Questions Raised About Necessity, Utility of Debarment Screening

Richard P. Kusserow | March 2013

Former HHS Inspector General Richard P. Kusserow invites health care organizations to rethink their use of the General Services Administration’s debarment list, which generally is part of a compliance officer’s screening toolbox. Kusserow, president of Strategic Management in Alexandria, Va., notes that GSA screening is not mandated but only recommended by the OIG; its value is questionable; and false hits are not uncommon. Contact him at [email protected].

A growing number of health care providers raising questions and concerns relating to the problems of sanction screening against the General Services Administration’s EPLS, as of August 2012 referred to as the System for Awards Management or SAM. This data is not user-friendly and creates many false hits.  This leads to considerable work in resolving them.  For most health care organizations, the number of vendors and contractors they use may run into many thousands.  As a result there is a growing back lash against EPLS sanction screening from those charged doing it as being a waste of time and resources.

For over a decade, the OIG has been issuing “voluntary” compliance program guidance calling for sanction screening against the OIG’s List of Excluded Individuals and Entities (LEIE), as well as EPLS.  They stress that organizations are responsible for whom they hire, give discretionary authority, and do business.  Well, there is no question that sanction screening against the LEIE is absolutely essential, in that employing or engaging a party on the LEIE violates conditions of participation in Medicare and Medicaid: and that any claims arising from such an arrangement may be viewed as false claims.  As such, in order to avoid potential CMP liability, health care providers and entities have been advised by the OIG conduct sanction screening prior to hiring or contracting with individuals or entities and thereafter periodically check it for the status of current employees and contractors.  In addition, the OIG has established their authority to seek action and penalties for providers who utilize the services of an excluded individual or entity.  However, the necessity of sanction screening against the EPLS is not so clear.

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Sanction screening against the GSA is a different ball game form the LEIE.[1]  The stated purpose of EPLS is to provide a single comprehensive list of individuals and firms excluded by Federal government agencies from receiving federal contracts or federally approved subcontracts.  It was established to ensure that agencies solicit offers from, award contracts, grants, or financial or non-financial assistance and benefits to, and consent to subcontracts with responsible contractors only and not allow a party to participate in any affected program if any Executive department or agency has debarred, suspended, or otherwise excluded (to the extent specified in the exclusion action) that party from participation in an affected program.

At a House Committee on Oversight and Government Reform hearing on February 26, 2009, David A. Drabkin, Acting Chief Acquisition Officer for the GSA testified that “Suspension and Debarment is not a punishment” but is “intended to prevent the Government from doing business with companies or individuals who demonstrate a lack of present responsibility.”  He went on to not that government agencies are responsible to check EPLS to determine whether a company has been suspended or debarred from doing business with the Federal government (See Executive Order 12549 and 12689, “Debarment and Suspension”).

Contractors can currently be debarred or suspended under federal statutes or under the Federal Acquisition Regulation (FAR), an administrative rule governing contracting by executive branch agencies. The affect of a debarment is to remove a contractor from eligibility for future contracts with the government for a fixed period of time, while suspension temporarily debars a contractor for the duration of any agency investigation of the contractor or ensuing legal proceedings.  Debarment and suspension are collectively known as exclusions, a term that DHHS uses for equivalent actions.

EPLS Screening Rarely Applies to Providers

There are two types of debarments:

(1)  Statutory debarments are often mandatory, leaving no discretion to contracting officers; and last for a period prescribed by statute, with limited opportunities for agencies to waive them. Statutory suspensions otherwise resemble statutory debarments, but last only until a designated agency official finds that the contractor has ceased the conduct violating the statute.

(2)  Administrative debarments are within the discretion of agency contracting officials; cannot be punitive; may generally last no longer than three years; and can be waived by agency heads. Administrative debarments are within the discretion of agency contracting officials; suspensions are temporary administrative debarments, lasting only as long as any agency investigation of contractor misconduct or ensuing legal proceedings.

The key point here is that the EPLS applies to federal government agencies. There are very few providers of health care services and products that meet that standard.  Among the exceptions meeting that definition are the Veterans Administration, Indian Health Service, National Institutes of Health, Department of Defense healthcare facilities, and other similar bodies of government providing health care.  EPLS was not created for non-governmental entities in any sector, including health care.

It is clear that the purpose of the EPLS is for use by government agencies.  There are no mandates that non-government entities use the EPLS or act upon those parties found to be on the List. Debarments prohibit debarred parties from contracting with the government. Health care providers may participate in government finance programs, in that they provide services and products and engage in business activities that are paid for by government programs, such as Medicare or Medicaid, but that does not make them a government agency, or a grantee of the Federal government. Put simply, those parties who contract with a health care provider are not contracting with the government.

It is Reasonable to Rethink GSA Screening

Taken together, a provider can reasonably question whether they should expend considerable resource for sanction screening against the EPLS, as well as what they would do if they encounter a person or entity that has been suspended or debarred from bidding on government contracts. It is certainly reasonable to note that they want to know whether the Federal government refused to contract with them and conclude they won’t either.

On the other hand, they are not bound to avoid doing business with the debarred entity and may find that the facts and circumstances that led to their being placed on the EPLS are not relevant to their circumstances.  At any rate it is reasonable to review some key points that may affect the decision as to whether routine sanction screening against the EPLS for all employees, vendors, contractors, and other affected parties is necessary or cost effective. The OIG advice perform sanction screening against the Debarment list does not carry the same weight and force as the call for sanction screening against the LEIE.

  1. The Government debarment and suspension procedures are intended for government agencies contracting with commercial entities, not for non-government entities.
  2. GSA sanction screening is not as user friendly as the OIG Website and leads to many “false hits” that result in considerable work to make determination as to whether the entity in question is identifiable to the one on which the hospital is checking.
  3. Unlike the OIG LEIE that has verification tools available to assist with possible hits, the EPLS often lacks solid identifiable information to permit easy verification that the party listed.  This problem is further complicated by the large number of entities with similar sounding names.
  4. The overwhelming majority of entities on the EPLS are not relevant to health care entities. It makes sense to conduct sanction screening health care related contractors or vendors, but most hospitals have thousands of other types providing everything imaginable for running any business, such as printing paper, toilet paper, computer supplies, delivery services, ground keeping services, trash hauling contractors, accounting and legal services, on and on.  All one has to do is to look at the accounts payable and see that the list can be never ending.  Yet, there is no guidance as to where to draw the line for sanction screening.
  5. Many of the government contractors on the EPLS are very large multi-billion dollar organizations with many subsidiaries.  It is difficult to know when a debarment arises from one of those subsidiaries how relevant it is to another.
  6. DHHS and CMS regulations are silent on the issue of GSA debarments and the effect on the health care financing programs of Department.
  7. Although “hits” as result of sanction screening against the EPLS are very common, legitimate one are very uncommon.
  8. The costs versus benefits of sanction screening against the EPLS can reasonably lead to limiting those that are compared against that list to providers of health care services or products.  It makes little sense to run IBM, Staples, a courier service, computer repair services, etc. through the EPLS

Valid Hits Can Create Problems

In the end, it can become a significant problem should there be a verified, valid hit on the EPLS.  What do you do with that information? The significance of the underlying reason for their placement on the list would be important to know, but does that mean a cessation of contracting with that entity regardless of the track record of their past performance?  Even government agencies, under the debarment rules, are not required to discontinue a current contract because an entity is placed on the EPLS.

However, once a provider knows that they are contracted with or have a pending contract with an entity on the EPLS, there would always be the nagging worry that someone would question any decision other than terminating the relationship, especially if something were to go wrong with that contract at a later date.   Pregnant knowledge can be a dangerous thing.

The final question to be answered for providers is whether they should limit, discontinue, or not perform EPLS sanction screening.  It can be noted that whereas sanction screening against the OIG’s LEIE is mandatory, there is the option of not sanction screening against the EPLS.  Providers may find it useful to conduct a cost/benefit analysis on the EPLS sanction screening.  That would begin with determining the cost in human resources and dollar expense to perform that sanction screening and compare that with the results of having done that in the past. Now armed with that information, decisions might be made.  The easiest decision in backing off of the EPLS sanction screening is to limit them to entities that provide services or products related to health care, and avoid doing that for the other multitude that does not meet that standard.

This article was reprinted with the permission of the author from the Report on Medicare Compliance, Volume 19, Number 4, February 1, 2010.

[1] Note that the Center for Medicare/Medicaid Services also calls for screening the GSA sanction database.

About the Author

Richard P. Kusserow established Strategic Management Services, LLC, after retiring from being the DHHS Inspector General, and has assisted over 3,000 health care organizations and entities in developing, implementing and assessing compliance programs.