The Impact of Medical Fraud and Abuse in Healthcare on Legal Practices

Medical fraud and abuse in healthcare cost the U.S. tens of billions of dollars each year. The National Health Care Anti-Fraud Association (NHCAA) cites a conservative estimate of 3% of total healthcare expenditures lost to fraud, while noting that some government and law enforcement agencies have placed the figure as high as 10%.¹

The financial consequences are only part of the problem. Healthcare fraud can increase costs for patients and employers, compromise medical records, and expose patients to unnecessary or unsafe care.¹ For attorneys and other professionals working in healthcare, understanding the laws designed to prevent fraud and abuse is an important part of protecting patients, healthcare organizations, and public resources.

This blog post examines common forms of healthcare fraud and abuse, the federal laws used to address them, and strategies healthcare organizations can use to reduce legal and compliance risks.

What is Healthcare Fraud and Abuse?

Healthcare fraud and abuse can take many forms. The FBI identifies common schemes involving medical providers, patients and other individuals, and prescription drugs. Provider fraud can include double billing or upcoding, which involves billing for a more expensive service than the one actually provided. Patient-related fraud can include using another person’s health insurance, while prescription fraud can involve forged prescriptions or the diversion of prescription medications for illegal purposes.²

These activities can increase healthcare costs, expose patients to unnecessary medical procedures, and undermine trust in healthcare providers and systems. Prescription fraud can also contribute to substance misuse and its associated health risks.²

Healthcare organizations and investigators increasingly use data analytics and technologies such as artificial intelligence (AI) to identify patterns in claims data that may indicate fraud or billing errors.³ Investigators may also look for warning signs such as unusually frequent patient visits or suspicious billing patterns.⁴

Which Regulations Help Enforce Anti-Fraud in the U.S.?

Several federal and state agencies investigate and enforce laws involving healthcare fraud and abuse. They include:

• The Department of Justice (DOJ), including its Health Care Fraud Unit⁵
• The U.S. Department of Health and Human Services Office of Inspector General (HHS OIG)⁶
• State Medicaid Fraud Control Units (MFCUs), which investigate and prosecute Medicaid provider fraud as well as patient abuse or neglect in healthcare facilities⁷
• The FBI²

Private organizations also contribute to anti-fraud efforts. The National Health Care Anti-Fraud Association (NHCAA), for example, brings together private health insurers and government and law enforcement agencies to share information and strengthen fraud prevention and detection efforts.⁸

Federal laws that address fraud and abuse include the False Claims Act, the Anti-Kickback Statute, and the Physician Self-Referral Law, commonly known as the Stark Law.⁶ These laws address different types of conduct and can carry civil or criminal consequences.

The False Claims Act
The civil False Claims Act imposes liability when a person knowingly submits, or causes the submission of, false or fraudulent claims for payment to the federal government.⁶ In fiscal year 2024, the DOJ reported more than $2.9 billion in False Claims Act settlements and judgments, with more than $1.67 billion involving the healthcare industry.⁹

The Anti-Kickback Statute
This criminal law prohibits knowingly and willfully offering, paying, soliciting, or receiving remuneration to induce or reward referrals or generate business involving items or services payable by federal healthcare programs.⁶ In 2012, pharmaceutical company GlaxoSmithKline reached a $3 billion global resolution involving several types of alleged misconduct, including allegations that the company paid kickbacks to healthcare professionals to promote and prescribe certain drugs.¹⁰

The Physician Self-Referral Law, or Stark Law
This law generally prohibits physicians from referring patients for certain designated health services payable by Medicare or Medicaid to entities with which the physician or an immediate family member has a financial relationship, unless an exception applies.⁶ In a prominent enforcement case, a South Carolina hospital faced a $237 million judgment after a jury found that physician compensation arrangements violated the Stark Law and that the hospital had submitted more than 21,000 false Medicare claims.¹¹

How to Prevent Fraud and Abuse in Healthcare

Healthcare organizations can reduce the risk of fraud and abuse by establishing compliance programs designed to prevent, identify, and address potential violations. HHS OIG recommends measures that include written compliance standards, designated compliance leadership, employee training and education, open lines of communication, and regular auditing and monitoring.¹² Organizations should also establish procedures for responding to suspected violations and taking corrective action when problems are identified.¹²

Effective reporting procedures are another important part of fraud prevention and detection, particularly when employees understand the laws that protect healthcare workers who raise concerns about potential misconduct. Employees need clear ways to speak up, and organizations should investigate credible reports of potential misconduct and respond appropriately.¹² Attorneys and compliance professionals can help organizations develop these policies, evaluate potential legal risks, and determine what action may be required when concerns arise.

Whistleblowers also play an important role in identifying fraud against federal programs. Under the False Claims Act’s qui tam provisions, private individuals may bring certain claims on behalf of the federal government and may receive a portion of the recovery when an action succeeds.⁹

Build Your Expertise in Healthcare Law and Compliance

Healthcare fraud and abuse create legal and compliance challenges for healthcare organizations, attorneys, and other professionals responsible for understanding and applying healthcare law. Specialized legal education can deepen your knowledge of the regulatory environment and help you address these challenges in your work.

Hofstra University’s Maurice A. Deane School of Law offers online health law programs for professionals with different educational backgrounds and career goals. The online Master of Laws (LLM) in Health Law and Policy provides licensed attorneys with advanced study in health law and policy. The 100% online Master of Arts in Health Law and Policy is designed for non-lawyers whose work requires a strong understanding of healthcare law, while the online Certificate in Health Law and Policy offers focused study for working professionals and credits that can later be applied toward Hofstra Law’s MA or LLM program.

Explore Hofstra Law’s online health law and policy programs, tuition and financial aid information, and admissions requirements. When you’re ready to discuss your goals, contact us directly or schedule a call with an admissions outreach advisor to find the program that aligns with your professional plans.