There is a common misconception that if a healthcare provider only accepts private funds, they are immune from federal prosecution. While there is no denying that a provider who receives substantial reimbursement from federal payors is more likely to find him/herself under federal scrutiny, there has been increasing focus on providers who received little to no federal funds.
There have always been criminal statutes that prohibit healthcare fraud when dealing with private funds. The most widely used is the healthcare fraud statute, 18 U.S.C. § 1347, which criminalize the knowing and willful defrauding of any health care benefit program or obtaining money or property by false or fraudulent pretenses from any healthcare benefit program. Notably “healthcare benefit program” is defined as “any public or private plan or contract, affecting commerce, under which any medical benefit, item, or service is provided to any individual, and includes any individual or entity who is providing a medical benefit, item, or service for which payment may be made under the plan or contract.” 18 U.S.C. § 24.
Others commonly used criminal statutes in healthcare fraud prosecutions which are not limited to federal funds include mail fraud, 18 U.S.C. §1341, and wire fraud, 18 U.S.C. §1343. These statutes are similar to the healthcare fraud statute and criminalize the use of mail or wires by an individual who obtains money or property by false or fraudulent pretenses. Similarly, False Statements Relating to Healthcare Matters criminalizes the knowing and willful making of a false statement “in connection with the delivery of or payment for health care benefits, items, or services,” 18 U.S.C. § 1347, and is not limited to government funds. There can also be violations of federal conspiracy law, 18 U.S.C. §§ 371 and 1349, and the money laundering laws, 18 U.S.C. §§ 1956 and 1957, based upon these statutes. While these lists are not exclusive, the bottom line is that there are and always have been many federal statutes and corresponding regulations that criminalize or prohibit certain conduct regardless of whether federal funds are involved.
Bribery Prosecutions and New Statutory Schemes
While the federal Anti-Kickback Statute, 42 U.S.C. §1320a-7b(b) (AKS), only reaches federal funds, new legislation and novel use of an old statue has been used to prosecute bribery schemes involving non-federal funds.
In late 2018, President Trump signed legislation to combat the opioid epidemic knowns as the SUPPORT for Patients and Communities Act. Part of the law criminalizes kickbacks or illegal remunerations for referrals to recovery homes, clinical treatment facilities and laboratories. In supporting this law, the Department of Health and Human Services emphasized that the federal Anti-Kickback Statute only applies to federal health care programs and not privately insured patients, and therefore this statute was necessary to reach private pay funds. See https://wirskyelawfirm.com/new-opioids-anti-kickback-law-targeting-non-government-pay-patients/ for a more extensive discussion of this new law.
There are also recent federal cases in which the government has indicted healthcare providers under the Federal Travel Act and state commercial bribery statutes when there were little or no federal funds involved. There have been prosecutions in California, New Jersey, Florida and Texas in which the federal government utilized this strategy. United States v. Beauchamp, Case No. 16-cr-016 (N.D. TX.); United States v. Aponte, Case No. 13-cr-00464 (D. N.J.). For a more extensive discussion of the use of the travel act, see https://wirskyelawfirm.com/governments-use-of-the-travel-act-to-combat-bribery-in-healthcare-fraud-cases/.
Insurance Company Actions
In addition to statutory developments, this trend is also due to insurance companies becoming more aggressive in pursuing or making referrals to the federal government when they believe that they have been defrauded. For example, in 2017 United Healthcare filed a civil lawsuit against Next Health LLC and affiliates alleging a $150 million referral-kickback and bribery scheme. The alleged fraud was uncovered during a review of routine medical laboratory test claims to identify abnormal activity.
Consequently, the federal government opened a criminal investigation that has resulted in guilty pleas and indictments. Andrew Hillman, former co-owner, pleaded guilty in 2018 to violating federal anti-kickback laws, was sentenced to 66 months in prison and ordered to pay $3 million in restitution. Co-owner Seymon Narasov also plead guilty to similar conduct and was sentenced to 76 months in prison.
Three other individuals have also been charged to date, including former Next Health marketing representatives Erik Bugen, Kirk Zajac, and Vinson Woodlee. Woodlee, owner of Med Left LLC, was recently indicted, in August 2020, on one count of conspiracy to pay and receive healthcare kickbacks and three counts of soliciting and receiving healthcare kickbacks. https://www.justice.gov/usao-ndtx/pr/nexthealth-marketer-charged-60-million-kickback-scheme.
While the Next Health case involved substantial funds, there was a recent federal indictment in the Eastern District of Louisiana involving only $567,710.39 in a copay waiver case. Darren Martin, a pharmacist, plead guilty to conspiracy to commit health care fraud, under 18 U.S.C. 1349 and 1347. According to the indictment, Martin breached his provider agreement with CVS Caremark, a pharmacy benefit manager for Blue Cross to collect copayments from Blue Cross-covered patients. https://www.justice.gov/usao-edla/pr/new-orleans-man-pleads-guilty-conspiracy-commit-health-care-fraud.
As stated earlier, while there is no denying that a provider who receives substantial reimbursement from federal payors is more likely to find him/herself under federal scrutiny, there has been increasing focus on providers who received little to no federal funds. Therefore, health care providers who deal in private pay should take steps to help ensure that they are not in violation of applicable federal statutes and regulations.
 Moreover, state statutes may not be limited to government payors. For example, the Texas Patient Solicitation Act, which criminalizes bribery or healthcare referrals in exchange for benefits is not limited to government pay. Tex. Occ. Code § 102.001.