Get to Know your Vendor – Vendor Compliance Management Best Practices

Get to Know your Vendor – Vendor Compliance Management Best Practices

Vendors play an important role in the delivery of healthcare. Most healthcare companies work with, on average, 1.5-2.0 times the amount of vendors than employees. For a hospital or long term care system, this can result in thousands of third-party contractors, vendors or suppliers each day. So, getting to know your vendor is an important tool for your compliace tool belt and brand.

Did you know the OIG has guidance on monitoring for excluded vendors?

For example, if a hospital contracts with a staffing agency (third-party vendor) for temporary or per diem nurses, then the hospital will be subject to overpayment liability and might be subject to CMP liability if an excluded nurse from that staffing agency furnishes items or services to Federal health care program beneficiaries. The same would hold true if the staffing company itself was excluded as an entity. Thus, the mere contracting with an excluded third-party company can result in civil fines and monetary penalties, according to the OIG.

Examples of Excluded Vendors:

In late 2014, NY Attorney General indicted three pharmacies and seven individuals involved in a $5 million Medicaid fraud scheme. According to the charges, a clerk working behind the counter paid cash to customers for prescriptions written by local doctors, never filled them, and then billed Medicaid for the prescriptions. In addition to the prescription fraud scheme, two of the pharmacies were owned by Munir A. Khan who himself was banned from billing Medicaid and deported to Pakistan following a 2008 conviction of adulteration of prescription drugs and falsifying tax returns. Khan’s daughter and son were listed as owner/operators to hide his involvement in the pharmacies.

Excluded Owners of Vendors:

According to the OIG Guidance, “In addition, an excluded individual may be subject to CMPL liability if he or she has an ownership or control interest in a provider participating in Medicare or state health care programs or if he or she is an officer or a managing employee of such an entity. Further, the provider may not seek Federal health care program payment for any services, including the administrative and management services described above, furnished by the excluded owner. As a practical matter, this means that an excluded person may own a provider, but may not provide any items or services, including administrative and management services, that are payable by Federal health care programs. If an excluded owner does, for example, participate in billing activities or management of the business, both the owner and the provider will risk CMPL liability”  page 10.


Knowing who your vendors are, who you contract with and provide access to your facility, whether through key card access to provide the contracted services or as part of your services, is key to effective vendor compliance. Implementing monthly monitoring of your vendors into your organization’s compliance plan is what the OIG recommends as best practice for vendor compliance management. Whether you chose to monitor your vendors is dependent on your risk tolerance. No one type of vendor provides any more less risk than another – regardless of whether that vendor provides direct care or has access to patients, according to the OIG. So, consider adding your vendors to your monthly monitoring program, and treat your vendor no differently than you would an employee. 

Check out our February vendor blog series:
The Cure to Vendor Procurement Fraud
5 Steps to Ensure Vendor Compliance
Why Vendor Monitoring is your Responsibility
Vendor Screening – Employees vs. Vendors
4 Misconceptions about Vendor Monitoring and OIG Exclusions

Michael Rosen, ESQ

Written by Michael Rosen, ESQ
ProviderTrust Co-Founder,

Michael brings over 20 years of experience founding and leading risk mitigation businesses, receiving numerous accolades such as: Inc Magazine’s Inc 500 Award and Nashville Chamber of Commerce Small Business of the Year
Connect with Michael on Linkedin

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