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What are the Penalties for Medicaid Fraud?

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Medicaid is unique among the major government health care benefit programs in that it is jointly funded by each state and the federal government. States administer Medicaid locally according to federal requirements, and this means that both state and federal laws govern Medicaid providers in all 50 states nationwide.

At both levels of government, Medicaid fraud is a serious offense. In broad terms, Medicaid fraud involves any method (either intentional or unintentional) of obtaining funds from Medicaid where (i) the funds are not properly owed, or (ii) the funds are used for an improper purpose (such as payment of referral fees). Medicaid fraud can be charged as a civil violation or as a crime, with potential penalties including recoupments, fines, jail time, program exclusion, and more.

State and Federal Laws Impose Penalties for Medicaid Fraud

Under the federal health care system, the primary fraud laws that apply to Medicaid providers are the False Claims Act, the Anti-Kickback Statute, and the Stark Law. Most states have adopted analogous statutes as well, although specific prohibitions and penalties vary from one state to the next. Some states, such as Florida, have enacted numerous different statutes that apply to health care providers, with some that apply industry-wide and some that apply only to certain medical facilities and licensed practitioners.

If your medical practice or health care business is being targeted in a Medicaid fraud investigation, understanding what is at stake requires you to know:

(i) whether you are being investigated by state or federal authorities,

(ii) which statute(s) you are alleged to have violated, and

(iii) whether the investigation is civil or criminal in nature.

With this significant caveat, here is a brief introduction to some of the penalties that may apply.

Federal Penalties for Medicaid Fraud

While the False Claims Act and the Anti-Kickback Statute contemplate both civil and criminal penalties, the Stark Law is exclusively civil in nature. The Anti-Kickback Statute and Stark Law include specific penal provisions, and in civil cases they also allow for imposition of liability under the False Claims Act.

False Claims Act (31 U.S.C. Sections 3729-3733)

The False Claims Act makes it a federal offense to submit any “false or fraudulent” claim to the government. This includes overbilling Medicaid. There are potential civil and criminal penalties under the False Claims Act.

Civil Penalties Under the False Claims Act

  • Fines of roughly $21,500 per false claim (as of 2017)
  • Treble damages (three times the government’s actual losses)
  • Recoupment of overbilled amounts
  • Pre-payment review and non-payment of future claims
  • Exclusion from Medicaid and other health care benefit programs
  • Potential licensing action

Criminal Penalties Under the False Claims Act

  • Up to $250,000 in fines
  • Recoupments
  • Program exclusion
  • Potential licensing action
  • Up to five years of federal incarceration per violation

Anti-Kickback Statute (42 U.S.C. Section 1320a-7b(b))

The federal Anti-Kickback Statute prohibits the offering, solicitation, payment, or receipt of any form of compensation in order to induce or reward referrals for services that are reimbursed by Medicaid. Providers charged with violating the Anti-Kickback Statute can face both civil and criminal penalties.

Civil Penalties Under the Anti-Kickback Statute

  • False Claims Act liability
  • Recoupments
  • Treble damages
  • Civil monetary penalties (CMP)
  • Program exclusion

Criminal Penalties Under the Anti-Kickback Statute

  • Fines of up to nearly $75,000 per violation
  • Up to five years of federal incarceration per violation

Stark Law (42 U.S.C. Section 1395nn)

The Stark Law prohibits physicians from making referrals to related entities for “designated health services” that are reimbursed through Medicaid. It also imposes penalties for the entities that receive prohibited referrals. Civil penalties under the Stark Law include:

  • False Claims Act liability
  • Recoupments
  • Treble damages
  • Civil monetary penalties
  • Additional CMP and program exclusion for “knowing” violations

State Penalties for Medicaid Fraud

The penalties for Medicaid fraud under state law vary greatly from one jurisdiction to the next. At the state level, Medicaid fraud cases are investigated and prosecuted by Medicaid Fraud Control Units (MFCUs), Offices of the Attorney General, and various other authorities. Here are the potential penalties in some of the states with the heaviest focus on Medicaid fraud enforcement.

California: Medicaid Fraud Penalties

Prosecutors in California have several statutory tools for pursuing criminal charges for Medicaid (Medi-Cal) fraud. Providers that engage in Medi-Cal fraud and that assist patients in defrauding Medi-Cal can face penalties including:

  • Welfare & Institutions Code Section 14014 (False Declaration of Eligibility): Felony or misdemeanor penalties (felony in cases involving over $400)
  • Welfare & Institutions Code Section 14107 (Fraudulent Claims): Misdemeanor penalties of up to one year in jail and a $1,000 fine, or felony penalties of two to five years of incarceration plus treble damages
  • Welfare & Institutions Code Section 14107.2 (Kickbacks, Bribes, or Rebates): Misdemeanor penalties of up to one year in jail and a $10,000 fine, felony penalties of imprisonment and a $10,000 fine for a second offense
  • Penal Code Section 550(a) (Preparing, Making or Submitting a False Claim): Misdemeanor penalties (for claims of $950 or less) of one year in jail and a $1,000 fine, or felony penalties (for claims greater than $950) of two to five years of incarceration plus the greater of $50,000 or double the amount of the fraud

Florida: Medicaid Fraud Penalties

Section 409.920 of the Florida Statutes imposes criminal penalties for all forms of Medicaid fraud. This includes overbilling Medicaid as well as paying and receiving kickbacks in connection with Medicaid-reimbursed services, equipment, and supplies. The criminal penalties for Medicaid fraud in Florida include:

  • Third-degree felony ($10,000 or less in value): $5,000 fine and five years of imprisonment
  • Second-degree felony ($10,001 to $49,999 in value): $10,000 fine and 15 years of imprisonment
  • First-degree felony ($50,000 or greater in value): $10,000 fine and 30 years of imprisonment
  • All cases: A fine “in an amount equal to five times the pecuniary gain unlawfully received or the loss incurred by the Medicaid program or managed care organization, whichever is greater.”

Louisiana: Medicaid Fraud Penalties

In Louisiana, Medicaid fraud can be charged as either a civil or criminal offense. Potential penalties include:

  • Civil: CMP of $2,000 per false claim
  • Criminal: Fines of up to $20,000 and five years of imprisonment
  • All cases: Exclusion from Medicaid program eligibility

Michigan: Medicaid Fraud Penalties

Similar to California, Michigan has several laws that MFCUs and other authorities can use to prosecute cases of Medicaid fraud. Some of these laws include:

  • Medicaid False Claims Act (Michigan Compiled Laws Section 400.604): Fines up to $30,000 and four years of imprisonment per violation
  • Health Care False Claims Act (Michigan Compiled Laws Sections 752.1004-752.1004B): Fines up to $50,000 and four years of imprisonment per violation
  • Physician Division of Fees (Michigan Compiled Laws Section 750.428): Misdemeanor fine of up to $750 and up to six months of imprisonment, loss of license for a second offense

New York: Medicaid Fraud Penalties

In New York, Medicaid fraud is charged under the state’s False Claims Act as well as the state’s health care fraud statute and various other criminal statutes. Potential penalties for Medicaid fraud under these statutes include:

  • New York False Claims Act (State Finance Law Sections 187-194): Thousands of dollars in fines, treble damages, costs of litigation
  • Social Services Law (Sections 145 and 366-b): CMP of up to $10,000 per violation and treble damages in civil cases, misdemeanor penalties in criminal cases
  • Health Care Fraud Statute (Penal Law Section 177): Criminal charges ranging from class A misdemeanor to class B felony

Texas: Medicaid Fraud Penalties

In Texas, Medicaid fraud can be charged as a civil violation, a misdemeanor, or a felony offense depending upon the specific circumstances involved. In each type of case, potential penalties include:

  • Civil: Civil monetary penalties
  • Misdemeanor: Tens or hundreds of thousands of dollars in fines for each violation
  • Felony: Tens or hundreds of thousands of dollars in fines plus five years of imprisonment for each violation
  • All cases: Exclusion from Medicaid program eligibility

Are You Facing a Medicaid Fraud Investigation?

If you are being investigated by an MFCU, the U.S. Department of Justice (DOJ), the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services (DHSS), the Drug Enforcement Administration (DEA), or any other state or federal law enforcement authority, it is critical that you seek experienced legal representation. If you have not yet been charged, you need to do everything possible to avoid having your investigation lead to a civil or criminal prosecution.

At Oberheiden, P.C., we have decades of experience representing clients in Medicaid fraud investigations, and several of our senior attorneys worked for the DOJ and state prosecutors’ offices prior to entering private practice. Once you contact us, we will quickly make contact with the investigating authority in order to intervene in the investigation. Once we determine the specific allegations against you, we will then develop and execute a customized defense strategy designed to resolve your investigation without charges and without long-term impact to your business or practice.

Contact Oberheiden, P.C.

To speak with the Medicaid fraud defense attorneys at Oberheiden, P.C., please call (888) 452-2503 or contact us online. With offices in California, Louisiana, Michigan, New York, and Texas, we represent health care providers nationwide.

Not all attorneys of Oberheiden, P.C. are licensed in California and nothing contained in here is meant to constitute the unauthorized practice of law.