Responding to Healthcare Staffing Agency Fraud Charges

Healthcare staffing agencies provide an essential service, connecting healthcare professionals like nurses, doctors, and therapists with medical facilities in need of temporary staff. However, some agencies have recently come under fire for allegedly engaging in fraudulent business practices that harm both healthcare workers and medical facilities. So what constitutes fraud by a healthcare staffing agency, and what can an affected party do about it? This article provides an overview of common staffing agency fraud schemes, legal implications and defenses, and steps for responding to suspected fraud.

Common Types of Healthcare Staffing Agency Fraud

Several types of fraudulent behavior by staffing agencies have recently garnered attention. These include:

Failing to pay workers as promised. Many nurses have filed lawsuits alleging that staffing agencies failed to pay them the high wages they were originally offered, often citing unjustified deductions from paychecks[1]. A similar lawsuit was filed in California by Filipino nurses who were promised $10,000 per month but only paid $3,000 on average[2].

Misrepresenting job terms. Some agencies have been accused of falsely advertising details like wages, benefits, housing, and contract duration in order to recruit workers. Once on the job, workers find the actual terms much less favorable. This “bait and switch” tactic constitutes fraud in many jurisdictions.

Inflating bills to medical facilities. Staffing agencies may fraudulently overbill client facilities for nurse wages, bonuses, or other services. This overbilling allows the agency to pocket the difference while facilities lose money[3].

Billing for services not rendered. The most straightforward type of healthcare fraud is billing for nurses that were never actually provided to a facility. Federal officials have prosecuted some staffing agencies for this kind of false billing[4].

Kickback schemes. Some staffing agencies pay or receive kickbacks in exchange for referral relationships with medical facilities. These relationships subvert the market pricing system and can inflate healthcare costs across the board[5].

Legal Implications of Healthcare Staffing Fraud

Most types of fraud by staffing agencies violate civil law, criminal law, or both. On the civil side, affected parties like nurses or medical facilities can file lawsuits against an agency to recover damages. Common legal claims in these lawsuits include:

• Breach of contract
• Fraud/misrepresentation
• Unjust enrichment
• Violations of wage/hour laws

Lawsuits can result in awards forcing the agency to pay back wages, benefits, damages, legal fees, and other compensation to wronged parties.

On the criminal side, staffing agencies and their executives can face prosecution by state or federal officials for fraud and related charges like:

• Mail/wire fraud
• Money laundering
• Tax evasion
• Violations of the Anti-Kickback Statute
• Violations of the False Claims Act (if the fraud involved Medicare/Medicaid funds)

Criminal fraud convictions can lead to massive fines for agencies along with possible prison time for executives and managers involved in the unlawful schemes.

Defenses to Healthcare Staffing Fraud Allegations

Agencies facing fraud lawsuits or charges have several possible defenses to consider asserting, such as:

Lack of fraudulent intent. Fraud requires knowingly making false representations or showing deliberate ignorance of the truth. If errors resulting in underpayment were accidental, it may not qualify as fraud.

Statute of limitations. There are strict time limits on filing fraud-based lawsuits and charges, generally between two to six years. If too much time has passed, the claim could be dismissed.

Preemption by federal law. The Airline Deregulation Act and ERISA may preempt certain state-level wage and contract claims against staffing agencies in some contexts.

Binding arbitration clause. Staffing agencies often require employees and clients to sign agreements with binding arbitration clauses, waiving rights to file lawsuits. This can force disputes into private arbitration instead of court.

Compliance with advice of counsel. Following an attorney’s legal advice can sometimes shield companies or individuals from fraud liability even if the advice later proves incorrect.

An experienced lawyer can assess the specifics of each agency’s situation to identify the defenses offering the best chance to defeat allegations of fraud.

The bottom line is responding quickly and strategically with experienced legal counsel offers the best chance to hold unscrupulous staffing agencies fully accountable for fraudulent business practices. While navigating these situations is complex, the law provides protections and remedies for healthcare professionals and facilities impacted by staffing agency fraud schemes.