September 13, 2016 Articles

Medicare Fraud: A Historic Takedown

The Affordable Care Act provides tools and resources to fight federal healthcare fraud.

By Ariella Cohen – September 13, 2016

The largest healthcare fraud takedown in history occurred on June 22, 2016, following an operation led by the Medicare Fraud Strike Force. The unprecedented nationwide sweep in 36 federal districts led to the charging of 301 individuals, including physicians, nurses, other licensed professionals, and healthcare company owners for their involvement in $900 million of fraudulent billing.

Basics of Healthcare Fraud and Abuse 
In cases of healthcare fraud and abuse, defendants use or seek to use public finances for private benefit. Fraud occurs when a defendant submits, or causes someone to submit, false or misleading information for the purpose of reimbursement. Abuse occurs when provider practices are inconsistent with sound fiscal, business, or medical practices, resulting in unnecessary cost or in reimbursement for services that are medically unnecessary or fail to meet the standard of care. These criminals promise treatments but fail to provide any. They abuse trust, such as between doctor and patient, pharmacist and doctor, or taxpayer and government.

Efforts to Combat Healthcare Fraud and Abuse

Medicare/Medicaid entities fight healthcare fraud and abuse. The Medicare Fraud Strike Force and Medicaid Control Units have worked to stem healthcare fraud and abuse.

The Medicare Fraud Strike Force, established in March 2007, analyzes data and investigates intelligence to rapidly detect fraud and initiate prosecutions. A collaborative effort among the Office of Inspector General (OIG), U.S. Department of Justice (DOJ), Offices of the U.S. Attorneys, Federal Bureau of Investigation (FBI), local law enforcement, and others, the Strike Force operates in nine locations: Miami, Florida; Los Angeles, California; Detroit, Michigan; southern Texas; Brooklyn, New York; southern Louisiana; Tampa, Florida; Chicago, Illinois; and Dallas, Texas. Its operations are part of the Health Care Fraud Prevention and Enforcement Action Team (HEAT), a joint initiative announced in May 2009 between the DOJ and the U.S. Department of Health and Human Services (HHS) to focus efforts to prevent and deter fraud and enforce current antifraud laws nationwide. HEAT is comprised of law enforcement agents, prosecutors, attorneys, auditors, evaluators, and other DOJ and HHS staff.

According to Assistant Attorney General Leslie R. Caldwell, the Strike Force’s strategic approach has been remarkably successful at staying ahead of healthcare fraud trends. Since its inception, the Strike Force has charged over 2,900 defendants who collectively falsely billed Medicare for over $8.9 billion.

Medicaid Fraud Control Units (MFCUs) investigate and prosecute Medicaid provider fraud, as well as patient abuse and neglect in healthcare facilities and board and care facilities. The MFCUs are single, identifiable entities that are separate and distinct from state Medicaid agencies. Typically as part of state attorney general offices, the MFCUs employ teams of investigators, attorneys, and auditors. The OIG exercises oversight for the MFCUs and annually recertifies each MFCU, assesses each MFCU’s performance and compliance with federal requirements, and administers a federal grant award to fund a portion of each MFCU’s operational costs.

Legislation addresses healthcare fraud and abuse. Legislation addressing healthcare fraud and abuse includes the Affordable Care Act, the False Claims Act, and the Anti-Kickback Statute.

The Affordable Care Act (ACA) provides tools and resources to fight federal healthcare fraud. The ACA provides $350 million to HHS’s prevention and enforcement efforts, enabling HHS to hire additional prosecutors and expand the Strike Force. This grants the Centers for Medicare and Medicaid Services (CMS) greater authority to screen out questionable providers and suppliers prior to their enrollment in Medicare and increases data sharing across government. The ACA clarifies that the sum amount billed to Medicare determines the loss due to the healthcare fraud; the ACA increases prison time for the billed amounts, thus acting as a deterrent to committing fraud.

A defendant is guilty of committing a crime under the False Claims Act if the defendant knowingly and willfully submitted a false claim to the federal government for reimbursement. Intent is the heart of this act. A conviction under the False Claims Act makes the defendant automatically liable for civil false claims penalties. If the defendant meets the standard of proof, the defendant will most likely be barred from doing business with the federal government.

A defendant is guilty of committing a felony under the Anti-Kickback Statute if the defendant knowingly and willfully exchanges, or offers to exchange, anything of value (including any kickback, bribe, or rebate) in an effort to induce the referral of federal healthcare program business. Conviction under the Anti-Kickback Statute results in mandatory exclusion from participation in federal healthcare programs.

The $900 Million Historic Takedown
In the historic $900 million Medicare takedown, the defendants allegedly participated in schemes to submit claims to Medicare and Medicaid for medically unnecessary treatments that were often never provided. Cash kickbacks were allegedly paid to patient recruiters, Medicare beneficiaries, and other coconspirators in exchange for proving beneficiary information to providers, enabling providers to submit fraudulent bills to Medicare for these medically unnecessary or never rendered services.

Among the healthcare fraud charges alleged against the defendants are conspiracy to commit healthcare fraud; violations of the Anti-Kickback Statute; money laundering; aggravated identity theft; falsifying claims for disability benefits; permitting unlicensed individuals to perform physician services and billing Medicare as if the services were physician performed; falsifying applications and licensing requirements; and falsifying claims for medical treatments and services, including home health care, psychotherapy, physical and occupational therapy, durable medical equipment, prescription (including intravenous) drugs, and compounding pharmacies. Over 60 of the defendants were charged with fraud related to Medicare Part D, which is Medicare’s prescription drug benefit program.

The Strike Force–led takedown involved the participation of 23 state MFCUs, 26 U.S. Attorneys Offices, the FBI, HHS-OIG, the Drug Enforcement Administration, and the Defense Criminal Investigative Service. CMS is using authority granted to it by the ACA to suspend payments to providers, including physicians, nurses, healthcare company owners, and other licensed professionals.

Keywords: criminal litigation, Affordable Care Act , healthcare fraud, Medicare Fraud Strike Force, Medicaid Fraud Control Units, healthcare abuse, False Claims Act, Anti-Kickback Statute


Ariella Cohen is a program specialist at the American Association of Blood Banks in Washington, D.C.