No Rest For The Caretakers: Health Care Industry In Crosshairs For Expanded False Claims Act And Criminal Enforcement Activity

The health care industry – already bracing for the financial impact of Medicaid cuts – faces another hard truth: This administration isn't slowing the pace of health care fraud enforcement. Rather, it's doubling down on traditional focus areas for criminal fraud and False Claims Act (FCA) investigations, like Medicare Advantage and kickbacks, while also planning to deploy the FCA against the health care industry to enforce the administration's priorities on gender and diversity.

Enforcement activity continuing unabated

Like much of the Department of Justice (DOJ), the Fraud Section in the Civil and Criminal divisions at DOJ have experienced disruptions in staffing and focus since January of this year, with line attorneys and senior leadership alike leaving the sections in large numbers.

Despite those changes, health care fraud enforcement activity appears to be continuing apace. The Civil Division has announced about $1 billion in recoveries from the health care industry under the FCA since the Trump administration took office, slightly more than the Biden administration recovered in the same period last year.

DOJ has not just been collecting settlements on cases developed under the previous administration. Just last week, a federal judge ordered Omnicare to pay $542 million in penalties – $164.8 million of which CVS must pay – based on allegations that CVS and its Omnicare unit fraudulently billed Medicare, Medicaid and other programs for drugs for older and disabled people without valid prescriptions.¹ And in May, DOJ intervened in a case against United, Aetna and Elevance (formerly Anthem) and three insurance brokers, alleging that from 2016 through at least 2021, the defendant insurers paid hundreds of millions of dollars in illegal kickbacks to the defendant insurance brokers in exchange for enrollments into the insurers' Medicare Advantage plans.²

The Criminal Division has also been active. On June 3, 2025, the CEO of Power Mobility Doctor Rx LLC was convicted in a $1 billion Medicare fraud scheme involving a network of pharmacies, durable medical equipment suppliers, and marketers accepting illegal kickbacks and bribes, in exchange for fraudulently signed doctor's orders.³ Weeks later, on June 30, 2025, DOJ announced its largest-ever coordinated health care takedown of 324 individuals charged in connection with over $14.6 billion in alleged fraud, across multiple schemes, that included 96 licensed professionals. That operation involved DOJ Criminal, HHS-OIG, FBI and DEA and multiple U.S. Attorneys' Offices.⁴ The coordination of and publicity given to these prosecutions are intended to send a clear message that DOJ intends to pursue and put resources behind criminal health care fraud prosecutions.

FCA Working Group announced

DOJ and the Department of Health and Human Services (HHS) have also announced the launch of a joint FCA Working Group with six priority areas, many of which (though not all) are familiar to participants in the health care industry:

1. "Medicare Advantage." The focus here has historically included allegations that private Medicare Advantage plans manipulated their diagnostic data to increase their risk adjustment scores and resulting capitation payments, and there is no suggestion that focus has changed.
2. "Drug, device, or biologics pricing and discounts." This refers to the exchange of discounts, rebates and service fees paid by pharmaceutical, biologics and medical device manufacturers in exchange for formulary placement by health plans and pharmacy benefit managers. This has been the subject of significant regulatory, legislative and antitrust activity in recent years, and now the FCA is following suit.
3. "Barriers to patient access and violations of network adequacy requirements." This is a relatively new category of enforcement, seeming to refer to compliance with requirements for the provider networks for Medicare, Medicaid and Affordable Care Act exchange plans.
4. "Kickbacks." Claims related to violations of the Anti-Kickback Statute are old hat and continue to be a source of significant exposure for providers, plans and manufacturers alike. It therefore remains key to have rigorous compliance programs governing benefits provided in connection with drugs, medical devices, durable medical equipment, and other products and services paid for by federal health care programs.
5. "Defective medical devices impacting patient safety." Companies that manufacture unsafe medical equipment have long faced FCA exposure in addition to product liability and securities fraud claims, and so this is no surprise.
6. "Manipulation of Electronic Health Records systems to drive inappropriate use of Medicare covered products."⁵ This signals that outsourced health care billing and coding service providers, as well as software companies that develop billing and coding tools for providers, are now facing increased scrutiny. In the 2010s, federal incentive programs drove widespread adoption of Electronic Health Records (EHR) systems, and early enforcement actions focused on vendor misrepresentations around functionality of those systems.⁶ With those incentive programs now wrapped up, DOJ's attention has shifted to how providers may be exploiting EHR systems to overbill, upcode or otherwise game the billing system.

The agencies also emphasized a continued expansion of the use of data analytics to identify potential sources of claims. DOJ and HHS have demonstrated greater capacity to deploy analytics to identify and build FCA cases. And while third-party data firms have had mixed success as relators pursuing claims based solely on identifying outliers in public data, and DOJ representatives have expressed wariness of "data relators" who do not bring any insider information, DOJ has intervened in data relator cases. For example, in 2021, DOJ intervened in a case brought by a serial data relator against 11 nursing homes in New York, contending that the nursing homes were keeping patients longer than necessary.⁷ That case remains pending four years after DOJ elected to intervene.

In addition, the FCA Working Group memorandum notes that HHS may take steps to suspend payment to providers facing credible allegations of FCA fraud pending resolution of the case, which would place significant pressure on defendants. The agencies indicate that they will consider dismissing weaker cases but did not suggest the standard for doing so has changed. This appears to be consistent with DOJ's (very) occasional practice of intervening in qui tam suits that impose a burden on the government without offering a strong likelihood of success.⁸ That may offer a sliver of hope for health care companies that DOJ under this administration will be receptive to requests to dismiss weak cases—but only if defense counsel knows the system and can explain to federal regulators why dismissal is warranted in a case.

DOJ drags the FCA into the culture wars

In addition to its conventional areas of civil FCA enforcement, DOJ has announced its intention to use the FCA as a tool to ensure that health care providers and other institutions receiving federal funds align with its priorities on gender and diversity.⁹ DOJ leadership has issued multiple memoranda stating the agency's intention to pursue FCA cases against providers, hospitals, pharmaceutical companies, and others that provide gender-affirming care and, presumably, any ancillary services.¹⁰ The administration has also stated that it intends to pursue FCA cases against private companies with diversity, equity and inclusion (DEI) programs that are discriminatory.¹¹

These are all novel uses of the FCA that create significant exposure for the health care industry, not least because these memoranda will motivate whistleblower employees to bring these types of cases even if DOJ does not follow through on bringing these cases directly. To be sure, past efforts to bring traditional civil rights cases under the FCA have had at most only limited success, but with the backing of DOJ, that may turn out differently for this effort. Participants across the health care industry will need to carefully weigh the risks of FCA liability against their own corporate and professional priorities, and consider strategies to mitigate those risks going forward while fulfilling their duties to patients and employees.

Footnotes

1. See Memorandum Decision on Statutory Penalties, July 7, 2025, ECF No. 779, U.S. ex rel. Bassan v. Omnicare Inc., U.S. District Court, Southern District of New York, No. 15-04179; see also https://www.justice.gov/usao-sdny/pr/statement-us-attorney-jay-clayton-verdict-us-v-omnicare-and-cvs-health-corporation ; https://www.justice.gov/usao-sdny/press-release/file/1226966/dl

2. See https://www.justice.gov/opa/pr/united-states-files-false-claims-act-complaint-against-three-national-health-insurance

3. See https://www.justice.gov/opa/pr/ceo-health-care-software-company-convicted-1b-fraud-conspiracy

4. See https://www.justice.gov/opa/pr/national-health-care-fraud-takedown-results-324-defendants-charged-connection-over-146

5. https://www.hhs.gov/press-room/hhs-doj-false-claims-act-working-group.html

6. See e.g., U.S. ex rel. Delaney v. eClinicalWorks LLC, 15-CV-00095,U.S. District Court, District of Vermont; https://www.justice.gov/archives/opa/pr/electronic-health-records-vendor-pay-155-million-settle-false-claims-act-allegations

7. See e.g., https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-files-suit-against-eleven-skilled-nursing-facilities-and-their

8. See e.g., U.S. ex rel. Polansky v. Executive Health Resources, Inc., 599 U.S. 419, 437 (2023) (finding the government gave good grounds for thinking that a qui tam suit under FCA relating to Medicaid fraud would not vindicate its interests, and thus, it was entitled to dismissal under the voluntary-dismissal standard)

9. See May 19, 2025, Civil Rights Fraud Initiative Memorandum, https://www.justice.gov/dag/media/1400826/dl?inline=&utm_medium=email&utm_source=govdelivery

10. See e.g., April 22, 2025, Preventing the Mutilation of American Children Memorandum,https://www.justice.gov/ag/media/1402396/dl

11. See February 5, 2025, Ending Illegal DEI and DEIA Discrimination and Preferences Memorandum, https://www.justice.gov/ag/media/1388501/dl?inline

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