Healthcare Fraud: Reporting Medicare and Medicaid Billing Violations

The recurring billing schemes

Healthcare fraud is mostly a documentation problem that turns into a billing problem. The pattern is a gap between what happened clinically and what the claim says happened.

• Billing for services that were never provided
• Upcoding to a higher-reimbursing level of service than was delivered
• Unbundling procedures that should be billed together
• Billing medically unnecessary tests, procedures, or admissions
• Worthless services, where care was so deficient it had no value
• Kickbacks for referrals, prescriptions, or product selection
• Risk adjustment fraud in Medicare Advantage, through diagnoses that are not supported

The settings where it concentrates

Certain settings recur because their reimbursement rules reward volume or intensity in ways that are hard to audit from outside.

• Hospitals and health systems, particularly around admission status and coding
• Skilled nursing and long-term care, around therapy minutes and levels
• Hospice, around eligibility certification and terminal prognosis
• Home health, around homebound status and visit documentation
• Clinical laboratories, around test necessity and standing orders
• Addiction and behavioral health treatment
• Medicare Advantage plans, around risk-adjustment coding

Medical necessity is where most cases are decided

Federal programs pay for care that is reasonable and necessary for the diagnosis or treatment of illness or injury. That phrase carries most of the weight in healthcare fraud litigation.

Defendants argue that medical necessity is a clinical judgment, that reasonable physicians disagree, and that a difference of opinion cannot be fraud. The argument has force and it succeeds in some cases. It fails where the evidence shows the decision was not clinical at all.

What defeats it is usually a pattern rather than a chart. Admissions that track census targets rather than acuity. Therapy minutes clustering just above a reimbursement threshold. Testing ordered by standing protocol regardless of presentation. A physician whose utilization changed sharply after a compensation model changed. These patterns show the decision was driven by billing, and they are visible in data before anyone reads a record.

The 60-day overpayment rule

Under the Affordable Care Act, a provider that identifies an overpayment must report and return it within 60 days. Failing to do so converts a retained overpayment into a reverse false claim.

This is one of the most useful provisions for a relator, because it does not require proving the original billing was fraudulent. A provider that discovered a billing error through its own audit, quantified it, and then kept the money has a separate and cleaner problem.

Compliance staff and internal auditors are frequently the people who know an overpayment was identified and never returned. That knowledge, with the audit documentation behind it, is a case on its own terms.

Our experience in these matters

Our attorneys have recovered on healthcare fraud theories across several of these settings, including a case involving a home health provider that upcoded billings to federal healthcare programs, and a separate matter involving kickbacks paid by a home health provider to induce referrals.

The largest of our resolved matters, a 9 million dollar settlement, involved pharmacies dispensing a fentanyl product for uses federal programs did not cover. That case was not joined by the government and was carried to resolution anyway, and it reached the private equity owner and its principals rather than stopping at the operating companies.

A further matter, a 2 million dollar settlement announced by the United States Attorney for the Eastern District of Pennsylvania, involved an addiction treatment provider that mishandled controlled substances and billed federal programs for treatment services that were not properly provided or documented.

What to do if you are seeing this now

Healthcare relators are usually still employed when they decide, which makes the early steps consequential.

• Record dates, units, and what you observed on the day it happens, referring to patients by medical record number rather than name
• Do not access charts, billing systems, or reports outside your normal job authorization
• Do not discuss it with colleagues, which is how most cases become public prematurely
• Keep your own performance reviews and assignment records, which matter if retaliation follows
• Speak with counsel before using the internal compliance line, because that step alerts the organization
• Move promptly, because only the first relator to file on a given fraud can recover

Healthcare fraud in the Philadelphia region

Greater Philadelphia has one of the densest concentrations of healthcare delivery in the country. Penn Medicine, Jefferson, Temple, Main Line Health, and Trinity Health operate across Philadelphia, Montgomery, Delaware, Bucks, and Chester counties, alongside a large independent physician sector and one of the highest per-capita concentrations of addiction treatment providers in the United States.

The pharmaceutical corridor running from Philadelphia through Montgomery County and into central New Jersey adds manufacturers, contract research organizations, and specialty pharmacies. Southeastern Pennsylvania also carries a substantial skilled nursing and home health sector serving an older population in the Delaware and Schuylkill valleys.

That mix produces the case types we see most: hospital admission status and DRG coding, physician compensation arrangements under the Stark Law, skilled nursing therapy intensity, home health homebound certification, and addiction treatment billing. The density also means a single scheme frequently spans multiple counties and both Pennsylvania and New Jersey.

Where the case is filed and who investigates

Healthcare qui tam cases arising in the Philadelphia area are filed under seal in the Eastern District of Pennsylvania. The United States Attorney office for the district maintains a civil division that handles healthcare fraud, and investigations are run with the Department of Health and Human Services Office of Inspector General.

Depending on the conduct, other agencies participate. Controlled substance issues bring in the Drug Enforcement Administration. Federal employee health plans bring in the Office of Personnel Management Office of Inspector General. Our Recovery Centers of America matter involved all three alongside the United States Attorney.

Pennsylvania has no general state false claims act, so a Pennsylvania Medicaid case recovers the federal share under the federal statute. New Jersey does have one, which matters for the many providers operating on both sides of the Delaware River.