The Ultimate Guide to the Federal Healthcare Fraud Statute

Healthcare fraud is big business. Individuals and businesses that intentionally submit fraudulent reimbursements to Medicare and Medicaid rake in tens of billions of dollars in taxpayer funds each year. But, with the federal government’s focus on combating healthcare fraud, legitimate providers can face scrutiny as well—and all types of individuals and businesses can potentially face prosecution under the federal healthcare fraud statute.

The federal healthcare fraud statute (18 U.S.C. Section 1347) is just one of several laws that the U.S. Department of Justice (DOJ) uses to prosecute fraud targeting Medicare, Medicaid, and other payors. In this Ultimate Guide to the Federal Healthcare Fraud Statute, our federal white-collar defense lawyers take an in-depth look at Section 1347 while highlighting several of the other statutes that often come into play in federal healthcare fraud cases.

The Federal Healthcare Fraud Statute (18 U.S.C. Section 1347): An Overview

18 U.S.C. Section 1347 applies specifically to fraud targeting healthcare benefits programs (i.e., Medicare and Medicaid). Under the statute:

“Whoever knowingly and willfully executes, or attempts to execute, a scheme or artifice—(1) to defraud any health care benefit program; or (2) 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 under this title or imprisoned not more than 10 years, or both.”

Section 1347(a) goes on to provide for enhanced penalties in cases involving serious bodily injury or death:

“If [a] violation results in serious bodily injury . . . [the defendant] shall be fined under this title or imprisoned not more than 20 years, or both; and if the violation results in death, such person shall be fined under this title, or imprisoned for any term of years or for life, or both.”

For many people, especially healthcare providers who have no intention of defrauding Medicare or Medicaid, the severe penalties under the federal healthcare fraud statute come as a surprise. But, yes, allegations of healthcare fraud can lead to a decade or more of federal imprisonment; and, yes, the DOJ does pursue these penalties when warranted. As a result, facing charges under 18 U.S.C. Section 1347 is an extremely serious matter in any scenario, and individuals and businesses targeted under the statute need to be prepared to defend themselves by all means available.

There are a variety of ways to defend against federal healthcare fraud charges under 18 U.S.C. Section 1347. Along with asserting constitutional defenses (i.e., the improper execution of a warrantless search that renders the DOJ’s evidence inadmissible in court), healthcare providers and others can also defend against charges under the statute by challenging elements of the DOJ’s case such as:

• “Knowingly and willfully” – To secure a conviction under the federal healthcare fraud statute in federal district court, DOJ prosecutors must be able to prove that the defendant acted “knowingly and willfully.” If you accidentally overbilled Medicare or Medicaid, you may be liable for recoupments, but you are not a criminal.
• “Executes, or attempts to execute” – The federal healthcare fraud statute also requires evidence that the defendant either executed or attempted to execute a fraudulent plan targeting a federal healthcare benefit program. If the DOJ’s prosecutors cannot prove that you took steps toward executing a plan to defraud the government, they should not be able to secure a conviction.
• “A scheme or artifice” – This plan to defraud the government is referred to as a “scheme or artifice.” If your billing team submitted reimbursement requests to Medicare, Medicaid, or another federal healthcare benefit program in the ordinary course of business, this may give rise to civil liability, but it is not prosecutable as a criminal offense.

Of course, the specific defenses that are available in any case prosecuted under 18 U.S.C. Section 1347 will depend on the specific facts and allegations involved. While some targeted healthcare providers will be able to defend against charges under Section 1347 by arguing lack of knowledge or willfulness, others may need to focus on challenging the DOJ’s evidence of execution (or attempted execution) of a scheme or artifice to defraud. In any case, determining what defenses are available requires a prompt and comprehensive compliance and risk assessment, and the first step toward conducting this assessment is to engage experienced federal defense counsel as soon as possible.

Other Federal Statutes Used to Prosecute Healthcare Fraud

Along with 18 U.S.C. Section 1347, the DOJ uses a variety of other federal statutes to prosecute healthcare fraud as well. While the federal healthcare fraud statute focuses on fraud affecting federal healthcare benefit programs specifically, these other statutes target other healthcare-related crimes.

As a result, it is not uncommon for healthcare providers (and others) to face charges under 18 U.S.C. Section 1347 and under one or more other federal statutes. This includes charges under statutes such as:

• 18 U.S.C. Section 1031 (the federal government fraud statute)
• 18 U.S.C. Sections 1341 and 1343 (the federal mail fraud and wire fraud statutes)
• 18 U.S.C. Section 1349 (the federal attempt and conspiracy statute)
• The Anti-Kickback Statute (AKS)
• The Controlled Substances Act (CSA)
• The Drug Supply Chain Security Act (DSCSA)
• The False Claims Act (FCA)

Each of these statutes establishes its own prohibitions and penalties. In large-scale healthcare fraud prosecutions, it is not unusual for defendants to face millions of dollars in combined fines and decades of federal imprisonment. When facing allegations of federal healthcare fraud, it is imperative to quickly identify the specific statutory provisions at issue—and then build a defense strategy focused on the specific allegations at hand.

Responding to Criminal Allegations Under the Federal Healthcare Fraud Statute

Most healthcare providers will learn that they are facing criminal allegations under the federal healthcare fraud statute when they receive a visit from the Federal Bureau of Investigation (FBI) or a target letter or search warrant from the DOJ or the U.S. Department of Health and Human Services’ Office of Inspector General (OIG). Frequently, allegations of criminal healthcare fraud will follow audits that allegedly uncover evidence of fraudulent billings.

If you are facing (or your business is facing) allegations of criminal healthcare fraud, there are some important steps that you will need to take promptly. To respond to criminal allegations under the federal healthcare fraud statute, healthcare providers (and others) should:

1. Engage Federal Defense Counsel to Conduct a Compliance and Risk Assessment

When facing allegations of criminal healthcare fraud, you need to have an accurate understanding of your risk. Will the DOJ be able to gather the evidence needed to substantiate charges under the federal healthcare fraud statute? Or, do you have a complete defense to criminal culpability? Answering these types of questions requires a prompt compliance and risk assessment—which should be conducted with the oversight of outside counsel to secure the protections of the attorney-client privilege.

2. Evaluate All Potential Criminal Healthcare Fraud Allegations and Defenses

Based on the outcome of your compliance and risk assessment, you will need to carefully evaluate all potential criminal healthcare fraud allegations and defenses. Even if the focus of the government’s investigation is limited currently, it could expand if federal agents find evidence to suggest that a broader scope is warranted.

3. Formulate a Comprehensive and Cohesive Defense Strategy

After evaluating all potential criminal healthcare fraud allegations and defenses, the next step is to formulate a comprehensive and cohesive defense strategy. Your defense strategy should take into account the true facts at hand, and should be focused on achieving a specific desired outcome through a systematic and methodical approach.

4. Focus on Resolving the Matter Without a Federal Grand Jury Indictment

Generally, when facing criminal allegations under the federal healthcare fraud statute (or any of the other statutes listed above), your focus should be on favorably resolving the matter without a federal grand jury indictment. Not only does this limit the costs of your defense and avoid negative publicity, but it also ensures that you will not be at risk of facing a conviction at trial.

5. Prepare to Defend Against Criminal Healthcare Fraud Allegations in Court if Necessary

While your goal should generally be to avoid going before a grand jury, this won’t be possible in all cases. If the DOJ decides to move forward with pursuing charges and secures an indictment, you will need to be prepared to defend against criminal healthcare fraud allegations in federal district court. Here, too, having experienced defense counsel is key, and not only does engaging counsel promptly reduce the risk that you will face an indictment, but it also ensures that your counsel will have all of the information needed to present an effective trial defense if necessary.

Speak with a Federal Healthcare Fraud Defense Lawyer at Oberheiden P.C.

At Oberheiden P.C., we have extensive experience defending healthcare providers and others against criminal allegations under the federal healthcare fraud statute. If you are under investigation or facing charges, you can call 888-680-1745 or contact us online to arrange a free and confidential consultation.