Reinstatement 101: A Guide for When Staff Return from OIG Exclusion (42 CFR § 1001.3001)

When a staff member has been excluded from participation in federal healthcare programs, reinstatement is neither automatic nor guaranteed. Under 42 CFR § 1001.3001, an excluded individual or entity must submit a formal request for reinstatement to the Office of Inspector General (OIG) after the exclusion period expires. Until OIG grants reinstatement in writing, the individual remains excluded and may not participate in federally reimbursed activities.

For small healthcare practices, misunderstanding reinstatement requirements can lead to employing an individual who is still excluded, resulting in non-payable claims and potential enforcement action. This article explains the reinstatement framework, outlines common risks, provides a case study, includes a self-audit checklist, and highlights best practices to help small practices manage reinstatement compliantly.

Small healthcare practices often face staffing shortages and may wish to rehire experienced employees whose exclusion periods have ended. However, many practice owners mistakenly assume that exclusion automatically ends when the stated period expires.

Federal regulations require affirmative action by the excluded individual and written approval by OIG before participation in federal healthcare programs may resume. Until that approval is received, claims associated with the individual remain ineligible for payment under 42 CFR § 1001.1901, and enforcement consequences may arise under 42 CFR Part 1003.

Understanding reinstatement requirements is critical to preventing avoidable compliance violations.

Regulatory Framework

42 CFR § 1001.1901 – Effect of Exclusion

Under 42 CFR § 1001.1901, federal healthcare programs may not pay for items or services furnished, ordered, or prescribed by an excluded individual or entity. This prohibition applies broadly to both clinical and non-clinical roles when their work is connected to federally reimbursed services.

Employing or contracting with an excluded individual before reinstatement is granted can result in non-payable claims and repayment obligations.

42 CFR § 1001.3001 – Reinstatement After Exclusion

42 CFR § 1001.3001 governs the timing and method of requesting reinstatement. Key provisions include:

• Reinstatement is not automatic.
   The excluded individual or entity must submit a written request for reinstatement to OIG after the exclusion period specified in the notice expires.

• Application alone does not restore eligibility.
   Obtaining a provider number or submitting an application does not reinstate participation.

• OIG review is required.
   OIG may request additional information and authorizations to evaluate whether reinstatement is appropriate.

• Written approval is mandatory.
   Reinstatement becomes effective only when OIG issues written notice approving the request.

Until these steps are completed, the individual remains excluded.

From a compliance perspective, rehiring an individual who is still excluded is treated the same as hiring someone who was never eligible. Claims associated with that individual’s work may be deemed non-payable, and repayment obligations can accrue quickly.

Because reinstatement status is determined solely by OIG’s written approval, reliance on verbal assurances or application receipts is insufficient.

Case Study: Premature Rehire After Exclusion

A small family practice planned to rehire a billing supervisor who had completed a three-year exclusion period. The individual provided documentation showing that a reinstatement application had been submitted to OIG.

Believing this was sufficient, the practice allowed the employee to resume billing duties. During a Medicaid audit, investigators confirmed that OIG had not yet approved the reinstatement request. All claims processed during this period were reviewed, resulting in substantial repayment obligations and additional scrutiny.

Key Takeaway

An application for reinstatement does not restore eligibility. Only written approval from OIG permits participation in federal healthcare programs.

1. Confirm Exclusion End Date
   Review the original exclusion notice to determine when the individual may apply for reinstatement.

2. Require Written OIG Approval
   Do not allow the individual to resume federally connected duties until written reinstatement approval is received.

3. Verify LEIE Status
   Confirm removal from the OIG LEIE and document the search results.

4. Check State Exclusion Lists
   Ensure state Medicaid programs also recognize reinstatement.

5. Document and Retain Records
   Maintain all verification materials in personnel and compliance files.

Common Pitfalls and How to Avoid Them

Assuming Reinstatement Is Automatic

Avoidance: Require written OIG approval before rehiring.

Treating Applications as Approval

Avoidance: Verify reinstatement status through OIG documentation and LEIE searches.

Ignoring State Program Requirements

Avoidance: Check both federal and state exclusion lists.

Poor Documentation

Avoidance: Retain all verification records consistent with retention requirements.

• Integrate reinstatement verification into onboarding workflows

• Use standardized documentation checklists

• Centralize compliance records for easy access

• Train hiring and management staff on reinstatement rules

• Escalate uncertainties before allowing work to resume

These practices help small organizations demonstrate diligence and reduce enforcement exposure.

Reinstatement compliance is most effective when supported by leadership and embedded into daily operations. Clear expectations, shared accountability, and consistent documentation reinforce compliance awareness and reduce the likelihood of costly errors.

Reinstatement after OIG exclusion is governed by 42 CFR § 1001.3001 and requires affirmative action and written approval from OIG. Until reinstatement is granted, individuals remain excluded, and claims associated with their work are not payable under 42 CFR § 1001.1901.

By following a structured verification process, using self-audit tools, and avoiding common pitfalls, small practices can manage reinstatement responsibly and protect themselves from unnecessary compliance risk.

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