Health Care Fraud – When Is It a Crime?

Health care fraud is a crime whereby physicians, medical facility staff or patients intentionally submit, or cause someone else to submit, false or fraudulent claims to governmental agencies or insurance companies. People may submit fraudulent claims to either a private medical insurance company or a government medical insurance program such as Medicare or Medicaid.

Health care fraud is also referred to as

• “billing fraud,”
• “health insurance fraud,”
• “HMO fraud,” or
• “Medicare fraud.”

Examples

• a doctor billing for unnecessary services.
• a physician engaging in “upcoding,” where he/she bills for more expensive medical services than the ones a patient received.
• a patient submitting multiple insurance claims for one procedure.

Defenses

People accused of billing fraud in the U.S. can challenge the accusation with a legal defense. Common defenses include defendants showing that:

1. they did not know they were submitting false or fraudulent information,
2. they did not act with an intent to defraud, and/or
3. law enforcement violated one of their constitutional rights.

Penalties

In most jurisdictions, health insurance fraud is either a misdemeanor or a felony depending on the total amount of the fraudulent claim that gets submitted.

The crime is punishable by substantial fines and typically between five to 10 years in jail or prison.

Our California criminal defense attorneys will address the following in this article:

• 1. What are common types of health care fraud?
  • 1.1. Submitting claims for benefits that were not delivered
  • 1.2. Submitting false or fraudulent claims
  • 1.3. Multiple claims
  • 1.4. Submitting undercharges without overcharges
  • 1.5. Preparing a writing in support of a fraudulent claim
• 2. Who investigates these types of cases?
• 3. Are there legal defenses?
  • 3.1. No knowledge
  • 3.2. No intent to defraud
  • 3.3. Violation of a constitutional right
• 4. What are the penalties?
• 5. What is the law in California – Penal Code 550a

1. What are common types of health care fraud?

Healthcare fraud is a criminal offense where people engage in fraud schemes against health care systems or insurance programs/insurance plans.

While state laws may slightly differ as to the exact meaning of the crime, prosecutors typically have to prove the following to successfully convict a person of this offense:

1. the defendant knowingly and intentionally executed, or attempted to execute, a scheme, and
2. the scheme was one to either defraud a healthcare benefit program, or obtain, by means of false or fraudulent pretenses, representations, or promises, of any of the money or property owned by, or under the custody or control of, any healthcare benefit program.¹

Common ways people commit this crime are by:

1. submitting claims for benefits that were not delivered,
2. submitting false or fraudulent claims,
3. submitting multiple claims,
4. submitting undercharges without overcharges, and
5. preparing a writing in support of a fraudulent claim.

1.1. Submitting claims for benefits that were not delivered

The most common way a physician commits this offense is by submitting a claim for any sort of health care service, medical equipment, or procedure that was never provided to a patient.

Example: Dr. K. has a practice in New York delivering babies. However, he often does not show up at the deliveries and instead sends an assistant. Still, he bills his patients’ insurance companies for his services at the delivery room. Here, Dr. K is guilty of submitting claims for services he never rendered.

1.2. Submitting false or fraudulent claims

People are guilty of Medicare fraud when they submit a false or fraudulent claim for health care benefits.

Examples of this illegal conduct include:

• performing a service that a patient did not need and billing an insurance company for it,²
• up-coding, or billing insurers for a more expensive procedure or service than the one performed, and
• not charging patients for services when they pay out of pocket, but charging patients for these same services when they pay with insurance.

1.3. Multiple claims

Medical care providers often commit health care fraud by submitting multiple claims for the same medical service. Here, the provider essentially double bills the insurance company.

Example: Oliver is an oncologist (a doctor who specializes in cancer). When he suspects a patient might have cancer, he runs a whole series of tests including a CT scan and bills the patient’s insurer for all of those tests. But he then also sends the insurer a separate bill for the CT scan, even though it was included in the bundle of tests. Oliver is billing the insurance company twice for the same CT scan.

1.4. Submitting undercharges without overcharges

This is the scenario where a person sends a bill to a health insurer for services that were undercharged in the past, without also sending at the same time a bill for services that were overcharged in the past.

Example: Dr. Jones is Pete’s primary care doctor. Pete has a number of physical complaints and visits the doctor several times over the course of a year. When he is going over his accounts for the year, Dr. Jones discovers two mistakes:

1. Pete visited him in March for a physical exam and a prescription drug, which together should have cost $500. But Dr. Jones’ office only billed Pete’s insurance company for $300, which was the cost of just the exam (not the drug). So, the office underbilled the insurance company by $200 ($500-$300).

2. Pete visited Dr. Jones’ office again in October to have his vital signs taken. Dr. Jones’ office billed the insurance company for $300, which is the cost of an office visit with the doctor. But, in fact, Pete did not see Dr. Jones on that visit. He only saw the nurse, which costs just $150. So, the office overbilled the insurance company by $150 ($300-$150).

If Dr. Jones now submits to the insurance company a claim for $200 (the amount that was underbilled in March), but does not tell them about the $150 extra that he got paid in October, he has committed health care fraud.

1.5. Preparing a writing in support of a fraudulent claim

Providers and patients commonly commit Medicare fraud when they prepare any document and use it to support a fraudulent health care claim.

2. Who investigates these types of cases?

Agencies of the federal government and state agencies typically investigate cases involving health care fraud. Examples include:

• state health care fraud prevention units,
• state Medicaid fraud control units,
• local Medicare & Medicaid services departments,
• a state’s attorney general’s office,
• the Department of Justice (DOJ) Healthcare Fraud Strike Force,
• the Department of Health and Human Services Office of Inspector General (HHS-OIG),
• the Federal Bureau of Investigation (FBI), and
• the Drug Enforcement Administration (DEA).

Taxpayers are encouraged to report fraud by using the HHS-OIG fraud hotline.

People often learn that state or federal agencies are investigating them for fraud via a:

• search warrant,
• grand jury target letter,
• grand jury subject letter,
• grand jury subpoena, and
• civil investigative demand.

3. Are there legal defenses?

Criminal defense lawyers draw upon several legal strategies to help clients challenge allegations of health care fraud. Three common ones include lawyers showing that:

1. the accused did not act with knowledge.
2. the defendant did not act with an intent to defraud.
3. law enforcement violated one of the defendant’s constitutional rights.

3.1. No knowledge

Recall that people are only guilty of this offense if they act knowingly. People cannot be convicted of this fraud unless they knew that the claim they were submitting was fraudulent, or knew that they prepared a document to submit with a false claim. A defense, then, is for a defendant to say that he/she did not act with this knowledge.

3.2. No intent to defraud

Recall, too, that a defendant must act with criminal intent to be guilty of health care fraud, In particular, accused people are only guilty of this crime if they intended to defraud a medical insurance company for some type of health care benefits. Therefore, it is always a defense for defendants to show that they did not act with a fraudulent intent. Maybe, for example, an accused committed a fraud by accident.

3.3. Violation of a constitutional right

People can always contest a fraud charge by showing that the police violated one of their constitutional rights.

Perhaps, for example, law enforcement:

• conducted an unlawful search or seizure,
• stopped or arrested the defendant without probable cause,
• coerced a confession, or
• failed to read the accused his/her Miranda rights.

If any of the above applies, then a judge can reduce or drop a defendant’s health care fraud charges altogether.

4. What are the penalties?

Most jurisdictions say that the penalties for this crime will depend on the value of the fraudulent claim that a defendant submits to an insurer.

The crime, therefore, can be charged as either a misdemeanor or a felony depending on the facts of a particular case.

Penalties can include substantial fines and up to five to 10 years in jail or state prison.

The penalties for violating the federal health care fraud statute include 10 years in federal prison and/or a fine.³

If the violation resulted in serious bodily injury to someone, a judge can increase a sentence to 20 years.⁴

5. What is the law in California – Penal Code 550a

Health care fraud is a serious crime in California.

Penal Code 550a PC sets forth several ways in which a person can commit this offense. Examples include when a person:

• knowingly makes or causes to be made any false or fraudulent claim for payment of a health care benefit,
• knowingly submits a claim for a health care benefit that was not used by, or on behalf of, the claimant, and
• knowingly presents multiple claims for payment of the same health care benefit with an intent to defraud.⁵

For purposes of this statute, people “intend to defraud” if they intend to deceive another person either to cause a loss of:

• money,
• goods,
• services, or
• something else of value.⁶

Further, a claim for payment of a healthcare benefit includes a claim submitted by or on behalf of the provider of a workers’ compensation health benefit defined in the Labor Code.⁷

If a person violates the above law, a California prosecutor can charge it as either a misdemeanor or a felony depending on the value of the fraudulent claim that an accused submits.

If an allegedly fraudulent claim is worth no more than $950 in total, the offense is a misdemeanor.⁸ In this case, the potential penalties are:

• imprisonment in a county jail for up to six months, and/or
• a fine of not more than $1,000.⁹

But if a claim totals more than $950, the offense is a wobbler. This means that a prosecutor can charge the crime as either a misdemeanor or a felony.¹⁰

If charged as a felony, the maximum penalties are:

• custody in jail for up to five years, and/or
• a fine of up to $50,000 or double the amount of the fraud (whichever is greater).¹¹

For additional help…

For additional guidance or to discuss your case with one of our criminal defense attorneys, we invite you to contact our law firm at the Shouse Law Group. Our attorneys provide both free consultations and legal advice you can trust.

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