For healthcare contracting professionals, exclusion monitoring is a critical component of regulatory administrative compliance, ensuring that hospitals and health systems do not enter into agreements with excluded individuals or entities. Failing to screen vendors, contractors, and employees against federal and state exclusion lists—such as the OIG’s List of Excluded Individuals and Entities (LEIE)and GSA’s System for Award Management (SAM)—can lead to severe financial penalties, reputational harm, and even loss of federal funding.

Exclusion monitoring must be embedded into the contracting process to ensure that healthcare organizations do not enter agreements with excluded individuals or entities. A strong CLM system helps automate these checks, reducing compliance risks and manual workload.

This guide provides best practices to help contracting professionals automate exclusion checks, minimize risk, and build safeguards into contracts to protect their organizations from costly compliance violations. Failure to comply can lead to significant fines, reputational damage, and loss of federal funding. This guide outlines the most effective strategies for robust exclusion monitoring, helping healthcare organizations mitigate risk and maintain compliance.

 

1. Regularly Check the OIG’s List of Excluded Individuals and Entities (LEIE)

Effective exclusion monitoring goes beyond a one-time check during vendor onboarding. Healthcare organizations must continuously screen and monitor all contracted parties to remain compliant with Medicare, Medicaid, TRICARE, and other federal program requirements.

The OIG’s List of Excluded Individuals and Entities (LEIE) is the primary database of individuals and entities barred from participating in federally funded healthcare programs. Common reasons for exclusion include:

  • Patient abuse or neglect
  • Medicare or Medicaid fraud convictions
  • Revocation of a healthcare license
  • Felony drug convictions
  • Healthcare-related financial misconduct

Since the LEIE is updated monthly, organizations must perform exclusion screenings consistently to ensure compliance. Best practices include automating searches, integrating screenings into HR workflows, and verifying potential matches using Social Security Numbers (SSNs) or dates of birth (DOBs) to avoid false positives.

Why Monthly Checks Matter

The LEIE is a dynamic database, and individuals or entities may be added or removed based on administrative actions, appeals, or new convictions. Organizations that do not conduct frequent checks risk unknowingly employing excluded individuals, which can lead to severe penalties.

A CLM system should integrate exclusion checks directly into the vendor onboarding process, ensuring that screenings occur before contracts are signed. By reviewing exclusions monitoring during contract execution workflows, organizations can block non-compliant vendors before agreements are finalized.

Tip: Organizations should schedule automated searches at least monthly and document all search results for audit purposes.

 

2. Expand Exclusion Checks to Include Additional Databases

While the LEIE is critical, it is not the only exclusion list that healthcare organizations should monitor. Other essential exclusion databases include:

  • General Services Administration (GSA) System for Award Management (SAM): Identifies individuals and organizations debarred from federal contracts and subcontracts.
  • State Medicaid Exclusion Lists: Many states maintain their own exclusion lists, which may include individuals not found in the LEIE.
  • Office of Foreign Asset Control (OFAC) Sanctions List: Identifies individuals and entities restricted from conducting business in the U.S.

The Risk of Overlooking State Exclusion Lists

Each state maintains its own exclusion criteria and enforcement mechanisms. A healthcare provider operating in multiple states must ensure compliance with all applicable state exclusion lists. Failing to check these lists can result in fines at both the state and federal levels.

Example: A hospital in New York unknowingly hired a vendor flagged on the state Medicaid exclusion list, resulting in a compliance violation and hefty fines. Expanding exclusion monitoring to state lists could have prevented this.

Tip: Ensure exclusion monitoring processes include all relevant federal and state databases, and update protocols regularly to reflect changing compliance requirements. CLM platforms should automate screening against multiple databases, flagging high-risk entities before contract approval. Regular re-screening throughout the contract lifecycle ensures ongoing compliance, preventing organizations from maintaining relationships with newly excluded parties.

 

3. Understand the Risks and Penalties of Hiring Excluded Individuals

Hiring or contracting with an excluded individual poses significant risks. Organizations may face Civil Monetary Penalties (CMPs) exceeding $130,000 per violation. Additionally, billing federal programs for services provided by excluded individuals can result in legal action, substantial fines, and reputational harm.

Real-World Consequences of Non-Compliance

  • Financial Penalties: Organizations that employ or contract with excluded individuals may be required to return payments received from federal healthcare programs.
  • Legal Action: Violations can trigger lawsuits and regulatory investigations, which can disrupt operations and cause long-term damage.
  • Loss of Public Trust: Patients, investors, and regulatory agencies closely monitor compliance infractions, which can erode confidence in an organization’s integrity.

Case Study: A Texas long-term care facility was fined $360,000 after employing excluded individuals and billing Medicaid for their services. To avoid such penalties, compliance officers must implement a rigorous, ongoing exclusion monitoring program and establish clear protocols for addressing potential matches.

 

4. Implement Continuous, Automated Exclusion Monitoring

One-time exclusion screenings at hiring are insufficient. The OIG recommends ongoing monitoring since individuals may become excluded after they are hired.

Contract renewal and performance review cycles should trigger automatic re-checks for exclusions.

Healthcare organizations should adopt a continuous monitoring system that:

  • Conducts real-time exclusion checks
  • Alerts compliance officers of new exclusions
  • Generates reports for audit purposes
  • Reduces administrative workload

The Benefits of Real-Time Monitoring

  • Faster Detection: Continuous monitoring ensures that exclusions are identified as soon as they occur.
  • Regulatory Compliance: Automating monitoring reduces the risk of oversight.
  • Operational Efficiency: Compliance teams can focus on resolution rather than manual data checks.

Tip: A best practice is to integrate exclusion monitoring into HR and vendor onboarding systems, ensuring real-time compliance checks before engagement.

 

5. Establish a Strong Internal Review and Audit Process

CLM processes should enforce standardized contract language requiring vendors to maintain exclusion compliance and self-report any status changes. Audit logs within exclusion monitoring solutions can help compliance teams track exclusion checks and demonstrate due diligence during regulatory reviews.

To maintain compliance, organizations must regularly review their exclusion monitoring program. Best practices include:

  • Conducting internal audits to verify adherence to policies
  • Providing ongoing employee training on exclusion screening protocols
  • Fostering collaboration across departments (HR, legal, compliance) to ensure uniform screening procedures
  • Using the OIG Work Plan to stay ahead of enforcement priorities and regulatory changes

Why Internal Audits Matter

Internal audits ensure that compliance processes are functioning as intended and can help detect issues before they escalate into major violations.

Example: A healthcare provider that conducted bi-annual internal audits discovered that a newly acquired subsidiary had inconsistent exclusion monitoring practices, allowing them to correct the issue before facing penalties.

 

6. Develop a Clear Remediation Plan for Potential Matches

When a potential match is found during exclusion monitoring, organizations must take immediate action. A remediation plan should include:

  • Verification: Confirm the match using SSNs, DOBs, and other identifiers.
  • Investigation: Determine the nature and reason for the exclusion.
  • Reporting: Notify compliance officers and legal teams.
  • Corrective Action: Terminate contracts or employment if confirmed.

We recommend contract templates that include exclusion-related clauses outlining immediate corrective actions, termination rights, and indemnification provisions.

Importance of Documenting Resolutions

Organizations must maintain detailed records of all findings and resolutions. This documentation can be critical for demonstrating compliance during audits and legal reviews.

Tip: Establish a clear chain of responsibility for handling exclusions and ensure all actions are logged in a centralized compliance system.

 

Conclusion: Proactive Monitoring Ensures Compliance and Patient Safety

OIG exclusion monitoring is more than just a regulatory requirement—it’s a crucial safeguard to protect patients and prevent fraud. By implementing these best practices, healthcare organizations can ensure compliance, minimize risk, and maintain eligibility for federal funding.

Key Takeaways

  • Regularly check OIG’s LEIE and additional exclusion lists.
  • Understand penalties and implement a strong compliance framework.
  • Automate exclusion monitoring to reduce manual workload.
  • Conduct regular audits and train employees.
  • Have a remediation plan for handling exclusions.

By incorporating exclusion monitoring into contract lifecycle workflow reviews, organizations can create a proactive compliance strategy that ensures vendor integrity from onboarding through contract termination. A well-structured CLM system enhances risk management by facilitating exclusion checks, tracking compliance history, and enforcing contractual safeguards.

Healthcare organizations that adopt these best practices can create a culture of compliance, protect their reputations, and ensure that they continue to provide safe, high-quality care to patients.

For further guidance, consult OIG resources and follow Ntracts for industry best practices to stay ahead of regulatory changes and evolving compliance requirements.