Medical Fraud Guide for Attorneys




We often get calls from experienced criminal defense attorneys who are handling their first medical fraud case.  They are very confident in their abilities but need to understand the nuances of a medical fraud case.  Here is a summary of our response.

First, you can do this type of case.  In the end, a medical fraud case is no different from any other criminal case.

You may not be a health care fraud specialist, but you are a top defense attorney.  Your skills in the courtroom and your case preparation skills, will carry over to the health care arena.

The Vagueness Barrier and How it may Actually be a Road map to a Defense

The first hurdle is time consuming but intellectually easy to overcome.  There are a large number of vague (and subject to interpretation) medical and billing terms that you need to know.  Different fraud statutes and health care websites will provide definitions.  The basic concepts will be the same but the context (Medicare, Workers Compensation) may make the same “word” mean slightly different things.    These inconsistencies are a type of impenetrable confusion that trip up legitimate medical practices and lead to unfounded fraud charges.  So, as you learn the basic terms of art, look for the areas where an expert might claim that a term has a clear and specific meaning but in reality, the meaning is context based.

The medicaid fraud investigation process is usually carried out by non-medical professionals who are educated and advised by the insurance industry.  They have a body of experience that is often biased in favor of finding criminal intent.  As healthcare fraud involves a culpable mental state, statutory muck is often the legitimate basis of a defense.  Just as law enforcement finds criminal intent in the muck, a good defense shows how even the completely innocent doctor would step over the vaguely drawn lines.

The Scotus Blog has an excellent article on the void for vagueness issue. The blog is written by attorney Kevin Johnson.         ☜ Click

Unbundling as an Example

Under Medicare and other billing guidelines, certain procedures are meant to be bundled together for purposes of billing.  Each task may be individually billable but there is also a way to bill as a package. Just like buying in bulk at Costco, bundled services usually cost less than unbundled. When the billing structure (e.g. Medicare) requires bundled billing, the deliberate, repeated unbundling may be a crime.   How often can an unbundling error be considered “just a mistake” ?  Many medical practices employ outside billing services which charge as their fee, a % of the total amount received from insurers.  If the biller unbundles, is the medical practice or individual physician responsible ?   Again, knowledge, implied knowledge and intent are key.  And you can imagine, informants, disgruntled employees especially, are often key prosecution witnesses.

The Lexicon

The core vocabulary  will vary from case to case but ultimately you can compile it.  The main sources of the lexicon of your case, will be.

  1. The Indictment including phrases used and the statutes.
  2. Have your client go through his/her view of the charges.
  3. Internet searches for companies that handle the kind of work relevant to your complaint (e.g. medical billing)
  4. Hire an expert.

The key point is that unlike a standard criminal case, medical fraud cases deal with lots of government regulations and the interpretation of those regulations.  Disagreements as to interpretation of rules are often the genesis of a criminal prosecution.  Understand early whether your client has invented a deliberate scheme or has fallen into legislative quicksand.  For examples of deliberate healthcare abuse, the ACFE (American Certified Fraud Examiners) website lists <<Common Health Fraud Schemes>>

The first scheme they describe is having patients at a facility watch the movie “Forrest Gump” for the “upteemth” time being billed as group therapy.  There is not much defense to a charge such as that.  A mitigation approach would make sense.  Other areas in the article include “Billing for a non-covered service as a covered service.”  This is not necessary so black and white.  It can be, but not necessarily so.  If your client bills for “Accupuncture”, a covered service, but also provides a complimentary massage, is that billing fraud ?  Web MD describes massage/pressure techniques related to accupuncture.  Even if the billing rules don’t allow a substitution, is this FRAUD ?  Or just a civil/financial matter ?

Understand the Politics

The “big picture” is often the “small picture”.  On July 13, 2017, the New York Times headline figuratively screamed !

“U.S. Charges 412, Including Doctors, in $1.3 Billion Health Fraud”.

For those who work in this area, the nature of the charges drew our attention.  About 1/3 of the charges were narcotics related.

There is a lot of abuse in this area but “pain medicine” has a lot of built in defenses as well.  You may have a moral dilemma here because people who are guilty of being drug dealers with an “M.D.” behind their name, can get off on technical defenses because the area of pain medicine has a great deal of “judgment” involved.   Another areas involved “kickbacks” where even legitimate referrals to the “best” diagnostic centers became a crime when a kickback was involved.  A cash kickback is hard to defend but cross referrals, advertising sharing and gifts (e.g. paid vacations), are not necessarily “kickbacks”, although they are often charged that way.

If you are in the cross hairs of a politically popular type of offense, the chances of an excellent negotiated resolution drop like a rock in a pond.

Understand THEIR Investigative Process

The Inspector General for Health and Human Services, is the go to place for Medicare fraud investigations.  They are a “tip” based operation and a lot of cases start with a phone call to the Centers for Medicare and Medicaid Services (CMS). Look here for more information.  <<OIG Fraud Reporting Site>>

Competitors, employees and potential civil litigants (Qui Tam litigators) will often make the call.   A CMS screener reviews the initial accusation/claim and they have access to a database of prior claims.  If the claim seems valid, and especially if the claim is one of many (of the same type), the case will be escalated.  The FBI will often take over the investigation at this point.  The National Law Journal has published an good article by attorney Jonathan Tycko, titled “Top 10 Tips for Qui Tam Whistleblowers”.  If you are defending a medical practice, the article is worth reading.   Click DOJ Emblem ☞ DOJ Emblem (Department of Justice) with a link embeded to the article by the national law review titled top 10 tips for qui tam whistle blowers

Tracking the investigation requires some push on your part.  In a federal (Medicare) case, there is less disclosure of the investigative process than in a state case.  And yet, that very process may reveal bias on the part of witnesses since the initial complainants may in fact be witnesses in the criminal fraud case.

To understand financial motivations for reporting alleged fraud, there is an excellent primer on the False Claims Act published by the Department of Justice <<Click for Primer>>

But There Must Be A Single Reliable Source ??

There is no clear, comprehensive guide to the laws for medical billing and coding.  There are experts and interpretive guides but nothing as clear as a statute with spelled out elements.  This vagueness in medical billing laws in an opening for an effective defense.  Void for vagueness motions (not as the statute is written but as applied), are often a solid defense strategy.

There is a tendency for medical professionals to err on the side of caution in billing and practice procedures.  That way, a vague law will not be accidentally violated.  Medical fraud cases often focus on practitioners who are less cautious but they may not (necessarily) be criminals.

 The  First Steps

1. Learn the Language of Medical Fraud

There are standard terms and phrases that apply to most medical fraud cases.  CPT codes ICD-9, ICD-10, , Health Insurance Claim Form (HCFA, 1500), upcoding, unbundling are some that you should know.

Here are some of the basics with links to web pages that give some useful detail.  Note: These are not our links.  If any of them go “bad”, please let us know so we can update.

CPT Coding Website (Recommended)





SOAP notes

Health Insurance Claim Form (HCFA, 1500)


2. Hire an Expert Immediately

Medical fraud is often a battle of experts. Billing and medical practice involves a tension between patient care, profitability and masses of government and insurance company regulations.  Reasonable people and hired guns can and will differ on interpretation.

For example, let’s assume that your client has more 99245 billings than 90% of practitioners in similar locales with a similar type of practice.  99245 is a high level of care during a single visit.

Your client is then charged with billing fraud via upcoding.  The theory is that the vast differential in billing data (your client has far more complex visits than similar MD’s), is caused by fraud.  Perhaps a disgruntled employee has contacted prosecutors or the medical board and promoted this theory.

Your defense may focus on some aspect of the client’s practice that distinguishes his/her practice from the mean.  Your client can help with this but an expert will be needed.  Very early on you must assemble evidence to support this position.  That includes interviews of staff, an investigation into the background of the disgruntled employee and an expert review of relevant records.

Do not be intimidated by the limitations on expert testimony in Federal Rule of Evidence 704.  Except for expressing an “ultimate” opinion as to the existence of an element of the crime, experts have a lot to say.  The fact that the expert gives an opinion on a predicate matter from which a jury might easily infer the defendant’s mental state, is not a basis for exclusion.  The case of  U.S. v. Morales (9th Cir. 1997) 108 F.3d 1031 was a rather simple bookkeeping fraud case. In Morales, a bookkeeping expert, “intended to testify to a predicate matter—Morales’s level of understanding of bookkeeping principles—and not to whether Morales willfully made the false entries.” Despite the fact that there was a small jump from that opinion to the ultimate issue in the case, the Ninth Circuit held that the evidence should have been admitted because “Rule 704(b) does not preclude expert testimony from which a jury might infer that a criminal defendant did or did not possess the requisite mens rea”. U.S. v. Morales (9th Cir. 1997) 108 F.3d 1031, 1041   In other words, even though the expert came real close to saying “Hey, there’s no fraud, he just didn’t know what he was doing !!!!”, his testimony was admissible.

3. Understand the Charges

Medical fraud is unlike even a special circumstance murder case.  The charges are very VERY broad and it is often difficult to relate the listed charges to specific files, billings or conduct.  A typical case might charge the following:

18 USC 1347  − Health Care Fraud
18 USC 1035 − False Statements Relating to Health Care Matters
8 USC 956(h) − Conspiracy to Commit Money Laundering

For some of these charges there is a jury instruction available.  <<Instruction for 8 USC 956>> (money laundering)

<<Instruction for 18 USC 1035>> (conspiracy)

Otherwise, read the leading cases after you have read the statute.  There are often jurisdictional differences in the interpretation of these vague laws.  You are going struggle to clearly understand the government’s theory and defining their universe of relevant documents.  Motions for a bill of particulars, a review of search warrant affidavits and a focus on prearrest communications with insurance companies are methods of clearly defining the scope of the government’s case.

4. Organize Documents

Create a very clear computer based discovery system. We use Casemap to index documents and to note the date and production (discovery) batch that they come from. We also clearly delineate documents that are self generated and privileged.

Keep a clean, untouched set.

Use a Bates numbering system.

4. Use Your Documents – And Do it Early

Hire a coder, biller or experienced paralegal to take the Indictment and break out each separate alleged wrongful act into a folder. Put every document that relates to that alleged wrongful act into the folder.

Make sure that the folders are on your computer and you can use paper if you like.

Make sure each document has a Bates number.

If you do these 4 things ASAP, you will have control of your case. If you don’t, do it at the beginning, you will have lost valuable time.

The Legal Part

If a client comes to you with a DUI, homicide or any normal crime, you automatically know the elements, defenses and particularly, the requirement mental states.

In medical fraud cases the elements, defenses and mental state are not that easy.  Intent changes among statutes and the same acts easily fall under many statutes.  Consider the fact that the pattern jury instructions used in federal court do not generally sufficiently focus on intent.  Consider this U.S. Supreme Court holding on a good faith belief as a defense to fraud.

… if Cheek asserted that he truly believed that the Internal Revenue Code did not purport to treat wages as income, and the jury believed him, the    Government would not have carried its burden to prove willfulness, however unreasonable a court might deem such a belief. Of course, in deciding whether to credit Cheek’s good-faith belief claim, the jury would be free to consider any admissible evidence from any source showing that Cheek was aware of his duty to file a return and to treat wages as income, including evidence showing his awareness of the relevant provisions of the Code or regulations, of court decisions rejecting his interpretation of the tax law, of authoritative rulings of the Internal Revenue Service, or of any contents of the personal income tax return forms and accompanying instructions that made it plain that wages should be returned as income. [citations]
Cheek v. U.S. (1991) 498 U.S. 192, 202–03

You need to craft a special instruction on this issue (in most jurisdictions including the 9th Circuit).

Another example is the insanity defense.  In federal court the defendant has the burden of proof on this issue.  9th Circuit pattern instruction 6.4 reads (in part)

A defendant is insane only if at the time of the crime charged:

1. The defendant had a severe mental disease or defect; and
2. As a result, the defendant was unable to appreciate the nature and quality or the wrongfulness of her acts.

The defendant has the burden of proving the defense of insanity by clear and convincing evidence. Clear and convincing evidence of insanity means that it is highly probable that the defendant was insane at the time of the crime. Proof by clear and convincing evidence is a lower standard of proof than proof beyond a reasonable doubt.

That’s fine if the crime is murder.  But what if the crime is fraud ?  You can negate fraud by a good faith but insane belief in the righteousness of your client’s conduct.  By getting the insanity instruction above, you are shifting the burden of proof from the government (to show criminal intent), to the defendant.

Again, a special instruction has to be crafted.  Here is some law (check to see if it is still good), that will help you get a modified instruction.

[T]he Due Process Clause protects the accused against conviction except upon proof beyond a reasonable doubt of every fact necessary to constitute the crime with which he is charged.” In re Winship, 397 U.S. 358, 364 (1970) United States v. Leal–Cruz, 431 F.3d 667, 670–72 (9th Cir.2005), held that due process “forbids shifting the burden of proof to the defendant on an issue only where establishing the defense would necessarily negate an element that the prosecution must prove beyond a reasonable doubt under Winship.”

Pull the statutes involved with your case. Check the jury instructions to the extent that they exist. Then, tedious as it may seem, write instructions based upon the statute and case law. Check your jurisdiction vs. other jurisdictions.

5. Initial Investigation

Interview Staff.  The FBI has likely interviewed all major staff members.  Staff members are often trained professionals and they are TERRIFIED of losing their license.  Statements to law enforcement are often a run for cover and are very hostile to your position.  Use an investigator with impeccable credentials because he/she will undoubtedly be on the witness stand explaining why the statement that he/she took from the witness is so different from that obtained by the FBI.  Credentials, credibility and integrity will be challenged.

6. Run the Sentencing Guidelines

Your big concern is the dollar bump up in penalty – which is huge.  Here is a <<Sentencing Worksheet Link>>.   This page from the <<US Attorney’s Manual>> reviews some of the factors that add sentencing points.  You can be sure that abuse of a position of trust and leadership role are going to be battle grounds in terms of whether they apply to your case.  But loss amount is the major driver at sentencing.  Here is what you need to know about federal sentencing loss amounts. <<Loss Calculation>>

7. Talk to the AUSA

You need to quickly assess the value of a plea.  You need your early acceptance of responsibility point reduction.  <<Good Summary of Law Here>>

You also need to find agreement as to loss amount (if possible).  A typical sentencing deal might include the top that the AUSA will ask for with an agreement that you can argue for a downward departure.

8. Black Friday Sale at Walmart !!!!

At the start of most federal fraud cases, there is a rush to the U.S. Attorney’s office that resembles the stampede that you see at Walmart on Black Friday.  Co-defendants, targets and potential defendants rush to be the prosecutor’s favorite cooperating defendant.  Unlike hard core violent criminals who fear retribution and the “snitch” label, white collar types want nothing more than to walk free at all costs. <<Singleton Case – Prosecutors Can “Bribe” Cooperators>>   Read U.S. Attorney Brief  justifying rewards to cooperators.  Finally, read this blog article, “The Use of Federal Rule of Criminal Procedure 35(b)” to reward cooperators after initial sentencing”.

9. Prepare Mitigation

We are fighters and assume we will win.  In state court, sentencing is often rigid and relatively inflexible.  Not true in medical fraud cases.  Put together a major mitigation packet.  This will include good things about your client from the past, charity work, overcoming adversity etc..  If should also include post offense conduct.  Hiring a professional billing outfit, reimbursing insurers, righting the alleged wrongs.

10. Superseding Indictments

Just when you think you are prepared for trial, the U.S. attorney will add, modify and complicate the case by filing a new and more onerous “superseding indictment”.  This is routine and you should expect that it will happen.  This is especially true and co-defendants drop like flies and cooperate.

In federal court, indictments are also redrawn if an indictment is dismissed because of legal defect or grand jury irregularity.  Both are rare but the government may return a new indictment within six months of the date of dismissal.  If the statute of limitations has run, you are in luck.   After the original limitation period has expired, a superseding indictment may narrow, but not broaden, the charges. See 18 U.S.C. §§ 3288-3289; United States v. Miller, 471 U.S. 130 (1985); United States v. Grady, 544 F.2d 598 (2d Cir. 1976). (This section based upon the U.S. Attorney manual)

11. If you are new to Federal Court

The federal public defender’s offices are wonderful in helping private counsel navigate their day to day world.  One caveat, medical fraud cases are not frequently defended at the public defender level so they may lack some expertise in the narrow specialty of health care fraud defense practice.  However, they are still a wonderful resource.  Check out these federal public defendant websites.

Federal Defenders of New York

Defender Services Office (Training)

12. Defenses & Jury Instructions

Unlike basic murder, battery, or drug crime cases, white collar and particularly criminal medical cases, do not have good or established jury instructions.  Your defenses will often focus on vagueness and culpable mental state.  If you have lost on the mechanics of the case, intent is a goldmine for the defense.

Health care defendants are sometimes cynical criminals but in many cases they are good people with mental and emotional problems. If you find a case where your provider is using drugs or has severe psychological issues, consider a mental state defense.   A good faith belief in the legitimacy of a practice can be a defense – even if that good faith belief is unreasonable.

We have a model special instruction on that point that you are free to use.  Reads good faith defense instruction and links to webpage on site that has the instruction on good faith defense to fraud

In extreme cases we have used the insanity defense.  Your client need not be a lunatic and howl at the moon to qualify.  What if your client believes that his/her conduct is justified ?  The logic of the justification might be that the evil 1% run the insurance companies and your client is submitting phantom bills in order to provide necessary care to the poor.  While the cynical among you might claim that this is Bernie Sanders campaign platform, if the belief is more delusional than political, it just might sway some jurors.

The technical problem with the insanity defense is that in health care cases, the insanity burden of proof may be on the client.  As you know, the culpable mental state element is on the prosecution.  We have a modification of the standard insanity instruction that deals with that issue.   Modified insanity instruction caption with link to instruction on page with authorities