providers have an affirmative duty to promptly notify Medicaid
when they receive a payment they aren’t entitled to.
Remedies for Medicaid fraud include administrative actions, civil
suits, and criminal prosecution.
If a facility fails to maintain its certification, it cannot participate
in the Medicaid program.
points of view and opinions stated in this article are those of the author
and may not represent the official position of Jennifer M. Granholm, attorney
general of the state of Michigan.
note: The area of fraud and abuse in health care has received a great
deal of attention from federal and state regulators during the past few
years. This is a growing area of legal practice. The author of this article
presents a summary of the state law remedies for Medicaid fraud and abuse
Department of Community Health (DCH) administers Michigan’s Medicaid program
(Medicaid). The terms and conditions of a provider’s participation in
Medicaid is governed by the Social Welfare Act, MCL 400.1 et seq., the
provider’s contract with Medicaid, and by Medicaid’s provider manuals.
submitting claims to Medicaid, a provider is certifying to Medicaid that
the claims are true and accurate; prepared with the provider’s knowledge
and consent; do not contain any untrue, misleading, or deceptive information;
and comply with Medicaid’s policies, procedures, and guidelines. In light
of this, Michigan courts have held that:1
The failure to bill in accordance with Medicaid guidelines may constitute
a false claim.
Deviation from the Medicaid procedures are presumed to be intentional
or provide evidence that the provider knew the claims were false.
Providers have an affirmative duty to check the accuracy of their claims
to avoid mistakes.
addition, providers have an affirmative duty to promptly notify Medicaid
when they receive a payment they are not entitled to or that exceeds the
amount they were entitled to receive.2
The failure to return the ‘‘overpayment’’ to Medicaid constitutes conversion.
When a payment is challenged, the provider must be able to prove that
it was entitled to the money it received from Medicaid.3
Any payment the provider cannot substantiate is an overpayment and may
be considered a false claim.
of Medicaid fraud or abuse4
(fraud) may involve thousands of individual claims. An actual audit of
each claim is far too costly and time consuming to be practical. Accordingly,
DCH relies on statistically valid random“sample audits to establish the
total amount of overpayments received by a provider. The courts accept
the audits as evidence of Medicaid’s losses.5
An audit may be challenged or rebutted on the basis that it is not statistically
valid, was not random, or it contains mathematical or other errors.
for Medicaid fraud include administrative actions, civil suits, and criminal
prosecutions. The remedies are not mutually exclusive. When appropriate,
they are used in conjunction with each other to meet the state’s needs
in a particular case.
analyze the potential for liability for Medicaid fraud, it is important
to understand the following terms.6
Benefit: money, goods, or anything of pecuniary value
Claim: any attempt to cause DCH to pay money under the Medicaid
Deceptive: a statement of fact or a failure to reveal a material
fact that leads DCH to believe the represented or suggested facts are
different than they actually are
False: wholly or partially untrue or eceptive
Knowing and knowingly: a person possesses facts under which he
or she is aware or should be aware that his or her conduct is substantially
certain to cause the payment of a Medicaid benefit
Person: an individual, corporation, association, partnership,
or other legal entity
criminal charges for Medicaid fraud are not limited to the Michigan Medicaid
False Claims Act (MFCA), codified at MCL 400.601–MCL 400.613. Charges
against a provider may be based on any criminal statute that is violated
by a person that defrauds Medicaid. This includes falsification of a medical
and computer fraud.11
It also includes conspiracy, accessory, aiding and abetting, and attempts
of any crime committed during the submission of false claims.
are not limited to the individuals directly involved in the fraud. Consultants,
accountants, attorneys, and other persons indirectly involved in the fraud
may also be prosecuted.
claims are often brought under the MFCA. The most frequently used section
of the MFCA is MCL 400.607(1). This section of the act requires proof
that the accused, knowingly made, presented, or caused a false claim to
be made or presented to Medicaid. An error or mistake will not support
a false claim charge unless the person’s course of conduct indicates a
systemic or persistent tendency to cause inaccuracies in the claims submitted
to Medicaid. In such a case, the person is considered to have knowledge
of and to have intended the submission of the false claims.
penalty for violation of MCL 400.607(1) is imprisonment for up to four
years and/or a fine of up to $50,000.
providers are required to provide goods and services that are medically
necessary as defined by professionally accepted standard of care. It is
a felony to submit a claim to Medicaid for providing goods or services
that are not medically necessary.12
The felony is punishable by imprisonment for up to four years and/or a
fine of not more than $50,000.
400.607(2) of the MFCA applies primarily to health care providers other
than health facilities or agencies. A health facility or agency is not
liable under this section unless it acted in concert with a physician
or other provider to falsely represent the medical necessity of the goods
or services provided to a Medicaid recipient.
MFCA, MCL 400.604, prohibits soliciting, offering, or accepting a bribe
or kickback for furnishing goods or services or referring patients for
goods or services.13
The bribe or kickback may be anything of value, including money, reduced
rent, services, goods or rebate on the provider’s fee, or the patient’s
copayment. A violation of this section is a felony punishable by up to
four years imprisonment and/or a fine of up to $30,000.
skilled nursing facilities, intermediate nursing facilities, and home
health agencies are required to obtain certification prior to Medicaid
participation. If a facility fails to maintain its certification, it cannot
participate in the Medicaid program. In order to safeguard Medicaid recipients,
the legislature has made it a felony to make a false statement or representation
of material fact regarding the conditions in or operation of a facility
in order to obtain or maintain the required certification.14
A violation of this section may be punished by imprisonment for up to
four years and/or a fine of up to $30,000.
are required to order restitution based on the defendant’s ‘‘course of
Accordingly, the actual dollar value of the specific Medicaid fraud counts
charged in the criminal complaint is irrelevant in determining the amount
of restitution to be ordered by the court.16
The defendant is required to fully repay all of the money illegally received
from Medicaid by the course of conduct described in the criminal complaint.
order of restitution is a judgment and lien on all of the assets
of the defendant.17
If the defendant is financially able to do so, the restitution order must
be paid immediately.18
The law does not allow the defendant to keep vacation property, retirement
accounts, investments, luxury vehicles, or other assets that may be used
to pay restitution. Accordingly, a detailed and thorough review of the
defendant’s assets is required. After inventorying the defendant’s assets,
the court should order the liquidation of the assets necessary to pay
provider is contractually and statutorily obligated to provide care to
Medicaid recipients, consistent with state and federal statutes, rules,
and guidelines. A provider breaches its contract with Medicaid when it
fails to provide the required level of care or comply with the conditions
of Medicaid participation. Accordingly, the state may recover on a contract
theory, such as breach of contract or unjust enrichment, for the submission
of false claims and/or the failure to provide the required services.
MFCA requires the court to award the state a civil penalty against any
person who through fraud, making a fraudulent statement, or knowingly
concealing a material fact, receives Medicaid money that the person is
not entitled to receive.19
The civil penalty is required to be imposed as the result of a civil suit
or criminal prosecution and is equal to:
the total amount of the false claim; plus
three times the damages suffered by the state
damages equal the sum of the Medicaid overpayment,20
plus lost interest, investigative costs, audit costs, and costs of litigation,
including attorney fees.
Director of DCH (director) has the authority to impose administrative
sanctions on providers that voluntarily participate
director may issue an emergency order to protect the public health, safety,
or welfare; Medicaid recipients; or Medicaid funds. Circumstances that
warrant emergency action by DCH include, a reasonable belief that:21
The provider has submitted claims for services that were medically unnecessary,
inappropriate, or of inferior quality and that the provider’s continued
participation constitutes a threat to the public’s or Medicaid recipient’s
health, welfare, or safety.
The provider has violated the MFCA, the Health Care False Claim Act,22
or a similar statute of another state or the federal government.
An overpayment may not be recovered.
The provider is refusing to:
provide the records necessary to document its claims to DCH, the attorney
general, or federal authorities; or
make or file statutorily required disclosures regarding the ownership
of its business or sharing of payments for services provided to Medicaid
the director determines that emergency action is warranted, he can summarily
suspend all payments to the provider or suspend the provider’s participation
The sanctions are effective on the latter of the date specified in the
order or the date the order is served on the provider. The order is not
stayed by an administrative or judicial appeal.
is not required before issuing an emergency order. A hearing may be requested
after the order is issued. The hearing is a contested case under the Administrative
and will determine whether the emergency order is supported by competent,
material, and substantial evidence.
a provider fails to conform to professionally accepted standards of medical
practice, the director of DCH may:25
refuse to enroll the provider
terminate the providers contract and program participation
suspend the provider indefinitely or for a specified period of time
the provider on probation with controls and supervision on the providers
practice and submission of claims
director must refuse to enroll a provider or terminate a provider’s participation
in Medicaid if the provider:26
convicted of Medicaid fraud, health care fraud, or a substantially similar
statute of another state of the federal government
is convicted of a criminal offense related to the provider’s practice
of health care in any jurisdiction
or reinitiates a practice for which the provider was previously sanctioned
dispenses, renders, or provides goods or services without the appropriate
to avoid providing or refuses to provide DCH, the attorney general,
or the federal government with access to all records necessary to fully
document the goods or services provided to a Medicaid recipient, to
fully substantiate each claim and to demonstrate the medical necessity,
appropriateness, and quality of service for each claim
terminated or suspended from Medicaid, Medicare, or any governmentally
funded program in any jurisdiction
addition, the director must refuse to enroll a provider, suspend or place
a provider on probation, or terminate a provider for a broad range of
The sanctions are required for, among other things:
Submission of claims for reimbursement of a fee or charge that is higher
than the provider’s usual and customary fee
Inclusion of charges or fees not related to the goods or services provided
to the recipient
Misrepresentation of the identity of the person who actually provided
the service, the identity of the recipient, or the date of service
Misrepresentation of the goods or services provided to the recipient
or the recipient’s diagnosis, treatment, or the cause of the recipient’s
a provider is sanctioned by DCH it often triggers sanctions by the federal
government, licensing boards, other health care entities, and insurers.
These sanctions may lead to additional legal and financial problems, including
being required to withdraw from ownership or control of a business that
receives Medicaid or Medicare funds.28
DCH’s sanction precludes a person from enrolling in Medicaid or terminates
the person’s participation, then the person cannot directly or indirectly
participate in Medicaid while under the sanction.29
This effectively precludes employment by hospitals, managed care organizations,
clinics, and other health care providers that receive funds from Medicaid,
Medicare, or other government health care programs.
precluding or terminating a provider’s participation in Medicaid, DCH
typically imposes the same sanction as the federal government. Thus, if
a provider is excluded from Medicaid for five years by the federal government,
DCH will exclude the provider for five years. It should be noted, however,
that the termination or denial of enrollment under MCL 400.111e(2) for
fraud does not contain any time limits. The exclusion is permanent unless
the director determines that the provider’s reinstatement is in the best
the Medicaid program; and
the medical care of Medicaid recipients.
such a determination by the director, there is no legal basis to allow
a person who has been excluded to participate in Michigan’s Medicaid program.
Therefore, the mere expiration of a federal exclusion is not enough to
allow reinstatement as a provider in Michigan’s Medicaid program.
a civil or administrative judgment is entered against a provider for an
overpayment, the state may collect the judgment from the provider or the
provider’s corporation, partnership, business associates, employees, provider
group, or successors and assignees.31
In addition, the state has a priority lien on all of a provider’s assets
to recover an overpayment obtained by fraud.32
People v Orzame, 224 Mich App 551, 559–561 (1997).
Prechel v Dept of Social Services, 186 Mich App 547, 549 (1990).
See also, MCL 400.111b(10).
‘‘Abuse’’ means heath care practices that are substandard, negligent,
or unnecessarily increase the cost of heath care. Abusive practices may
or may not rise to the level of fraud.
Rutherford v Dept of Social Services, 193 Mich App 326 (1992).
MCL 750.483a and MCL 750.122.
MCL 750.411j et seq.
MCL 750.159g et seq.
See also, MCL 333.16221 as amended by 2002 PA 402 (effective June 3, 2002)
and MCL 333.16226, which defines the sanctions.
MCL 400.605(1) and (2).
MCL 769.1a(2) and MCL 780.766(2).
People v Gahan, 456 Mich 264 (1997).
MCL 769.1a(13) and MCL 780.766(13).
MCL 769.1a(14) and MCL 780.766(14).
The difference between what was paid on the claim and what would have
been paid had the claim been properly submitted.
MCL 752.1001 et seq.
See, MCL 24.271–MCL 24.287 and MCL 24.301–MCL 24.306.
MCL 400.111e (d) and 400.111d(1) (a)–(f). See also, 42 USC 1320a-7(b).
MCL 400111e(2) and 400111d(1)(a) and (c). See also, 42 USC 1320a-7(a).
MCL 400.111d(2) and 42 USC 1320a-7(b)(8).
MCL 400.111e (6).