United States: Why Every Healthcare Provider Should Be Concerned About Potential Healthcare Fraud Allegations

Recent trends show that federal and state governments and the private insurance industry are all very concerned about the reduction of healthcare fraud, abuse, and waste, and are engaged in aggressive enforcement actions against healthcare providers alleged to have engaged in fraudulent activities. At the end of FY2016, the government collected $2.5 billion in recovery based on alleged healthcare fraud.

Allegations of fraud can devastate a healthcare practice. Healthcare providers could face revocation or suspension of a license to practice; loss of admitting privileges; cancellation and exclusion from Medicaid, Medicare, and private insurances; negative publicity; the potential for double or triple damages owed to the government; potentially being subjected to extensive government regulation under a corporate integrity agreement; and even criminal prosecution and conviction, resulting in federal imprisonment. Providers owe a duty to themselves, their patients, and the public to closely monitor their billings and business practices to avoid any serious allegations of healthcare fraud.

Below are some warning signs healthcare providers should look out for that could signal a potential fraud allegation on the horizon, and how properly trained legal counsel can assist.

Signs of Trouble (& How Legal Counsel Can Help)

A Request for Documentation. When a Medicaid representative contacts your office asking for additional records, you need to take a "time out." Private practice is hectic, but if Medicaid is reaching out to your office requesting additional documents to support the level of a billing code, this could indicate failing internal controls. While not intentionally fraudulent, failing internal controls could be a sign that your office is not giving your billings practice the level of attention needed to avoid future audit or recoupment actions, if not civil or criminal investigations.

Trained legal counsel can work with healthcare providers to assess the accuracy and propriety of billings practice and adequacy of internal controls. This can include analysis and review of compliance with Medicaid billing policies, medical necessity, documentation errors, charting, document retention, and staff training. Counsel can also advise on whether a self-audit is necessary, and can even engage in independent, privileged review of files to determine if there is any potential liability based on a healthcare practice's billings and documentations practice.

Before a Medicaid representative does contact your office, you can, for relatively little legal costs, take the initiative to identify and implement easy fixes or even detect previously unknown problems in your office. Additionally, aggressively responding to concerns about documentation also evidences good-faith efforts to comply with Medicaid's billing requirements and provides you with a wealth of information about your practice and billings at a time when the information is most helpful. Moreover, an internal review can lead to an increase in the productivity and profitability of your practice.

Audit & Recoupment Letters. Medicaid evaluates the billing practice of healthcare providers by evaluating years of submission data by code and provider. A recoupment letter is a notice from Medicaid that they have reviewed your billings practice, determined that it is erroneous (if not fraudulent), and that you have already received funds that you were not entitled to receive –whether on grounds that the procedure was not medical necessary, the billing submission was not supported by the documentation, or the billing submission caused some other reimbursement policy violation, such as unbundling – and should automatically put healthcare providers into recovery mode. In short, an audit or recoupment letter means that Medicaid has identified you, evaluated you, and made you a target for investigation.

A healthcare provider who receives this type of letter should consider it an official notice that their practice's billing is wrong and needs to be entirely re-evaluated. Failure to take serious and extensive action upon receipt of an audit or recoupment letter will likely be used as evidence in any future false claims or fraud investigation as evidence of intent to defraud. Even if such a letter is limited by a time period or billing code, providers should not misinterpret that limitation to mean that their billings practice is otherwise acceptable. Where there is smoke, there is fire and an audit or recoupment letter should put providers on notice that they are on Medicaid's radar for submission of false claims.

Upon receipt of an audit or recoupment letter, a healthcare provider should immediately retain competent legal counsel, as these kinds of letters are subject to an administrative process and can be appealed. Counsel can help providers evaluate the likely success of an appeal and whether an appeal is cost-effective, and can also prosecute the appeal, reducing the ultimate recoupment accepted by the government to resolve the issues raised in the letter.

Trouble with Office Management. Office staff can be a healthcare professional's greatest resource, but they are always a source of their greatest liability. Healthcare professionals should pay close attention to changes in the behavior or lifestyle of their staff members, especially office management, billing supervision, and financial oversight staff. Constant complaints, sudden changes in office culture, poor interpersonal dynamics, adverse employments decisions – these and other negative aspects of a practice can lead a current or former employee to become a whistle blower or turn state's evidence. Current and former employees, partners, or associates, who file whistleblower actions can be entitled to receive 15% to 25% of any recovery the government makes when they file a whistleblower action. Moreover, healthcare providers can wind up on the hook for the whistleblowers' attorneys fees and legal costs.

Healthcare providers in the midst of such employment-based issues should carefully consider their billings practice and potential whistleblower lawsuits when evaluating a course of action to resolve the situation. In addition to evaluating a practice's billings and documentation policies for potential whistleblower action liability, legal counsel can advise on the best way to resolve employment issues in the office so as to reduce any implication of wrongful intent on the part of the healthcare provider and avoiding any appearance of a cover up or retaliation. Legal counsel can also advise on the release of an employee's claims or potential claims against a healthcare provider.

Civil Investigative Demand. A Civil Investigation Demand, or CID, is a civil subpoena issued by the Department of Justice requiring the production of documents, primarily focusing on patient records and diagnostic imaging studies, but may also include lists of employees, payroll information, and identification of private insurers with whom a healthcare provider has contracted. The government uses a CID to obtain documents to supplement and expand its investigation of a healthcare provider. It allows the government to choose whether to proceed with criminal or civil charges, or not to proceed at all. CIDs can be invasive, expansive, and expensive.

A CID can also have dire consequences for a practice with a significant Medicaid patient population. Upon receiving a "credible" allegation of fraud, from the DOJ or otherwise, Medicaid can freeze all reimbursements until the matter is resolved. If Medicaid reimbursements are important to the financial health of a practice, this can make continued practice, and the defense of any alleged fraud, very difficult unless it is dealt with in a timely and concise manner.

Any healthcare provider who receives a CID should be aware that the government has performed a preliminary fraud investigation and found sufficient evidence for it to justify moving forward with a formal investigation of your billings practice. A CID marks the last meaningful chance for healthcare providers facing a fraud investigation to limit their civil and criminal exposure, and retention of a competent attorney is critical.

A CID typically results in one of three scenarios: (1) a settlement with the government, (2) false claims act civil litigation, or (3) a criminal indictment and possible prosecution. Legal counsel can evaluate the scope and propriety of the CID and object in whole or in part as appropriate. Counsel can also work with the government attorney to limit the scope of the CID as much as possible and help the healthcare provider develp an appropriate response to the CID. Finally, counsel can assist in preparing any and all defenses, reviewing all codes in question, and evaluating any potential exposure and resolution strategies. These can include the generation and preservation of evidence, such as witness interviews, the retention of witness statements, and identifying and preserving documents helpful to the defense, even if not responsive to the CID.


Even with the best intentions, healthcare providers may find themselves facing serious allegations of fraud. To ensure the safety of your healthcare practice, we highly recommend you seek the advice of skilled legal counsel before any such issues arise.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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