Justice Department targets billing fraud with new center

The Justice Department opened a National Fraud Detection Center this week, combining analysts and data from over a dozen federal inspector general offices into one prosecutor-led unit. The effort aims to eliminate gaps that have let fraudsters exploit multiple taxpayer-funded programs at once without detection.

Colin M. McDonald, assistant attorney general of the department’s National Fraud Enforcement Division, described the center as a major change in how the federal government spots and investigates complex fraud. The initiative focuses on a cross-program blind spot where schemes span Medicare, Medicaid, and other federal programs without notice.

Enforcement now begins with data, not complaints. Shannon Sumner, managing principal at PYA and the firm’s chief compliance officer, explained that investigations increasingly start with analytics. Practices get flagged when their data differs from peers.

The approach has changed. Investigators once reviewed claim samples and extrapolated results. Now, a practice’s full claims history can be analyzed and compared to others. A billing pattern that stands out, even within one code family, can prompt scrutiny without any charts being pulled.

That scrutiny does not always lead to charges. The first result of a data flag is often a payment hold. Pat Naples, an attorney at ArentFox Schiff who specializes in health care litigation, said data mining became a valid basis for a “credible allegation of fraud” in federal regulation in 2011. The government usually looks for large outliers rather than single odd claims.

This threshold is important because a credible allegation lets the Centers for Medicare & Medicaid Services suspend payments. The agency decides whether to consider a provider’s written rebuttal, and formal appeals go through administrative channels before reaching court.

In June, CMS suspended 1,079 providers and revoked billing privileges for 1,403 more during a national health care fraud takedown. The action showed the reach of this authority.

Many practices do not grasp how fast the financial impact can arrive. A payment suspension can disrupt operations long before any legal case starts, and challenging it is slow and uncertain. The system prioritizes caution, so false positives can still harm a practice’s ability to function.

Naples advises practices to monitor their own data closely. Doing so keeps the option of voluntary self-disclosure open, which reduces penalties.

Sumner suggests creating internal dashboards that match the analytics regulators use. These should track evaluation and management distributions, modifier rates, high-cost code usage, denials, and refunds. Practices should concentrate audits on the 20% of activity posing the most risk.

Certain areas face the most scrutiny: E/M level selection, medical necessity, modifier misuse, incident-to billing, split and shared visits, telehealth documentation, and Medicare Advantage risk adjustment. Relationships with suppliers, like durable medical equipment companies, also carry high risk.

A compliance program does not need a large budget. Sumner said the basics include a designated compliance lead who does not handle billing, written policies that reflect actual operations, role-specific training, and routine audits of high-risk billing areas. She noted that data errors are seen as compliance failures, not technical mistakes, and the Office of Inspector General has indicated the lack of an effective program can worsen penalties, even for small practices.

Third-party risks also matter. Sumner stressed vendor due diligence, business associate agreements, and internal risk assessments of how AI-assisted documentation and coding tools affect billing. A billing company’s default settings can shape a practice’s entire data profile.

Practices not directly targeted may still face costs. Naples pointed out that serving as a witness in a supplier’s case can require responding to subpoenas and making staff available for interviews.

The center is already active. There was no public comment period, and no start date was announced.

Pre-visit planning can help practices avoid these issues by improving workflow and reducing errors before claims are submitted.