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Doctor’s Risk of Arrest: Popular Bases for Texas Health Care Fraud Prosecutions

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Law enforcement is more likely to investigate Texas health care providers for certain activities known to be targeted by prosecutors.  

Health care is big business in this country.  The U.S. medical industry is defined as not only involving (1) those providing medical services, but also (2) manufacturers of medical equipment or drugs; (3) providers of medical insurance; and (4) those that otherwise facilitate the provision of healthcare to patients. Health care alone is credited with providing our national economy with almost a fifth of overall gross domestic product (GDP).  See, “Healthcare Sector,” written by Jim Chappelow and Gordon Scott and published by Investopedia on March 23, 2020.

The huge revenues generated from providing health care services long ago caught the eye of law enforcement at both the state and federal levels.  The Texas Attorney General’s office describes health care fraud and abuse as “deceptive practices in the health industry that lead to undeserved profit. These schemes cost the nation billions of dollars each year and result in higher health insurance premiums and out-of-pocket expenses for consumers.”

Health care fraud is deemed a “high priority.”  So much so, that there are federal statutes providing specific budgets to finance anti-fraud investigations.  See, e.g., the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which created the Health Care Fraud and Abuse Control Program to fight against health care fraud in either public or private health insurance plans.

Today, in Texas, it is more and more likely for health care providers throughout the medical industry to be investigated for health care fraud by either state and/or federal law enforcement.  A doctor in Dallas or Fort Worth, for example, can be targeted by either state or federal officials without being aware that he or she has come under scrutiny.  Physicians who have not had any prior dealings with the police in their entire lives may be shocked to discover they have become a target for health care fraud prosecution, with an arrest being their first awareness they are in trouble.  See, e.g.:

  1. Arresting Texas Doctors For Health Care Fraud: What You Need To Know;
  2. Doctors In Texas Alert: Feds Are Targeting Health Care Fraud Arrests; and
  3. Doctor Warning: Opioid Drug CEO Indictment Is Tip Of Health Care Fraud Arrest Iceberg.

State and Federal Health Care Fraud Investigators in Texas

Any number of investigators may be involved in building a case of health care fraud against a Texas health care provider.  The Federal Bureau of Investigation (“FBI”) handles most federal health care fraud investigations while the Consumer Protection Division of the Office of the Attorney General for the State of Texas undertakes most state health care fraud matters.

Of course, other agencies can also be involved here, as for example the U.S. Department of Health and Human Services and the Department of Veterans’ Affairs in federal health care fraud matters.

Obviously, this means there is a boundless number of law enforcement personnel that may become suspicious of a doctor, dentist, physician, clinic, hospital administrator, billing service, or other Texas health care provider, and decide to look into their operations for evidence of health care fraud.  This does not mean that there are a correspondingly vast number of factual bases for these investigations.

The majority of Texas health care fraud prosecutions can be grouped into the following three categories.  Every participant in the Texas medical industry accordingly should be aware of these hot spots for law enforcement investigations and prosecutions for health care fraud.  

The Three Common Bases for Health Care Fraud Prosecutions in Texas

Each member of the Texas medical industry should understand what activities are most likely to form the basis of a health care fraud investigation and prosecution.  Essentially, they involve one of the following:

  1. billing practices which the government opines are designed for profit;
  2. care or services the investigators believe to be unnecessary, unwarranted, or unsubstantiated; and/or
  3. professional relationships (allegations of kickbacks for patient referrals; prescription drug revenues).

For more detail, consider how the Texas Attorney General’s Office describes the four most common reasons that a health care provider is prosecuted for fraud by state officials (quoting from the site):

  • Health Insurance and Medical Billing
    • Billing for services not actually performed
    • “Upcoding,” or billing for a more expensive service than the one actually performed
    • “Unbundling,” or billing each stage of a procedure as if it were a separate procedure
    • Falsifying a patient’s diagnosis to justify procedures that aren’t medically necessary
    • Accepting kickbacks for patient referrals
    • Waiving patient co-pays or deductibles and over-billing the insurance carrier
  • Medicare and Medicaid Fraud
  • Medical billing fraud specific to these government benefit programs. It is when a health care provider claims Medicare or Medicaid health care reimbursements that they are not entitled to in order to dishonestly collect money.
  • Home Health Care Fraud
  • Home health agencies bill insurers, government benefit programs, or homebound patients for unnecessary services or for services that were never delivered.
  • This can also fall under Medicare or Medicaid fraud if the homebound patient receives home care as part of either benefit program. It is fraud if claims are submitted that are not compliant with government program requirements.
  • Drug Fraud and Abuse
    • Drug pricing fraud is when a physician dishonestly prescribes unnecessary medication to a patient in order to profit from the sale.
    • Counterfeit drug fraud is when a physician knowingly pushes stolen, expired or altered or fake prescription drugs.
    • Drug diversion abuse is when a health care worker does not administer a patient’s medication but keeps it for personal profit. 

From a national perspective, there is a similar categorization or focus.  The National Health Care Anti-Fraud Association (NHCAFA), which describes itself as the leading national organization focused exclusively on the fight against health care fraud, reports the following as the most common types of health care fraud (quoting from the site):

  • Billing Issues
    • Billing for services that were never rendered-either by using genuine patient information, sometimes obtained through identity theft, to fabricate entire claims or by padding claims with charges for procedures or services that did not take place.
    • Billing for more expensive services or procedures than were actually provided or performed, commonly known as “upcoding” – i.e., falsely billing for a higher-priced treatment than was actually provided (which often requires the accompanying “inflation” of the patient’s diagnosis code to a more serious condition consistent with the false procedure code).
    • Unbundling – billing each step of a procedure as if it were a separate procedure.
    • Billing a patient more than the co-pay amount for services that were prepaid or paid in full by the benefit plan under the terms of a managed care contract.
    • Waiving patient co-pays or deductibles for medical or dental care and over-billing the insurance carrier or benefit plan (insurers often set the policy with regard to the waiver of co-pays through its provider contracting process; while, under Medicare, routinely waiving co-pays is prohibited and may only be waived due to “financial hardship”).
  • Medically Unnecessary Services
    • Performing medically unnecessary services solely for the purpose of generating insurance payments.
    • Falsifying a patient’s diagnosis to justify tests, surgeries or other procedures that aren’t medically necessary.
    • Misrepresenting non-covered treatments as medically necessary covered treatments for purposes of obtaining insurance payments-widely seen in cosmetic-surgery schemes, in which non-covered cosmetic procedures such as “nose jobs” are billed to patients’ insurers as deviated-septum repairs.
  • Taking Kickbacks for Referrals.

Recent Texas Health Care Fraud Prosecutions

How do these lists compare to actual cases that have been filed against health care providers in Texas?  Here are some recent examples of investigations and prosecutions at both the state and federal level:

Examples of Federal Health Care Fraud Prosecutions in Texas

Below are examples of three 2020 U.S. Department of Justice prosecutions into Texas health care fraud:

1.  Kickback for Patient Referrals: Blood Testing Labs Indictment

In North Texas, three people were indicted for violating the federal anti-kickback statute.  They  allegedly orchestrated the referral of federal health care beneficiaries for testing services to clinical laboratories in both Texas and Virginia, in order to get paid for each test without concern for whether or not these tests were in the best interest of the patient or medically necessary.

Two of the defendants allegedly set up a number of companies that would collect blood from patients at a family member’s medical practice and then send the blood for testing at the labs, while the third defendant was an employee and officer in Health Diagnostic Laboratory, a now-defunct corporation investigated for paying health care providers for sending blood samples to its laboratories.

For more, read the news release issued by the United States’ Attorney General’s Office and “Texas Trio Indicted in Alleged Kickback Scheme Connected to HDL,” written by Ali Rockett and published by the Richmond Times-Dispatch on January 11, 2020.

2.  Doctor’s False Diagnoses for Profitable Treatment: $325 Million

A rheumatologist practicing in Mission, Texas, was convicted of health care fraud involving falsely diagnosing patients with life-long diseases and not only requiring invasive treatments they did not need, but also having them undergo unnecessary medical tests for additional revenue.

For more, read the news release issued by the United States’ Attorney General’s Office.

3.  Doctors’ Billing Services’ Contractor Uses India Company for Fake Billing: $4.8 Million

A defendant who acquired several Texas’ physicians’ practices and then took over control of their billing departments was charged with overseeing fraudulent billing through an India-based company where private insurance carriers as well as Medicare and Medicaid were billed for services that were never performed.

For more, read the news release issued by the United States’ Attorney General’s Office.

Examples of State Health Care Fraud Prosecutions in Texas

Below are two examples of two state health care fraud investigations involving Texas Attorney General Paxton’s Medicaid Control Fraud Unit, prosecuted in federal court:

1.  Falsifying Ownership of Provider and Billing for Unnecessary Services: $3.7 Million

Elder Care, based in Garland, Texas, was found to have been operated by defendants who had been barred from participating in the Medicare and Medicaid programs and that as administrators of Elder Care, the defendants had signed false documents not only to hide their identities but also to bill Medicare for unnecessary services.

For details, read the news release issued by the Attorney General for the State of Texas.

2.  Billing for Home Health Care Services, Diagnostic Tests, and Eye Procedures That Were Medically Unnecessary or Not Provided: $12 Million

The doctor who owned a Houston-based medical clinic as well as a physician who operated the clinic and another clinic operator were indicted for submitting fraudulent claims to Medicare and Medicaid for home health care services, diagnostic tests and eye procedures that were either not medically necessary or were necessary but not provided.

For details, read the news release issued by the Attorney General for the State of Texas.

Criminal Defense against Texas Health Care Fraud Charges

Anyone involved in the Texas medical industry should understand how aggressive law enforcement is in suspecting and investigating allegations of health care fraud in all its forms.  These cases can begin with a simple phone call from a displeased patient or a disgruntled employee.

Investigations need not result in arrests before a health care provider suffers harm to their reputation or their livelihood.  Arrests, if they do occur, need not result in conviction.

Being proactive and understanding the risks facing providers of health care in Texas insofar as health care fraud allegations is vital in order to protect the best interests of the doctor or clinic owner, etc., as well as their loved ones.

Mere rumor or innuendo of a health care fraud investigation can be devastating to providers, their employees and staff as well as their families.  Actual legal investigations into medical practice behavior can result in permanent harm: the need for experienced criminal defense advocacy here cannot be underestimated.

Read our discussions in:

  1. Health Care Fraud: 21 Indictments in Forest Park Medical Center Case;
  2. The New DEA Drug Report: Drug Cartels, Doctors, and Health Care Fraud; and
  3. Medicare Fraud Sting Operations by Federal Government Includes Senior Volunteers Spying on Doctors and Health Care Providers: Expect to See More National Stings and Sweeping Arrests of Medical Pros in the Future.


For more information, check out our web resources, read Michael Lowe’s Case Results, and read his in-depth article,” Pre-Arrest Criminal Investigations.


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