DOJ Expands Health Fraud Probes, Courts Whistleblowers

“Don’t be another Theranos.” The Justice Department delivered that warning to health care executives Thursday while outlining an expanded effort to fight fraud in Medicare and Medicaid, public programs millions of Americans depend on for care.

At the STAT Summit in Boston, Jacob Foster, deputy assistant attorney general in the National Fraud Enforcement division, detailed the changes. Foster oversees the unit investigating health care fraud. The department is widening corporate wrongdoing investigations and making it easier for companies to report possible criminal activity. It’s also urging whistleblowers to come forward.

A One-Stop Shop for Self-Disclosure

Companies seeking to make voluntary disclosures will now have one point of contact at the Justice Department. Before, they had to navigate a separate process at the Department of Health and Human Services. The DOJ’s health care fraud section is taking over that process.

“What do you do? Who do you call? That is a question that industry shouldn’t have to ask,” Foster said.

Companies reporting potential criminal misconduct may receive benefits from both agencies at once, including a limit on financial damages. Foster laid out the incentive directly. “There’s nothing more that we want to know when a compliance failure occurs than to hear about the great efforts to remediate it, and reward that,” he said.

The incentive structure matters. Self-reporting remains voluntary, and coming clean can earn a company a ceiling on what it owes. Whether that bargain benefits taxpayers or violators depends on how consistently the department applies it.

Data, Algorithms and Whistleblowers

The department won’t rely on tips alone. Foster said investigators will use data analytics and artificial intelligence algorithms to find signs of corporate wrongdoing. He cited three patterns: providers billing for services patients didn’t need, companies fabricating patient records, and health tech firms adding redundant diagnoses. Investigators also search social media, news reports and other sources for clues that companies may be breaking the law.

The health care fraud section combines expertise on issues such as digital health technology.

An Oct. 1 memo from Assistant Attorney General Colin M. McDonald spells out a further role for people who spot wrongdoing. The department will create programs that “appropriately incentivize” whistleblowers to report fraud. Insiders, in other words, are being positioned as a frontline defense.

Where Prosecutors Will Look Hardest

The McDonald memo tells prosecutors to focus extra attention on schemes involving health care, controlled substances and violations of the federal Food, Drug, and Cosmetic Act. It directs them to give “great weight” to several factors: whether corporate executives knew about fraud or tried to hide it, whether a scheme lasted more than three years or crossed state lines, and whether it affected taxpayer-funded programs.

That last factor puts the public stake front and center. Foster described these programs as belonging to everyone. “No one, irrespective of party, likes the government being ripped off by wrongdoers,” he said. “These cases not only involve the theft of all of our tax dollars, [but] involve the theft from a program, a trust fund — Medicare — that could run out.”

The push comes as the Trump administration continues its fight against Medicare and Medicaid fraud, as the department describes it.

Why This Matters: Medicare and Medicaid provide the backbone of coverage for older, disabled and low-income Americans. Every dollar fraudsters siphon off is a dollar not spent on care. Foster warned that Medicare is a trust fund that “could run out.” Stronger enforcement, improved data tools and protected whistleblowers can help shore up public programs, sending a message that taxpayer-funded health care deserves real oversight.

But the details will determine what happens. A damages cap for companies that self-report could weaken accountability if officials apply it loosely. And the guidance’s attention to executive knowledge and concealment will matter only if senior leaders, not just companies, face consequences. Patients who relied on fabricated records or unnecessary services suffer first. Whether this expansion protects them and the programs they depend on will show in who prosecutors actually charge.