OIG provides guidance on purchasing land from excluded individuals

OIG provides guidance on purchasing land from excluded individuals


In September 2019, the Department of Health and Human Services Office of the Inspector General (OIG) posted a favorable advisory opinion, 19-05, permitting a community health center to purchase real estate from an excluded individual. The OIG decided not to impose sanctions on the proposed arrangement pursuant to the civil monetary penalties law because the Requestor certified it would not submit any claims to, or request any payments from, the government associated with the purchase of the land, and no federal grant funds would be used to finance the purchase. Although the opinion is limited to this land purchase only, it provides useful guidance for future real estate transactions involving excluded parties.

The Requestor currently receives federal grant funding for the operation of eight community health center sites, each of which is enrolled in Medicare as a Federally Qualified Health Center. The Requestor sought to purchase the property where one of its community health centers is located from a company owned and managed in part by an individual excluded from participation in Federal health care programs. The purchase price of the property would be determined by an independent appraisal of the site. Further, the Requestor certified the following facts about the proposed arrangement: the purchase would be completely independent from any Federal health care program (i.e. not listed on any cost report or itemized on a request for payment or claim); the excluded person would not finance any portion of the purchase; and, there would not be any ongoing relationship with the excluded person following the purchase.

The OIG addressed whether this arrangement would violate 42 U.S.C. 1320a–7a, and expose the Requestor to potential civil monetary penalty liability. Under 42 U.S.C. 1320a–7a, the government may impose penalties for contracting with individuals excluded from Federal healthcare programs “for the provision of items or services for which payment may be made under such a program.” The OIG noted that the term “items or services” includes, among other things, those that are listed on a claim for payment, included in any government reimbursement method, or are listed on a cost report.

The OIG concluded the proposed arrangement would not result in the imposition of civil monetary penalties for contracting with excluded parties because no claims for reimbursement from any government program would be sought, no federal grant funds would be used for the purchase, the excluded party would not finance any portion of the purchase, and all involvement with the excluded party would end after the completion of the purchase. The OIG noted that even though the land would be considered an “item” if the Requestor submitted “any claims to, or otherwise requested payment from, any Federal healthcare program for the purchase,” the proposed arrangement did not involve “any such claim or request any such payment.” Accordingly, the OIG reasoned the proposed arrangement would not violate 42 U.S.C. 1320a–7a because no federal funds would be going to the excluded individual in the purchase or ongoing operation of the site.

Advisory Opinion 19-05 is encouraging for other healthcare entities wanting to perform similar transactions with excluded individuals, as it seems to adopt a more nuanced approach to the OIG’s exclusion prohibition - at least on this issue. While the OIG acknowledged that its decision would be different if the facts of the arrangement changed, this advisory opinion provides insight as to the OIG’s interpretation of the prohibition on conducting business with excluded individuals. However, any land purchase or similar transaction with an excluded individual should be structured to include at least the safeguards identified in this advisory opinion.

Belmont Law student Paige Goodwin contributed to this report.

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