Healthcare fraud enforcement ramps up in the Trump administration, with implications for all stakeholders

Even as hospital leaders consider how to manage decreased reimbursement and higher costs, federal fraud enforcement continues to have some of the most significant financial stakes of any healthcare industry issue.

Rather than taking a hands-off approach, the Trump administration is maintaining and even expanding the Biden administration’s push in this area. Two months ago, the Department of Justice (DOJ), with help from HHS and other agencies, concluded what was described as the largest-ever national healthcare fraud takedown.

Nearly 100 medical professionals were among the 324 individuals charged in schemes that allegedly totaled $14.6 billion. More than $4 billion in payments for fraudulent claims were prevented, and billing privileges were suspended or revoked for more than 200 providers.

“Healthcare fraud, regardless of who is in office and what administration is in power, has always been a big focus,” said Ellen Persons, a litigator with Polsinelli and formerly an assistant U.S. attorney. “Mainly because the dollars are huge.”

At a time of retrenchment for government programs and agencies, the administration appears intent on increasing the resources devoted to healthcare fraud, waste and abuse.

“If there’s a specter of patient harm, there’s going to be continued DOJ scrutiny of individuals and companies, as well as even the prospect of congressional scrutiny over the next few years,” said Lisa Miller, a partner with Sidley and previously deputy assistant attorney general in the DOJ’s Criminal Division from 2021 until January 2025.

Areas of focus

Recent years have brought an uptick in fraud enforcement cases involving telemedicine, genetic testing and durable medical equipment (DME), Persons said.

With telehealth, “There’s complexity in how you comply with both state licensure requirements and program requirements, and the requirements for billing,” said Jaime Jones, global co-leader of the healthcare practice at Sidley. “It could be an area of potential vulnerability, and it could be [a reason] why claims ultimately don’t get paid, or even that there might be an enforcement action.”

There’s also the prospect of kickbacks stemming from referral arrangements between telehealth providers and labs, life sciences companies and other healthcare providers.

While recognizing telehealth as a key modality for expanding access to healthcare, government authorities also see the technology as rife with potential abuse, given the extent to which it can “expand the volume of claims submitted to Medicare,” Miller said.

Telehealth and DME often go hand in hand in a fraud investigation, she said, because from the government’s perspective, telehealth allows a DME company to market products nationwide instead of merely in its local area.

Scrutiny also has increased for wound care products, which constituted $1.1 billion of the fraud targeted in this summer’s takedown. CMS is planning new coverage policies for skin substitutes, an advanced type of wound care product, in 2026.

“There have been a lot of questions about whether there’s coverage for that under Medicare, and how those grafts are being used,” Persons said.

FCA in the spotlight

The DOJ announced in early July that it’s restarting the False Claims Act (FCA) working group, which had been launched during the first Trump administration. The group will include senior representation from HHS.

Among the areas of emphasis for the group are Medicare Advantage, kickbacks, drug and device prices, and inappropriate utilization stemming from manipulation of electronic health records.

FCA violations lead to between $3 billion and $5 billion per year in penalties across industries, Jones said. Most allegations of underlying fraud are linked to healthcare.

A key initiative of the working group is to look beyond whistleblower claims by mining cross-agency data “to identify actions that wouldn’t previously have come to light,” Jones said.

Hospitals and other providers should take note of what such a change could mean, Persons said. The government could use data analytics to target outliers more intensively in areas such as high-revenue procedures or the two-midnight rule.

“Just because you’re an outlier doesn’t necessarily mean that you’re doing anything wrong, so it could create some issues in the sense that there may be some investigations opened strictly based on data,” she said.

One risk of being subjected to an FCA inquiry is the complexity involved in such allegations. Investigations tend to last at least a year and can span a half-decade.

“That obviously brings with it a lot of expense, a lot of drag on the organization, a lot of distraction for senior personnel,” Jones said.

Medicare concerns

In an announcement that garnered significant industry attention, CMS in May said it would vastly expand auditing procedures for Medicare Advantage (MA) health plans. Instead of auditing a sampling of 60 plans each year, the agency will begin reviewing all 500-plus plans for potential overbilling.

To accommodate the increased workload, the agency is hiring nearly 2,000 staff and contractors and accelerating its use of advanced technology.

“It is time CMS faithfully executes its duty to audit these plans and ensure they are billing the government accurately for the coverage they provide to Medicare patients,” Mehmet Oz, MD, CMS administrator, said in the announcement.

While health plans are the direct target of the auditing plan, the tighter surveillance will trickle down to providers as plans seek to ensure they can justify their healthcare spending. Plans also can be expected to pass along any monetary losses they incur from payment claw-backs.

In traditional Medicare, a regulation that could increasingly resonate with providers is the 14-day rule for lab tests.

Hospitals should examine “whether they are holding physician orders for tests to get around the application of the 14-day rule and avoid paying for them,” Jones said.

Compliance tips

Hospitals and other healthcare organizations should recognize the shifting landscape and act accordingly, experts say.

“It’s really important for providers and hospitals to just make sure their house is in order, so that if they get that knock from the government, they have an explanation for why maybe they are an outlier,” Persons said. “Are they providing some sort of specialty care that others don’t? Are they [serving] a unique patient population?”

Larger health systems likely already take an adequate approach to compliance in terms of resources, advanced data monitoring and attention to areas such as coding and billing. Still, there may be opportunities to take a more holistic approach.

“What we’ve seen are situations in which, for example, a company’s revenue management organization will go out and commission data sometimes from third parties, sometimes they do it in-house, but they [do] take a look at coding trends, they take a look at billing trends … but there’s not the mechanism in place for the revenue management people to identify that as an issue and to throw it across the line to Compliance and Legal,” Jones said.

That poses a concern beyond failing to counteract a looming compliance issue.

“The government is going to look at that as then, from that point when one area of your organization identified the issue and failed to act, you have committed a knowing violation of law,” Jones said. “You have committed a knowing fraud.”