Healthcare Fraud Defense in New York

Federal healthcare fraud under 18 U.S.C. § 1347 carries a maximum of ten years per count — twenty if serious bodily injury results, life if death results. The investigation usually begins with a civil audit (UPIC/ZPIC), a CMS overpayment determination, or a qui tam complaint, and migrates to the US Attorney's Office only when the dollar volume justifies it.

The Audit-to-Indictment Pipeline

• UPIC/ZPIC audits. The Unified Program Integrity Contractor pulls a sample of claims, calls the records, and extrapolates the error rate across the universe of paid claims. Defense work focuses on the sampling methodology, the medical-necessity standard applied, and the documentation underlying each contested claim.
• OIG subpoenas. HHS-OIG can issue subpoenas under 5 U.S.C. App. § 6(a)(4). Compliance and privilege review must happen quickly.
• Search warrants. When the case turns criminal, the practice or pharmacy gets a search warrant. Patient charts, billing software, and bank records leave on a truck. Pre-warrant lawyering preserves options the audit-stage client cannot reclaim.
• Indictment. Counts typically include 18 U.S.C. § 1347 (healthcare fraud), § 1349 (conspiracy), § 1343 (wire fraud), and frequently kickback charges under 42 U.S.C. § 1320a-7b(b).

Common Defenses

• Medical necessity. Whether a service was medically necessary turns on the standard of care, not the auditor's worksheet.
• Specific intent. 18 U.S.C. § 1347 requires intent to defraud. Reliance on coding consultants, compliance officers, and billing services is a defense.
• Sampling and extrapolation. Statistical sampling methodologies are routinely vulnerable to challenge under HHS-OIG and CMS guidance.
• Stark Law and AKS structuring. Many relationships fall within statutory safe harbors that the prosecution misreads.

Parallel Civil and Licensing Issues

Criminal healthcare prosecutions run alongside False Claims Act civil actions, OIG exclusion proceedings, and state licensing matters before OPMC, OPD, the Board of Pharmacy, or the Department of Health. We coordinate all four tracks so a move in one does not damage the others.

Who Is Looking at the Case

The agency landscape on a healthcare-fraud matter is layered and the players do not always talk to each other. On the federal side, HHS-OIG Special Agents conduct the criminal investigation, often paired with FBI agents on the DOJ Health Care Fraud Strike Force in the Eastern and Southern Districts of New York. CMS contracts with UPICs (replacing the older ZPIC structure), MACs, and RACs to run program-integrity audits and overpayment determinations. The DEA opens parallel diversion investigations under the Controlled Substances Act when controlled prescribing is in play. The IRS-CI joins when the money has been moved through shell entities or unreported income.

On the state side, the Medicaid Fraud Control Unit (MFCU) within the Office of the Attorney General investigates both Medicaid-specific fraud and patient abuse and neglect. The Office of the Medicaid Inspector General (OMIG) conducts civil audits, demands self-disclosures, and issues exclusion determinations. The Department of Health regulates facilities and certificate-of-need issues; the Office of Professional Medical Conduct (OPMC) and the Office of Professional Discipline (OPD) handle physician, dentist, and allied-health licensing. Pharmacies sit under the Board of Pharmacy. Each agency moves on its own clock and can hand evidence to the others without notice.

Federal and State Statutes in Play

• Health care fraud, 18 U.S.C. § 1347. Ten years per count; twenty if serious bodily injury; life if death results.
• Conspiracy, 18 U.S.C. § 1349. Same maximums as the underlying offense; no overt-act requirement.
• Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b). Ten years and exclusion; any remuneration in exchange for federal-program referrals.
• Stark Law, 42 U.S.C. § 1395nn. Civil/strict-liability physician self-referral statute; pleads into False Claims Act liability.
• False statements relating to health care matters, 18 U.S.C. § 1035. Five-year exposure for false statements on claim forms and in CMS submissions.
• Aggravated identity theft, 18 U.S.C. § 1028A. Mandatory consecutive two years where a beneficiary's identifiers are used.
• Wire and mail fraud, 18 U.S.C. §§ 1343 and 1341. Routinely stacked on every electronic claim submission.
• Criminal False Claims Act, 18 U.S.C. § 287; civil FCA, 31 U.S.C. §§ 3729–3733. Treble damages and per-claim penalties on the civil side.
• NY Penal Law Article 177 health care fraud. Tiered by dollar value at PL §§ 177.05, 177.10, 177.15, 177.20, and 177.25, with thresholds of $3,000, $10,000, $50,000, and $1,000,000.
• NY State Finance Law § 187 et seq. The New York False Claims Act, which allows the AG and qui tam relators to recover treble damages.

Stark and Anti-Kickback Safe Harbors

Many of the financial arrangements that prosecutors charge as kickbacks were actually structured to fall within published regulatory safe harbors. The AKS safe harbors at 42 C.F.R. § 1001.952 protect specific compensation arrangements, equipment leases, personal services contracts, and certain investment interests when their elements are met. Stark exceptions at 42 C.F.R. §§ 411.355–411.357 protect in-office ancillary services, bona fide employment, fair-market-value compensation, and several recruitment arrangements. Compliance with a safe harbor is a defense; substantial compliance with the spirit of one is a sentencing argument.

The defense work is to walk the prosecutor or grand jury through the agreement, the FMV opinion, the commercial reasonableness analysis, and the volume-or-value reality before the indictment is drafted. After indictment, the same showing becomes a motion in limine, a Rule 29 argument, or a jury-charge fight about good-faith reliance on counsel.

Whistleblowers and Qui Tam

A meaningful share of healthcare-fraud criminal cases starts with a qui tam complaint filed under seal in federal court under 31 U.S.C. § 3730(b). The United States then has at least sixty days — usually extended for years — to investigate while the complaint remains sealed. When the criminal investigation reveals itself, the provider often does not know that a former employee, billing manager, or competitor is the named relator. Identifying the relator's narrative early, and stress-testing it, often dictates whether the case is winnable.

Defenses Beyond Medical Necessity

Medical necessity is the front-line defense, but it is rarely the only one. We routinely build cases around good-faith reliance on coding and compliance professionals, which negates the specific intent the government must prove under 18 U.S.C. § 1347. We attack the chain of causation between the provider and the claim where billing was outsourced or where a third-party intermediary touched the submission. We litigate the standard of care with treating-physician affidavits and outside experts rather than letting the prosecution define it through a contractor's worksheet.

Where the government's theory rests on statistical extrapolation, we depose the contractor's statistician and challenge the sampling frame, the sample size, the precision interval, and the homogeneity assumptions. The Medicare Program Integrity Manual sets out specific requirements for statistical sampling; non-compliance is a frequent and useful attack vector. In kickback cases, we develop the FMV record — appraisals, comparable arrangements, commercial reasonableness analyses — before the grand jury closes.

Pretrial Motion Practice

Healthcare-fraud indictments are paper cases, and the motion practice reflects that. Motions to dismiss under Rule 12(b)(3) test whether the indictment pleads each element of § 1347 with the specificity required for a paper-intensive case. Bills of particulars under Rule 7(f) force the government to identify which claims, which patients, and which dates are charged as fraudulent — not merely a representative sample. Suppression motions challenge defective search warrants that swept entire patient databases without particularity. Kastigar issues arise where employees have given immunized statements to OIG or OMIG before the criminal case opened, and a Kastigar hearing can knock out the government's evidence wholesale where the wall is not clean.

Sentencing Exposure and Loss

Healthcare-fraud sentencing under U.S.S.G. § 2B1.1 turns on loss amount, with the government typically arguing the billed amount and the defense pushing for the paid amount net of services actually rendered. Enhancements apply for federal health care offenses involving government health care programs, for ten or more victims, for sophisticated means, and for abuse of a position of trust. We have seen loss fights move guidelines ranges by ten or more offense levels — the difference between probation and a decade.

Forfeiture under 18 U.S.C. §§ 981 and 982 reaches accounts, real property, and substitute assets under 21 U.S.C. § 853(p). Mandatory restitution under 18 U.S.C. § 3663A flows to Medicare, Medicaid, and private payors. Civil False Claims Act exposure layers treble damages and per-claim penalties on top.

Collateral and Licensing Consequences

A healthcare-fraud conviction triggers mandatory exclusion from federal health care programs under 42 U.S.C. § 1320a-7(a) for at least five years — longer in many cases. Exclusion is published on the OIG LEIE and SAM lists and effectively ends federal-program practice. OPMC and OPD proceedings frequently follow, with license revocation or surrender on the table. DEA registration is at risk in any case touching controlled substances. We coordinate the criminal disposition with the exclusion negotiation and any state licensing process so one resolution does not poison the others.

For Medicaid-specific exposure, see also our Medicaid Fraud Attorney and Medicaid Investigation Attorney pages. For the underlying federal charging statutes, see wire fraud and the broader fraud defense overview.

If you have received an audit demand, a subpoena, or an indictment in a healthcare-fraud case, call us at 212-233-1233 or email [email protected].