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April 24, 2024

Government Relations 101: What Drives the Government's Decision to Pursue a Medicaid Program Violation as a Crime?

This blog is the ninth in a series about interacting with government regulators and is intended to help our clients understand and manage contact and outreach from government regulators, law enforcement, or both.

The Setup

As noted in the last blog in this series, this blog post also explores those factors that make a program violation material and when or under what circumstances it may be pursued as a crime, thereby potentially impacting a provider’s liberty, or pursued instead as a civil liability, thereby potentially impacting their wallet. Like with the last two posts, while this post addresses the question from the perspective of a pharmacy owner, the issues raised apply across all provider types.


The decision to pursue a program violation as a crime or as a civil wrong often lies more in the quantum of evidence underlying the violation than in the violations themselves. The same program violation—for example, upcoding or fee splitting1—can result in either criminal or civil liability depending on the facts, the strength of those facts, and who is bringing the action. And indeed, the difference between a civil and criminal fraud is often who is making the allegation. Only the government can charge an individual or entity with a crime, and in those instances, the government brings charges on behalf of the aggrieved party, the state. However, an aggrieved party can also be a private individual or entity, and they can individually accuse another of civil fraud. An example would be a finding that a pharmacy improperly upcoded a medication, seeking reimbursement, for example, for medication at a greater strength than ordered by the issuing physician. If this conduct was found to be systematic and intentional, criminal charges could be brought by the government. If, however, the conduct was the result of mistake or negligence, a pharmacy benefit manager (PBM) could nevertheless use this finding to terminate the pharmacy in question, seek repayment of those claims found to be mistaken, or both. This type of proceeding would be civil in nature.
A significant deciding factor is whether the rule or regulation was violated repeatedly or the violation was isolated. Repeated, long-standing violations, particularly those that were committed intentionally, are much more likely to result in criminal charges, as they evince a calculated intent to defraud the Medicaid program. By contrast, violations that do not evince an intent to defraud, even if systematic, are more likely not to be considered criminal and, if pursued, could subject a provider to an overpayment demand, administrative sanctions, or both.2

Periodic self-audits by providers to uncover improper but mistaken billing patterns are an important tool to avoid and, if necessary, address program violations. They provide a means to correct conduct a government regulator might otherwise find highly suspicious and prevent the provider from becoming the subject of an audit or investigation. 

Another significant deciding factor is the burden of proof. Success in a criminal case requires proving the underlying violation beyond a reasonable doubt; whereas in a civil case, the plaintiff’s burden is to prove the underlying violation by a preponderance of the evidence. The former is considerably more stringent than the latter, and in those instances where the proof is particularly strong, the government is more likely to pursue criminal charges. When the proof is weaker, the government is more likely to pursue civil charges. Non-governmental payors, such as managed care companies, PBMs, or both, are generally required to refer all program violations evincing criminal conduct to the government for investigation, prosecution, or both. Often, they do not. In those cases, and in other cases where the proof is weak, these non-governmental actors will seek the return of funds allegedly overpaid or seek other administrative remedies, such as exclusion or termination.

The Takeaway

Whether a program violation will garner government attention and lead to criminal charges is nuanced and depends on a host of factors, including the particulars of the violation, its frequency, the amount of money involved, and which government or non-governmental agency is investigating. A provider’s obligation to report a program violation as well as their options upon uncovering it is also heavily fact dependent and warrants careful consideration. 

Enrolled Medicaid providers who are the target of an audit or investigation, or who independently believe they may have violated program rules, are urged to contact their lawyer to discuss the situation and weigh their options. While funds expended in advance of an audit or investigation are certainly an unwelcome expense, these upfront expenditures are often considerably less than the cost of defending an audit or investigation after the government or a third-party payor has made findings or brought charges. 

Providers should consult with competent counsel as soon as they receive notice of a government or third-party payor audit or investigation or independently have reason to believe that they or their company could become the target of an audit or investigation. Barclay Damon has experienced professionals who can assist in setting up and conducting self-audits as well as creating plans of action to address government and third-party payor audits and investigations.

If you have any questions regarding the content of this blog, please contact Chris Shaw, partner, at, or another member of the firm’s Health Care Controversies or Health & Human Services Providers Teams or White Collar & Government Investigations Practice Area.

1See, 18 NYCRR § 515.2(14). “Factoring. Assigning payments under the program to a factor, either directly or by power of attorney; or receiving payment through any person whose compensation is not related to the cost of processing the claim, is related to the amount collected or is dependent upon collection of the payment.” As an unacceptable practice, factoring, like other unacceptable practices, can subject a provider to a host of sanctions, including exclusion.
2It is worth noting, however, that a provider’s “reckless disregard” of the falsity of their claims could subject the provider to liability under the False Claims Act.

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