OIG vs. State Medicaid Lists: What You Must Check (42 CFR § 1001.1901)

Healthcare providers are required to ensure that excluded individuals do not participate in services reimbursed by federal healthcare programs. Under 42 CFR § 1001.1901, no payment may be made for items or services furnished, ordered, or prescribed by excluded individuals or entities. While most small practices are familiar with the Office of Inspector General’s (OIG) List of Excluded Individuals and Entities (LEIE), many overlook state Medicaid exclusion lists, which operate independently of the federal list.

Failure to check both federal and state exclusion sources exposes practices to non-payable claims, repayment obligations, civil monetary penalties assessed under 42 CFR Part 1003, and reputational harm. This article explains the difference between OIG and state Medicaid exclusion lists, outlines enforcement risk, presents a real-world case study, provides a self-audit checklist, identifies common pitfalls, and highlights defensible best practices for small clinics.

Exclusion screening is a cornerstone of healthcare compliance. By identifying individuals and entities barred from participation in federal or state healthcare programs, exclusion lists protect program integrity and patient trust. For small clinics, confusion often arises around which exclusion lists must be checked, how often, and why federal screening alone is insufficient.

The OIG’s LEIE is the primary federal exclusion database. However, state Medicaid agencies maintain their own exclusion lists, which may include individuals excluded for state-specific reasons not reflected on the federal list. Relying exclusively on the LEIE leaves clinics exposed to state-level enforcement actions even when federal screenings are performed consistently.

Small clinics must therefore establish processes to screen both federal and applicable state lists, document results, and demonstrate reasonable diligence.

Regulatory Breakdown

42 CFR § 1001.1901 – Effect of Exclusion

42 CFR § 1001.1901 governs the payment effect of exclusion. The regulation provides that:

• No payment may be made under Medicare, Medicaid, or any other federal healthcare program for items or services furnished, ordered, or prescribed by an excluded individual or entity.

• This prohibition applies regardless of whether the exclusion originates at the federal or state level, if the individual is excluded from participation in the program being billed.

• Claims associated with excluded individuals are considered non-payable and may be subject to repayment.

The regulation focuses on payment eligibility, not the mechanics of screening. Responsibility rests with the provider to implement safeguards preventing excluded individuals from participating in claim-related activities.

OIG List of Excluded Individuals and Entities (LEIE)

• Maintained by the Office of Inspector General

• Applies to all federal healthcare programs

• Updated monthly

• Includes individuals and entities excluded due to fraud, abuse, or other federal enforcement actions

• Must be checked prior to engagement and on an ongoing basis as part of compliance diligence

State Medicaid Exclusion Lists

• Maintained independently by each state Medicaid agency

• May include individuals excluded for state-specific reasons, such as licensing actions, Medicaid fraud, or disciplinary findings

• Names may not appear on the federal LEIE

• Apply to claims submitted to that state’s Medicaid program

Failing to check state Medicaid exclusion lists may result in Medicaid claims being deemed non-payable, even when the individual does not appear on the LEIE.

When excluded individuals participate in services connected to federal or state healthcare program claims:

• Claims may be deemed non-payable under 42 CFR § 1001.1901

• Overpayments must be identified and repaid

• Civil monetary penalties and assessments may be imposed under 42 CFR Part 1003, based on the facts and circumstances of the case

• Repeated or serious failures may result in additional oversight or exclusion actions

Penalty amounts are case-specific and are not fixed by § 1001.1901.

A small behavioral health clinic hired a licensed counselor and conducted OIG LEIE screening at onboarding. The clinic continued to perform monthly LEIE checks but did not screen the state Medicaid exclusion list.

During a state Medicaid audit, investigators discovered that the counselor had been excluded from Medicaid by the state due to licensing action. The exclusion did not appear on the federal LEIE. All Medicaid claims associated with the counselor’s services during the exclusion period were deemed non-payable.

Outcome

• Medicaid overpayments were identified and required to be repaid

• Additional enforcement scrutiny followed

• The clinic was required to implement corrective compliance controls

Key Lesson

Federal screening alone is insufficient. State exclusion lists must also be reviewed.

Common Pitfalls and How to Avoid Them

Relying Only on the LEIE

Avoidance: Include applicable state Medicaid exclusion lists in screening workflows.

Screening Only at Hire

Avoidance: Conduct recurring screenings aligned with updated exclusion data.

Overlooking Non-Clinical Roles

Avoidance: Screen all individuals connected to billing or service delivery.

Poor Documentation

Avoidance: Maintain dated, defensible logs for each screening.

Delayed Response to Matches

Avoidance: Suspend affected duties until exclusion status is resolved.

• Use free OIG and state Medicaid search tools

• Align screening schedules with payroll or billing cycles

• Centralize documentation for audit readiness

• Assign clear responsibility for screening tasks

• Train staff on federal vs. state exclusion differences

These practices help demonstrate reasonable diligence during audits and investigations.

Effective compliance requires more than checklists. Leadership engagement, staff awareness, and transparency ensure that exclusion screening is treated as a routine operational safeguard rather than an administrative burden.

When staff understand the importance of checking both federal and state exclusion lists, compliance gaps are less likely to occur.

Under 42 CFR § 1001.1901, claims associated with excluded individuals are not payable, regardless of whether the exclusion originates at the federal or state level. While the OIG LEIE is essential, state Medicaid exclusion lists must also be checked to ensure full compliance.

By implementing dual screening processes, maintaining documentation, and embedding compliance into daily operations, small clinics can reduce enforcement risk, protect patient trust, and safeguard financial stability.

To safeguard your practice, adopt a compliance management system. These tools consolidate regulatory obligations, provide ongoing risk monitoring, and ensure you’re always prepared for audits while demonstrating your proactive approach to compliance.

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

• Federal Register. Civil Monetary Penalties, Assessments, and Exclusions (42 CFR Part 1003)