Healthcare Fraud – 18 U.S.C. § 1347 Sentencing Guidelines

Thanks for visiting Spodek Law Group, a second-generation firm managed by Todd Spodek with over 40 years of combined experience defending healthcare professionals and business owners against federal fraud charges. Section 1347 criminalizes schemes to defraud healthcare benefit programs or to obtain money or property from those programs by false pretenses. Maximum sentence: 10 years imprisonment, or 20 years if violations result in serious bodily injury, or life imprisonment if violations result in death. The statute targets Medicare and Medicaid fraud but extends to any healthcare benefit program whether government or private.

Healthcare fraud prosecutions have exploded over the past two decades. The federal government loses tens of billions annually to fraudulent Medicare and Medicaid claims. Prosecutors view healthcare fraud as epidemic requiring aggressive enforcement. That enforcement targets everyone from executives running sophisticated billing schemes to individual providers who make occasional coding errors. The line between fraud and billing mistakes often gets drawn after the fact based on whether government auditors find patterns they deem suspicious.

What Qualifies as Healthcare Fraud

Knowingly executing or attempting to execute a scheme to defraud healthcare benefit programs or to obtain money from such programs through false statements or pretenses. The elements are similar to wire and mail fraud: a scheme to defraud, intent to defraud, and materiality of false statements.

Common healthcare fraud schemes include: billing for services never provided, upcoding procedures to receive higher reimbursement, unbundling services that should be billed together, performing medically unnecessary procedures solely to generate billings, kickback arrangements where providers pay for patient referrals, marketing off-label uses of drugs while billing as on-label.

But determining what’s fraud versus aggressive billing or genuine coding errors requires expertise most prosecutors lack. Medical coding is enormously complex. Thousands of billing codes exist, many with subtle distinctions. Providers routinely make mistakes selecting codes without intending fraud. When do those mistakes become criminal?

The Intent Requirement Prosecutors Ignore

Section 1347 requires knowing execution of fraudulent schemes. Negligent coding errors, misunderstandings about billing requirements, and disputes about medical necessity shouldn’t constitute criminal fraud. Yet prosecutors often charge healthcare fraud based solely on billing patterns showing higher-level codes than government auditors believe were justified.

A physician bills level 5 evaluation codes more frequently than peers in the same specialty. Government auditors review medical records and conclude level 3 codes were appropriate for many visits. They calculate “overpayment” based on the difference between what was billed and what they believe should have been billed. Prosecutors charge fraud, arguing the pattern proves intent to defraud.

Defense must show the physician genuinely believed level 5 codes were appropriate based on time spent, complexity of patients’ conditions, and medical judgment. Coding level disagreements shouldn’t become criminal prosecutions absent evidence of intentional overbilling rather than medical judgment differences.

Sentencing Based on Fraudulent Billings

Guidelines Section 2B1.1 governs, calculating offense levels from loss amounts. Healthcare fraud losses often reach hundreds of thousands or millions because fraudulent billing occurs over years before detection. A physician who overbilled Medicare $800,000 over five years faces offense level 18 (27-33 months at Category I).

Sophisticated means enhancement applies to healthcare fraud involving elaborate schemes—use of multiple provider numbers, shell companies, billing services designed to obscure fraud, coordination among multiple participants. That adds 2 levels, plus role adjustments if defendants organized others (another 2-4 levels). Healthcare fraud sentences can easily reach 5-7 years for schemes involving significant amounts even when patients received legitimate care and nobody was harmed.

The loss amount is almost always disputed. Prosecutors calculate loss as every allegedly fraudulent bill submitted over years. Defense argues loss should be reduced by: legitimate costs incurred providing services even if billed improperly, amounts already repaid through audits, portion of billings that would have been reimbursable under correct coding. These adjustments can reduce loss by half or more, dramatically lowering offense levels.

When Death or Injury Results

Section 1347 increases maximum sentence to 20 years if fraud results in serious bodily injury, or life if death results. This applies when patients are harmed by fraudulent healthcare—receiving unnecessary surgeries, taking counterfeit medications, or being treated by unqualified providers as part of fraud schemes.

These enhancements raise causation questions. Did the fraud cause the injury or did medical complications unrelated to fraud cause it? A patient who received unnecessary surgery as part of billing fraud, then developed surgical complications—did the fraud cause that harm or did medical risk inherent in any surgery cause it?

Defense challenges causation by showing patients received competent care even if billing was fraudulent, that complications arose from medical risks disclosed to patients regardless of fraud, that injuries weren’t foreseeable consequences of the fraud. Government must prove fraud caused injuries beyond reasonable doubt, not just that injuries occurred during fraud schemes.

Kickbacks and the Anti-Kickback Statute

Healthcare fraud prosecutions frequently involve Anti-Kickback Statute violations (42 U.S.C. § 1320a-7b) charged alongside Section 1347. The AKS criminalizes paying or receiving remuneration to induce referrals of patients covered by federal healthcare programs. Pharmaceutical companies paying doctors to prescribe their drugs, laboratories paying physicians for test referrals, hospitals paying doctors for patient admissions—all potentially violate AKS.

The government argues AKS violations automatically constitute healthcare fraud because claims submitted based on illegal kickback arrangements are false claims. If a doctor refers patients to a laboratory because the laboratory pays kickbacks, claims submitted for those tests were fraudulently induced and violate Section 1347 even if the tests were medically appropriate and properly performed.

This theory makes every AKS violation into healthcare fraud, dramatically increasing sentencing exposure. What might be 5-year AKS violation becomes 10-year healthcare fraud charge with loss amounts calculated from all claims flowing from illegal relationships. The multiplication of charges serves prosecutorial interests but doesn’t reflect distinct criminal conduct.

The Stark Law Overlap

Stark Law (42 U.S.C. § 1395nn) prohibits physician self-referrals—physicians can’t refer Medicare patients to entities in which they have financial interests except under specific exceptions. Stark is civil statute with no criminal penalties. But prosecutors argue Stark violations make resulting Medicare claims fraudulent, supporting Section 1347 charges.

A physician who owns an MRI facility refers patients to that facility for scans. If the arrangement doesn’t fit within a Stark exception, the referrals violate Stark. Prosecutors charge healthcare fraud, arguing every Medicare claim submitted for those scans was false because they resulted from illegal self-referrals.

This transforms civil regulatory violations into criminal fraud. Congress made Stark civil statute deliberately, recognizing that physician ownership arrangements raise policy concerns but aren’t inherently criminal. Prosecutors circumvent congressional intent by using regulatory violations as predicates for fraud charges.

Telemedicine Fraud Prosecutions

The explosion of telemedicine during COVID-19 created opportunities for fraud and aggressive prosecution. Telemedicine companies paid physicians to approve durable medical equipment, genetic tests, or prescriptions for patients they’d never examined in person. Medicare paid billions for equipment and tests ordered through these arrangements.

Prosecutors shut down dozens of telemedicine companies and charged hundreds of physicians with healthcare fraud. The schemes clearly involved fraud—doctors approving equipment for patients they knew nothing about, companies paying doctors per order rather than for legitimate consultations. But some physicians believed they were providing legitimate telemedicine services and that brief phone consultations justified approving medically appropriate equipment.

The prosecutions raised questions about evolving standards of care. Is telemedicine consultation without in-person examination adequate for prescribing or ordering equipment? Medical boards and professional associations struggle with these questions. Criminal prosecutors declared the practice fraudulent, charging physicians who participated with healthcare fraud carrying decade-plus sentences.

The Medically Unnecessary Standard

Many healthcare fraud prosecutions involve allegations that billed services were medically unnecessary. Government auditors review medical records and conclude procedures weren’t justified, diagnostic tests weren’t appropriate, or treatment exceeded what standard of care required.

But medical necessity involves judgment. Physicians disagree about appropriate treatment constantly. Second opinions differ because medicine involves uncertainty and clinical judgment. When do differences in medical judgment become fraud?

Prosecutors argue that when physicians consistently perform procedures government auditors deem unnecessary, patterns prove intent to bill for unnecessary services. Defense must present medical experts who testify that defendants’ clinical decisions fell within acceptable medical practice even if aggressive compared to conservative approaches others might take.

The prosecution of medical necessity cases criminalizes medical judgment. Physicians facing potential fraud charges for treatment decisions understandably practice defensive medicine, ordering fewer tests and providing less aggressive treatment to avoid fraud allegations. That prosecutorial pressure affects patient care in ways that undermine the healthcare system’s effectiveness.

Defending Healthcare Fraud Prosecutions

Challenge intent by showing defendants relied on billing company advice, coding consultant recommendations, or industry standards. Healthcare providers aren’t billing experts—they delegate coding to professional billers. When those billers made errors or pushed aggressive billing practices, providers lacked the fraudulent intent Section 1347 requires.

Contest loss calculations by demanding detailed analysis of which bills were actually fraudulent versus which reflected coding errors, judgment differences, or legitimate billing. Government loss calculations often include every bill within broad categories without analyzing individual claims. Defense must force itemized accounting showing specific fraudulent claims rather than accepting categorical condemnation of entire billing categories.

Present expert testimony about standard of care and medical necessity. When fraud allegations rest on medical necessity judgments, competing medical experts create reasonable doubt about whether defendants acted fraudulently versus providing appropriate care under reasonable clinical judgment.

Negotiate civil resolutions before criminal charges when possible. Healthcare fraud often can be resolved through civil False Claims Act settlements with reimbursement, penalties, and exclusion from Medicare without criminal prosecution. When overpayment resulted from billing errors rather than intentional fraud, civil resolution better serves justice than criminal prosecution.

If you’re under investigation for healthcare fraud or facing Section 1347 charges, contact Spodek Law Group immediately. Healthcare fraud investigations typically involve years of billing records, complex audits, and extensive interviews before criminal charges are filed. Early representation allows us to present evidence of good faith billing practices, engage experts who can challenge government’s medical necessity or coding conclusions, and negotiate about whether conduct warrants criminal versus civil resolution. We represent physicians, pharmacists, medical equipment suppliers, and healthcare executives facing fraud allegations ranging from individual billing errors to systematic schemes. These cases require expertise in criminal law, healthcare regulations, and medical practice standards. We’re available 24/7.