When Does A Billing Error Become Federal Healthcare Fraud?

At Mark Diaz & Associates, we work with many medical professionals, office managers, and business owners who never imagined they would be facing criminal charges. One of the most common areas where this happens is in healthcare billing. What might start as a minor documentation mistake or coding error can quickly trigger a federal investigation. The question we hear often is: when does a billing error cross the line into federal healthcare fraud?

The answer depends on the intent behind the action, the pattern of conduct, and how the billing was submitted to Medicare, Medicaid, or other federally funded healthcare programs. While human error is not a crime, repeated or intentional misstatements on claims can lead to serious legal consequences, including federal felony charges.

In Texas, state and federal agencies are working more closely than ever to monitor billing practices. Providers in Galveston, Houston, and across the state need to understand what puts them at risk—and how to respond if they are accused of wrongdoing.

What Is Federal Healthcare Fraud?

Healthcare fraud is broadly defined under 18 U.S.C. § 1347. This federal statute makes it a crime to knowingly and willfully execute, or attempt to execute, a scheme to defraud any healthcare benefit program, or to obtain funds through false or fraudulent pretenses. The law covers billing submitted to Medicare, Medicaid, TriCare, the VA, and any federally funded insurance.

The government does not need to prove that the fraud was successful—only that there was intent to deceive or gain money improperly. That means even an attempt to submit a false claim can result in criminal prosecution.

Examples of conduct that can lead to charges include:

• Billing for services not provided
• Using incorrect billing codes to increase reimbursement (upcoding)
• Submitting duplicate claims for the same service
• Misrepresenting the provider of service
• Falsifying patient records to justify procedures
• Paying or receiving kickbacks for patient referrals (which may also violate the Anti-Kickback Statute, 42 U.S.C. § 1320a–7b)

The Role Of Intent In Determining Criminal Liability

One of the most important legal factors is intent. If a billing mistake was truly accidental, it may result in overpayment recovery or administrative penalties—but not criminal charges. However, if there is evidence that the provider or billing staff knew the claim was false and submitted it anyway, prosecutors may pursue fraud charges.

Courts look at documentation, emails, staff instructions, and billing patterns to determine if there was a willful plan to submit false information. A single mistake is usually not enough to lead to prosecution. But repeated or coordinated actions often raise red flags.

How Texas Law Addresses Medicaid Fraud

In addition to federal law, Texas Penal Code § 35A.02 addresses Medicaid fraud under state law. This statute makes it illegal to knowingly make false statements or misrepresentations to obtain payment from the Medicaid program.

Texas law outlines offenses such as:

• Billing for unnecessary medical services
• Concealing information affecting eligibility or payments
• Making false statements in applications or billing documents
• Failing to refund overpayments

Penalties can range from a state jail felony to a first-degree felony, depending on the amount involved. State prosecutors may work with federal agencies or pursue charges independently.

What Triggers An Investigation?

Federal healthcare fraud cases often begin with:

• Whistleblower complaints from employees under the False Claims Act
• Audits or data analysis showing irregular billing patterns
• Patient complaints about being billed for unreceived services
• Referrals from other agencies, like the Department of Health and Human Services (HHS) or the Texas Office of Inspector General

Once an investigation begins, providers may receive subpoenas, civil investigative demands, or even search warrants. Being proactive in this situation is essential.

Civil vs. Criminal Liability

Not all healthcare billing cases result in criminal charges. In many situations, the government pursues civil penalties instead of or before filing criminal indictments.

Under the False Claims Act, providers can be sued civilly for knowingly submitting false claims. These cases often involve substantial financial penalties, including treble damages (triple the government’s loss) and fines per false claim.

The government may also impose administrative sanctions, such as:

• Exclusion from Medicare or Medicaid participation
• Licensing action by the Texas Medical Board or the State Board of Pharmacy
• Civil monetary penalties (CMPs)

Defending Against Healthcare Fraud Charges

If you are under investigation or have been charged with federal healthcare fraud, you have the right to defend yourself. At our firm, we examine every detail of the case, including:

• Whether the billing issue was intentional or clerical
• If the statute was applied correctly
• Whether prosecutors can prove intent beyond a reasonable doubt
• If the evidence supports a lesser charge or civil resolution
• Whether the provider took steps to correct the error before being contacted

Every case is unique, but we often find that early legal action can prevent escalation and help avoid severe penalties.

Protecting Your Practice Going Forward

Healthcare billing is complex, and even well-meaning providers can make mistakes. We advise our clients to:

• Train all staff on proper billing procedures
• Use compliance programs to monitor billing accuracy
• Document all services clearly in the patient’s medical record
• Review coding and claims submissions regularly
• Respond promptly to any overpayment notice or audit request

Implementing strong internal controls can help reduce the risk of facing a criminal inquiry.

Federal Healthcare Fraud And Billing Error FAQs

Can A Simple Billing Mistake Lead To Criminal Charges?

Not all billing mistakes are crimes. To be prosecuted under federal law, the mistake must involve intent to defraud. This means the provider knowingly submitted a false claim or used deception to obtain funds. Honest clerical errors or misunderstandings about coding are usually handled through administrative processes, not criminal courts. However, repeated mistakes or failure to correct known issues can raise suspicion and lead to legal trouble.

What Is The Difference Between A Civil False Claims Case And A Criminal Fraud Case?

A civil case under the False Claims Act is focused on recovering money for the government. It may involve large fines but does not result in prison time. A criminal healthcare fraud case, on the other hand, can result in felony charges, prison time, and a permanent criminal record. Both cases may stem from the same facts, but the burden of proof and consequences are different.

How Do Investigators Prove Intent In A Fraud Case?

Prosecutors rely on emails, billing records, testimony from employees, and audit results to show intent. If the evidence shows the provider knew the claim was false but submitted it anyway—or ignored clear signs of fraud—intent can be established. Prosecutors may also look at whether the provider changed behavior after receiving a warning, which can either help or hurt the defense.

Can I Be Prosecuted If My Billing Staff Made The Error?

Yes, but only if you were involved or willfully ignored the issue. As the owner or manager of a practice, you may be held responsible under theories of conspiracy or aiding and abetting if you approved or encouraged the false billing. However, if your staff made the error without your knowledge and you corrected it quickly, that is a strong defense.

What Are The Penalties For Federal Healthcare Fraud?

Federal healthcare fraud is a felony. Conviction under 18 U.S.C. § 1347 can result in up to 10 years in prison per count, or up to 20 years if serious bodily injury is involved. In addition, defendants may be ordered to pay restitution, fines, and may lose their professional license or billing privileges.

Are Kickbacks Considered Fraud Even If The Patient Got Care?

Yes. Under the Anti-Kickback Statute, it is illegal to offer or receive anything of value in exchange for patient referrals, even if the services were medically necessary and properly billed. Violations can lead to separate federal charges and increase the overall penalties in a fraud case.

How Long Does A Federal Investigation Take?

Federal investigations often take months or even years. Agents will gather documents, conduct interviews, and build their case before filing charges. This gives defense attorneys time to intervene early and potentially resolve the case through a settlement or civil resolution. Waiting to act can limit your options and increase your risk.

What Should I Do If I Get A Subpoena Or Target Letter?

Call a criminal defense attorney immediately. A subpoena or target letter means the government is already investigating. Do not speak to investigators or try to “clear things up” on your own. Anything you say can be used against you later. A defense lawyer can review the letter, protect your rights, and begin building your defense strategy.

Call Mark Diaz & Associates For Your Free Consultation

At Mark Diaz & Associates, we defend healthcare providers and business owners accused of federal healthcare fraud, Medicaid fraud, and related offenses across Galveston and Houston. If you are being investigated or have received a subpoena, target letter, or audit notice, do not wait. Your license, career, and freedom may be at risk.

Contact our Galveston criminal defense attorney at Mark Diaz & Associates today by calling 409-515-6170 to schedule your free consultation. We will help you understand your legal options and fight to protect your name, your practice, and your future.