Health Care Fraud Overview

Sean Buckley provides the following information as a summary of the legal background and current trends applicable to defending the modern Health Care Fraud case.

    1. Federal Programs Including Medicare, Medicaid, and TRICARE

For years, the U.S. Department of Justice has designated Houston and the Rio Grande Valley as hotspots for Health Care Fraud involving Federal Health Care Programs such as Medicare, Medicaid, and TRICARE. As such, Houston and South Texas have become “high enforcement areas” for the U.S. Government’s Health Care Fraud Prevention & Enforcement Action Team (HEAT). Other such areas around the U.S. include Baton Rouge and New Orleans, LA; Brooklyn, NY; Chicago, IL; Detroit, MI; Los Angeles, CA; and Miami and Tampa, FL.

As a Federal Criminal Defense Attorney based in Houston, Sean Buckley has represented numerous clients locally and across the United States facing civil and criminal Federal Health Care cases from the investigation phase to jury trial. Through this experience Buckley has identified several factors that tend to influence whether a Health Care Fraud investigation relating to a Federal Health Care Program evolves into a Civil Action or a Criminal Prosecution:

  1. The alleged “loss amount,” which means the amount of money billed to the Federal Health Care Program(s) during the alleged violations;
  2. The amount of money available for refund to the Federal Health Care Program if improper or fraudulent reimbursement is established;
  3. The percentage of the defendant’s overall business activities that allegedly constituted fraud;
  4. Whether the alleged conduct involved violations of the Anti-Kickback Statute (AKS) or Stark laws, and in particular whether illegal kickbacks were made to patients (see Reference Materials below);
  5. The type of service or product being reimbursed by the Federal Health Care Program (current high-enforcement areas include Home Health Care, Compounded Prescription Drugs, and Opioid Prescribing / Distribution, among others);
  6. The ethnicity or nationality of the defendant or potential defendant (Federal Authorities tend to conduct Health Care Fraud investigations within certain communities, such as the Nigerian-American, Russian-American, Armenian-American, and even the African American / Black communities); thus, Health Care Providers in these communities are more likely to be unfairly scrutinized and even prosecuted for conduct that involved unintentional mistakes or misunderstandings of the law; and
  7. The quality and experience of the Criminal Defense Lawyer hired to represent the defendant or potential defendant.

Health Care Fraud prosecutions relating to Medicare, Medicaid, TRICARE, and other Federal Health Care Programs are typically prosecuted under various Federal criminal statutes including “Health Care Fraud,” “Conspiracy,” “False Claims Act (FCA),” and “Money Laundering,” among others.

    1. Private Insurers

Investigations into Health Care Fraud involving private insurers (such as Aetna or Blue Cross / Blue Shield, for example) are initiated upon the insurance company making a complaint to law enforcement.

Fraud against private insurers can occur in an endless variety of ways. A current trend in recent years has been the creation of “shell entities” so “in-network” providers can bill medical procedures at “out-of-network” rates. Faced with rising operating costs, private insurers are becoming more sophisticated in their efforts to detect and report fraud.

Health Care Fraud prosecutions relating to private insurers are typically prosecuted under various Federal criminal statutes including “Wire Fraud,” “Mail Fraud,” “Conspiracy,” and “Money Laundering,” among others.

  1. Responding to an Investigation or Arrest

An individual will normally learn that he or she is the target of a Health CareFraud investigation upon being visited by a Federal Agent (usually FBI, IRS, or HHS) or upon receiving a Grand Jury Subpoena for the production of documents.

When Criminal Prosecutions do occur, Federal Prosecutors typically initiate the case through an Indictment (which is a finding by a Federal Grand Jury that enough evidence exists to charge an individual or a group of individuals with a felony). Once the Indictment is issued, but before it is made public, the FBI (and sometimes other law enforcement agencies) will conduct surprise raids to arrest the defendants named in the Indictment and seize evidence.

Sean Buckley provides the following advice to all clients under investigation or facing prosecution for Federal Health Care crimes:

    • If you are arrested, always request access to a lawyer and never make statements to investigators without your lawyer present;
    • When hiring a lawyer, never trust any lawyer who promises to obtain a certain result in your case in advance, or who claims to have an actual numerical percentage ( __% ) success rate, as such claims are always misleading and usually fraudulent;
    • Do not say anything on the phone or write anything in an email or text message (even to your spouse) that you would not want broadcast or displayed in a courtroom;
    • It is a separate Federal Crime to make false statements to federal investigators; and
    • It is a separate Federal Crime to destroy or hide evidence or records, influence witnesses to testify falsely, or do anything else to obstruct the Government’s investigation.

This advice is extremely important, and much of it stems from the old adage in criminal law that the cover-up is often worse than the crime. If you believe you may be under investigation, or if you have already been arrested and charged, contact Sean Buckley today for a free consultation

Reference Materials
  1. The Anti-Kickback Statute
    Pocket Summary of the Anti-Kickback Statute, by Sean Buckley
  2. Selected Health Care Fraud Statutes
    Health Care Fraud and the Anti-Kickback Statute (AKS)
    42 USC Section 1320a-7b
    18 USC Section 1347
    Wire Fraud
    18 USC Section 1343
    Mail Fraud
    18 USC Section 1341
    False Claims Act (FCA)
    31 USC Section 3729
    Money Laundering
    18 USC Section 1956
    18 USC Section 1957
Enforcement Data

U.S. Department of Justice OIG Health Care Fraud & Abuse Reports
FY 2016
FY 2015
FY 2014
FY 2013


2017 Health Care Fraud Symposium

The Fontainebleau Miami Beach
Presented June 23, 2017

Summary by Attorney Sean Buckley
The Offices of Sean Buckley & Associates

770 South Post Oak Lane, Suite 620
Houston, Texas 77056
Tel: (713) 380-1220
Email: buckleyfirm@gmail.com

Overview of the Federal Anti-Kickback Statute Generally

The federal Anti-Kickback Statute, 42 U.S.C. §1320(b) (hereafter “AKS”) makes it illegal to solicit, receive, offer, or pay, any money in return for referring, arranging, or recommending business (in the form of any good or service) to an entity receiving payment for such under a federal health care program. The most common federal health care programs currently giving rise to AKS scrutiny and enforcement include Medicare, Medicaid, and military TRICARE insurance. Again however, any and all federal health care programs require AKS compliance.

Several exceptions to the AKS exist as defined either by statute (within 42 U.S.C. itself) or regulation (42 CFR Ch. V, §1001.952)(known as the “Safe Harbor” exceptions).

It is extremely important for providers, clinic owners, and others who may directly or indirectly receive funds from a federal health care program, to be aware of the AKS and its exceptions. Violating the AKS can result in substantial civil and criminal penalties including prison time. It has been the federal government’s position, and the federal courts have generally agreed, that a claim paid by a federal health care program becomes fraudulent when any part of the activity underlying the claim involves a violation of the AKS. In other words, an AKS violation infects the integrity of the entire claim or series of claims to which it relates.

Also be advised that additional regulations limit the permissible financial interests of Physicians who refer patients for Designated Health Services (DHS). These regulations, called Stark Laws, are not covered in this outline.

Title 42 Statutory Exceptions to the Federal Anti-Kickback Statute

The AKS does not apply to the following:

  1. Discounts and price reductions;
  2. Any amount paid by an employer to an employee with a bona-fide employment relationship for employment in the provision of covered items or services;
  3. Any amount paid by a vendor to a purchasing agent;
  4. A waiver of coinsurance;
  5. Any payment practice specified by the Secretary in regulations promulgated pursuant to section 14(a) of the Medicare and Medicaid Patient and Program Protection Act of 1987 [not applicable here] or in regulations under section 1395w-104 (e)(6) of Title 42;
  6. Any payment between an organization and an individual or entity providing items or services, or a combination thereof, pursuant to a written agreement between the organization and the individual or entity if the organization is an eligible organization under section 1395mm of Title 42 or if the written agreement, through a risk-sharing arrangement, places the individual or entity at substantial financial risk for the cost or utilization of the items or services, or a combination thereof, which the individual or entity is obligated to provide;
  7. The waiver or reduction by pharmacies of any cost-sharing imposed;
  8. Any remuneration between a federally qualified health center (or an entity controlled by such a health center) and an MA organization
  1. Under the structure of the Employee exception, the “employee” would be the party actually providing the covered good or service—not the party referring or arranging the covered good or service. In 2016, a federal indictment was handed down in Texas alleging numerous AKS violations where the defendants tried to circumvent the AKS by deeming their marketers and referrers “employees.”
  2. See 42 CFR Ch. V, section 1001.952 (analyzed below).
  3. Dealing with beneficiary protections in prescription drug coverage.pursuant to a written agreement described in section 1395w-23(a)(4) of Title 42;
  1. Any remuneration between a health center entity and various specified others to maintain or increase the availability, or enhance the quality, of services provided to a medically underserved population served by the health center entity;
  2. A discount in the price of an applicable drug;

“Safe Harbor” Exceptions in the Code of Federal Regulations (CFR)

Pursuant to 42 CFR Ch. V, section 1001.952, the following payment practices are not treated as criminal offenses under the AKS:

1.Return on Investment Interest

2.Space Rental;

3.Equipment Rental;

4.Personal Services and Management Contracts;
The AKS does not prohibit payment from a principal to an agent, for the services as the agent; however the payment must be tied to fair market value of the service provided, and cannot be tied to the volume or value of the referrals or business otherwise generated between the parties for which payment is made under a federal health care program.

5.Sale of Practice;

6.Referral Services;
The AKS does not prohibit payment to compensate for referrals, however, the payment must be based only on the cost of operating the referral service, and cannot be tied to the volume or value of the referrals or business otherwise generated for which payment is made under a federal health care program.

  1. Thus, a contract that provides for a 70% share of revenues gained from a federal health care program, would not be protected under the “referral services” Safe Harbor provision.
  1. Warranties;
  2. Discounts;
  3. Bona Fide Employees (as defined by 26 U.S.C. 3121(d)(2)) employed in the furnishing of any item or service for which payment is made under a federal health care program;
  4. Group purchasing organizations;
  5. Waiver of beneficiary coinsurance and deductible amounts [no relevance here];
  6. Increased coverage, reduced cost sharing amounts, or reduced premium amounts;
  7. Price reductions offered to health plans;
  8. Practitioner recruitment;
  9. bstetrical malpractice insurance subsidies;
  10. Investments in group practices;
  11. Cooperative hospital service organizations;
  12. Ambulatory surgical centers;
  13. Referral arrangements for specialty services;
  14. Price reductions offered to eligible managed care organizations;
  1. As before—under the structure of this exception, the “employee” would be the party actually providing the covered good or service—not the party doing the referring or arranging.
  2. There is no prohibition against referring a patient to a specialist with the agreement that the specialist will refer the patient back to the originating provider at a later date, however, no payments may be made in connection with this agreement.
  1. Price reductions offered by contractors with substantial risk to eligible managed care organizations;
  2. Ambulance replenishing;
  3. Health centers;
  4. Electronic prescribing items and services;
  5. Electronic health records items and services.
  1. This refers to items and services, such as hardware and software, utilized in the electronic transmission of prescription information.