Penalties for Medicare Fraud and Abuse

Penalties for Medicare fraud and abuse can come in many forms.

In our previous blog post, we have already established that you can be indicted for Medicare fraud felony. Apart from that, you might also be required to pay hefty fines and even be barred from gaining access to any federal or state healthcare programs.

So in order to know what penalties you are up against, we have created this guide to help you as well as better inform you about the laws surrounding fraud and abuse in our healthcare system.

Civil Penalties

Civil penalties are simply the price you have to pay for the damages you created. In a way, it is like a payable remedy for your violations. Rather than being sent to jail or prison, you can instead settle the amount you owe to the government and/or the other party for your wrongdoings.

It might sound like an easy way out for violators and abusers, but civil penalties can be very costly.

In fact and just last year, a big slice in settlements and judgments recovered from civil cases came from the healthcare industry. Given that the government highly protects our healthcare system, it is no wonder why fines and penalties related to Medicaid and Medicare fraud can rack up to millions of dollars.

Determining the Amount

Generally, the Office of the Inspector may levy the fines or the amount you have to pay. This may include a fine ranging from $11,000 and above plus/or a fine of three times the damages you did. However, the exact amount of your civil penalty would still ultimately depend on the violation you did.

Let us say you violated the Civil False Claim Act, according to the Department of Justice,  you are required to pay double the government’s damages plus a $2,000 (or more) each for every false claims act penalties

In contrast to when you violate the Anti-Kickback Statute, as per the Office of Inspector General, physicians who give and receive kickbacks can face penalties up to $50,000 per kickback plus three times the amount of remuneration.

See the striking difference of penalty/amount for these two violations?

That being said, we highly suggest you properly familiarize yourself with the laws related to the healthcare industry or consult with a legal expert so that you would know exactly how much you should pay. Doing these would not only keep you from paying hefty fines, but you can also avoid late fees and other unnecessary expenses.

Also, keep in mind that the Federal Government adjusts the Civil Monetary Penalties each year. So it is important to keep yourself up-to-date or cross-check this information with your legal attorney. For easy reference, please refer to this site for the latest civil monetary penalties adjustment.

Examples

To illustrate the severity of civil penalties, here are a few examples and excerpts from the Department of Justice website:

Friday, August 6, 2021 – False Claims Act | Type Violator: Medical institution

“San Mateo County Medical Center and San Mateo County (collectively SMMC), located in California, have agreed to pay approximately $11.4 million to resolve alleged violations of the False Claims Act for submitting or causing the submission of claims to Medicare for non-covered inpatient admissions.”

Tuesday, March 10, 2020 – Violation of the Substance Act | Violator: Individual, Physician

“A Richmond physician agreed to pay $24,000 in civil penalties for forging prescriptions for controlled substances for her own use in violation of the Controlled Substances Act.”

Tuesday, December 11, 2018 – Violation of False Claims Act and Stark Law | Violator: Healthcare entities

“United States Attorney Matthew D. Krueger announced today that Aurora Health Care, Inc. (“Aurora”) has agreed to pay $12 million to the United States and State of Wisconsin to settle allegations that Aurora violated the False Claims Act by submitting claims to Medicare and Medicaid in violation of the Stark Law.  Aurora and its affiliates (“Aurora”) are part of Advocate Aurora Health, Inc., an integrated health care system that serves patients throughout eastern Wisconsin, Illinois, and the upper peninsula of Michigan.”

Administrative Penalties

In the case of Medicare Fraud and abuse, administrative penalties are usually exclusions from any federal and state healthcare programs.

As per the US Code, there are two types of exclusions

 Mandatory Exclusion

The Office of the Inspector General is required by law to exclude violators who are found in:

  • Conviction of program-related crimes
  • Conviction relating to patient abuse
  • Felony conviction relating to health care fraud
  • Felony conviction relating to controlled substance

Permissive Exclusion

The Office of the Inspector General can exclude violators on the grounds of:

  • Conviction relating to fraud
  • Conviction relating to obstruction of an investigation or audit
  • Misdemeanor conviction relating to controlled substance
  • License revocation or suspension
  • Exclusion or suspension under Federal or State health care program
  • Claims for excessive charges or unnecessary services and failure of certain organizations to furnish medically necessary services
  • Fraud, kickbacks, and other prohibited activities
  • Entities controlled by a sanctioned individual
  • Failure to disclose required information
  • Failure to supply requested information on subcontractors and suppliers
  • Failure to supply payment information
  • Failure to grant immediate access
  • Failure to take corrective action
  • Default on health education loan or scholarship obligations
  • Individuals controlling a sanctioned entity
  • Making false statements or misrepresentation of material facts

The mandatory minimum for exclusion is five years. It varies depending on the severity of your violation.  

Keep in mind that reinstatement is not automatic. You have to file and seek reinstatement so that you would be able to enjoy the benefits from the federal and state healthcare program again.

If in case you think you have been wrongfully excluded, then you may file an appeal to the Department of Health and Human Services. There are tons of cases where people have been wrongfully excluded from the healthcare system.

In addition, it is also worth noting that exclusions not only affect the violators, it also affects employers. Anyone who hires violators under exclusion may be subjected to pay civil monetary penalties as well.

You can check out the List of Excluded Individuals and Entities here.

Examples

To illustrate this administrative penalty in action, we have listed a few examples and excerpts from the Department of Justice

Tuesday, June 8, 2021

“A 46-year-old chiropractor and her medical group have agreed to pay in order to resolve allegations of fraudulent billing, announced Acting U.S. Attorney Jennifer B. Lowery… In addition to the $2.6 million financial settlement, An and her medical entities have agreed to a 10-year-period of exclusion from participation in any federal health care programs.”

Tuesday, May 23, 2017

“Dr. Michael Esposito has agreed to pay $100,000 for billing Medicare despite his exclusion from all federal health care programs, announced United States Attorney Richard S. Hartunian. Dr. Esposito is an endocrinologist who treated patients in the Capital Region until earlier this year, when the New York State Board of Professional Medical Conduct ordered him to stop practicing medicine because he had engaged in professional misconduct.”

Monday, March 21, 2011

“The Justice Department has issued letters to the attorneys general of all 50 states, as well as U.S. territories to request their assistance in addressing the illegal exclusion of individuals with HIV/AIDS from occupational training and state licensing. Persons with HIV and persons with AIDS are covered by the Americans with Disabilities Act (ADA), which gives federal civil rights protections to persons with disabilities in public accommodations, employment, and state and local government services.”

Criminal Penalties

As we have discussed in this previous blog post, criminal penalties can be considered a misdemeanor or a felony.  You may either spend less time in jail or be incarcerated for not more than 10 years.

The Criminal Health Care Fraud Statute states that anyone who knowingly and willfully defrauds any health care program and obtains, under false pretense, anything under the federal/state healthcare program runs the risk of going to jail or prison.

Likewise, other violations and abuse to federal healthcare programs like Medicare and Medicaid are exposed to these criminal penalties as well. As long as you knowingly and willfully commit violations, you are exposed to facing criminal penalties no matter what.

For instance, on top of the civil penalties you have to pay, facing criminal penalties for violating any health care regulations means you have to spend time in jail or prison as well. In most states, it is the judge who has the final say when it comes to your punishment. As such, the prosecutor can charge you for a felony but the judge can still reduce it to a misdemeanor.

Keep in mind that criminal penalties are often accompanied by civil penalties. In some cases, it comes with administrative penalties like exclusion as well. So in a way, criminal penalties are sort of a package deal. You are not only required to serve your time but it is also expected of you to pay for the damages you did as well.

With that said, we highly recommend you consult with a legal attorney if you think you are in trouble. This way, you can avoid costly fines, prevent extensive litigation, and even reduce lengthy sentences.

Also, given that each state has different laws or different law interpretation/implementation, we suggest you look for a legal professional from your local community. This would not only save you time and resources, but they would also know how to effectively deal with your case because of their familiarity with your state’s laws.

Examples

To demonstrate criminal justice in action, we have listed a few examples and excerpts from the Department of Justice website:

Thursday, August 5, 2021 | Health Care Fraud | Violator Type: Individual/Healthcare Professional

“A resident of Fox Chapel, Pennsylvania, was sentenced in federal court following his conviction at trial on two counts of health care fraud, Acting United States Attorney Stephen R. Kaufman announced today.

United States District Judge David S. Cercone sentenced Samirkumar J. Shah, 58, to 78 months of imprisonment followed by three years of supervised release.”

Wednesday, March 3, 2021 | Health Care Fraud | Violator Type: Individual/Clinic Owner

“The chief executive officer of a Michigan and Ohio-based group of pain clinics and other medical providers was sentenced today to 15 years in prison for developing and approving a corporate policy to administer unnecessary back injections to patients in exchange for prescriptions of over 6.6 million doses of medically unnecessary opioids.”

Wednesday, May 17, 2017 | Health Care Fraud | Violator Type: Individual/Clinic Owner

“Two owners of sober homes and alcohol and drug addiction treatment centers were sentenced to 27 and 3 years in prison, respectively, for their participation in a multi-million dollar health care fraud and money laundering scheme that involved the filing of fraudulent insurance claim forms and defrauded health care benefit programs.”

How to Avoid Penalties

The most obvious thing to do here is to not do any violations or wrongdoings.

However, given that our healthcare system, as well as the people involved in it are not perfect, penalties are inevitable and mistakes are still bound to happen.

Here are a few tips and compliance programs from the Office of the Inspector General manual for physicians:

  1. Frequently conduct internal monitoring and auditing
  2. Put in place a compliance and practice standard in your clinic
  3. Hire a dedicated and specific compliance officer
  4. Be up-to-date and conduct appropriate training at all times
  5. Immediately and appropriately respond to offenses by devising a corrective action plan
  6. Stay connected and openly communicate with your employees or staff
  7. Enforce disciplinary standards through well-publicized guidelines

In compliance with the Patient Protection and Affordable Care Act of 2010, it is crucial that you have comprehensive healthcare compliance regulations like these in your clinic or practice.

Conclusion

We hope you gain valuable insight from this guide and that it is not too simplistic.

All in all, you just have to keep in mind that the three penalties you might face if you commit Medicare fraud and abuse are:

  • Civil Penalties
  • Administrative Penalties
  • Criminal Penalties

In some of the examples that we have listed, you can see that these penalties often come in bundles or packages. So in order to avoid these, we highly recommend you to assess and audit the quality of service you provide at all times.

Doing this would not only prevent penalties, but you would also be doing a great public service by minimizing the problem and lightening the burden to our healthcare system.

The information mentioned above is not meant to be comprehensive nor should be construed as legal advice. This guide is only meant to highlight the penalties involving Medicare fraud and abuse.

Leave a Comment