While law enforcement always aims to stop crime, certain categories of criminal activity tend to get more attention than others.  There was a time when the war on drugs was the leading prosecutorial trend before it was replaced by banking and savings loan violations.  Today, however, the primary focus of law enforcement is health care fraud.

The reason is that healthcare fraud is both the greatest current source of economic losses and the greatest source of economic recovery.  In other words, leaving healthcare fraud undetected is expensive, but prosecuting it is lucrative.

If you have been charged with healthcare fraud, consult with a criminal defense attorney as soon as possible.  Efforts to investigate will involve phone calls, probes into your data, and other avenues through which you may be lured into providing information that ends up hurting your chances of acquittal in the long run.  

Federal Healthcare Fraud By Statute

The regulations prohibiting healthcare fraud are both specific and complex.  This means that if you are charged with a healthcare fraud violation, your conduct may be punishable under a number of different federal statutes.

Health Care Fraud, generally:

The broadest statute prohibiting health care fraud is 42 U.S.C. §1347, which punishes by fine and/or up to 10 years in prison the knowing and willful execution of a scheme to:

  1. defraud a health care benefit program, or
  2. obtain by fraudulent pretenses, representations or promises, any money owned by or under the control of any health care benefit program.  

Even if your conduct does not rise to this level, it may be punishable by fine and/or up to five years imprisonment under one of the following federal statutes:

The False Claims Act:

When a doctor bills for services that are either unnecessary or undelivered in order to receive reimbursement, The False Claims Act is triggered.  Indeed, this act covers some of the most common healthcare fraud violations, including upcoding, bundling, and billing for unnecessary services. The specific statutory language reads:

“Whoever makes or presents to any person or officer in the civil, military, or naval service of the United States, or to any department or agency thereof, any claim upon or against the United States, or any department or agency thereof, knowing such claim to be false, fictitious, or fraudulent, shall be imprisoned not more than five years and shall be subject to a fine in the amount provided in this title.”

To successfully bring charges under the false claims act, all three of the following elements must be met:

  • The defendant presented a claim to a department of the United States that was either false, fictitious, or fraudulent;
  • The defendant had knowledge that the claim was false, fictitious or fraudulent; and,
  • The defendant’s specific intent was to violate the law,  or the defendant had the consciousness that what he was doing was wrong.

In a healthcare context, this often occurs where a healthcare provider seeks reimbursement of medical goods or services.  In reality, the services claimed were either not provided, not provided as stated, or provided, but not medically necessary.  

It is important to note that the statement need not be made directly to the federal government to be prohibited under the False Claims Act.  Submitting a false statement to a state agency or an insurance company that is later submitted to the government is enough.

An example of a False Claims Act violation would be where a doctor bills Medicaid for blood work ordered which the patient did not actually need.  Although medical discretion can make this kind of abuse difficult to detect, violations are severely penalized.

The False Statements Act:

Similar to the False Claims Act, the False Statements Act applies to communications to the government containing false statements, representations, writings, or documents, or that falsify or cover up a material fact.

In other words, the False Claims Act would apply where a healthcare provider submits a bill for a blood test that never occurred.  The False Statements Act would apply where that healthcare provider claimed a diagnosis of an illness the patient did not actually have.  

The elements of a False Statements Act also differ somewhat from an FCA violation, in that the prosecution must prove:

  • The statement directly or indirectly submitted to the federal government was false.
  • The defendant intentionally submitted the statement with knowledge of its falsity, and
  • The statement was material to the business of the government agency or department.

Regarding the third element, in a healthcare context, this simply means that the statement was of a type likely to influence the agency’s action.  A false statement claiming that the patient was suffering from knee pain would likely be considered material if the intent was to gain insurance coverage of knee surgery, but that same statement might be considered immaterial when seeking coverage for cancer treatment.  

The Social Securities Act also criminalizes a variety of healthcare fraud violations.  Provisions 42 U.S.C. S1320a-7b(a) concern cases where false statements made a connection with services covered by a federal healthcare program.  The statute defines “federal healthcare program” as any state health care program receiving federal funds. Specifically prohibited are false statements made:

  • in connection with services covered by a federal healthcare program,
  • in an application for benefit or payment under a federal health care program,
  • In determining rights to a benefit or payment under the Medicaid Act,
  • In order to cover up an event affecting the provider’s right to a benefit or the person on whose behalf the provider is applying for the benefit,
  • regarding the physician’s license in a claim for reimbursement of services.

Anti-Kickback Statutes

Whether you are an orthopedist receiving compensation from the physical therapy center you refer your patients to, or a psychiatrist accepting concert tickets from a pharmaceutical company in exchange for giving out samples of its new product, it is generally illegal to receive reimbursement for the referral of products or services in the healthcare industry.

Indeed, sections 42 U.S.C. 132Oa-7b(b) of the Social Security Act essentially prohibit any such exchange so long as it happens knowingly and willfully.  Unlike the statutes discussed above, which involve knowing and willful submission of false information, the anti-kickback statute can more easily be violated because many healthcare providers knowingly engage in this kind of conduct without recognizing it’s illegal.  

It’s important to note that “safe harbor” regulations exempt certain kinds of kickbacks, including payments made for space or equipment rentals, referrals made through a service agreement, and specific payments made for health practitioner recruitment purposes.  

Where some anti-kickback violations are accidental, others are part of a more deliberate scheme involving conduct prohibited by the False Claims Act.  The reason is that healthcare providers in receipt of kickbacks might be incentivized to refer patients for unnecessary tests administered by outside facilities or to prescribe erroneous medications, in order to receive benefits from those organizations.  

The Social Security Act also prohibits false statements regarding the condition or operation of healthcare facilities, as well as illegal patient admittance and retention practices.  For example, falsely claiming your facility meets the requirements of a hospital, or overcharging a patient, would both be punishable under the anti-kickback statutes.

Federal Mail and Wire Fraud

Considering that medical claims are often submitted electronically or by mail, healthcare fraud charges can also be brought under the Federal Mail and Wire Fraud statue: 18 U.S.C. §1341, §1343.

In addition, theft or embezzlement in connection with health care is prohibited under 18 U.S.C. §669.  This occurs where the assets of a healthcare program are intentionally misapplied, or knowingly and willfully converted.  Other than 42 U.S.C. §1347, it is the only federal statute other than the federal health care statue we have discussed.

However, regarding penalties, it is important to understand that they apply for each violation.  That means that fines imposed for FCA violations, for instance, multiply according to the number of false claims submitted.

New York Healthcare Fraud By Statute

New York law criminalizes health care fraud more straightforwardly than the federal statutes discussed above.  Under Penal Law 77, health care fraud violations are divided into five degrees, according to the specific amount of money received as a result of the fraud.  

Fifth-degree health care fraud is a class A misdemeanor, and is defined as follows:  

“A person is guilty of healthcare fraud when with intent  to defraud a  health plan, he or she knowingly and willfully provides materially false information or omits material information for the  purpose of requesting payment from a health plan for a health care item or service and, as a result of such information or omission, he  or she or another person receives payment in an amount that he, she or such other person is not entitled to under the circumstances.”

Fourth through first-degree health care fraud is essentially fifth-degree health care fraud, differing only according to the monetary benefit that results from the conduct.  It is categorized according to the amount of money wrongfully obtained within a one year period, as follows:

  • Fourth degree: Over three thousand dollars (class E felony)
  • Third degree: Over ten thousand dollars (class D felony)
  • Second degree:  Over fifty thousand dollars (class C felony)
  • First degree: Over one million dollars  (class B felony)

Sentencing is determined according to the felony class, as follows:

  • Class E:  No jail, 1 ⅓ to 4 years probation
  • Class D:   No jail, 1-3 to 7 years probation
  • Class C:   No jail, 1-2 years to 15 years probation
  • Class B:   1-3, maximum 25 years in prison

It is important to note here that New York Penal law 77 provides an affirmative defense to healthcare fraud.  Unlike other defenses, which the prosecution must disprove beyond a reasonable doubt, an affirmative defense burdens the defendant with establishing it by a preponderance of the evidence.

The statute provides the following:

“In  any prosecution  under this article, it shall be an affirmative defense that the defendant was a clerk, bookkeeper  or other employee, other than an employee charged with the active management and control, in an executive capacity,  of the affairs of the corporation, who, without personal benefit, merely executed the orders of his or her employer or of a superior employee generally authorized to direct his or her activities.”

This means that if you defend a health care fraud charge by claiming that you were simply following your employer’s orders, your criminal lawyer will have to present enough evidence to establish that you (1) were under your employer’s direction without executory authority of your own, (2) did not receive a personal benefit from the fraudulent action, and thus (3) your action was merely in response to your employer’s direction.

Detection

As we mentioned earlier in this article, health care fraud costs the federal government billions of dollars per year.  Accordingly, detection efforts are both extensive and multi-faceted.

Whistleblower Incentives:

On the federal level, the False Claims Act incentivizes people with evidence of health care fraud to come forward by allowing them to serve as a plaintiff on the government’s behalf in suits against wrongdoers.  While the government has the option to intervene in the suit, the whistleblower would still be entitled to a portion of the recovery, which could easily stretch into the millions.

New York has its own False Claims Act, N.Y. Fin. Law Ch. 13 §§ 187-1194, which enables individuals to personally file civil claims alleging violations of New York Penal Law 77 (discussed in detail above).  Although this article deals with criminal consequences, it is relevant to note for detection purposes that civil claims can result in treble (triple) damages. This means that the incentive to report is high.  

Government Investigation:

In addition, the Department of Justice has a Health Care Fraud Unit dedicated entirely to healthcare fraud investigation.  Similarly, one of the primary responsibilities of the Insurance Fraud Bureau of New York’s Department of Financial Services is to investigate health care fraud.

Technological Advancements:

Finally, the internet is an enormous source of health care fraud detection.  Both the Office of the Inspector General and the US Department of Health and Human Services are increasingly relying on technology to mine data and evaluate trends in analyzing claims submitted to Medicare and Medicaid programs.  This technology is capable of detecting known fraud patterns and comparing ratios of alleged services to national norms in order to identify potential fraudsters.

Criminal Proceedings

Once enough evidence of health care fraud is gathered, a formal criminal investigation may ensue.  At this stage, investigators may show up at your home or office attempting to question you, you may receive a letter from the US Attorney’s office informing you that you are the target of a federal investigation, and/or you may be served with a subpoena eliciting relevant documents or sworn testimony.  At a certain point, federal agents may come to your home or business with a search warrant.

If you are formally charged with criminal health care fraud, you will likely be offered some form of a plea deal by the prosecution.  This means that you will be given the opportunity to plead guilty to a reduced charge, which would also come with reduced penalties.  

The benefit of accepting a plea deal is that it puts a limit on the expense of time and money that comes with defending yourself in a criminal suit.  The risk is that had you initially pled not guilty and hired a criminal lawyer you may have either gotten your case dismissed, received a better plea deal, or have been acquitted at trial.

Most people accused of health care fraud make the wise decision of consulting with a criminal attorney before making any major decisions.  Indeed, many criminal lawyers offer a risk-free consultation and bill by the hour thereafter. So even if you plan to accept a plea deal, it is still prudent to have a criminal lawyer go over the facts with you, rule out the possibility that any procedural violations or evidence gaps are likely to lead to a dismissal, and attempt to negotiate a better plea deal with the prosecutor.  

The best possible chance of getting your case dismissed is to hire a criminal lawyer who is willing to put in the work. While this requires more time and expense, because it involves preparing your case for trial, it creates the possibility that the prosecution will drop all charges before you are faced with the major expense of hiring experts, calling witnesses, amidst numerous other significant trial costs.

However, if your case does not get dismissed, the work your criminal attorney does to prepare it for trial will still likely present you with far better choices than you had the day you were charged.  By gradually pointing out weaknesses in the prosecution’s case, demonstrating strengths in your defense, and illuminating that your actions do not define your character, your criminal attorney will likely induce a prosecutor unwilling to dismiss a case to at the very least offer you a more preferable plea deal than what you initially received.  This means reduced fines, lesser or no jail time, and a decreased impact on your criminal record.

In addition, the work your criminal attorney has done will give him the knowledge to adequately advise you regarding your chances of success at trial, so that you can make a fully informed decision.  Finally, should you choose to go to trial, that homework will pay off in allowing you to go in prepared.

Health Care Fraud in the News

While health care fraud convictions are on the rise, the news is full of examples of where good lawyering leads to acquittals, dismissals, or at the very least plea deals that are highly preferable to conviction.

When the prosecution fails to obey certain legal protocols and procedure, that in itself can be the basis for acquittal.  For example, in 2016 a federal judge dismissed fraud charges against a pharmacy owner because prosecutors failed to disclose evidence, destroyed certain evidence, and presented false testimony at trial.  

The accused there had submitted false claims for prescription refills that were neither requested nor received by customers.  The false claims had been submitted to Medicare, Medicaid, and private insurers. Though the case initially resulted in a conviction, the defendant hired new lawyers on appeal who identified the prosecution’s error and successfully argued for dismissal.

Another example of where health care fraud charges may be dropped is where the prosecution fails to establish a violation beyond a reasonable doubt.  Recall that the prosecution must prove each element of the relevant criminal statute by this standard. This was the basis for acquittal in a case against a cardiologist accused of performing unnecessary heart surgeries, as the prosecution could not provide enough evidence to establish that he submitted false claims.  

What To Do

The best way to avoid health care fraud charges is to consult with a white-collar criminal defense attorney well before a crime is committed.  Your criminal lawyer can help you understand precisely how to avoid committing health care fraud on both the state and federal level. In addition, you can learn how to establish a compliance program within your organization so that you are never held liable for the actions of someone you work with.  

However, if you are concerned that you may have already committed health care fraud, if you are currently being investigated, or if you have been charged, it is critical that you consult with a criminal attorney immediately.  Knowing your rights and responsibilities can protect you from inadvertently incriminating yourself, or worse, committing additional crimes by providing false information to investigators. Understand that 18 USC S 1001 makes criminal false statements to government officials, and the effect of violating this statute can be a significant increase in both fines and jail time.  

Remember that health care fraud is being aggressively investigated and prosecuted on both the state and federal level and that efforts to eradicate it are only increasing over time.  If you are a healthcare provider, it is crucial that you take the necessary steps to protect yourself, your business, and your professional future from the devastating implications of a violation.  

Our white collar criminal defense attorneys are experienced in representing health care providers against fraud allegations on both the state and federal level.   We provide risk-free consultations to help you determine whether our representation is best suited to your needs. Please do not hesitate to contact us for assistance in ascertaining your legal rights and protecting your options.