CMS Can Now Exclude Physicians From Medicare and Medicaid. The Inspector General Keeps the Same Power.
A Federal Register notice published Oct. 14 gives the CMS administrator the HHS secretary's permissive exclusion authority, effective immediately. Two agencies can now bar a physician from federal health programs, and CMS has not said how it will use the power.
On Oct. 14, the Department of Health and Human Services published a Statement of Delegation of Authority in the Federal Register (91 FR 65219). In it, Health Secretary Robert F. Kennedy Jr. delegates to the administrator of the Centers for Medicare and Medicaid Services (CMS) the authorities vested in the secretary under section 1128(b) of the Social Security Act. That section is the permissive exclusion authority: the power to bar an individual or entity from Medicare, Medicaid and every other federal health care program. The delegation is effective immediately.
Until now, physicians who faced permissive exclusion dealt with the HHS Office of Inspector General (OIG), which has held the authority since 1988. The notice does not take it away. It states that the delegation "does not affect or diminish" the secretary's 1988 delegation to the inspector general. Two parts of HHS can now exclude.
What the notice says
The notice is one page. It says CMS asked for the authority, and gives the agency's reasoning: as the agency that runs Medicare and Medicaid, CMS "is uniquely positioned to investigate, identify, and develop the evidentiary basis underpinning permissive exclusion determinations." Putting the authority with CMS, the notice says, "aligns investigative and enforcement responsibilities within a single operating division, reducing redundancy and improving program integrity outcomes."
There are limits. CMS does not get the authority to conduct hearings or to issue regulations, and the secretary keeps the power to report to Congress and write rules. CMS may redelegate the authority within the agency. The notice revises a March 14, 2011, delegation and ratifies any actions the administrator or subordinates took under the authority before it was published.
The change was not a surprise. Kennedy announced the plan at a July 21 news conference on health care fraud, Medical Daily reported, and the outlet said CMS Administrator Mehmet Oz has pledged to use the power judiciously.
Two agencies can now exclude. The practical question for a physician is not who signs the letter but whether the claims, orders and licensure record behind it would hold up.
What permissive exclusion covers
Mandatory exclusions, such as those after a felony health care fraud conviction, stay as they were. The permissive grounds in section 1128(b) are the ones where the government may exclude but does not have to. For physicians, the ones that matter most include a misdemeanor conviction tied to health care fraud or to prescribing or dispensing a controlled substance; a license revoked or suspended, or surrendered during a pending disciplinary proceeding, for reasons bearing on competence, performance or financial integrity; services substantially in excess of patients' needs or below professionally recognized standards; and conduct covered by the civil monetary penalty and anti-kickback statutes.
The statute sets the length for several grounds. An exclusion based on a license action lasts at least as long as the license action itself. One based on a misdemeanor fraud or controlled substance conviction runs three years unless mitigating or aggravating circumstances apply. Hearing rights and judicial review sit in the statute, and the notice does not change them.
What is not known
The notice does not explain how CMS and OIG will divide the work, and CMS has not said when it will issue its first exclusions or whether it will publish guidance, Medical Daily reported. Health lawyers quoted by the outlet asked whether CMS will follow OIG's exclusion procedures, how long its exclusions will run and how the two offices will avoid overlapping penalties. CMS already uses billing revocation heavily: it revoked Medicare billing privileges for 5,586 providers and suppliers in 2025, according to its program integrity annual report as cited by Medical Daily.
What practices should do now
Exclusion reaches further than revocation. An excluded physician cannot be paid for items or services furnished, ordered or prescribed under federal programs, and an organization that knowingly employs or contracts with an excluded person faces civil monetary penalties. Make sure your group screens employees, contractors and ordering physicians against the federal exclusion list on a regular schedule and keeps a record of each check. Treat any state board action, even one that seems minor, as an exclusion risk and review it with counsel early. Then watch for CMS guidance on notice and procedure, and for the first CMS-issued exclusions. This is general information, not legal advice; the habits that keep claims and orders defensible, covered in our piece on coding accuracy, are the same ones an exclusion review would test.
Reported, fact-checked and edited by The Script Pad's editorial staff.
This article is for professional education and does not replace clinical judgment. Treatment decisions should be based on the individual patient and current guidelines.
