On November 10, 1980 the Department of Health and Human Services (HI-IS) introduced new regulations for rendering persons guilty of fraud or other abuse who are responsible for federal funds ineligible to receive financial assistance from HHS. The regulations provide for two basic sanctions, debarment and suspension. 'Debarment' refers to exclusion from eligibility for financial assistance awarded or administered by HHS for a specified period of time. Suspension involves an immediate exclusion from eligibility for financial assistance without a prior hearing pending completion of debarment or other proceedings. These sanctions apply not only to individuals but also to institutions. With regard to the latter, the regulations explicitly call for imputing individual conduct to associated institutions where the conduct in question took place within the scope of its authority and under conditions such that its responsible officials knew or should have known about it. In addition, where an institution is the primary offender, any individual who knowingly participated in the debarable conduct may also be debarred.

The regulations specify seven causes for debarment: (1) conviction for any criminal offense committed as an incident to obtaining or attempting to obtain a public or private contract or any form of financial assistance; (2) conviction under the Organized Crime Act of 1970, or conviction far such crimes as embezzlement, forgery, bribery, etc., which indicate "a lack of business integrity"; (3) conviction under the Federal Antitrust Statutes arising out of the submission of bids, applications or proposals; (4) serious violations of the applicable statutes, regulations, or other terms of a previous award of financial assistance; (5) a record of serious unsatisfactory performance or failure to perform under one or more prior awards of financial assistance; (6) debarment from government contracting or financial assistance by a government agency (7) any other cause significantly affecting responsibility as a recipient under a federal program.

The decision to initiate proceedings for debarment lies entirely with the Secretary of Health and Human Services as do decisions concerning the length of the debarment period. In this regard, however, the period must be for a definite period of time commensurate with the seriousness of the offense. In addition, the regulations explicitly allow the Secretary to take into account the degree of seriousness of the offense as a mitigating factor both in deciding whether or not to debar and in setting the period of debarment.

As for the procedure that HHS must follow when seeking to debar an individual or institution, such action is initiated by serving the party in question with written notice from the Secretary. This notice states that debarment is being considered, sets forth the reasons for the proposed debarment and its proposed length of time, and indicates that the party will have an opportunity for sharing if requested. The party has thirty days to make such a request. If none is received within this period then the Secretary proceeds to make a final determination and notifies the party to that effect.

Parties that request a hearing have a right to counsel. A hearing officer who is an employee of HHS but not previously involved in the matter at issue presides over the hearing. HHS is represented by its general counsel or a designee. After completion of the hearing the hearing officer makes a written determination on the evidence presented. He or she then transmits this to the Secretary of HHS and the parties. The parties have a right of appeal to the Secretary, and the Secretary may also decide on his or her own motion, or at the request of the general counsel, to review the findings of the hearing officer. If the Secretary reviews the matter then he or she provides written notice to all parties of the determination. When an individual or institution is debarred HIS publishes a notice in the Federal Register containing the names of the parties debarred, the authority under which the action was taken, a brief explanation of the reasons for doing so, and the extent of restrictions imposed including effective dates.

The procedures for suspension resemble those far debarment with the following exceptions. Suspension is only undertaken when compelling reasons dictate that the interests of the United States would be jeopardized by waiting for completion of debarment proceedings. Further more, except where suspension is based on criminal indictment, debarment proceedings must be initiated within six months after notice of suspension. If not, then the suspension is automatically terminated. When debarment proceedings are initiated within the six month period, the suspension continues in effect pending the completion of debarment proceedings or for a period of no more than twelve months after the date of the notice of the proposed debarment, whichever occurs first. When suspension is based upon criminal indictment, it may continue until completion of the criminal proceedings or for eighteen months, whichever first occurs.