Medicaid Fraud Investigation Process and Penalties

MFCUs are unique in that their cases can result in criminal prosecutions and/or civil lawsuits in which providers are sued under the False Claims Act. That determination is made based on the nature and quality of the evidence (i.e., whether there is sufficient proof of intent to defraud).

Alternatively, when there is weak evidence of fraud to support either a criminal or civil case, the MFCU might end up closing an investigation and referring the matter to its state Medicaid program integrity office for collection of overpayments.

Providers should be aware that MFCU investigations can result in simultaneous criminal charges and civil lawsuits, sometimes known as “parallel proceedings.” As such, providers can face more than one battlefront arising out of the same set of facts and face both prison time as well as hefty civil monetary penalties.

On the criminal front, each state has a criminal statute specifically criminalizing the knowing or purposeful submission of false or fraudulent claims to Medicaid, sometimes called “Provider Fraud” or “Medicaid Fraud.” Just like any prosecution, MFCUs can also charge any state crime as may be appropriate under the circumstances, such as theft or computer crime.

Medicaid provider fraud prosecuted at the state level can be a felony or misdemeanor, depending on the state law. In some states, it is a felony regardless of the amount involved.

It is important to note that Medicaid fraud cases can be investigated and prosecuted by federal agencies as well. In many instances, such cases involve additional aspects such as Medicare fraud, private insurance fraud, or drug diversion. It is not unusual to see multiagency collaboration among MFCUs, the HHS-OIG, the FBI, the DEA and U.S. Attorneys’ Offices. 

On the civil front, most states have enacted some version of a False Claims Act, similar or identical to the federal corollary. False Claims lawsuits allow the government to recover treble damages and impose civil monetary penalties.

There is one main difference between a criminal case and a civil case. Criminal cases must demonstrate proof of intent to defraud beyond a reasonable doubt. Civil cases, however, require less proof of intent and can be won by demonstrating by a preponderance of the evidence that a provider was merely reckless in the submission of false claims to Medicaid.