The rapidly rising costs of modern healthcare means millions of dollars a day flow through hospitals, in the form of charges to patients, insurance, and government payers like Medicare, Medicaid, and Tricare. This creates opportunities for providers in hospitals to commit hospital fraud. Hospital fraud is when hospitals seeking increased profits for shareholders and greater compensation for executives engage in practices that help their bottom line. They do this at the expense of the federal government, taxpayers, and patients.

Hospital Fraud describes a wide range of illegal practices when hospitals attempt to collect more money than they are legally entitled. They may use improper medical billing, charging, coding, or cost reporting practices to generate more profit. Often, hospitals that engage in medical billing fraud don’t stop at just one—they typically commit some combination of fraud practices. Some types of hospital fraud that have been seen with hospitals and other healthcare providers include:

  • Billing for medical services or medical supplies that were not medically necessary in a patient’s care
  • Billing for medical services or supplies that were not provided to patients or used at all
  • Upcoding: manipulating billing codes to bill an insurer, Medicare or Medicaid, for a procedure that earns a higher reimbursement than the one performed
  • Unbundling: the practice of billing parts of one procedure separately to obtain higher levels of compensation
  • Billing for services performed by medical residents that were not supervised as required by law by a teaching physician
  • Paying kickbacks (or bribes) to doctors and other healthcare providers in exchange for referring patients to the hospital

Fortunately, thanks to the False Claims Act, our legal system provides incentives to whistleblowers, who play a vital role in helping stop hospitals that engage in billing fraud, Medicare fraud, and insurance fraud. Whistleblowers – often ordinary employees in administrative roles who are first-hand witnesses to these fraudulent practices – can pursue legal action that brings hospital fraud to light. With the help of attorneys, whistleblowers may be rewarded and receive a percentage of what the government recovers.

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Hospitals are also subject to a separate type of medical fraud known as a kickback violation. The Anti-Kickback Statue (AKS) is a federal law that prohibits offering, receiving, paying, or soliciting anything of value to reward referrals or generate Federal healthcare business. The idea behind a kickback, or bribe, is that the organization seeking reimbursement from the government for a service to be rendered pays a provider to:

  • Refer a patient
  • Purchase a piece of equipment
  • Initiate a transaction that will bring federal income to that organization

There are a wide variety of ways in which hospitals may violate the AKS, such as:

  • Agreements between providing organizations to refer patients for a percentage of the amount collected from the government
  • The fraudulent leasing of medical equipment as a way for a hospital to pay a doctor for referrals

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Inpatient fraud is sometimes discussed as a separate category of medical fraud. The unique aspects of treatment in a hospital environment, and particularly emergency room—high patient load, fast turnover, wide-ranging diagnostic testing—can create abundant opportunities for dishonest providers to commit medical fraud.

Medical Necessity

One key area where hospital inpatient fraud is often found is the area of “medical necessity” decisions – or lack thereof. This begins with the hospital’s decision to admit the patient; if a hospital elects to admit a patient without determining whether admission is necessary, the hospital may be subject to a claim of hospital billing fraud.

Ghost Patients

Inpatient fraud may also occur when services were billed but never actually delivered—these are so-called “ghost” patients. The provider would submit claims for health care services (treatments or tests) that were never given to the patient. Or, a medical provider might submit a claim for tests, treatments or other health care services for a patient who either does not exist or who never received the services. This is a clear example of hospital billing fraud that may take an attentive hospital whistleblower to uncover.

Patient Transfers

Hospitals may also commit inpatient fraud through the misuse of patient transfers. The use of improper coding procedures in patient transfers is a common area of fraud. Transferring a patient with intentionally improper coding allows a hospital to receive a per diem transfer payment. This is a violation of the False Claims Act. Another example is inappropriate transferring of patients between a host hospital and a hospital-within-a-hospital.

Annual Cost Reporting

Another area where hospital fraud is frequently found is in annual cost reporting. Hospitals that participate in Medicare Part A must submit an annual cost report. These reports itemize many of the costs incurred by the hospital in providing care, like various procedures performed at the hospital, the costs of devices and equipment purchased by the hospital, leasing costs, etc.

This annual cost report is considered a “claim” within the meaning of the False Claims Act. The report serves as the basis for claims for reimbursement submitted to Medicare, Medicaid and TRICARE programs. Hospitals that overstate the costs they incurred on one of these reports are effectively committing hospital Medicare fraud. Often whistleblowers are the most effective backstop at identifying and catching this fraud.


Whistleblowers are most often current or former employees of a hospital. The key requirement a whistleblower must satisfy is that he or she must have clear knowledge of fraudulent activity by the hospital or healthcare provider.

Though hospital employees are the most common whistleblowers in hospital fraud cases, whistleblowers are not limited solely to hospital employees—independent contractors, consultants, and other individuals who have knowledge of Medicare fraud at hospitals may also be eligible to serve as whistleblowers. Administrators, doctors, nurses, physician assistants, accountants, billing specialists, coding supervisors, and benefit administrators are all people who have served in whistleblower roles bringing false hospital fraud cases to light.


The False Claims Act (FCA) makes it illegal to submit a false claim for payment to the government by a government contractor. This includes healthcare providers reimbursed through government healthcare programs.

When a whistleblower initiates a case under the FCA, they file their complaint under seal, making the allegations of the complaint confidential. The FCA also affords these whistleblowers protection from employment retaliation. Whistleblowers also receive a reward—between 15-25% of the total recovery.

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These are just some examples of the types of hospital billing fraud cases that involve violations of the False Claims Act, and which may be brought to successful resolutions thanks to whistleblowers.

A notable example of a kickback violation occurred in 2017, when Staten Island physicians were caught accepting hundreds of thousands of dollars in cash kickbacks in return for sending blood samples to a New Jersey lab. Pediatrician George Roussis and brother Nicholas Roussis, an obstetrician-gynecologist, admitted to accepting roughly $175,000 in cash payments from the lab in question from October 2010 to April 2013. In exchange for these illegal kickbacks, the doctors in turn referred their patients’ blood specimens to the lab, generating more than $1.7 million in total lab business. The government recovered millions of dollars from these doctors after uncovering their illegal kickback scheme.

A similar case in 2018 illustrates the magnitude of the fraud in these cases, and also the size of the potential recoveries, thanks to whistleblowers. In a whistleblower case in South Carolina, a federal judge imposed civil damages and penalties totaling more than $114 million on the former CEO of a medical testing lab and two owners of the lab’s marketing partner for violations of the False Claims Act.

The CEO of Health Diagnostic Laboratory (HDL) in Richmond, VA, and the owners of BlueWave Healthcare Consultants, an Alabama marketing company, were ordered to pay more than $111 million in damages and penalties for fraud. The fraud was in relation to HDL’s arrangement with BlueWave to market HDL blood tests in part by offering illegal kickbacks to physicians who ordered the tests.


While the FCA offers rewards and protections for whistleblowers, a whistleblower reporting hospital fraud should consult with an experienced attorney before taking action against a provider. The legal issues surrounding whistleblower protections are complicated, and obtaining relief for discharge, demotion, or discrimination as a result of whistleblowing involves knowing how to navigate the federal and state laws. Whistleblowers can face severe personal and professional harm as their reward for their stepping forward if they are not backed by attorneys who know the law, and who know how to handle FCA cases.

The attorneys at Price Armstrong have experience in successfully representing whistleblowers in FCA cases. If you have information about hospital fraud, or other forms of medical billing fraud, an attorney at Price Armstrong is available for a free consultation regarding your options.

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If you have evidence of past or ongoing hospital fraud, contact the attorneys at Price Armstrong. We can help you seek justice and protect your rights throughout the process. We represent clients nationwide with offices in Birmingham, AL, Tallahassee, FL and Albany, GA.Call us today at (205) 208-9588 for a free initial consultation and review of your case. Let us fight for you – call now!