What constitutes Medicare Fraud? What are the penalties?

As the population in the US increases, medical demands also have increased. This dramatic event has encompassed several economic undertakings, posing a stronger challenge to the government in regulating cases involving fraudulent activities in health care services. Now, the challenge is not an end for the government but also on your initiative. Medicare fraud is not only posing a potential threat to medical practitioners but also it has an imminent danger to your family and friends. Have you ever experienced being scammed in a health care service? How well-versed are you about Medicare Fraud? Do you know the existing laws protecting your rights against the dangers of Medicare Fraud?

You don’t need to be a medical expert for you to be protected. Our aim in this article is to give you a complete guide on what constitutes Medicare Fraud.

What is Medicare Fraud? 

Medicare Fraud, also known as Health Care Fraud, involves the swindling of health care claims for a goal to profit. Categorized as one of the common white-collar crimes in the United States, Medicare Fraud can be manifested in various ways. 

It includes, but not limited to: kickback schemes; self-referral; doctor shopping; identity fraud; layering; upcoding and unbundling; submitting double bills; billings for services not provided.

Medicare Fraud Defense & CMS Exclusion Defense Lawyers

If you are under an investigation for phantom billing, up-coding, kickback schemes, self-referral, doctor shopping, or accused of billing medically unnecessary services, you should put no efforts in explaining to your lawyer the concepts previously mentioned. Expect that your counsel should have sufficient knowledge in delivering the best strategic defense in times of crisis.

Take note that cases involving Medical fraud constitute a federal felony and monetary liabilities which can be enormous. Being investigated in such cases requires an ample amount of time for a strategic and thorough defense plan. By all means, you need to present to the court that you have committed no fraudulent activities and it is for the government to be imposed on civil liabilities that caused your business to lose.

Where should I ask for assistance?

Khouri Law Medicare Fraud Defense Team

The counsels of Khouri Law deliver quality legal services, making sure that clients are always in good hands. 

For years, our legal team has made a successful streak in defending our clients including physicians, medical groups, mental health professionals, pharmacies, nursing homes, home health care agencies, durable medical product companies, dentists and other health facilities, in every aspect of Medicare/Medi-Cal program audits, investigations and litigation. 

Why do people commit Medicare Fraud?

Always take note that most patients are only concerned with two important matters: checking their health status (getting healthy or finding relief) and checking the expenses should they pay for medical services.

Here, insurance companies take a vital place in accounting for the payables. The prime duty of insurance companies is to bill payments, as such, patients have no qualms as long as they get their ends.

That is the reason why fraudsters make strategic ways to fraud health care services by obtaining data and acquiring personal information from their targeted persons working for or availing to the medical services.

What are some common types of Medicare Fraud?

Kickback Schemes

To define, kickbacks are undisclosed payments made by a third-party to a company’s employees. In other words, it involves collusion between employees and vendors. This corruption scheme aims a vendor to submit an inflated invoice to the targeted organization and such an employee of that organization assists in ensuring to reach the false invoice into their system. Hence, this results in a kickback scheme – it either overstates the cost of actual goods and services or overstates the number of goods sold or delivered.


Referral marketing fraud takes place when a buyer attempts to leverage the current offering by trying to hack the process to get numerous incentives. Under such a fraudulent scheme is the Self-Referral fraud. Self-Referral fraud aims to get the rewards an advocate receives and the rewards of a referred customer through creating fake accounts and identity theft. A blatant example is a scammer tries to refer themselves to earn discounts without actually making a purchase.

Doctor Shopping

Centers for Disease Control and Prevention defines “doctor shopping” as the act of a patient obtaining controlled substances from multiple healthcare practitioners without the prescribers’ knowledge of other prescriptions. Further, in a corroborative study of Sansone and Sanone (2012), “doctor shopping” is defined as a patient seeing multiple treatment providers, either during a single illness episode or to procure prescription medications illicitly. Doctor shopping either in the changing of doctors without a professional referral during the same illness episode, consulting multiple doctors during the same illness or a patient contacting three or more care sites during a single illness.

Medical Identity Theft

Medical identity theft occurs when someone steals your personal information and uses it to obtain medical services, treatment or drugs. The goal of identity theft is to obtain personal information to take advantage of fraudulent billing insurance on providers or government programs for medical goods that are never provided. In other words, an identity theft focuses on obtaining some essential personal information to be used in verification purposes such as Social Security number (SSN), complete name, date of birth, or the personally identifiable information (PII), including your healthcare, medical data, and prescription history.


It is another form of medical fraud that allows traders to place orders to give a fake impression of an intention to buy or sell shares. Further, it manipulates in the sharing and exploiting the movement of prices to make profits and cancel the remaining fake orders. To give you a closer look, layering can be indicated when the fraudster induces others to trade when they otherwise would not, to affect a price rather than to change his position and to create misleading market conditions. 

Upcoding and Unbundling

In the language of Health Care service, Medical Coding occupies an integral space in obtaining insurance reimbursement as well as maintaining patient records through a system of number and letter labels that are unique for each diagnosis, symptoms, and cause of death in human beings. Medical Coding reports data that is used for a variety of research studies such as diseases, drugs, procedures or trends in health care

Coding claims let insurance payers know the accurate illness or injury of the patient and the method of treatment in the latter through Common Procedural Technology (CPT) codes, HCPCS (Healthcare Common Procedure Coding System), etc. Hence, fraudsters take advantage of using these codes through Upcoding and Unbundling.

Unbundling. Billing separately for procedures that are part of a single procedure can increase profits beneficial to some providers. In this type of medical fraud, a fraudster takes advantage of submitting a single bundled medical code for all of the component parts of the procedure.

Upcoding. It takes place when it misrepresents a level of service or procedure performed in order to receive a higher reimbursement rate. In fact, the service provided is not covered by Medicare, but still, the provider bills covered service in its place.

What are the corresponding statutes penalizing medical fraudulent activities?

Fair Claims Act

(Civil statute: Sec. 3729, Title 31 of US. Code)

False Claims constitute, including but not limited to knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; or knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.

(Criminal statute: Section 287. False, fictitious or fraudulent claims, Part 1, Title 18 of the US Code)

Whoever makes or presents to any person or officer in the civil, military, or naval service of the United States, or to any department or agency thereof, any claim upon or against the United States, or any department or agency thereof, knowing such claim to be false, fictitious, or fraudulent, shall be imprisoned not more than five years and shall be subject to a fine in the amount provided in this title.

Stark Law (Self-Referrals)

(Civil Statute: Sec. 1395nn. Limitation on certain physician referrals, Chapter 7, Title 42 of the US Code)

The Stark Law aims to prohibit a physician’s referral to a particular and designated health care service (DHS) to a certain entity if the physician (or any member of a physician’s immediate family) has a financial relationship with the same unless otherwise provided by the law.

(Exceptions: Sec. 1001.952. Exceptions, Title 42 of the Electronic Code of Federal Regulations)

Anti-Kickback Statute (AKS)

(Criminal statute: Sec. 1320a-7b. Criminal penalties for acts involving Federal health care programs, Title 42 of the US Code)

Anti-Kickback statutes are designed to prohibit the knowing and willful payment of “remuneration” to induce or reward patient referrals or the generation of business involving any item or service payable by the Federal healthcare programs (e.g. drugs, supplies, or health care services for Medicare or Medicaid patients).

The law says that remunerations include anything of value and can take many forms besides cash, such as free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies. 

Under the law, paying for referrals constitutes a crime. Physicians who pay or accept kickbacks also face penalties of up to $50,000 per kickback plus three times the amount of remuneration.

Civil Monetary Penalties Law

(Civil statute: Sec. 1320a-7a. Civil monetary penalties, Title 42 of the US Code)

In adjacent to the criminal statute constituting criminal penalties for acts involving Federal Health care programs, Civil Monetary Penalties law arise when the accused presents a claim that the claimant knew or should have known for an item or service not provided as claimed or that is false and fraudulent, presenting a claim that the claimant knew or should have known is for an item or service that is not reimbursable by Medicare; or any violation of the Anti-Kickback Statute.

Under this statute, the general rule allows the government to charge up to $50,000 per false claim plus three times the amount of remuneration offered, solicited, paid or received.

Criminal Fraud Statute

(Criminal Statute: Sec. 1347. Health Care Fraud, Part 1, Title 18 of the US Code)

Whoever knowingly or willfully executes or attempts to execute a scheme to defraud any health care benefit program or to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any health care benefit program in connection with the delivery of or payment for health care benefits, items, or services, shall be fined or imprisoned of up to 10 years, or both.

As a general rule, the statute doesn’t limit its application only to health providers, but also it includes “anyone” including physicians, nurses, practice managers, non-licensed individuals, practice owners, health care businesses, and even institutions.

Who are the authorities in a position to investigate Medical Fraud?

Medicare Fraud
  • Office of Inspector General (OIG);
  • Department for Health and Human Services (HHS);
  • Department of Justice (DOJ);
  • Federal Bureau of Investigation (FBI);
  • Medicaid Fraud Control Units (MFCUs);
  • State Medicaid Agencies in cooperation with the Health Care Fraud Prevention and Enforcement Action Team (HEAT);
  • General Services Administration (GSA); and 
  • Centers for Medicare and Medicaid Services (CMS).

What are the corresponding penalties and sanctions to be faced by a guilty in a civil and criminal case? 

If an accused is guilty beyond a reasonable doubt or a defendant is civilly liable in a preponderance of the evidence, targets of investigations may be exposed to recoupment requests, non-payment of future claims, civil fines of up to $ 11,000 per false claim, exclusion from federal healthcare programs, treble damages, attorney fees, criminal fines, criminal indictment, or incarceration in federal prison.

Liability does not require a specific intent to violate the law; in fact, the government does not even need to prove actual knowledge of the wrongfulness of the transaction.

Government Investigation: Civil or Criminal? 

The answer is both: Criminal and Civil in nature.

As a general rule, when criminal action is instituted, the civil action for recovery of civil liability arising from the offense charged is impliedly instituted with the criminal action, unless the offended party expressly waives the civil action or reserves his right to institute it separately or unless provided by the law. 

In statistics, about 1,400 individuals are indicted in federal court for health care fraud each year and more than 2,500 individuals are under Medicare criminal investigation.

Where do we create the line? It begins with a talk with you through a legal consultation. By hearing your side, our legal team seasonably plans out the strategy on defending the bench. With a milestone reach of legal experience in health care litigation, our legal team aims to pay close attention to avoid the nuisance of the investigation.  

Call us today to discuss your case with our medicare fraud attorneys. All initial consultations are free and confidential. We want you to gain relief and to move on with your life. Let us handle your case.

Who are potential persons to be investigated?

Medicare Fraud

The law provides that statutes apply to any individual or business, directly or indirectly, contracts with and is paid for services regulated by the US government. 

Health care Fraud exposes providers and business owners alike. Statutes apply to any individual or business that directly or indirectly contracts with and is paid for services by the United States government. Particularly exposed are service arrangements with the government in the following areas:


  • Hospitals
  • Home Health Centers
  • Physician-Owned Entities
  • Health care Providers (e.g. Physicians)
  • Laboratories (toxicology, biologics)
  • Pharmacies (incl. compound)
  • Medical Device Companies

Recent Examples:

  • Medicare Fraud Strike Force charges 90 individuals
  • Medicare Fraud Strike Force charges 89 individuals
  • Doctor Admits Taking Bribes in Test-Referral Scheme with Lab
  • Owner of Nursing Agency Convicted of Multi-Million Dollar Fraud Scheme
  • Principal in $28.3m Medicare Fraud Scheme Sentenced to 11 Years in Prison

(Published by U.S. Department of Justice at http://www.stopmedicarefraud.gov/newsroom/)

Key Takeaways

A quality medical and health care is a human right. Hence, at the height of social demands and at the peak of social justice, you do not need to be at stake in this recurring medical fraud. You need to be protected through a dedicated and passionate legal team in the service of health care litigation. 

Thus in our growing population, it is undeniable to accept that medical fraud will not be eliminated. However, for at least, it should be mitigated. 

Time and again, you don’t need to be a medical expert for you to be protected. You need the right team who can win your case.

If you’re under investigation, you can talk to us today.