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Avoiding the Wide Net of Fraud Conspiracy Investigation


Protecting your company from a potential exposure, whether on the civil or criminal end, from the outside or from insiders, requires dedication to compliance.

Fraud ConspiracyThe word is out. There is money to be made in healthcare fraud—and not just in schemes by providers to steal payor funds, but by the government under federal and state statutes busting fraudulent conduct. How an action starts is really quite simple: maybe a former patient or employee reports a provider, or maybe a provider is just such a high utilizer of services that the conduct is brought to the attention of an oversight agency. Either way, we have a potential target on a radar. From that target, the agent may hit the “zoom out” button and look to cast a wide net around affiliate providers, agents, vendors, and even employees of the provider. The more people and entities the agent can link to the potential fraud, the bigger the fraud becomes. The bigger the fraud becomes, the better the press on a potential bust or case brought. As the billing agent for providers, you are really in quite a precarious situation when it comes to a potential fraud situation. The claims inherently flow through you as the mainstay of your business, so that means you’ve touched the chain. The key to avoiding unnecessary involvement—or worse, being dragged in yourself or by your company—requires a level of plausible deniability only available to the traceably innocent. The purpose of this article is to elaborate on how a case may be built against you, and to introduce preventative steps you can take to better insulate yourself and your business.

When agencies (such as the US Attorney’s office, FBI, Office of the Inspector General, Medicaid Fraud Bureau, District Attorney’s office, etc.) build a fraud case, whether on the criminal or civil end, the first thing that happens is the records—both medical and billing—are requested or seized by the agency. Computers themselves may be seized, along with emails, phone records, possible recordings, and other electronic and paper records. What the government is looking for are hints of improper billing: upcoding, false claims, stealing of funds, etc. The easiest way exposure may arise for the billing or coding partner of a provider, without that agent actually being intentionally part of a fraud scheme, is for the agent to have taken it upon itself, as part of its process, to modify the coding in any way from what the provider has submitted. If the agent sticks to the basics—just transmits the claims as received and attempts collection with only what the provider has provided—the likelihood of the agent’s involvement in a false claims action notably decreases.

It is when the agent involves itself in the chain of coding where we see an issue. What is meant by involvement? Shouldn’t the agent be performing claims scrubbing? Yes, claims scrubbing is standard, as is assisting in compliance with coding regulations. However, standard course from a compliance perspective is requiring the client’s consent for each and every suggested modification to a billing code, which is very different from no consent from the client for modification, or a “standing order” from the client that for each similar instance the agent provide a modification—such as a modifier to increase reimbursement—or bundling/unbundling to increase reimbursement.

Extreme examples of abuse are the easiest to use as instructional tools of what not to do. One such example is the 2015 indictment of a billing company located in Charlotte, NC. The owner provided billing services and credentialing services to mental health companies and other health providers, and was charged criminally with healthcare fraud and aggravated identity theft charges for, allegedly, engaging in a scheme that “defrauded Medicaid of millions of dollars” as “discovered” by the US Attorney for Western District of North Carolina and the FBI, Charlotte Division.1 According to allegations contained in the indictment, the accused received billing instructions from clients by way of billing spreadsheets containing claim information, and the accused changed the information received in order to bill two or three times the amount of services he was instructed to submit to Medicaid. An example given in the indictment alleges the accused took 268 dates of therapy and fabricated different claims, inflating the services to over 400 dates of therapy. Medicaid paid out millions in false claims. Currently, the accused is out on bail and awaiting trial; others also charged in the same conspiracy have been tried and convicted, including the “feeder” consultant who helped onboard providers to the billing company.2

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As a second example, in 2014, a Florida radiology billing company agreed to pay the government $1.95 million to resolve false claims act allegations for, allegedly, fraudulently changing diagnosis codes on claims to Medicare and Medicaid, in order to get the rejected claims paid on behalf of radiologists.3 The civil settlement resolved the United States’ investigation into the company’s billing practices after an account representative brought a Qui Tam (whistleblower) action against the employer. The complaint—initially brought by the account representative—alleged that the company tasked junior-level employees, with no coding or medical background, to take every claim denied for lack of medical necessity, and consider whether a change in diagnosis code should be made to ensure reimbursement. Further, the complaint alleges managers at the company directed subordinates to alter diagnosis codes on multiple denied claims to ensure reimbursement. Also noted, the company failed and refused to adopt basic, common and well-known compliance measures that would likely detect, expose, and terminate the company’s conduct.4

The press release announcing resolution of the Florida matter states: “The healthcare providers who contracted with the [billing company] placed their trust in the company to correctly process claims and not submit fraudulent information to the Medicare and Medicaid programs,” said Derrick L. Jackson, Special Agent in Charge of the US Department of Health and Human Services, Office of Inspector General in Atlanta. “The lack of compliance and oversight by [billing company] placed all these providers at risk. Billing services such as [the billing company] have no less of a duty to ensure truthful information on claims than do the providers who use these services.”

“Billing companies provide a key check-point to combat medical billing fraud. Consequently, they will be examined with the same scrutiny as healthcare providers,” said United States Attorney Sally Quillian Yates.5

From the true tale of the Florida radiology billing company, you may have picked up that the initial agitator worked for the company as an account representative. The account representative was not only protected from termination by the billing company under relevant whistle blower statutes, but also received a portion of the settlement funds. How can that be possible? Well, it is the law, and if you think there is much worse than having your business potentially destroyed from the inside, while having to endure that individual as a continuing employee, rest assured that it is near the top of the list of intolerable realities.

Protecting your company from a potential exposure, whether on the civil or criminal end, from the outside or from insiders, requires dedication to compliance. It requires appointing an individual or individuals tasked with keeping up-to-date with compliance requirements, ensuring quality assurance from top to bottom and inside out, and introducing education, policies, and procedures into the framework of your business—in every regard—from client contracting; to payment; to operations; to employee onboarding, training and termination; and everything in between. Many of us avoid taking preventative measures because doing so can be time consuming and an additional expense; however, nowadays it is a cost of doing business.

Jen KirschenbaumJennifer Kirschenbaum, Esq., is the managing partner of Kirschenbaum & Kirschenbaum, P.C.’s (K&K) healthcare department. K&K regularly works with HBMA members on client contracts and relations, HIPAA compliance, employee matters, and client/employee disputes. HBMA members receive free initial consultations, discounted legal fees, and a 10 percent discount on all compliance documents available at as an HBMA member benefit. To contact Jennifer Kirschenbaum, email or call (516) 747–6700 x. 302. For more information about K&K, visit To join K&K’s free healthcare newsletter, visit For K&K’s customizable form billing contracts and business associate agreements, visit

1 See
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4 See Complaint, available here: https://www.courtlistener. com/docket/4505019/united-states-of-america-ex-rel-v-medical-business-service-inc/#entry-1
5 See

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