Comprehensive Guide to White-Collar Criminal Defense: Health Care Fraud

Introduction to Federal Health Care Fraud

Federal health care fraud laws are a cornerstone of efforts to protect the integrity of the nation’s health care system, particularly Medicare, Medicaid, and other government programs. These laws target a wide range of fraudulent activities, including billing for services not rendered, inflating costs, kickbacks for referrals, and false certifications. With health care expenditures constituting a significant portion of the U.S. economy, fraud poses not only financial harm but also risks to patient safety and trust in the health care system.

Key statutes that govern health care fraud include 18 U.S.C. § 1347, which addresses health care fraud directly; the False Claims Act (31 U.S.C. §§ 3729–3733), which imposes liability for submitting false claims to the government; the Anti-Kickback Statute (42 U.S.C. § 1320a-7b), which prohibits offering or accepting remuneration for referrals covered by federal programs; and the Stark Law (42 U.S.C. § 1395nn), which restricts physician self-referrals for certain designated health services reimbursed by Medicare or Medicaid.

These laws provide the government with powerful tools to investigate and prosecute fraud, but they also present significant challenges for defendants due to their broad scope and severe penalties. This post explores these statutes, their key elements, prominent cases, legal issues, and potential defenses.

1. 18 U.S.C. § 1347 (Health Care Fraud)

The Health Care Fraud statute criminalizes knowingly and willfully executing or attempting to execute a scheme to defraud any health care benefit program or obtain money or property through false representations. This statute applies broadly to any fraudulent conduct involving health care programs, making it a critical tool for prosecutors. Common schemes prosecuted under this statute include billing for services not rendered, misrepresenting services provided, and falsifying patient diagnoses to justify unnecessary procedures. The statute’s flexibility allows the government to target both individual providers and larger organizations involved in systemic fraud.

Key Elements for Conviction:

• A scheme or artifice to defraud a health care benefit program.

• Intent to defraud or obtain money/property under false pretenses.

• Material misrepresentations or omissions.

Notable Cases:

• United States v. Patel, 778 F.3d 607 (7th Cir. 2015): A physician was convicted for falsely billing Medicare for services never rendered. Additional Cases: United States v. AseraCare Inc., 938 F.3d 1278 (11th Cir. 2019): A hospice care provider prosecuted for submitting false claims by certifying patients as terminally ill without proper evidence. United States v. Dynamic Visions Inc., No. 1:15-cv-105 (D. Mass. 2018): Prosecution for inflating billing and improper Medicare claims. United States v. Wilkerson, 776 F. Supp. 2d 1266 (M.D. Fla. 2011): Conviction for submitting claims for unperformed services to Medicare.

• United States v. Melgen, 967 F.3d 1250 (11th Cir. 2020): An ophthalmologist received a lengthy prison sentence for inflating claims for unnecessary procedures. Additional Cases: United States v. Rogan, 517 F.3d 449 (7th Cir. 2008): Florida case involving Medicare fraud and false patient records. United States v. Friedman, No. 1:16-cr-10276 (D. Mass. 2017): Case addressing improper billing and fraudulent home health care services. United States v. McCulloch, No. 1:17-cr-10150, 2019 WL 3890347 (D. Mass. 2019): Prosecution of a surgeon for submitting false claims related to unnecessary surgeries.

Key Legal Issues:

• Intent to Defraud: Courts typically assess 'intent to defraud' by evaluating whether the defendant knowingly and willfully engaged in deceptive practices. Evidence such as falsified documents, suspicious billing patterns, or internal communications may be used to establish intent. Additionally, courts may infer intent from the defendant's actions, such as repeated violations or attempts to hide transactions.

• Materiality: Misrepresentations must be significant enough to influence payment decisions by the health care program.

Potential Defenses:

• Lack of Intent: Arguing that errors were due to administrative mistakes rather than fraudulent intent.

• Compliance Efforts: Demonstrating a good-faith effort to comply with billing regulations.

• Medical Necessity: Establishing that the services provided were medically necessary and appropriately billed.

2. The False Claims Act (31 U.S.C. §§ 3729–3733)

The False Claims Act (FCA) is one of the government’s most powerful tools in combating health care fraud. It imposes liability on anyone who knowingly submits or causes the submission of false claims for government funds. Enacted during the Civil War to combat fraud against the Union Army, the FCA now serves as a cornerstone in addressing fraudulent claims for government funds. In the health care context, the FCA targets a wide range of fraudulent conduct, including upcoding, unbundling of services, and submitting claims for medically unnecessary treatments. The statute’s qui tam provisions incentivize whistleblowers to report fraud by allowing them to share in financial recoveries, making the FCA an effective mechanism for uncovering hidden fraud.

Key Elements for Liability:

• Submission of a false or fraudulent claim to the government.

• Knowledge of the claim’s falsity (includes actual knowledge, deliberate ignorance, or reckless disregard).

• Materiality of the falsehood.

Notable Cases:

• United States ex rel. Harman v. Trinity Industries, 872 F.3d 645 (5th Cir. 2017): Whistleblower allegations led to a $663 million judgment for false claims related to defective products. Additional Cases: United States v. Philip Esformes, 923 F.3d 1233 (11th Cir. 2019): A Florida case involving a $1.3 billion Medicare fraud scheme. United States ex rel. Loughren v. UnumProvident Corp., 613 F.3d 300 (1st Cir. 2010): Massachusetts case addressing false claims under health insurance policies. United States v. Baystate Medical Center, No. 3:10-cv-30013 (D. Mass. 2012): Settlement involving false claims for Medicare overbilling.

• United States v. Health Management Associates, 591 F. App'x 693 (11th Cir. 2014): A hospital chain settled FCA claims involving unnecessary admissions and upcoding.

Key Legal Issues:

• Materiality Standard: Courts evaluate whether the falsehood was significant enough to affect government payment decisions (Universal Health Services, Inc. v. United States ex rel. Escobar).

• Whistleblower Protections: The FCA’s qui tam provisions allow private individuals to file lawsuits on behalf of the government and share in any recovery.

Potential Defenses:

• Lack of Knowledge: Demonstrating that any misstatements were inadvertent.

• Challenging Materiality: Arguing that the alleged false claims were not material to payment decisions.

• Regulatory Compliance: Showing adherence to complex billing and coding requirements.

3. The Anti-Kickback Statute (42 U.S.C. § 1320a-7b)

The Anti-Kickback Statute (AKS) prohibits offering, paying, soliciting, or receiving any remuneration in exchange for referrals or services reimbursed by federal health care programs. This statute is aimed at eliminating financial incentives that could compromise medical decision-making and lead to increased costs or substandard care. The AKS’s broad scope covers not only explicit bribes but also indirect payments, such as gifts or disguised compensation arrangements. Violations of the AKS can result in both criminal and civil penalties, including exclusion from federal health care programs, making compliance with its provisions essential for providers.

Key Elements for Violation:

• Offering or receiving remuneration (including cash, gifts, or other benefits).

• Intent to induce referrals or generate business for federally reimbursed services.

Notable Cases:

• United States v. Greber, 760 F.2d 68 (3d Cir. 1985): Established that any payment with the intent to induce referrals violates the AKS, even if other legitimate purposes exist.

• United States v. Omnicare, No. 1:14-cv-00578, 2020 WL 204322 (S.D. Ohio 2020): A major settlement involving kickbacks to nursing homes in exchange for Medicare referrals.

Key Legal Issues:

• Intent Standard: The government must prove that remuneration was offered with the intent to induce referrals.

• Safe Harbor Provisions: Certain arrangements, such as properly structured joint ventures, are exempt from liability.

Potential Defenses:

• Safe Harbor Compliance: Demonstrating that the arrangement falls within a statutory or regulatory safe harbor.

• Lack of Intent: Arguing that payments were made for legitimate business purposes, unrelated to referrals.

4. The Stark Law (42 U.S.C. § 1395nn)

The Stark Law, also known as the Physician Self-Referral Law, prohibits physicians from referring Medicare or Medicaid patients for designated health services (DHS) to entities in which they or their immediate family members have a financial interest. Unlike the Anti-Kickback Statute, the Stark Law imposes strict liability, meaning that intent to violate the law is not required for enforcement. The statute’s purpose is to prevent conflicts of interest that could compromise patient care or inflate costs. Physicians and organizations must carefully structure financial arrangements to comply with the Stark Law’s numerous exceptions, such as those for fair market value compensation and in-office ancillary services.

Key Elements for Violation:

• A financial relationship between the referring physician and the entity providing DHS.

• Referrals for services reimbursed by Medicare or Medicaid.

Notable Cases:

• United States v. Halifax Hospital Medical Center, No. 6:09-cv-01002, 2014 WL 6865466 (M.D. Fla. 2014): Allegations of improper physician compensation arrangements led to a $85 million settlement. Additional Cases: United States v. Novartis Pharmaceuticals Corp., No. 1:11-cv-8196 (S.D.N.Y. 2016): While based in New York, this case included Massachusetts clinics in a kickback scheme. United States v. Renown Health, No. 3:12-cv-0367 (D. Nev. 2013): A Nevada case with implications in Massachusetts for Medicaid false claims. United States ex rel. Heineman-Guta v. Guidant LLC, 874 F. Supp. 2d 35 (D. Mass. 2012): Case involving false claims for defective medical devices sold to Medicare.,

• United States ex rel. Drakeford v. Tuomey Healthcare, 675 F.3d 394 (4th Cir. 2012): A landmark $237 million judgment for Stark Law violations involving physician contracts.

Key Legal Issues:

• Exceptions and Safe Harbors: Determining whether financial arrangements meet exceptions, such as fair market value compensation.

• Strict Liability: Unlike the AKS, the Stark Law does not require proof of intent to violate the law.

Potential Defenses:

• Fair Market Value: Demonstrating that financial arrangements were consistent with fair market value and commercially reasonable.

• Non-Referral Services: Showing that referred services did not qualify as DHS under Stark.

Penalties and Collateral Consequences

Violations of health care fraud statutes can result in severe penalties, including:

• Criminal penalties: Fines and imprisonment (up to life in cases involving patient harm).

• Civil penalties: Treble damages and monetary penalties under the FCA.

• Program exclusion: Loss of eligibility to participate in Medicare and Medicaid.

• Reputational harm: Damage to professional credibility and potential loss of licensure.

Defeating Health Care Fraud Charges

Dynamis lawyers have years of experience defending against health care fraud allegations. Effective defenses often include:

1. Lack of Intent or Knowledge:

   • Key Defense: Argue that the defendant lacked the intent to commit fraud or knowledge of the alleged misconduct.

   • Result: Errors or mistakes without fraudulent intent often fall short of criminal liability.

2. Compliance with Regulations:

   • Key Defense: Show adherence to billing, coding, and payment rules, even if technical violations occurred.

   • Result: Demonstrates good-faith efforts to comply with complex regulatory requirements.

3. Challenging Materiality:

   • Key Defense: Argue that any misstatements or omissions were immaterial to government payment decisions.

   • Result: Undermines the prosecution’s case under FCA or fraud statutes.

4. Medical Necessity and Professional Judgment:

   • Key Defense: Establish that services provided were medically necessary and based on sound clinical judgment.

   • Result: Validates the underlying treatment decisions and billing practices.

5. Safe Harbor Provisions:

   • Key Defense: Show that financial relationships or payment arrangements fall within AKS or Stark Law exceptions.

   • Result: Provides a statutory or regulatory shield from liability.

For expert legal advice, contact attorneys at Dynamis LLP or email whitecollar@dynamisllp.com, today. We’re here to guide you through every step of your defense.