and compliance documentation consistent with federal retention standards. -
Overpayment Identification
Maintain processes to identify and address overpayments promptly. -
Billing Accuracy
Periodically review claims for documentation support and program compliance. -
Training Records
Ensure staff receive compliance training and that attendance is documented. -
Escalation Procedures
Maintain written procedures for responding to identified compliance issues. -
Leadership Oversight
Document leadership review of compliance findings and corrective actions.
Common Pitfalls and How to Avoid Them
Screening Only at Hire
Avoidance: Implement recurring screening schedules.
Overlooking Non-Clinical Staff
Avoidance: Include billing, administrative, and support roles in screening processes.
Delayed Overpayment Resolution
Avoidance: Act promptly once an overpayment is identified.
Incomplete Documentation
Avoidance: Maintain dated, consistent compliance records.
Assuming Small Size Limits Enforcement
Avoidance: Recognize that enforcement standards apply regardless of practice size.
Best Practices for Small Practices
-
Use OIG’s free LEIE search tools
-
Integrate screening into existing administrative workflows
-
Centralize compliance documentation
-
Conduct periodic internal self-audits
-
Document corrective actions clearly and consistently
These measures help practices demonstrate good-faith compliance efforts during audits and reviews.
Building a Culture of Compliance
Compliance is most effective when embedded into daily operations. Leadership involvement, shared accountability, and transparency reinforce the importance of screening, documentation, and oversight. When staff understand that compliance protects both patients and the practice, adherence improves across all roles.
Conclusion
Under 42 CFR § 1001.1901, claims associated with excluded individuals are not payable, and enforcement consequences may arise under 42 CFR Part 1003. Small practices frequently encounter OIG violations due to process gaps rather than intentional misconduct, but the consequences can still be severe.
By understanding common violations, conducting regular self-audits, maintaining documentation, and embedding compliance into daily workflows, small practices can significantly reduce their exposure to enforcement actions and protect their long-term viability.
Strengthening compliance isn’t just about checking boxes. A compliance platform helps your practice stay ahead by tracking regulatory requirements, running proactive risk assessments, and keeping you audit-ready, proving to patients and regulators that you prioritize accountability.