How Small Practices Can Prepare for a CMP Investigation (42 CFR § 1003.102)

Civil Monetary Penalties under 42 CFR § 1003.102 empower the HHS Office of Inspector General (OIG) to impose fines, assessments, and exclusion from federal healthcare programs for conduct such as false claims, contracting with excluded persons, and improper remuneration. Small practices should treat CMP risk as an operational hazard because a single systemic error or the hiring of an excluded individual can trigger penalties that scale by claim and by day, creating outsized financial risk. Proactive evidence preservation, documented remediation, and consistent internal processes substantially reduce the probability of severe enforcement outcomes and improve negotiating leverage if an investigation occurs. Prompt, well-documented responses, not silence or ad-hoc fixes, are often the difference between a manageable settlement and crippling penalties. 

CMP inquiries can begin in many ways: a beneficiary complaint, a payer recovery audit, data analytics that flag billing anomalies, a whistleblower, claim, or a downstream contractor alert. For small practice owners, these triggers create an urgent need to be able to assemble accurate, auditable responses quickly. The law referenced in this guide, (42 CFR § 1003.102(a)–(b)) and related sections in Part 1003, defines the specific types of conduct that can give rise to CMPs, and the OIG’s public enforcement activity shows that such cases involve both large systems and small providers. Understanding the statutory exposure and putting inexpensive routines in place dramatically lowers long-term risk. 

Understanding How Small Practices Can Prepare for a CMP Investigation Under 42 CFR § 1003.102

The CFR provisions at Part 1003 articulate bases and procedures for CMPs, assessments, and exclusions. Section 1003.102 lists specific grounds (such as submitting false or fraudulent claims, making false statements, or contracting with excluded individuals) that the OIG can pursue administratively.(42 CFR § 1003.102(a)) For operational readiness, the critical takeaway is that investigators trace financial flows and document chains: who ordered the service, who provided it, what the documentation shows, and whether any remuneration or exclusion issues exist. A narrow, evidence-focused readiness plan maps directly to those investigative threads and helps prioritize which records to preserve first. 

Why this reduces risk: an organized packet demonstrating prompt discovery, investigation, repayment where appropriate, and corrective action is often treated as mitigation when settlements are negotiated; conversely, ad hoc responses or missing documentation can lead to escalated penalties. The OIG’s published enforcement actions show repeated patterns where prompt repayment and cooperation materially affected outcomes.

While OCR enforces HIPAA rules and does not impose CMPs for the specific prohibited conduct covered by OIG, its investigations can overlap with CMP inquiries when a privacy breach accompanies potential fraud. If an investigation touches PHI handling (for example, wrongful access to charts used to support claims), OCR may open a parallel compliance review. Therefore, practices should coordinate privacy incident response with CMP preparation: segment PHI-related logs, document access controls, and preserve audit trails. Treat OCR as a parallel risk domain that can amplify consequences if privacy failures are found during a CMP inquiry. 

These steps are practical, low-cost, and designed for owners with limited administrative resources. Each is tailored to the specific exposures under (42 CFR § 1003.102(a)(1)–(6))

Step 1, Design an "Investigation Packet" Template

How to comply: Create a short standardized packet that includes an incident header, a factual timeline, list of potentially affected claims, staff names, and an index of attachments. Required evidence: one-page header, claim ID spreadsheet, and an index. Low-cost implementation: use a Word template stored in a secure cloud folder and require the office manager to populate it when an issue is flagged. This packet is the core artifact you will produce for counsel and, if necessary, investigators. 

Step 2, Data Preservation Protocols

How to comply: Immediately export command logs, billing runs, EHR entries, and supporting documents to read-only formats (PDF/CSV) and save them in a dated evidence folder. Required evidence: exported files with metadata, storage audit trail. Low-cost implementation: identify a staff member responsible for preservation and keep a simple checklist. Preservation demonstrates integrity and reduces disputes over late or missing data. 

Step 3, LEIE and Exclusion Checks

How to comply: Verify every new hire and contractor against the OIG List of Excluded Individuals/Entities (LEIE) and check periodically for current staff. Required evidence: dated screenshots or CSV exports of LEIE checks and HR files showing the check. Low-cost implementation: schedule monthly checks and save CSV downloads; many clinics use a single spreadsheet to log checks rather than expensive software. Hiring an excluded person can itself be a basis for CMPs, so this simple step is high-impact  (42 CFR § 1003.102(a)(2)–(3)). 

Step 4, Rapid Chart-to-Claim Sampling

How to comply: Pull a small statistically relevant sample of charts tied to the suspect billing codes and compare clinical documentation to billed services. Required evidence: sampled charts, sampled claims, and a short discrepancy memo. Low-cost implementation: do two- to five-chart spot checks per clinician; document the method and results to show a reasoned approach rather than ad hoc selection. Sampling helps quantify exposure and prioritize corrective action. 

Step 5, Overpayment Identification and the 60-Day Rule

How to comply: If an overpayment is identified, track it in an overpayment register and follow the CMS/OIG guidance for timely reporting and return. Required evidence: overpayment register, calculation worksheet, proof of repayment or correspondence with payer. Low-cost implementation: maintain a simple spreadsheet that tracks identification date, investigation status, calculation, and repayment. Failing to follow the statutory timeline increases enforcement leverage. 

Step 6, Documented Remediation and Prevention

How to comply: Prepare a remediation memo describing root cause, immediate fix, repayment actions, and long-term prevention steps. Required evidence: remediation memo, training logs, and updated policies. Low-cost implementation: a one-page memo and a brief staff training session recorded as an attendance sheet, these artifacts weigh heavily in mitigation discussions. 

Step 7, Communications, Counsel, and Privilege Preservation

How to comply: Log all communications, and seek counsel before producing privileged work product. Required evidence: communications log, counsel engagement records, and redacted legal memos retained separately. Low-cost implementation: keep a list of affordable healthcare lawyers that offer limited-scope engagements and use an engagement letter to preserve privilege. Legal involvement early preserves options like voluntary self-disclosure and settlement negotiations. 

Step 8, Financial Modeling and Contingency Planning

How to comply: Model potential penalty ranges and repayment scenarios to understand worst-case liquidity needs. Required evidence: simple financial model and notes. Low-cost implementation: use a spreadsheet to estimate exposure under different settlement scenarios and plan access to short-term funds or lines of credit if needed. Knowing the financial upside/downside informs settlement decisions and operational continuity planning.

Case Study

A small orthopedic clinic discovered during an internal chart review that a bundle of PT charges lacked adequate documentation after a new billing rule was applied. The practice followed the steps above: they assembled an investigation packet, sampled 25 claims to estimate exposure, froze billing for the affected code series, contacted the payers with voluntary repayment offers for straightforward overpayments, documented remediation steps (updated EHR templates and an immediate staff training), and retained counsel for negotiation. The OIG enforcement history shows that early repayment and organized remediation often lowers CMP assessments; in the clinic's case, the payers accepted repayment and no OIG action followed, though the clinic paid three months of extra billing staff time and legal fees. This case shows how documented, proactive responses limit long-term reputational damage and avert exclusion risk. 

Simplified Self-Audit Checklist for How Small Practices Can Prepare for a CMP Investigation (42 CFR § 1003.102)

Below is a slightly expanded audit table you can paste into your operation's binder. Every row supports evidence likely to be requested during a CMP inquiry.

These errors commonly increase CMP exposure; each item explains the legal risk and a short practical consequence.

• No immediate preservation of data. Investigators often treat missing records as evidence of poor internal controls or obstruction, increasing the chance of higher penalties. The fix is a short preservation checklist executed at discovery.

• Not checking LEIE routinely. Hiring or contracting an excluded person can be the basis for a CMP and exclusion; periodic checks reduce this risk.

• Failing to document remediation. Quiet fixes without dated memos reduces mitigation leverage; always memorialize actions with dates and signatures.

• Ignoring overpayment timelines. Delays in investigating and reporting overpayments can be treated as noncooperation or worse under statutory rules.

Each of these fixes directly tightens the documentary record that OIG will evaluate and reduces settlement leverage against the practice.

These best practices are deliberately low-cost to fit small-practice budgets.

• Automate LEIE checks with calendar reminders and archive CSVs; it's inexpensive and directly lowers exclusion risk.

• Keep a dedicated overpayment worksheet with owner sign-off and timestamps to document the 60-day investigative discipline.

• Adopt a single remediation memo template so that every corrective action is consistently documented and indexed.

• Train staff annually on the investigation packet process and preservation steps; low-cost training prevents bigger problems.

These steps align directly with OIG priorities under Part 1003 and are designed to create tangible mitigation artifacts without large budgets.

Practical integration ideas include: short weekly "compliance minutes" during staff huddles, assigning a rotating compliance champion to manage LEIE checks, conducting quarterly mock-packet drills, and including a compliance checklist in new-hire orientation. Leadership involvement and visible management sign-off on remediation memos make the program credible to external reviewers. These cultural investments reduce human error and make the documentation you need during a CMP inquiry routine rather than panic-driven.

Final summary: (42 CFR § 1003.102(b)(11)) exposes small practices to CMP risk arising from excluded hires, false claims, improper remuneration, and unreturned overpayments. The highest-return preparedness actions are preserving evidence, maintaining LEIE discipline, documenting remediation and repayments, and consulting counsel early. Implement the Investigation Packet template this month, add LEIE checks to a calendar, and create a simple overpayment register.

Advisers subsection: rely on the following affordable or free resources: the eCFR text for 42 CFR Part 1003 (for authoritative regulatory language), the HHS OIG LEIE/exclusions page (for routine staff checks and CSV downloads), and the OIG enforcement actions pages (to review settlements and learn mitigation patterns). For low-cost tools, use calendar reminders, secure cloud storage for evidence, spreadsheet templates for overpayment registers, and limited-scope counsel engagements for notice responses. 

• Electronic Code of Federal Regulations, 42 CFR Part 1003 (Civil Money Penalties, Assessments and Exclusions)

• U.S. Government Publishing Office, Office of Inspector General–Health Care, HHS § 1003.102 (govinfo)

• HHS Office of Inspector General, Exclusions Program / List of Excluded Individuals and Entities (LEIE)