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<!-- META_DESCRIPTION: Comprehensive guide to federal healthcare fraud charges under 18 U.S.C. § 1347. Learn about elements, sentencing guidelines, penalties, and notable cases. -->
{{Infobox federal offense
{{Infobox federal offense
|name = Healthcare Fraud
|name = Healthcare Fraud
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|related_offenses = [[Wire Fraud|Wire Fraud]], [[False Statements|False Statements]], [[Anti-Kickback Statute|Anti-Kickback Statute]]
|related_offenses = [[Wire Fraud|Wire Fraud]], [[False Statements|False Statements]], [[Anti-Kickback Statute|Anti-Kickback Statute]]
}}
}}
'''Healthcare fraud''' is a federal crime under 18 U.S.C. § 1347 that prohibits schemes to defraud healthcare benefit programs or obtain money or property from healthcare benefit programs through false or fraudulent pretenses, representations, or promises. The statute covers fraud against both public programs (Medicare, Medicaid, TRICARE) and private health insurance.<ref name="uscode-1347">18 U.S.C. § 1347.</ref>
'''Healthcare fraud''' is a federal crime under 18 U.S.C. § 1347. It prohibits schemes to defraud healthcare benefit programs or obtain money or property from them through false or fraudulent pretenses, representations, or promises. The statute covers fraud against both public programs (Medicare, Medicaid, TRICARE) and private health insurance.<ref name="uscode-1347">18 U.S.C. § 1347.</ref>


Healthcare fraud carries a maximum sentence of 10 years imprisonment, which increases to 20 years if the offense results in serious bodily injury, and life imprisonment if the offense results in death. Given the frequency with which healthcare fraud prosecutions involve patient harm, these enhanced penalties are significant.<ref name="uscode-1347" />
The potential sentences are substantial. A conviction can bring 10 years in prison, which jumps to 20 years if someone gets seriously hurt, and life imprisonment if a patient dies. Given how often healthcare fraud prosecutions involve patient harm, these enhanced penalties matter a lot.<ref name="uscode-1347" />


== Elements of the Offense ==
== Elements of the Offense ==


To secure a healthcare fraud conviction under 18 U.S.C. § 1347, federal prosecutors must prove:
Federal prosecutors need to prove two things to win a healthcare fraud case under 18 U.S.C. § 1347:


# '''Scheme to Defraud''': The defendant knowingly and willfully executed, or attempted to execute, a scheme or artifice to defraud a health care benefit program, or to obtain money or property from a health care benefit program through false or fraudulent pretenses, representations, or promises
# '''Scheme to Defraud''': The defendant knowingly and willfully executed, or attempted to execute, a scheme or artifice to defraud a health care benefit program, or to obtain money or property from a health care benefit program through false or fraudulent pretenses, representations, or promises
Line 24: Line 23:
=== Health Care Benefit Program ===
=== Health Care Benefit Program ===


A "health care benefit program" is defined broadly under 18 U.S.C. § 24 to include any public or private plan or contract affecting commerce under which any medical benefit, item, or service is provided to any individual. This covers:
"Health care benefit program" gets defined pretty broadly under 18 U.S.C. § 24. It means any public or private plan or contract affecting commerce under which any medical benefit, item, or service is provided to any individual. This includes:


* Medicare
* Medicare
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=== No Wire or Mail Required ===
=== No Wire or Mail Required ===


Unlike wire and mail fraud, healthcare fraud does not require proof that the defendant used any particular instrumentality. The crime is complete upon execution of the fraudulent scheme against a healthcare program.
Here's something important: unlike wire and mail fraud, prosecutors don't need to prove the defendant used any particular instrumentality. The crime is complete once someone executes the fraudulent scheme against a healthcare program.


== Statutory Penalties ==
== Statutory Penalties ==
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|}
|}


In addition to imprisonment and fines, convicted defendants face:
Prison time and fines aren't the only consequences. Convicted defendants also face:


* Exclusion from participation in federal healthcare programs (Medicare, Medicaid)
* Exclusion from participation in federal healthcare programs (Medicare, Medicaid)
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== Federal Sentencing Guidelines ==
== Federal Sentencing Guidelines ==


Healthcare fraud is sentenced under USSG §2B1.1, the general fraud and theft guideline.
Healthcare fraud falls under USSG §2B1.1, the general fraud and theft guideline.


=== Base Offense Level ===
=== Base Offense Level ===


The base offense level for healthcare fraud under §2B1.1(a) is '''7''' for offenses involving fraud or deceit.<ref name="ussg-2b1">United States Sentencing Commission, USSG §2B1.1 (2024).</ref>
The starting point is offense level '''7''' for fraud or deceit offenses.<ref name="ussg-2b1">United States Sentencing Commission, USSG §2B1.1 (2024).</ref>


=== Loss Amount Enhancements ===
=== Loss Amount Enhancements ===


The loss amount enhancement table under §2B1.1(b)(1) applies. In healthcare fraud cases, loss is typically calculated as the amount fraudulently billed to healthcare programs, less any legitimate value of services actually provided.
The loss table in §2B1.1(b)(1) applies. For healthcare fraud, loss is typically the amount fraudulently billed to healthcare programs, minus any legitimate value of services actually provided.


=== Healthcare-Specific Enhancements ===
=== Healthcare-Specific Enhancements ===


Additional enhancements particularly relevant to healthcare fraud include:
Several enhancements apply specifically to healthcare fraud:


* '''+2 levels''': If the offense involved 10 or more victims
* '''+2 levels''': If the offense involved 10 or more victims
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=== Departure for Patient Harm ===
=== Departure for Patient Harm ===


When healthcare fraud results in patient harm, the guidelines authorize upward departures beyond the standard enhancements. If the offense resulted in death, serious bodily injury, or life-threatening conditions, courts may impose sentences above the guideline range.
When a patient actually gets hurt, the guidelines let courts impose sentences above the standard range. If the offense resulted in death, serious bodily injury, or life-threatening conditions, judges can go well above the guideline recommendation.


== Common Healthcare Fraud Schemes ==
== Common Healthcare Fraud Schemes ==
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=== Billing for Services Not Rendered ===
=== Billing for Services Not Rendered ===


Billing Medicare, Medicaid, or private insurers for medical services, procedures, or equipment that were never provided to the patient. This is the most basic form of healthcare fraud.
This is the simplest form. Billing Medicare, Medicaid, or private insurers for medical services, procedures, or equipment that were never actually provided to the patient.


=== Upcoding ===
=== Upcoding ===


Billing for a more expensive service than was actually performed. For example, billing for a comprehensive office visit when only a brief visit occurred, or billing for a more expensive surgical procedure than was performed.
Billing for something more expensive than what you actually did. A comprehensive office visit billed as something premium when it was just a quick check-in. Or a complex surgery coded as something more elaborate than it was.


=== Unbundling ===
=== Unbundling ===


Billing separately for services that should be billed as a single bundled service at a lower rate. Healthcare programs pay a single rate for bundled procedures; unbundling allows providers to charge higher total amounts.
Billing separately for services that should be billed as one bundled service at a lower rate. Healthcare programs pay one rate for bundled procedures; unbundling lets providers charge higher total amounts.


=== Kickbacks ===
=== Kickbacks ===
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=== Pill Mill Operations ===
=== Pill Mill Operations ===


Operating pain management clinics or medical practices that prescribe controlled substances without legitimate medical purpose, billing insurers for "office visits" while primarily functioning as drug distribution operations.
Operating pain management clinics or medical practices that prescribe controlled substances without legitimate medical purpose. They bill insurers for "office visits" while really functioning as drug distribution operations.


=== Durable Medical Equipment (DME) Fraud ===
=== Durable Medical Equipment (DME) Fraud ===


Fraudulently billing for wheelchairs, hospital beds, oxygen equipment, and other durable medical equipment, often to patients who never ordered the equipment or do not need it.
Fraudulently billing for wheelchairs, hospital beds, oxygen equipment, and other durable medical equipment. Often the patients never ordered the equipment or don't actually need it.


=== Home Health Care Fraud ===
=== Home Health Care Fraud ===


Billing for home health services not provided, or provided to patients who do not meet eligibility requirements. Schemes may involve billing for skilled nursing care when only unskilled services are provided.
Billing for home health services not provided, or provided to patients who don't meet eligibility requirements. These schemes might involve billing for skilled nursing care when only unskilled services were provided.


=== Laboratory Fraud ===
=== Laboratory Fraud ===


Billing for medically unnecessary tests, upcoding tests, or billing for tests never performed. Lab fraud schemes often involve kickbacks to physicians who order the unnecessary tests.
Billing for medically unnecessary tests, upcoding tests, or billing for tests that were never performed. Lab fraud often involves kickbacks to physicians who order the unnecessary tests.


=== Telemedicine Fraud ===
=== Telemedicine Fraud ===


Following the COVID-19 pandemic expansion of telemedicine, new fraud schemes emerged involving:
After the COVID-19 pandemic expanded telemedicine, new fraud schemes showed up:


* Billing for telemedicine visits that never occurred
* Billing for telemedicine visits that never happened
* Using telemedicine to prescribe controlled substances without proper evaluation
* Using telemedicine to prescribe controlled substances without proper evaluation
* Billing in-person rates for telemedicine services<ref name="doj-telemedicine">U.S. Department of Justice, "National Telemedicine Fraud Takedown," April 2023.</ref>
* Billing in-person rates for telemedicine services<ref name="doj-telemedicine">U.S. Department of Justice, "National Telemedicine Fraud Takedown," April 2023.</ref>
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=== Dr. Farid Fata (2015) ===
=== Dr. Farid Fata (2015) ===


Michigan oncologist Farid Fata was sentenced to 45 years in federal prison for administering unnecessary chemotherapy treatments to patients who did not have cancer, billing Medicare for over $17 million. The case involved approximately 550 patients who received medically unnecessary treatments.<ref name="fata-doj">U.S. Department of Justice, "Michigan Cancer Doctor Sentenced to 45 Years in Prison," July 10, 2015.</ref>
Michigan oncologist Farid Fata got 45 years in federal prison for administering unnecessary chemotherapy to patients who didn't have cancer. He billed Medicare for over $17 million. About 550 patients received medically unnecessary treatments.<ref name="fata-doj">U.S. Department of Justice, "Michigan Cancer Doctor Sentenced to 45 Years in Prison," July 10, 2015.</ref>


=== Philip Esformes (2019) ===
=== Philip Esformes (2019) ===


Miami nursing home operator Philip Esformes was convicted of healthcare fraud in one of the largest prosecutions in history. The scheme billed Medicare and Medicaid for approximately $1.3 billion, of which $200 million was paid. Esformes received a 20-year sentence, which was later commuted by President Trump.<ref name="esformes-doj">U.S. Department of Justice, "Nursing Home Operator Convicted in $1.3 Billion Health Care Fraud Scheme," April 5, 2019.</ref>
Miami nursing home operator Philip Esformes was convicted in one of the largest healthcare fraud prosecutions ever. His scheme billed Medicare and Medicaid for approximately $1.3 billion, of which $200 million was actually paid. He received a 20-year sentence, later commuted by President Trump.<ref name="esformes-doj">U.S. Department of Justice, "Nursing Home Operator Convicted in $1.3 Billion Health Care Fraud Scheme," April 5, 2019.</ref>


=== Martin Shkreli (2017) ===
=== Martin Shkreli (2017) ===


[[Martin Shkreli]], the pharmaceutical executive infamous for raising the price of Daraprim, was convicted of securities fraud related to a hedge fund scheme. While his most publicized actions involved drug pricing, his federal conviction related to defrauding investors in his hedge funds. He was sentenced to 7 years in federal prison.<ref name="shkreli-conviction">U.S. Department of Justice, "Martin Shkreli Sentenced to Seven Years in Prison," March 9, 2018.</ref>
[[Martin Shkreli]], the pharmaceutical executive known for raising the price of Daraprim, was convicted of securities fraud related to a hedge fund scheme. His federal conviction wasn't about drug pricing but about defrauding investors in his hedge funds. He was sentenced to 7 years.<ref name="shkreli-conviction">U.S. Department of Justice, "Martin Shkreli Sentenced to Seven Years in Prison," March 9, 2018.</ref>


=== Sylvia Hofstetter (2019) ===
=== Sylvia Hofstetter (2019) ===


Sylvia Hofstetter operated a massive DME fraud scheme, fraudulently billing Medicare for approximately $100 million for orthotic braces. She orchestrated a network of call centers, telemedicine companies, and DME suppliers to bill for braces patients did not need or want. She was sentenced to 15 years in federal prison.<ref name="hofstetter-doj">U.S. Department of Justice, "South Florida Woman Sentenced to 15 Years in $100 Million Medicare Fraud Scheme," 2019.</ref>
Sylvia Hofstetter ran a massive DME fraud scheme, fraudulently billing Medicare for approximately $100 million for orthotic braces. She'd orchestrated a network of call centers, telemedicine companies, and DME suppliers to bill for braces patients didn't need or want. Fifteen years in federal prison.<ref name="hofstetter-doj">U.S. Department of Justice, "South Florida Woman Sentenced to 15 Years in $100 Million Medicare Fraud Scheme," 2019.</ref>


=== National Telemedicine Takedown (2023) ===
=== National Telemedicine Takedown (2023) ===


In April 2023, the Department of Justice announced charges against 18 defendants in a nationwide telemedicine fraud scheme that billed Medicare for over $250 million. The scheme involved telemarketing calls to Medicare beneficiaries, followed by brief telemedicine calls to authorize expensive equipment and genetic testing that patients did not need.<ref name="doj-telemedicine" />
In April 2023, the Department of Justice announced charges against 18 defendants in a nationwide telemedicine fraud scheme. They'd billed Medicare for over $250 million. The scheme involved telemarketing calls to Medicare beneficiaries, followed by brief telemedicine calls to authorize expensive equipment and genetic testing that patients didn't need.<ref name="doj-telemedicine" />


== Statistics ==
== Statistics ==
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* Healthcare fraud costs the United States an estimated $100 billion annually
* Healthcare fraud costs the United States an estimated $100 billion annually
* Medicare and Medicaid are the primary targets of healthcare fraud
* Medicare and Medicaid are the primary targets
* In fiscal year 2023, the Medicare Fraud Strike Force charged over 250 defendants for schemes totaling approximately $1.8 billion in alleged losses
* In fiscal year 2023, the Medicare Fraud Strike Force charged over 250 defendants for schemes totaling approximately $1.8 billion in alleged losses
* The average sentence for healthcare fraud exceeds 36 months imprisonment
* Average sentences exceed 36 months imprisonment
* Civil settlements and judgments under the False Claims Act recover billions annually<ref name="hhs-oig">HHS Office of Inspector General, Semiannual Report to Congress (2023).</ref>
* Civil settlements and judgments under the False Claims Act recover billions annually<ref name="hhs-oig">HHS Office of Inspector General, Semiannual Report to Congress (2023).</ref>


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=== Medicare Fraud Strike Force ===
=== Medicare Fraud Strike Force ===


The Medicare Fraud Strike Force is an interagency team of analysts, investigators, and prosecutors who combat Medicare fraud. Operating in multiple cities, the Strike Force has charged over 4,800 defendants since 2007, with alleged fraud exceeding $23 billion.
The Medicare Fraud Strike Force is an interagency team of analysts, investigators, and prosecutors combating Medicare fraud. They operate in multiple cities and have charged over 4,800 defendants since 2007. The alleged fraud exceeds $23 billion.


=== Health Care Fraud Prevention and Enforcement Action Team (HEAT) ===
=== Health Care Fraud Prevention and Enforcement Action Team (HEAT) ===


HEAT is a joint HHS-DOJ initiative created in 2009 to coordinate healthcare fraud prevention and enforcement efforts across federal agencies.
Created in 2009, HEAT is a joint HHS-DOJ initiative that coordinates healthcare fraud prevention and enforcement across federal agencies.


=== Key Agencies ===
=== Key Agencies ===
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=== Lack of Willfulness ===
=== Lack of Willfulness ===


Healthcare fraud requires that the defendant acted "knowingly and willfully." Defendants may argue that billing errors resulted from negligence, confusion about complex billing rules, or good faith mistakes rather than intentional fraud.
Healthcare fraud requires "knowingly and willfully" acting. Defendants may argue that billing errors came from negligence, confusion about complex billing rules, or good faith mistakes rather than intentional fraud.


=== Medical Necessity ===
=== Medical Necessity ===


Defendants may argue that billed services were medically necessary and appropriate, even if the government's medical experts disagree. Medical necessity is often the central disputed issue in healthcare fraud cases.
A defendant might argue that billed services were medically necessary and appropriate, even if the government's medical experts disagree. Medical necessity often becomes the central disputed issue in these cases.


=== No False Statement ===
=== No False Statement ===


If billing codes and documentation accurately reflect services provided, there is no fraud. Disputes over coding interpretation may not constitute criminal fraud.
If billing codes and documentation accurately reflect services provided, there's no fraud. Disputes over coding interpretation don't necessarily constitute criminal fraud.


=== Reliance on Billing Staff ===
=== Reliance on Billing Staff ===


Physicians may argue they relied on billing staff or consultants and did not personally know that billing was fraudulent. This defense has limited effectiveness when the physician signed off on claims or received the fraudulent proceeds.
Physicians sometimes argue they relied on billing staff or consultants and didn't personally know that billing was fraudulent. Courts haven't been very sympathetic to this defense, especially when the physician signed off on claims or benefited from the fraud.


=== Government Overreach ===
=== Government Overreach ===


Defense counsel may argue that the government is criminalizing legitimate medical judgment or billing practices that are common in the industry.
Defense counsel may argue the government is criminalizing legitimate medical judgment or billing practices that are common in the industry.


== Related Offenses ==
== Related Offenses ==
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=== Anti-Kickback Statute (42 U.S.C. § 1320a-7b) ===
=== Anti-Kickback Statute (42 U.S.C. § 1320a-7b) ===


Prohibits offering, paying, soliciting, or receiving anything of value to induce or reward referrals of federal healthcare program business. Maximum penalty: 10 years imprisonment.
This prohibits offering, paying, soliciting, or receiving anything of value to induce or reward referrals of federal healthcare program business. Maximum penalty: 10 years imprisonment.


=== False Statements (18 U.S.C. § 1035) ===
=== False Statements (18 U.S.C. § 1035) ===


Prohibits false statements in connection with healthcare benefit programs. This statute covers false statements even when no claim is submitted.
This prohibits false statements in connection with healthcare benefit programs. It covers false statements even when no claim is submitted.


=== False Claims Act (31 U.S.C. § 3729) ===
=== False Claims Act (31 U.S.C. § 3729) ===


Civil statute allowing the government (and private whistleblowers) to recover damages for false claims submitted to federal programs. Provides for treble damages plus penalties.
This is a civil statute allowing the government and private whistleblowers to recover damages for false claims submitted to federal programs. It provides for treble damages plus penalties.


=== Wire Fraud (18 U.S.C. § 1343) ===
=== Wire Fraud (18 U.S.C. § 1343) ===
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* [[Federal Sentencing Guidelines and Offense Enhancements|Federal Sentencing Guidelines and Offense Enhancements]]
* [[Federal Sentencing Guidelines and Offense Enhancements|Federal Sentencing Guidelines and Offense Enhancements]]
* [[Martin Shkreli|Martin Shkreli]]
* [[Martin Shkreli|Martin Shkreli]]


== Frequently Asked Questions ==
== Frequently Asked Questions ==
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{{Federal Offenses}}
{{Federal Offenses}}
== Nightmare Success Guides ==
* [https://nightmaresuccess.com/guides/white-collar-cases-common-triggers-and-early-mistakes/ White-Collar Cases: Common Triggers and Early Mistakes] — Common escalation patterns and the early-stage discipline that limits damage.


[[Category:Federal Offenses]]
[[Category:Federal Offenses]]
[[Category:White Collar Crime]]
 
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Latest revision as of 17:58, 23 April 2026

Healthcare Fraud
Statute:18 U.S.C. § 1347
U.S. Code:Title 18, Chapter 63
Max Prison:10 years (20 if serious injury; life if death)
Max Fine:$250,000 ($500,000 for organizations)
Guidelines:USSG §2B1.1
Base Level:7
Agencies:HHS-OIG, FBI, DEA, CMS
Related:Wire Fraud, False Statements, Anti-Kickback Statute

Healthcare fraud is a federal crime under 18 U.S.C. § 1347. It prohibits schemes to defraud healthcare benefit programs or obtain money or property from them through false or fraudulent pretenses, representations, or promises. The statute covers fraud against both public programs (Medicare, Medicaid, TRICARE) and private health insurance.[1]

The potential sentences are substantial. A conviction can bring 10 years in prison, which jumps to 20 years if someone gets seriously hurt, and life imprisonment if a patient dies. Given how often healthcare fraud prosecutions involve patient harm, these enhanced penalties matter a lot.[1]

Elements of the Offense

Federal prosecutors need to prove two things to win a healthcare fraud case under 18 U.S.C. § 1347:

  1. Scheme to Defraud: The defendant knowingly and willfully executed, or attempted to execute, a scheme or artifice to defraud a health care benefit program, or to obtain money or property from a health care benefit program through false or fraudulent pretenses, representations, or promises
  2. Connection to Health Care: The scheme was in connection with the delivery of or payment for health care benefits, items, or services[2]

Health Care Benefit Program

"Health care benefit program" gets defined pretty broadly under 18 U.S.C. § 24. It means any public or private plan or contract affecting commerce under which any medical benefit, item, or service is provided to any individual. This includes:

  • Medicare
  • Medicaid
  • TRICARE (military healthcare)
  • Veterans health programs
  • Private health insurance
  • Self-insured employer plans
  • Workers' compensation medical benefits[3]

No Wire or Mail Required

Here's something important: unlike wire and mail fraud, prosecutors don't need to prove the defendant used any particular instrumentality. The crime is complete once someone executes the fraudulent scheme against a healthcare program.

Statutory Penalties

Category Maximum Imprisonment Maximum Fine
Standard healthcare fraud 10 years $250,000
Healthcare fraud resulting in serious bodily injury 20 years $250,000
Healthcare fraud resulting in death Life imprisonment $250,000
Conspiracy (§ 1349) Same as underlying offense Same as underlying offense

Prison time and fines aren't the only consequences. Convicted defendants also face:

  • Exclusion from participation in federal healthcare programs (Medicare, Medicaid)
  • Civil monetary penalties under the Civil Monetary Penalties Law
  • Treble damages under the False Claims Act
  • Loss of medical license
  • Restitution orders[1]

Federal Sentencing Guidelines

Healthcare fraud falls under USSG §2B1.1, the general fraud and theft guideline.

Base Offense Level

The starting point is offense level 7 for fraud or deceit offenses.[4]

Loss Amount Enhancements

The loss table in §2B1.1(b)(1) applies. For healthcare fraud, loss is typically the amount fraudulently billed to healthcare programs, minus any legitimate value of services actually provided.

Healthcare-Specific Enhancements

Several enhancements apply specifically to healthcare fraud:

  • +2 levels: If the offense involved 10 or more victims
  • +4 levels: If the offense involved 50 or more victims
  • +6 levels: If the offense involved 250 or more victims
  • +2 levels: If the offense involved vulnerable victims (patients)
  • +2 levels: If the offense involved misrepresentation that the defendant was a licensed physician or other professional
  • +2 levels: If the offense involved sophisticated means
  • +4 levels: If the offense involved conscious or reckless risk of death or serious bodily injury[4]

Departure for Patient Harm

When a patient actually gets hurt, the guidelines let courts impose sentences above the standard range. If the offense resulted in death, serious bodily injury, or life-threatening conditions, judges can go well above the guideline recommendation.

Common Healthcare Fraud Schemes

Billing for Services Not Rendered

This is the simplest form. Billing Medicare, Medicaid, or private insurers for medical services, procedures, or equipment that were never actually provided to the patient.

Upcoding

Billing for something more expensive than what you actually did. A comprehensive office visit billed as something premium when it was just a quick check-in. Or a complex surgery coded as something more elaborate than it was.

Unbundling

Billing separately for services that should be billed as one bundled service at a lower rate. Healthcare programs pay one rate for bundled procedures; unbundling lets providers charge higher total amounts.

Kickbacks

Paying or receiving compensation in exchange for patient referrals. The Anti-Kickback Statute (42 U.S.C. § 1320a-7b) prohibits offering or receiving anything of value to induce referrals of Medicare or Medicaid patients.

Pill Mill Operations

Operating pain management clinics or medical practices that prescribe controlled substances without legitimate medical purpose. They bill insurers for "office visits" while really functioning as drug distribution operations.

Durable Medical Equipment (DME) Fraud

Fraudulently billing for wheelchairs, hospital beds, oxygen equipment, and other durable medical equipment. Often the patients never ordered the equipment or don't actually need it.

Home Health Care Fraud

Billing for home health services not provided, or provided to patients who don't meet eligibility requirements. These schemes might involve billing for skilled nursing care when only unskilled services were provided.

Laboratory Fraud

Billing for medically unnecessary tests, upcoding tests, or billing for tests that were never performed. Lab fraud often involves kickbacks to physicians who order the unnecessary tests.

Telemedicine Fraud

After the COVID-19 pandemic expanded telemedicine, new fraud schemes showed up:

  • Billing for telemedicine visits that never happened
  • Using telemedicine to prescribe controlled substances without proper evaluation
  • Billing in-person rates for telemedicine services[5]

Notable Cases

Dr. Farid Fata (2015)

Michigan oncologist Farid Fata got 45 years in federal prison for administering unnecessary chemotherapy to patients who didn't have cancer. He billed Medicare for over $17 million. About 550 patients received medically unnecessary treatments.[6]

Philip Esformes (2019)

Miami nursing home operator Philip Esformes was convicted in one of the largest healthcare fraud prosecutions ever. His scheme billed Medicare and Medicaid for approximately $1.3 billion, of which $200 million was actually paid. He received a 20-year sentence, later commuted by President Trump.[7]

Martin Shkreli (2017)

Martin Shkreli, the pharmaceutical executive known for raising the price of Daraprim, was convicted of securities fraud related to a hedge fund scheme. His federal conviction wasn't about drug pricing but about defrauding investors in his hedge funds. He was sentenced to 7 years.[8]

Sylvia Hofstetter (2019)

Sylvia Hofstetter ran a massive DME fraud scheme, fraudulently billing Medicare for approximately $100 million for orthotic braces. She'd orchestrated a network of call centers, telemedicine companies, and DME suppliers to bill for braces patients didn't need or want. Fifteen years in federal prison.[9]

National Telemedicine Takedown (2023)

In April 2023, the Department of Justice announced charges against 18 defendants in a nationwide telemedicine fraud scheme. They'd billed Medicare for over $250 million. The scheme involved telemarketing calls to Medicare beneficiaries, followed by brief telemedicine calls to authorize expensive equipment and genetic testing that patients didn't need.[5]

Statistics

According to the Department of Justice and HHS Office of Inspector General:

  • Healthcare fraud costs the United States an estimated $100 billion annually
  • Medicare and Medicaid are the primary targets
  • In fiscal year 2023, the Medicare Fraud Strike Force charged over 250 defendants for schemes totaling approximately $1.8 billion in alleged losses
  • Average sentences exceed 36 months imprisonment
  • Civil settlements and judgments under the False Claims Act recover billions annually[10]

Investigation and Enforcement

Medicare Fraud Strike Force

The Medicare Fraud Strike Force is an interagency team of analysts, investigators, and prosecutors combating Medicare fraud. They operate in multiple cities and have charged over 4,800 defendants since 2007. The alleged fraud exceeds $23 billion.

Health Care Fraud Prevention and Enforcement Action Team (HEAT)

Created in 2009, HEAT is a joint HHS-DOJ initiative that coordinates healthcare fraud prevention and enforcement across federal agencies.

Key Agencies

  • HHS Office of Inspector General (HHS-OIG): Primary investigative agency for Medicare and Medicaid fraud
  • FBI: Investigates complex healthcare fraud schemes
  • DEA: Investigates pill mill operations and prescription drug diversion
  • CMS: Administers Medicare and Medicaid, conducts program integrity reviews[10]

Defenses

Lack of Willfulness

Healthcare fraud requires "knowingly and willfully" acting. Defendants may argue that billing errors came from negligence, confusion about complex billing rules, or good faith mistakes rather than intentional fraud.

Medical Necessity

A defendant might argue that billed services were medically necessary and appropriate, even if the government's medical experts disagree. Medical necessity often becomes the central disputed issue in these cases.

No False Statement

If billing codes and documentation accurately reflect services provided, there's no fraud. Disputes over coding interpretation don't necessarily constitute criminal fraud.

Reliance on Billing Staff

Physicians sometimes argue they relied on billing staff or consultants and didn't personally know that billing was fraudulent. Courts haven't been very sympathetic to this defense, especially when the physician signed off on claims or benefited from the fraud.

Government Overreach

Defense counsel may argue the government is criminalizing legitimate medical judgment or billing practices that are common in the industry.

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

This prohibits offering, paying, soliciting, or receiving anything of value to induce or reward referrals of federal healthcare program business. Maximum penalty: 10 years imprisonment.

False Statements (18 U.S.C. § 1035)

This prohibits false statements in connection with healthcare benefit programs. It covers false statements even when no claim is submitted.

False Claims Act (31 U.S.C. § 3729)

This is a civil statute allowing the government and private whistleblowers to recover damages for false claims submitted to federal programs. It provides for treble damages plus penalties.

Wire Fraud (18 U.S.C. § 1343)

Healthcare fraud schemes often involve wire communications and can be charged under wire fraud as well as healthcare fraud.

See also

Frequently Asked Questions

Q: What is healthcare fraud?

Healthcare fraud is a federal crime under 18 U.S.C. § 1347 that prohibits schemes to defraud healthcare benefit programs, including Medicare, Medicaid, and private health insurance. It covers billing for services not provided, upcoding, kickbacks, and other fraudulent schemes.


Q: What is the maximum sentence for healthcare fraud?

The maximum sentence for healthcare fraud is 10 years in federal prison. However, if the fraud results in serious bodily injury to a patient, the maximum increases to 20 years. If the fraud results in death, the defendant faces up to life imprisonment.


Q: What is upcoding?

Upcoding is a form of healthcare fraud where providers bill for a more expensive service than was actually performed. For example, billing Medicare for a comprehensive examination when only a brief visit occurred, or coding a minor procedure as a major surgery.


Q: What are kickbacks in healthcare?

Healthcare kickbacks are payments or other compensation exchanged for patient referrals. The Anti-Kickback Statute prohibits offering or receiving anything of value to induce referrals of Medicare or Medicaid patients. Kickbacks carry up to 10 years imprisonment.


Q: Can a billing error be charged as healthcare fraud?

Simple billing errors are not criminal fraud. Healthcare fraud requires that the defendant acted "knowingly and willfully." However, patterns of billing errors, especially with large dollar amounts, may be evidence of intentional fraud rather than mere negligence.


Q: What is the Medicare Fraud Strike Force?

The Medicare Fraud Strike Force is a joint DOJ-HHS team of analysts, investigators, and prosecutors who combat Medicare fraud in multiple cities. Since 2007, the Strike Force has charged over 4,800 defendants for schemes exceeding $23 billion in alleged fraud.


References

  1. ↑ 1.0 1.1 1.2 18 U.S.C. § 1347.
  2. ↑ U.S. Department of Justice, Health Care Fraud Unit, Criminal Resource Manual.
  3. ↑ 18 U.S.C. § 24.
  4. ↑ 4.0 4.1 United States Sentencing Commission, USSG §2B1.1 (2024).
  5. ↑ 5.0 5.1 U.S. Department of Justice, "National Telemedicine Fraud Takedown," April 2023.
  6. ↑ U.S. Department of Justice, "Michigan Cancer Doctor Sentenced to 45 Years in Prison," July 10, 2015.
  7. ↑ U.S. Department of Justice, "Nursing Home Operator Convicted in $1.3 Billion Health Care Fraud Scheme," April 5, 2019.
  8. ↑ U.S. Department of Justice, "Martin Shkreli Sentenced to Seven Years in Prison," March 9, 2018.
  9. ↑ U.S. Department of Justice, "South Florida Woman Sentenced to 15 Years in $100 Million Medicare Fraud Scheme," 2019.
  10. ↑ 10.0 10.1 HHS Office of Inspector General, Semiannual Report to Congress (2023).

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