Medicare Fraud Defense: Federal Audit and Investigation Strategies

Unified Program Integrity Contractors (UPICs) perform program-integrity work for the Centers for Medicare & Medicaid Services, including review of Medicare billing data and medical records. UPIC reviews can address potential overpayments, coverage and billing compliance, and suspected fraud, while CMS retains authority over payment suspensions and other program actions. These reviews can become relevant to a broader Medicare Billing Fraud matter when the billing issues extend beyond routine claim correction.

The Office of Inspector General of the Department of Health and Human Services has civil monetary penalty authority under 42 U.S.C. § 1320a-7a and separate exclusion authority under federal healthcare statutes. HHS-OIG can pursue administrative remedies while its investigative work may also contribute to civil or criminal enforcement. The applicable knowledge or intent standard depends on the statute and alleged conduct.

The Department of Justice handles matters involving potential civil False Claims Act liability and federal criminal violations. DOJ attorneys may use Civil Investigative Demands under 31 U.S.C. § 3733 in FCA investigations, while federal prosecutors can use grand jury subpoenas and other criminal investigative tools. These matters can involve Government and Internal Investigations concerning the False Claims Act or 18 U.S.C. § 1347.

The civil False Claims Act imposes liability for specified conduct involving false or fraudulent claims submitted knowingly. Under 31 U.S.C. § 3729(b), actual knowledge, deliberate ignorance, and reckless disregard can satisfy the knowledge requirement, while negligence alone does not. Coding or medical-necessity disputes therefore require examination of what the defendant actually knew or believed when the claims were submitted through a potential False Claims Act matter.

The Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b), prohibits specified knowing and willful conduct involving remuneration intended to induce or reward referrals or business payable by a federal healthcare program. Regulatory safe harbors under 42 C.F.R. § 1001.952 identify categories of arrangements that receive protection when the applicable regulatory conditions are satisfied. Financial relationships involving referrals may therefore require separate analysis in Kickback Investigations.

The physician self-referral law, 42 U.S.C. § 1395nn, generally restricts referrals for designated health services when a physician has a prohibited financial relationship with the entity furnishing those services, unless an exception applies. Unlike the Anti-Kickback Statute, Stark's referral and billing prohibitions do not depend on proving fraudulent intent. Claims prohibited by the statute are not payable, while refund and civil monetary penalty provisions apply under specified circumstances.

Administrative reviews conducted by UPICs or other CMS contractors can evaluate claim coding, medical necessity, and billing documentation. Depending on the applicable Medicare process and findings, disputed claims may lead to overpayment determinations, extrapolation issues, or payment-suspension proceedings. These administrative matters do not themselves establish individual criminal liability.

DOJ can investigate potential FCA violations, while private relators can bring qui tam actions subject to the statute's procedural requirements. Civil Investigative Demands can require documents, written answers, or testimony before the government files or intervenes in an FCA action. Civil FCA liability is determined under the statute's civil burden of proof and can include statutory penalties and multiple damages when its elements are established.

Criminal healthcare fraud investigations may involve federal prosecutors, FBI agents, HHS-OIG special agents, and a federal grand jury. Investigative tools can include grand jury subpoenas and search warrants. A conviction under 18 U.S.C. § 1347 requires proof beyond a reasonable doubt of a knowing and willful execution or attempted execution of the prohibited healthcare fraud scheme.

A subpoena, audit notice, or reasonably anticipated investigation can require review of existing preservation duties and routine deletion practices. A written legal hold may suspend relevant document destruction, electronic overwriting, or messaging auto-deletion practices. Under 18 U.S.C. § 1519, criminal exposure can arise when records are knowingly altered, destroyed, concealed, or falsified with the intent specified by the statute concerning a federal matter.

Attorney-client privilege can apply to confidential communications made for the purpose of obtaining or providing legal advice, while work-product protection involves a separate legal standard. An internal investigation conducted with counsel is not automatically privileged in its entirety. Disclosure of privileged communications to government investigators can create waiver issues depending on the information disclosed and the circumstances.

Federal healthcare investigations can involve administrative, civil, and criminal matters arising from overlapping facts. Information supplied during an administrative review may become relevant to a separate government investigation or enforcement proceeding. Coordinated review allows counsel to compare factual positions and identify statements that may affect another proceeding.

Healthcare providers may rely on coverage determinations, coding instructions, and other billing guidance when submitting Medicare claims. Contemporaneous guidance and evidence concerning the provider's actual understanding can be relevant to FCA scienter when billing requirements were disputed or ambiguous.

Government auditors may use statistical sampling when evaluating large groups of claims and calculating alleged overpayments. Independent clinical review can examine whether sampled medical records support the billed services and the government's medical-necessity conclusions.

When a provider identifies an overpayment, 42 U.S.C. § 1320a-7k(d) requires reporting and return by the applicable statutory deadline. The statute generally uses the later of 60 days after identification or the due date of a corresponding cost report, if applicable. The overpayment obligation should be analyzed separately from whether the facts satisfy FCA scienter or the intent elements of a criminal offense.