Healthcare Fraud: Up Next for DOJ

The Wall Street Journal’s article about a criminal healthcare investigation of United Health by DOJ’s Healthcare Fraud Section signals renewed emphasis on corporate healthcare investigations and continued scrutiny of Medicare Advantage programs.

United Health: Medicare Advantage

The article highlights how DOJ Fraud is investigating United Health’s Medicare Advantage business practices for potential healthcare fraud.

First, any corporate healthcare fraud investigation centers around the federal healthcare fraud statute: 18 U.S.C. § 1347.

• On a high level, this statute criminalizes a “scheme to defraud” which is generally defined as “means any plan, pattern, or course of action involving a false or fraudulent pretense, representation, or promise intended to deceive others in order to obtain something of value, such as money, from the institution to be deceived.”

• In the healthcare context, this statute requires proof that an individual acted with the intend to defraud by submitting false claims to Medicare for payment for claimed medical services.

Second, the healthcare fraud statute covers false claims submitted to Medicare as part of Medicare Advantage.

• Medicare Advantage is a bundled coverage option for Medicare beneficiaries. In other words, Medicare beneficiaries can sign up for a Medicare Advantage plan with a private insurer, like UnitedHealth, and obtain medical, dental, and hospital coverage in one health insurance plan.

• The pros of such a plan are efficiency for the beneficiary; he cons are limited provider options.

What’s the healthcare fraud angle?

If past is prologue (and it often is with indictments), prosecutors at DOJ’s Fraud Section may be looking at efforts by UnitedHealth insiders to falsify patient records (1) by stuffing patient files with fake diagnoses for Medicare beneficiaries so that the beneficiaries look more sick (2) all so that Medicare would pay more to United Health’s Medicare Advantage Program.

• In 2023, DOJ’s Fraud Section charged an individual who oversaw HealthSun’s Medicare Advantage Program. That individual was charged with conspiracy to commit healthcare fraud, wire fraud, and major fraud against the United States.

• That case is set for trial this summer in Miami (SDFL).

• The gist of the indictment was that the individual caused false information about beneficiaries’ health to be entered into HealthSun’s internal medical records. In essence, the goal of the charged scheme was to make the beneficiaries look more sick on paper (through falsified conditions and diagnoses) so that Medicare would pay more money to HealthSun.

• The money adds up quickly. The charged healthcare scheme in the HealthSun indictment resulted in tens of thousands of falsified diagnoses, and Medicare overpaying HealthSun millions of dollars.

Procurement Fraud Defense: On the Law-Enforcement Horizon

With DOGE and fraud, waste, and abuse at the forefront of most public statements by Trump Administration officials, it is a near certainty that an uptick in federal investigations and indictments for procurement fraud cases will follow. Defending procurement fraud cases requires knowledge of the relevant statutes, know-how in deconstructing them, and trial skills.

Investigated Conduct

Procurement fraud covers a range of conduct in connection with government contracting, which is defined broadly. Common examples include:

• Billing the U.S. government for goods or services not provided;

• Overcharging the U.S. government for goods or services;

• False certifications that goods or services conform to federal requirements, when in fact the goods do not or are otherwise defective; and

• Paying bribes to government officials in exchange for confidential information or contract awards.

Federal Criminal Statutes in Procurement Fraud Cases

Here’s a list of the most commonly charged federal offenses in indictments for procurement fraud:

• Conspiracy: 18 U.S.C. § 1349 or 18 U.S.C. § 371, generally criminalize the “agreement” to commit an offense under Title 18 (normally wire fraud)

• Wire Fraud: 18 U.S.C. § 1343, generally criminalizes a “scheme to defraud” or using false or fraudulent representations to obtain money and doing so with the intent to defraud

• Major Fraud against the United Sates: 18 U.S.C. § 1031, similarly criminalizes a “scheme to defraud” the United States involving a contract (or other identified financial arrangement) over $1,000,000

• False Claims: 18 U.S.C. § 287, criminalizes knowingly presenting a false or fraudulent claim to a department or agency

• Theft of Government Property: 18 U.S.C. § 641, which criminalizes the theft or misuse of U.S. government property or funds, with the intent to deprive the government of its use or value

• Kickbacks: 41 U.S.C. § 8702, criminalizes knowingly and willfully providing, offering, soliciting, or accepting any kickback (anything of value) in connection with a federal contract

Defending Procurement Fraud Cases

Defending a procurement fraud case is similar to defending any other white-collar fraud case. A successful defense strategy often turns on putting forward evidence on the following issues:

• Attacking Fraudulent Intent: Most of the above-referenced statutes require an “intent to defraud.” Proving this intent is the most difficult part of any procurement fraud case and where many prosecutions falter.

• Attacking False Representations: The false representation in a procurement fraud case is often not black and white, especially hwere the representation relates to contracting terms or vague or open-ended obligations.

• Attacking “Materiality”: The representation must have been material to the government agency. And government officials are susceptible to effective cross-examination that the underlying fraud was either blessed by government, ignored or not important in the grand scheme of things.

• Lack of Motive: A “target” of the investigation may not have benefitted financially in a meaningful sense from the alleged fraud, either because the contracting benefit flowed to the individual’s company or because the contract did not directly benefit the individual’s compensation

Trial Skills

Ideally, a skilled advocate can point out the above flaws in a procurement fraud case and convince DOJ to decline to proceed on one or more of those bases. If not, showing these issues to the jury is critical and is generally done through skilled cross examination of government witnesses.

Subpoenas in a Healthcare Investigation

Receiving a subpoena in a healthcare investigation can be a daunting event. It may be the first time that law enforcement has surfaced and provided an indication that someone is involved in healthcare investigation. There are several “must do’s” to respond correctly and protect your rights.

1. Retain with an attorney

   An individual should always hire an experienced attorney to manage a subpoena response. Don’t try to wing it yourself. An experienced attorney will be able to engage with the government official who issued the subpoena and collect critical information about (1) the nature of the investigation; (2) what conduct is under investigation; and (3) how the government sees your role in the case (“status”). Answering these questions are critical and will drive the ultimate response.

2. Your attorney will identify the nature of the investigation

   • There are several types of subpoenas in a healthcare investigation, which provide critical information about the nature of the investigation.

     • A grand jury subpoena: A grand jury subpoena reveals a criminal investigation, conducted by either state or federal authorities. There are two types of grand jury subpoenas: a subpoena duces tecum and a subpoena ad testificandum. These two subpoenas are critically different. A subpoena duces tecum is a command to produce documents. A subpoena ad testificandum is a command to appear before the grand jury to provide testimony. Either way, a grand jury subpoena signals a high-risk juncture because the government is investigating criminal offenses.

     • An administrative subpoena: An administrative subpoena reveals a civil (non-criminal) investigation, conducted by either state or federal authorities. Federal agencies, such as the Department of Health and Human Services, Office of Inspector General (HHS OIG) or Homeland Security Investigations (HSI), often issue these subpoenas. Medicaid Fraud Control Units (MFCU), which sit as part of a State AG office, also issue administrative subpoenas to investigate fraud relating to Medicaid programs. These subpoenas can be issued by federal agencies in either a criminal or civil investigation. For this reason, retaining an attorney to figure out the nature of the investigation is even more important.

     • Civil Investigative Demand: A subpoena that indicates a civil investigation by government officials, again either state or federal. These subpoenas are often issued by DOJ Civil as part of a false claims act (FCA) investigation relating to fraud or upcoding or overbilling as to Medicare or other federal programs. State Attorneys General, like the NYAG or DC AG or MD AG, also issue these subpoenas in the course of investigations. Civil investigative demands can be for documents, testimony, or both.

     • Trial Subpoena: This is a subpoena to either testify at trial or bring documents to a trial. This subpoena is unlikely to be a surprise, as at this point the case has been investigated, publicly charged, and is far along in the process. Nonetheless, responding to this subpoena requires quick identification of the relevant issues because it has a hard deadline: normally the first day of trial.

3. Your attorney will identify the conduct under investigation

   Whatever the form of the subpoena, it will likely request a swath of information. An attorney can work with the government to identify in broad strokes the type of information sought by the subpoena. In the healthcare context, the investigation can relate to a range of issues and offenses relating to: durable medical equipment (DME), telemedicine, office visits, wound care, home health, diversion of controlled substances (opioids or Adderall), prescription medication, genetic testing, vascular procedures, substance abuse. This list is endless. For this reason, identifying the issue under investigation will assist the response to the subpoena.

4. Your attorney will identify your status

   In a criminal case, one’s “status” is the most important piece of information. One’s status drives one’s potential jeopardy. Status generally falls into one of three categories: target, subject or witness. It is generally a bad idea to try to figure out one’s status without an attorney, as one’s statements to agents may be used against the speaker.

   • A target is someone for whom federal prosecutors have substantial evidence that an individual committed a federal crime. This status is the most serious and indicates criminal charges may be forthcoming.

   • A subject is someone for whom federal prosecutors have evidence connecting the person to a crime but not necessarily having committed a crime. This status has the most wiggle room for prosecutors. It can apply to a range of individuals who are connected in varying degree to the offense under investigation.

   • A witness is someone who does not face any criminal exposure. It is the lowest-risk category, although some prosecutors are unwilling to identify someone as a witness and will instead classify an individual under the catch-all status of subject. Identifying where one falls in the investigation will drive the subpoena response.

After figuring out these threshold issues, next comes to the hard part: responding to the subpoena. That is a complicated process that cannot be distilled quickly. In a nutshell, it requires extensive interaction with an attorney to identify the universe of documents covered by the subpoena and then producing relevant, non-privileged documents to the government.

False Claims Act (FCA) Update: DOJ Files Suit for Wound Care Fraud

The Department of Justice recently filed a complaint under the False Claims Act against entities and physicians for alleged fraud in connection with claims to Medicare for wound care treatment. DOJ alleged in the complaint a widespread scheme to overbill Medicare for medically unnecessary and upcoding for wound care services. The case reflects DOJ’s ongoing commitment to enforcing the False Claims Act in the healthcare industry, particularly in cases involving improper billing practices and fraud against federal healthcare programs, like Medicare.

Filed in the Southern District of Florida, the FCA complaint alleges a scheme to submit claims for wound care services over a roughly eight-year period. The services, according to the complaint, were either medically unnecessary, reflected upcoding or both.

Key allegations in the complaint

At the core of the False Claims Act wound care case are four primary allegations:

1. Upcoding Procedures:
   Vohra physicians allegedly performed wound care services but fraudulently billed them as more intensive and higher-reimbursed surgical excisional debridements. This practice, known as upcoding, resulted in millions of dollars of improper payments from Medicare.

2. Falsification of Medical Records:
   The complaint alleges how the entities Electronic Medical Record (EMR) system automatically generated fabricated procedure notes. Physicians had limited ability to document true clinical details, and the EMR inserted pre-populated language suggesting surgical procedures had been performed, even when they had not.

3. Internal Pressure to Inflate Billing:
   The entities allegedly set aggressive corporate targets that required physicians to perform high numbers of surgical debridements, regardless of medical necessity. Physicians who failed to meet quotas faced disciplinary action, while those who exceeded the quotas were financially rewarded.

4. Extraordinary Medicare Reimbursements:
   From 2019 to 2023 alone, the charged entities allegedly collected over $300 million in paid claims from Medicare tied to this alleged scheme.

DOJ will continue to use FCA cases to protect federal programs

DOJ’s complaint seeks treble damages and civil penalties under the False Claims Act. The prospect of treble damages after trial is one of the most powerful tools in combating healthcare fraud.

DOJ reiterated how this case reflects its efforts to protect Medicare’s financial integrity and hold healthcare providers accountable for putting profit over patients. DOJ also stressed that fraudulent-billing practices, like upcoding, drains resources intended for the nation’s seniors and other vulnerable populations.

Key takeaways from the wound care complaint

The wound care complaint highlights several relevant issues for healthcare enforcement going forward:

Technology Misuse

The FCA complaint emphasized that the at-issue EMR system was intentionally programmed to maximize billing and create misleading medical records. This allegation shows DOJ’s increasing scrutiny of how technology platforms can be used to facilitate fraud.

Pressure-Driven Misconduct

The FCA complaint’s allegations about high-pressure tactics—such as setting revenue-based quotas for medical procedures—can be a critical piece of evidence in an enforcement action. DOJ alleged that the entities’ corporate culture was a key contributor to the alleged fraudulent claims submitted to Medicare.

High-Dollar Cases

With over $300 million in allegedly false claims to Medicare, this case represents DOJ’s ongoing efforts to charge high-impact cases.

Going forward

This complaint will bring more attention to the practices of wound care clinics and physicians. Be on the lookout for “copy cat” or similar cases from DOJ, both in the civil and criminal context.

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Scott Armstrong, a former Assistant Chief at DOJ’s Fraud Section, defends physicians, owners in executives in healthcare fraud cases around the country. Email Scott Armstrong to learn how to learn how to defend yourself in a healthcare investigation.