Healthcare Fraud


Nancy Grace and Horowitz imagehorowitz in stockton california courtroom next to client chiropractor wil origel, addressing the court

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False Claims, Kickbacks, Self Referrals & More

Important Federal civil and criminal billing fraud / medical fraud laws are the False Claims Act (FCA), the Anti-Kickback Statute (AKS), the  Self-Referral Law (Stark law, see below for more detail), the Exclusion Authorities, and the Civil Monetary Penalties Law (CMPL).

California “Catch-All” Fraud Statute

In California there is the dreaded Penal Code Section 550 which is the catch-all provision where anything that you do that seems to support a fraudulent bill can be characterized as a felony fraud offense.

18 USC 1347 the Federal “Catch-All Fraud Statute

Billing fraud and more generally health care fraud, is a overly broad area.  There are thousands of pages of rules and regulations and many other relevant statutes. These include 18 USC 1347 (Plain Vanilla Health Care Fraud), 18 USC 1349 (Conspiracy related to Health Care Fraud), 18 USC 1035 (Health Care related false statements) and 18 USC 1956 (money laundering related to health care fraud).

Danger Areas

Upcoding, unbundling, self referral – the list of billing fraud landmines seems endless.  Often normal billing is seen as billing fraud when a disgruntled employee or competitor makes a complaint.  Even anonymous complaints to the medical board or chiropractic board can trigger a criminal investigation.  Worker’s Compensation is a current hot spot for investigations.  Fraud investigators are using computer programs that track usage of billing codes (charted against CPT code use in the general practice population for your area).

California “Hot Button”  – Physician’s Rx Network

Physicians Rx Network provides creams and medications for physician’s patients.  They provide the materials, bill and keep 20% of the gross revenue.  They also provide urine testing for drug use, prescription compliance.  For a variety of reasons, the use of this service is placing physicians under an investigative microscope.  Has the physician disclosed his/her profit in the prescription filling process ?  Is the prescription truly medically necessary ?   With urine tests there are inquiries along the same lines.  Is there a payment for the referral ?  Are referrals necessary ?  Is the referring MD making a large profit by reviewing the results ?   Beware the non-physician run profit centers that may give even the appearance of impropriety.

Issues for Chiropractors

Some billing issues are particular to particular licenses.  The American Chiropractic Association in 2015 published an article titled Coding Policy -Coding Misuse Prompts Fraud Investigations.Logo for American Chiropractic Association linking to article on chiropractic billing  An important sentence in the article reads, “In general, it is inappropriate to bill an established office/outpatient E/M CPT code (99211-99215) on the same visit as Chiropractic Manipulative Treatment (CPT code 98940)   Was that obvious ?  The answer explaining “why” is in the article.  But if you are a DC or bill for a DC, any hestitation in answering the question underscores how fraught with peril the billing world is.

Local Referral Networks

Another puzzle.  Various websites and local groups encourage cross-referrals between local businesses.  That’s fine between an attorney and a stationary store, but what if you are a physician and you agree to cross referrals with a particular MRI facility ?  We are not aware of any prosecutions based upon this type of referral, but the possibility is there and are tracking the law on this subject.

Computers Used to Track Medical Billing (Fraud?)

The Journal of the American Academy of Psychiatry and the Law published an article in 2009 titled “Health Care Fraud: Physicians as White Collar Criminals.

Journal of american psychiatry and the law article onmedical fraud and the increase in investigations and the public harm caused by medical fraud

In 2008, the Journal of Healthcare Information Management published an article detailing how billing tracking by computer (via the National Health Information Network, was a new tool to uncover fraud. <<Read IT Fraud Article Abstract>>   Many years later, billing tracking by computer has led to increase in investigations and a focus on computer identifiable fraud as the focus of physician based, criminal investigations.-

The SIU units often focus on the higher end billing codes e.g. 99215, 99245.  Even though they claim to apply the AMA CPT code rules for their review, they DO NOT.  The insurance company’s presume that a 99215 or 99245 actually took 40 minutes / 80 minutes (respectively).  The CPT codes require levels of complexity and the time component is an alternative.  However, the insurers find suspect visits that do not include a time documentation as well.


The list seems endless.  Here are more state and federal health fraud laws and some common “hot button” areas for medical practices.

        1. California Penal Code Section 550  (Similar as a “catch-all” to 18 USC 1347, the Federal Health Care Fraud statute)
In California, Penal Code section 550 is used as a catch-all provision for health fraud by physicians, providers of ancillary services and even attorneys representing injured workers.

(a) It is unlawful to do any of the following, or to aid, abet, solicit, or conspire with any person to do any of the following:

(1) Knowingly present or cause to be presented any false or fraudulent claim for the payment of a loss or injury, including payment of a loss or injury under a contract of insurance.

This section is often used in very creative and aggressive ways.  Minor violations and billing disputes are rocketed into a felony charge (PC 550) because any error or minor infraction can be deemed a “false claim” once it is put in the form of a bill sent to an insurance company.

Chiropractors forming medical corporations with physicians are often charged with this section and with practicing medicine without a license.  Physicians and chiropractors may see this charge filed in the context of anti-kickback or self referral charges made more serious by being charged under this felony section.  Physicians operating physical therapy centers and chiropractors who do more than simple adjustments are the targets of special scruitiny.

        2. Beneficiary Inducement Statute
The beneficiary inducement statute (42 U.S.C. § 1320a-7a(a)(5)) imposes financial penalties on Medicare / Medicaid providers if they pay patients to use their practices.  Seems easy to avoid.   But what is payment ?  Does your medical practice provide free ancillary services that medical other practices bill for ?
What about free diagnostic services provided by an imaging center for you and your office staff?    How many chiropractic offices advertise free diagnostic exams or free massage with treatment ?    Can you waive copayments for client’s having financial difficulties ?
         3. Stark Law
Stark is a trap for the entrepreneurial MD.  A violation of Stark does not require bad motives.  A simple misreading of the law can lead to massive civil penalties.
Stark creates liability for self referral of clinical laboratory services, physical therapy, radiology, MRI’s, prosthetics, orthotics, outpatient Rx’s, and many other services.
Reading the statute is not enough to answer “self referral” questions.  A lot of times, you have to press forward without knowing whether or not you have violated the law.  Even reliance on advice from an attorney may not be a defense.  As written and enforced, Stark is often a great wet blanket over health care innovation.
The penalties are financially crushing. A medical practice that submits a Medicare claim in violation of Stark will have to pay back the entire amount of the claim.  This is true even though the patient got real, medically necessary treatment.  Parties that knowingly violate Stark will have  (potential) False Claims Act liability and “program exclusion”.
         4. Modifier 25
The use of Modifier 25 is often the subject of upcoding claims. Modifier 25 allows additional payment for a separate E&M service rendered on the same day as another procedure.  Upcoding and billing fraud, can be alleged if Modifier 25 is used when the additional care is not significant. If you ask, what is or is not “significant”, the cynical lawyer’s answer is this.
                 “It depends upon how often you use the modifier and what a paid government (hired gun) expert says is the norm.”
        5. Rosacea & Other Problem Conditions

Are lasers legit for treating rosacea ?  Can you bill an insurance company for it?  The answer is, “Yes” then “No”.  It depends upon when you ask the question.  And even if it were reimbursable, “what is rosacea”?  What is treatable “rosacea”? For acne and other conditions, who can treat ?  A PA ?  An esthetician ?

Medical judgments will be questioned. Poor SOAP notes, lack of photos documenting the diagnosis, angry fired staff – can all cause an avalanche of misery for even an honest practitioner.  Here is one clue.  Does your practice on average, bill higher per patient ?  Does your practice utilize a certain profitable procedure, cost saving delegation of tasks, more than a typical practice of your type ?

        6. Big Pharma is the New Boogeyman

Everyone knows that drug companies are evil and are ripping off the public.  Or so that meme “informs” public opinion.

So, how does that impact an honest medical practitioner ?  Not much if you simply prescribe.  But if you engage with and interact with pharmaceutical companies, you may get some scrutiny.

Is a pharmaceutical or device company giving your consulting or speaking fees ?  Great !  ….. but is there a connection between those fees and your use of their products ?  Check out this website “Dollars for Docs” that tracks drug company payments to MD’s.  There is no similar website (that we know of), that tracks payments by herbal remedy companies or homeopathic (we are only selling placebo water !) companies.   In Dan Horowitz’ opinion, you are safer promoting “natural”, “herbal remedies”, than you are promoting medications that are double blind tested and subject to rigorous testing.  It is a strange time to be an evidence based physician.

The dividing line between your being a valuable consultant and being paid off is not always clear.  For organized confusion read the OIG Compliance Program Guidance for Pharmaceutical Manufacturers.  Federal Register 

        7. Obvious Red Flags
Some red flags are obvious.  SIU medical fraud investigations often follow complaints by vengeful employees or patients.  Many SIU investigators rely upon reviews of spreadsheets or complex computer fraud models.
Grey areas of practice like in office physical therapy (PT) and use of laser in treatments and procedures, as well as delegation of work to nurse practitioners (NPs), physician assistants (PAs), aestheticians, are all potential SIU fraud triggers.  If you have a feeling that your bills are being handled more slowly, that strange patients are presenting with peculiar symptoms, if you recently fired a staff person …. be wary.  The vague parameters of the Chiropractic Initiative Act make scope of practice determinations very subjective.  The use of low frequency sound waves may be outside the scope of chiropractic but high frequency sound may be within the scope.

Your Arrest May Help A Politician

Remember that Medicare billing fraud is the focus of many federal investigations.  Workers compensation fraud is a major focus of many state insurance commissioners.  In California the catch all fraud provision (Penal Code Section 550) is  sometimes used to bootstrap misdemeanor offenses into felony fraud charges.  Fraud defense lawyers know that politics drive medical fraud prosecutions.  Many practices have grey areas and if your “grey” is in the political cross hairs, be cautious.

They Follow Your Money – We Can Follow Their Money

Insurance companies provide funding to prosecutorsSpecial taxes on employers also support fraud investigations. This means there is a financial and emotional incentive for fraud prosecutors to file charges. The insurance companies become “crime fighting” partners to the district attorney white collar crime units. Medical practice management has many grey areas. Few white collar prosecutors have sufficient medical/medical billing/delegation of medical duty background to accurately assess the legitimacy of your conduct.

Many seminars are funded by insurance companies and some local prosecutors are “honored” with the opportunity to speak at those seminars to promote their careers.   Prosecutorial objectivity is often compromised.

BIG PROFITS – False Claims Act, 31 U.S.C. 3729 (FCA)

The False Claims Act, 31 U.S.C. 3729 (FCA), is a federal civil fraud statute. The FCA allows healthcare fraud, medicare fraud, and false claim lawsuits to be filed by professional litigators, disgruntled former employees and others.  They are called “relators” and they sue on behalf of a “defrauded” governmental entity.   The incentive is a percentage of the final recovery.

The government can also file its own civil Medical Fraud claim.    

Many times, a criminal case will follow shortly after the filing of one of these cases.  Sometimes the False Claims Act filing with be parasitic and follow the filing of criminal charges.  This is yet another expense that burdens a defendant.  Fortunately, some insurance policies will defend against these claims.

A Legal Type of Corruption

Former Law Enforcement Agents Work for Insurance Companies

Insurance companies often hire former law enforcement agents who are experienced in developing criminal fraud cases.  Their years of establishing contacts within prosecutors offices give them inside / personal connections that put their investigative target (you), at a disadvantage. Watch a California Dept. of Insurance SIU Training video HERE.


Insurance Company Lawyers Teach Prosecutors the Law

Seminars, in house training, and political lobbying are tools that change prosecutors’   INTERPRETATION of the law.  There is no back and forth dialogue, there is only Iago whispering in Othello’s ear.

Professional boards such as medical boards, can and often will, provide guidance on contested issues.  They can weigh in on unfair prosecutions and provide support.  Unfortunately the boards are over worked, over politicized, and often leave the issue “to the courts”.

Shock & Awe

Set Your Alarm for 6:30 am

Police raids at 7 in the morning are videotaped by invited television news teams.

Press conferences are held by the Department of Insurance while the physician sits in jail waiting to be booked.  By the time the physician has been released on bail, significant personal and reputational damage has been done.  So much for innocent until proven guilty.

Blue Skies

 Massive news publicity is part of the attack. California Insurance Code Section 1871.9 mandates the posting to the Department of Insurance’s public web site the names of people convicted of Worker’s Compensation Insurance Fraud. The “Blue Sky” scenario is no longer just part of the insurance company game plan.  Insurance lobby groups have succeeded in getting the publicity law passed.  Guilty until proven innocent is now written into the law.

As one of our experts once testified, it’s all about “blue skies”.  Once they arrest you, the insurance companies have already won. Word spreads in the medical community and physicians become very cautious – they run from the rain to the “blue sky”.  99244’s get billed as 99243.  Your arrest saves the insurance companies millions of dollars.  When you are an attorney providing medical license defense you understand the political forces that drive prosecutions.


If you are reading this far down the page, you have entered the Medical Fraud Twilight Zone.  Here are additional, harsh realities.

Professional License Defense is a Bar Room Brawl

Judge Tom Rogers (Alameda County) once said, “A jury trial is a bar room brawl.”   The same is true of medical license defense.   Civility is fine in the legal profession but only when it comes from a place of strength.

Trial By Jury ??

If you are facing a professional board accusation you never see a jury.    Your license, your career,  are in the hands of an experienced Administrative Law Judge [View OAH Website for Admin Law Judges]  The judge handles this type of case, over and over and over ……… .  In other words, they tend to know all the players, prosecutors, experts and it is a small community.

Could it get any worse ?   Yes it can !  If the ALJ rules in your favor, you still haven’t won.  The medical board that initiated the action against you, gets the final say.

Click HERE to get a brief bio for your Administrative Law Judge.

The Laws are Vague

The anti-fraud laws seem clear.  Don’t commit fraud.  Don’t submit false billings !  Don’t bill for services that you didn’t perform ! What could be easier ?

You’re honest, so you have no worries …………………………..?      Right ?

Maybe.  If you regularly bill 99241-99245, you know that it is not always clear which code applies.  If you consistently bill the grey areas in “your favor”, your computer score may be “skewed”.  The little “UPCODING” / “BILLING FRAUD” light goes on in SIU Headquarters.  You may not be upcoding but to the computer, all doctors of your type or class, are the same.

Geographic issues come into play.  If you are in a high quality of care community, you may make more specialist referrals, order more tests and spot more problems than if you are understaffed and lack quality diagnostic equipment. You may be seen to be over utilizing and hence over billing.    On the other hand, in an underserved area that lacks resources, a physician may compensate by spending more time with patients.  Simple visits may genuinely justify a high billing code.  But the computer may flag you for upcoding.  If you are rushed and your clinical documentation is “light”, you may have trouble defending your legitimate billings.

Areas such as Los Angeles have their own billing fraud focus.   Investigators focus on cosmetic treatments hiding as medical treatments. That happens a lot but the insurance company investigative net is wide and at times, indiscriminate.  Honest practitioners can get caught the same way Dolphins end up in Tuna nets.

COUNTER INTELLIGENCE – Danger Areas for Medical Fraud

Check fraud seminar websites. (Use words like, “medical fraud” or “medical billing fraud”) The lectures are road maps to “Hot Button” issues.

Currently, dermatologists are being looked at for the use of office staff to perform certain procedures. SOAP notes are viewed for “up diagnosing” to justify unnecessary (e.g. laser) treatments.   Billing codes that require EITHER complex reasoning or 80 minutes of face to face time are misinterpreted as being valid codes ONLY if an actual 80 minutes are spent.

More generically, criminal fraud investigators are focusing on:

Misdiagnosis in order to bill for services not medically necessary.
Billing for services not actually provided.
Billing for one service (covered) when an uncovered service is provided.
Billing on days when a patient is not present.
Unbundling especially when combined with deceptive billing.
Excessive treatment especially with poor clinical documentation.


 Does Your Case Justify Hiring a Specialist ?

Daniel Horowitz is a criminal defense law specialist. That certification is granted by the State Bar of California Board of Legal Specialization.  There are many excellent criminal defense attorneys who have not obtained this certificate but consider this; to be a specialist, a criminal defense lawyer must “survive” peer review, judicial review, pass a comprehensive written exam, and have practical experience significantly above that of the average defense lawyer.  To maintain the certificate, the criminal defense attorney must complete advanced level continuing education courses that focus on the criminal defense specialty.  Daniel Horowitz has been a certified specialist for over 20 years.  As of 8/23/2017 there was only 1 criminal defense specialist in Walnut Creek, California, 2 in Lafayette and approximately 200 statewide.  This expertise and extensive medical fraud experience, makes the Horowitz office a first choice for those wrongfully accused.

 Specialization as criminal defense lawyer issued by state bar of California criminal defense attorney specialist logo showing bear and this is the official log of the state bar of california

Guide to medical fraud defense written for experienced criminal defense lawyers who are new to medical fraud defense

CLICK ABOVE – Medical Fraud Guide for Attorneys