Healthcare Fraud Defense: Protecting Doctors and Providers

Healthcare fraud is the federal government’s most active white-collar enforcement priority by case volume. That priority has been constant for more than two decades and it has not diminished.

The Department of Justice and the Department of Health and Human Services operate a joint enforcement initiative, the Health Care Fraud Prevention and Enforcement Action Team, that has recovered tens of billions of dollars in civil settlements and criminal fines since its establishment in 2009. The enforcement activity it generates is substantial, consistent, and increasingly sophisticated in its targeting of billing irregularities, medically unnecessary procedures, and corrupt referral arrangements. Physicians, hospitals, medical equipment suppliers, and pharmacies are all within its reach.

The Federal Healthcare Fraud Statute

18 U.S.C. 1347 prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program or obtain by false or fraudulent pretenses any money or property owned by or under the custody or control of any healthcare benefit program. The statute covers Medicare, Medicaid, and private insurance programs. It requires proof of a scheme, a knowing execution of that scheme, and a connection to a healthcare benefit program.

The anti-kickback statute, 42 U.S.C. 1320a-7b, prohibits the knowing and willful offering, paying, soliciting, or receiving of remuneration to induce or reward referrals of federal healthcare program business. The Stark Law, 42 U.S.C. 1395nn, prohibits physician self-referrals to entities in which the physician has a financial relationship for certain designated health services. Each statute defines a distinct category of prohibited conduct, and each can form the predicate for both civil and criminal enforcement.

Billing Fraud and Upcoding

The most common forms of federal healthcare fraud involve billing practices: billing for services not rendered, upcoding services to higher-reimbursement procedure codes than the services provided warrant, unbundling procedure codes that should be billed together, and billing for medically unnecessary services. Each practice involves a misrepresentation to the billing program, satisfying the false pretenses element of the fraud statute.

The defense in billing fraud cases typically challenges the clinical basis for the billing decisions made. Medical necessity is determined by clinical judgment, and the application of procedure codes to complex clinical encounters involves genuine interpretive latitude. A physician who billed a higher-level office visit code because they spent additional time addressing comorbidities did not necessarily commit fraud, even if the government’s expert would have selected a lower code. The question is whether the billing decision reflected a good faith exercise of clinical judgment or a knowing misrepresentation.

Anti-Kickback Prosecutions

Anti-kickback prosecutions have expanded significantly as enforcement agencies have developed more sophisticated tools for identifying suspicious referral patterns. Laboratory companies that paid specimen processing fees to physicians in exchange for referrals, medical equipment suppliers that paid marketers on a per-referral basis, and pharmaceutical companies that funded speaker programs as vehicles for rewarding high-prescribing physicians have all been the subject of major anti-kickback prosecutions in recent years.

The defense in anti-kickback cases examines whether the alleged remuneration was structured to fit within one of the statute’s safe harbors: defined categories of arrangements that, if structured properly, fall outside the statute’s prohibition. The personal services safe harbor, the fair market value exception, and the employment exception each provide defenses to arrangements that superficially resemble kickbacks but that were structured and priced in accordance with legitimate business practice.

Healthcare fraud investigations are document-intensive, clinically complex, and frequently involve the testimony of government experts whose opinions about billing and clinical practice must be rigorously challenged. The defense that arrives at trial unprepared for the expert testimony is the defense that loses on the most contested ground in the case.

DEFENSE TEAM SPOTLIGHT

Todd Spodek

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Featured on Netflix's "Inventing Anna," Todd Spodek brings decades of high-stakes criminal defense experience. His aggressive approach has secured dismissals and acquittals in cases others deemed unwinnable.

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The Civil False Claims Act Parallel

Healthcare fraud investigations almost always proceed in parallel with civil False Claims Act investigations. The False Claims Act, 31 U.S.C. 3729, imposes civil liability for false claims submitted to federal healthcare programs, with treble damages and per-claim penalties. Qui tam relators, private parties who file suit on the government’s behalf, may initiate False Claims Act investigations through sealed complaints that remain confidential while the government investigates.

A healthcare provider who resolves a criminal healthcare fraud charge without addressing the parallel False Claims Act exposure may find that the civil matter, with its treble damages and cumulative per-claim penalties, produces a financial consequence more severe than the criminal sentence. Comprehensive resolution of healthcare fraud matters requires coordinated resolution of both proceedings.

The consultation that addresses both dimensions simultaneously, with counsel experienced in criminal and civil healthcare fraud defense, is the consultation that permits the full scope of exposure to be mapped and managed.