Health Care Fraud and Abuse: A Primer

If you are a health care provider, or a family member of one, and you have learned that the government is looking at billing, referrals, or payments, it helps to know which laws are in play. Four laws do most of the work: the criminal health care fraud statute, the Anti-Kickback Statute, the False Claims Act, and the Stark Law. Two are criminal, two are civil, and they often overlap. Here is how each one works.

This article was first published on July 8, 2020. The enforcement figures below are described as they were reported at the time.

The United States loses billions of dollars to health care fraud and abuse every year, with some estimates close to $100 billion a year. As national health care spending rises, now in the range of $3 trillion a year, health care fraud schemes appear to be getting more complex and more serious.

In response, the U.S. Department of Justice has put a lot of law enforcement effort into health care fraud. A 1996 law, the Health Insurance Portability and Accountability Act (HIPAA), set up a program that brings federal, state, and local law enforcement agencies together to focus on health care fraud and abuse.

Who investigates health care fraud?

HIPAA created the Health Care Fraud and Abuse Control Program ("HCFAC") (42 U.S.C. § 1320a-7c). The Attorney General and the Secretary of Health and Human Services oversee it together. FBI agents and investigators from the HHS Office of Inspector General often work these cases together.

On top of that program, the Justice Department and HHS created the Health Care Fraud Prevention & Enforcement Action Team ("HEAT") and the Medicare Fraud Strike Force. Both bring together officers from many government agencies to prevent and prosecute health care fraud.

This joint effort has produced results. As reported at the time, the Justice Department obtained $19.3 billion in civil settlements and judgments for health care fraud between 2009 and 2016. In 2014 alone, the Medicare Fraud Strike Force brought federal criminal charges against 353 people for health care fraud. And among those convicted and sentenced for criminal health care fraud, the average prison sentence was more than four years.

Against that backdrop, it helps to understand the laws the government uses most often, and to make sure your own health care practices follow them.

Which health care fraud laws are criminal?

The two laws below are criminal laws, so a conviction can mean significant prison time and fines. Both require the government to prove you acted knowingly and willfully — in other words, that you had some sense the conduct was wrong. Still, for both laws, the government does not have to prove you knew about the specific law or meant to break it (18 U.S.C. § 1347(b); 42 U.S.C. § 1320a-7b(h)).

• Criminal health care fraud statute, 18 U.S.C. § 1347: makes it a crime to knowingly and willfully (1) carry out a scheme to defraud any health care benefit program, public or private, or (2) use false statements to get money or property held by a health care benefit program. The penalty is up to 10 years in prison, up to 20 years if someone is seriously hurt, and up to life if someone dies. Section 1347 has no special fine of its own. The general federal limits apply: up to $250,000 for a person or $500,000 for an organization, or twice the gain or loss if that is more (18 U.S.C. § 3571).
• Anti-Kickback Statute (AKS), 42 U.S.C. § 1320a-7b(b): makes it a crime to offer, pay, ask for, or take anything of value to bring about or reward referrals for items or services paid by federal health care programs like Medicare and Medicaid. Simply put, it targets the classic case of a doctor paying others to send patients who are covered by a federal health care program. The penalty is up to 10 years in prison and a $100,000 fine.

Which health care fraud laws are civil?

The two laws below are civil, not criminal, so they do not carry prison time. But the money penalties in health care fraud cases under these laws can be very large.

• False Claims Act (FCA), 31 U.S.C. § 3729: makes people liable for knowingly submitting a false or fraudulent claim to the government for payment, or making a false record or statement that matters to such a claim. "Knowingly" includes reckless disregard of the truth; no intent to defraud is needed. The penalty is a set amount per false claim, which is adjusted for inflation each year and is now well above the $11,000 figure often cited in older sources, plus three times the government's losses. An FCA violation can also lead to exclusion from federal health care programs.
• Stark Law, 42 U.S.C. § 1395nn: a doctor generally may not refer a Medicare patient for certain services, such as lab work, imaging, or physical therapy, to a business the doctor or a close family member has a financial relationship with, unless an exception applies. The terms "referral" and "financial relationship" are complicated, so staying within the law can be hard. Claims from those referrals are not paid, and money already received must be refunded. Knowingly billing for them can bring a civil penalty of up to $15,000 per service, adjusted for inflation, plus possible exclusion from Medicare.

The laws overlap. A claim that results from an illegal kickback is treated as a false claim under the False Claims Act (42 U.S.C. § 1320a-7b(g)).

Can a conviction get you banned from Medicare?

Yes. A conviction for a crime tied to Medicare or Medicaid, or a felony health care fraud conviction, leads to mandatory exclusion from federal health care programs for at least five years (42 U.S.C. § 1320a-7).

Where can you read more?

• Federal health care fraud charges
• Justice Department Health Care Fraud Unit
• CMS guide to federal fraud and abuse laws (PDF)

What should you do next?

Book a consultation to talk it through with Brandon Sample.

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