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What is Medicare Fraud?

What is Medicare Fraud?

Medicare fraud isn’t what most people imagine. It’s not guys in back alleys running fake clinics. The biggest Medicare fraudsters in American history operated licensed nursing home chains, legitimate pharmacies, and established medical equipment companies. Philip Esformes ran over 30 skilled nursing facilities in South Florida. He billed Medicare for $1.3 billion in fraudulent claims. He personally pocketed $37 million. He bought a $360,000 watch with the proceeds. That’s what Medicare fraud actually looks like at scale.

Welcome to Spodek Law Group. Our goal is to explain what Medicare fraud really means – both for people facing charges and for healthcare providers who need to understand where the legal lines are. The government loses over $60 billion annually to Medicare fraud, and they’ve built an entire enforcement apparatus to find it. Understanding how that apparatus works is the first step toward protecting yourself.

Here’s the uncomfortable truth that every healthcare provider needs to understand: you don’t need criminal intent to be liable for Medicare fraud. Under the False Claims Act, “reckless disregard” for the truth of your billing claims is enough for civil liability. Your billing software might be submitting problematic claims without you knowing. Your employees might be coding things incorrectly. And you – as the provider – are still responsible. The government doesn’t care if you meant to commit fraud. They care that false claims were submitted.

The Six Ways Medicare Fraud Happens

The six primary healthcare fraud schemes are upcoding, phantom billing, billing for unnecessary services, double billing, unbundling, and giving or receiving kickbacks. Almost every Medicare fraud prosecution involves one or more of these.

Upcoding is inflating bills by using codes that indicate more severe conditions then the patient actualy has. A routine office visit becomes a complex evaluation. A standard blood panel becomes a comprehensive metabolic workup. Each upcode means higher reimbursement. Multiply that across thousands of patients and years of billing, and the numbers become enormous.

Phantom billing is billing for services or equipment that were never provided. The FBI defines this simply: charging Medicare for something the patient never recieved. It sounds obviously criminal, but it happens constantly – sometimes through fraud, sometimes through billing errors that the provider never catches.

Kickbacks are the cancer of Medicare fraud. They occur when healthcare providers recieve payments or incentives in exchange for referring patients to specific services, facilities, or equipment suppliers. Heres the thing most people dont understand about the Anti-Kickback Statute: the kickback dosent have to be cash. Any inducement – free equipment, paid vacations, consulting fees, equity stakes – can qualify as an illegal kickback if its tied to patient referrals.

Unbundling means submitting multiple bills for services that should be billed together under a single code. Double billing is charging twice for the same service. Billing for unnecessary services is exactly what it sounds like – ordering tests or procedures that have no medical justification just to bill Medicare.

Each of these schemes can result in federal prosecution. Each carries potential prison time. And each can be committed by providers who genuinely beleive there doing nothing wrong.

Heres something that should terrify every healthcare provider. The government dosent have to prove you knew your billing was fraudulent. Under the civil False Claims Act, “reckless disregard” is enough. If you should have known something was wrong – if reasonable oversight would have caught the problem – your liable. Ignorance is not a defense. Delegating to staff is not a defense. The only defense is actually having systems that work.

The 2025 National Health Care Fraud Takedown charged 324 defendants, including 96 doctors, nurse practitioners, pharmacists, and other licensed medical professionals. The alleged fraud totaled over $14.6 billion. These werent career criminals. These were healthcare providers with licenses, practices, and patients who trusted them. The distinction between legitimate provider and convicted felon can be surprizingly thin.

You Don’t Need Intent to Commit Medicare Fraud

Heres were Medicare fraud differs from most federal crimes. Under the civil False Claims Act, the government dosent have to prove you intended to defraud anyone. They only have to prove that claims were submitted with “reckless disregard” for there truth.

Think about what that means practicaly. If your billing department has sloppy practices and nobody checks the codes, you can be liable. If your electronic health records system has a bug that causes certain services to be upcoded, you can be liable. If you delegate billing entirely to staff without any oversight, you can be liable. The False Claims Act dosent care about your intentions. It cares about the accuracy of the claims.

The penalties are staggering. Fines of $13,946 to $27,894 for EACH false claim. Damages of three times what Medicare overpaid. If you submitted 10,000 claims over several years and 5% of them were problematic, do the math. The exposure can reach into the millions even for relatively small practices.

This is why compliance programs arent optional luxuries. There your first line of defense against liability you might not even know your accumulating. Todd Spodek tells every healthcare provider the same thing: if you dont have someone reviewing your billing practices regularly, your taking an enormous risk.

How Investigations Actually Start – And Why You Won’t Know

Most healthcare providers think Medicare audits happen randomly. They dont. The government uses sophisticated data analytics to identify statistical outliers before any investigation begins. Your billing patterns are being analyzed right now, compared against national averages and known fraud indicators.

Since 2011, the Centers for Medicare and Medicaid Services has used the Fraud Prevention System – FPS – to analyze ALL Medicare fee-for-service claims in real time, before payment is even made. This is the same predictive analytics technology that credit card companies use to detect fraudulent purchases. Your billing patterns are scrutinized the same way your Amazon shopping history is.

But heres what really should concern you. Whistleblower complaints under the False Claims Act are filed sealed. That means someone – an employee, a former business partner, a competitor – can file a complaint against you, and you wont know about it for years. The government investigates in secret. By the time the complaint is unsealed and you find out about it, they’ve already built there case.

The Medicare Fraud Strike Force, launched in 2007, has charged over 3,500 defendants who collectively billed Medicare for over $12.5 billion in fraudulent claims. They use interagency teams combining OIG investigators, FBI agents, and DOJ prosecutors with data analysts who identify fraud patterns. In 2018, they created a Data Analytics Team. Now there building a “Health Care Fraud Data Fusion Center” that combines cloud computing, artificial intelligence, and advanced analytics.

You are not flying under the radar. There is no radar to fly under. Everything is visible.

OK so what does this mean practicaly? It means that if your billing patterns look unusual – if you have higher rates of certain procedures, if your coding differs significently from national averages, if your patient population has unusual characteristics – you may already be flagged. The investigation might already be happening. You just dont know about it yet.

One complaint from a Medicare beneficiary probably wont start an investigation. Ten complaints about the same provider will. And your patients are a network of potential whistleblowers. Every time you send them an explanation of benefits that includes something they dont recognize, thats a potential trigger. Every time they recieve equipment they didnt order, thats a potential trigger. The system is designed to catch fraud from multiple angles simultaneously.

The Philip Esformes Story – $1.3 Billion in Fraud

Philip Esformes owned and operated assisted living facilities and skilled nursing facilities across South Florida. From 2007 to 2016, he orchestrated what the Department of Justice called the largest healthcare fraud scheme ever charged.

The scheme worked like this. Esformes bribed physicians to admit patients into his facilities – patients who often didnt need skilled nursing care, or who failed to recieve appropriate medical services once admitted. Those services were then billed to Medicare and Medicaid anyway. Over nine years, the fraudulent claims totaled approximately $1.3 billion.

Esformes personally netted more then $37 million from the scheme. He spent it on luxury cars, expensive watches (including one that cost $360,000), and other extravagances. His co-conspirators included a physicians assistant who recieved 80 months in prison and a business associate who got 15 months.

In 2019, a federal jury convicted Esformes on 20 criminal counts. A judge sentenced him to 20 years in federal prison.

Heres were the story gets strange. In 2020, President Trump commuted Esformes’s sentence. He walked out of prison. Then in 2024, the Department of Justice prosecuted him again on charges the first jury had deadlocked on. Esformes pleaded guilty to one count of conspiracy to commit healthcare fraud.

The takeaway isnt that crime pays. The takeaway is that even $1.3 billion in fraud, even a 20-year sentence, dosent necessariy mean the end. The system is imperfect. But it also dosent forget. Esformes will always be a convicted fraudster. His name is permanently associated with the largest healthcare fraud prosecution in American history.

At Spodek Law Group, weve handled Medicare fraud cases at every scale – from billing disputes involving thousands of dollars to major prosecutions involving millions. The pattern is always the same: early intervention produces better outcomes then waiting until the government has finished building its case.

Your Employees Are Your Biggest Threat

Congress designed the False Claims Act to incentivize insiders to report fraud. Heres how it works.

Anyone who knows about Medicare fraud can file whats called a “qui tam” lawsuit on behalf of the government. If the government joins the case and recovers money, the whistleblower recieves 15 to 25 percent of the recovery. If the government dosent join but the whistleblower wins anyway, they can recieve up to 30 percent.

The people most likely to know about billing fraud are your employees. Your billers. Your coders. Your office managers. Anyone with access to your billing practices. Congress understood this. They wanted employees to report fraud, so they made it enormously lucrative to do so.

Heres the kicker. Whistleblowers can file even if they participated in the fraud. Congress figured insiders would be the best source of information, and employees are often forced to participate in fraudulent schemes to keep there jobs. The law protects them. It also means the person helping you commit fraud today might be filing a sealed complaint against you tomorrow.

The qui tam complaint gets filed under seal. The government investigates – sometimes for years – before deciding wheather to intervene. During that time, you have no idea the investigation is happening. Your employee is still coming to work. There still billing claims. And there building a case against you with government lawyers.

This isnt paranoia. Its the system Congress created. The solution isnt to distrust your employees – its to create compliance systems that ensure there nothing to report.

Heres another uncomfortable reality. Disgruntled employees make the best whistleblowers. Someone you fired six months ago might be working with government lawyers right now. Someone who felt underpaid or disrespected might decide that a 15-30% cut of whatever the government recovers is adequate compensation for there grievances. The False Claims Act doesnt require the whistleblower to be a good person with pure motives. It only requires them to have information about fraud.

The qui tam system has recovered billions of dollars for the government. From there perspective, it works. From your perspective, it means that every person who ever had access to your billing practices is a potential threat. Not becuase there malicious. Becuase the law makes it extremly lucrative for them to report you.

What Happens When You Get Caught

The consequences of Medicare fraud conviction cascade through every aspect of your life.

Criminal penalties under 18 U.S.C. § 1347 include up to 10 years in federal prison per count. If the fraud resulted in serious bodily injury to a patient, the maximum increases to 20 years. If someone died as a result of the fraud, you can be imprisoned for life. The average sentence for healthcare fraud is 27 to 30 months, but major fraudsters like Esformes recieve much longer terms.

Civil penalties under the False Claims Act include fines of $13,946 to $27,894 per false claim, plus damages of three times what Medicare overpaid. Anti-kickback violations carry fines of up to $50,000 per kickback.

Exclusion from Medicare might be the most devastating consequence. The government can – and regularly does – exclude providers from participating in Medicare and Medicaid. This can happen before conviction. Once excluded, you cannot bill Medicare for any services. For most healthcare providers, this effectively ends there ability to practice.

The reputational damage is permanent. Your name will be associated with healthcare fraud forever. Google searches will surface the prosecution. State licensing boards will review your status. Malpractice insurers will drop you. Hospitals will terminate your privileges. Even if you avoid prison, your career as you knew it is likely over.

The False Claims Act – Why Civil Liability Is Almost Worse

Criminal prosecution requires proof beyond a reasonable doubt. Civil liability under the False Claims Act requires only a “preponderance of the evidence” – basically, more likely then not.

This lower standard makes civil cases much easier for the government to win. And the penalties can be devastating even without prison time. Triple damages plus per-claim fines can exceed the amounts involved in criminal prosecutions.

The False Claims Act also has a provision for “voluntary disclosure.” If you discover billing errors and report them to the government within 30 days, before any investigation has begun, your damages can be reduced from triple to double. This creates an incentive to self-report – but only if you catch the problem early.

Todd Spodek always advises healthcare clients to conduct regular internal audits. If you find problems before the government does, you have options. If the government finds them first, your options narrow dramatically. And if a sealed whistleblower complaint has already been filed, voluntary disclosure isnt available at all.

Spodek Law Group has helped healthcare providers navigate False Claims Act investigations from the earliest stages. The key is understanding your exposure before making any decisions about cooperation, disclosure, or defense. Call us at 212-300-5196 for a confidential consultation.

Protecting Yourself Before Theres a Problem

The best Medicare fraud defense happens before any investigation starts. Here’s what that looks like.

Implement a real compliance program. Not a paper program that sits in a binder – an actual system with regular audits, clear billing protocols, and someone responsible for oversight. The government looks at whether you had a compliance program when deciding how aggressively to prosecute.

Train your staff. Most billing errors arent malicious – there the result of inadequate training on coding, documentation, and compliance requirements. Invest in education before problems develop.

Respond to audit requests promptly and carefully. When Medicare or its contractors ask questions, the answers matter enormously. Having legal counsel involved from the first inquiry can prevent small problems from becoming major investigations.

Monitor your own billing patterns. If the government is using data analytics to identify outliers, you should be to. Understanding where your billing differs from national averages lets you either justify the difference or correct it before anyone asks questions.

The healthcare fraud enforcement apparatus is larger, better funded, and more sophisticated then it has ever been. The days when billing fraud could fly under the radar are over. The question isnt whether the government will find problems – its whether you find them first.

If your facing a Medicare fraud investigation or concerned about potential exposure, Spodek Law Group is here to help. We understand the stakes. We understand the system. And we understand that your entire career and freedom may depend on how this is handled. Contact us today.

Heres the final reality about Medicare fraud. The government is getting better at finding it. The technology is improving. The data analytics are becoming more sophisticated. The whistleblower incentives are drawing more insiders to come forward. The Strike Force is expanding to more cities. The days when healthcare fraud could hide in the complexity of the system are basicly over.

The question isnt whether problematic billing will be found. The question is whether you find it first and address it voluntariy, or whether the government finds it and addresses it for you. Those two scenarios produce dramatically diffrent outcomes. One leads to remediation and compliance. The other leads to prosecution, exclusion, and the end of your career.

We put this information on our website becuase healthcare providers deserve to understand the system there operating in. Knowledge is the first line of defense. If you have questions or concerns, call Spodek Law Group at 212-300-5196. The consultation is confidential. The cost of waiting is not.