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Under MCL 400.607, Michigan’s primary Medicaid fraud statute, it’s a felony to knowingly make a false statement to obtain Medicaid payments. That word—knowingly—is doing a lot of work. It doesn’t mean you consciously decided to steal from Medicaid. It means you either knew the claim was false, were recklessly indifferent to whether it was accurate, or deliberately avoided learning the billing rules. The law treats willful blindness the same as actual knowledge.
A single miscoded claim is an administrative error that results in a repayment demand. However, a hundred miscoded claims (especially the same type of error repeated over months) starts looking like intent. Prosecutors use data analytics to identify these patterns, then argue that the repetition itself proves you knew what you were doing, or should have known.
If you’ve received an overpayment notice, a subpoena, or an unexpected visit from investigators, call Ben Hall Law. We’ll assess whether this is an administrative matter or something more serious.
The core of any fraud case (what separates a civil penalty from a criminal conviction) is the element of intent. In other words, prosecutors must prove that you acted knowingly. Many providers mistakenly believe they are protected because they did not consciously decide to steal from Medicaid. The law, however, defines knowingly far more broadly than just direct, admitted intent.
Under Michigan’s primary Medicaid fraud statute, MCL 400.607, it is a felony to knowingly make a false statement to obtain Medicaid payments. This state law is complemented by federal statutes like 18 U.S.C. § 1347 (Health Care Fraud), which also hinges on a knowing and willful standard.
This is where providers fall into the so-called knowledge trap. The law accounts for situations that are not direct, premeditated theft through two key legal concepts:
Under the False Claims Act and corresponding criminal laws, a provider has a duty to exercise due diligence. You cannot simply trust that a third-party biller is doing everything correctly without any oversight, nor can you ignore red flags like an unusual number of claim denials for the same reason. Claiming ignorance of cumbersome coding rules is rarely a successful defense if your practice failed to take reasonable steps to ensure compliance.
Most criminal Medicaid fraud cases in Michigan do not begin with an arrest. They start with something far more common: a letter from the MDHHS Office of Inspector General (MDHHS-OIG) or a Medicaid Health Plan (MHP) announcing an audit. This administrative process may, and frequently does, serve as the launching point for a criminal investigation.
The turning point is the determination of a credible allegation of fraud. Under federal regulation 42 C.F.R. § 455.23, once a state agency determines such an allegation exists, it is required in most cases to suspend all Medicaid payments to the provider immediately. This can happen long before any charges are filed, choking off the financial lifeblood of a practice.
The process of a case moving from a civil audit to a criminal probe generally follows a clear path:
How can you tell if your administrative audit has crossed the line into a criminal investigation? There are several subtle but significant indicators:
If you observe any of these warning signs, stop all direct communication with investigators and contact legal counsel immediately.
A central challenge in defending against Medicaid fraud allegations is distinguishing between simple administrative mistakes and an intentional, fraudulent scheme. According to CMS data, a high percentage of improper Medicaid payments nationwide are the result of documentation errors, not outright fraud.
These are mistakes that typically result in overpayment demands and the implementation of a Corrective Action Plan (CAP). While serious, they are not usually considered criminal:
These are the red flags that investigators at the MFCU look for. They suggest a deliberate intent to deceive and are the focus of prosecution for providers facing potential charges of when billing errors become criminal Medicaid fraud. These schemes include:
A common mistake can escalate a civil issue into a criminal one. Imagine a provider, facing an audit, discovers they forgot to write a progress note for a patient visit weeks ago. In a moment of panic, they create the note and date it as if it were written on the day of the service.
This act of backdating transforms an administrative problem (missing documentation) into an affirmative false statement—a potential felony. It is sometimes the cover-up, not the original error, that leads to criminal charges.
Many providers under investigation make the same argument: “It was just a few bad claims out of the thousands we submit every year. How can that be a crime?” This defense misunderstands how prosecutors build a case. They are not focused on your overall accuracy rate; they are focused on the error rate within the sample of claims they audited.
Prosecutors use sophisticated data mining and statistical sampling to build their case. An auditor might review 100 claims, find errors in 30 of them, and then extrapolate that 30% error rate across every claim you submitted for the past several years. This turns a small sample of mistakes into a large-dollar scheme to defraud. The government argues that the sheer volume of errors, or the repetition of the same type of error, is itself evidence of a willful pattern and practice of fraud, not just isolated mistakes.
An effective defense strategy requires auditing the auditor. We scrutinize the government’s statistical methods to show that the alleged pattern is a misinterpretation of the data, a software glitch, or a result of confusing and ambiguous billing rules—not evidence of criminal willfulness. Essentially, we provide context that the government’s raw data lacks.
Perhaps the most immediate threat to a healthcare provider facing a fraud investigation is not a conviction, but the devastating impact of preliminary administrative actions. Your practice could be forced to close its doors long before your case ever sees the inside of a courtroom.
The first blow is typically the payment freeze. As mentioned, upon a finding of a credible allegation of fraud, MDHHS can suspend all Medicaid payments. There is no trial or hearing before this happens; the cash flow simply stops. For practices that rely heavily on Medicaid reimbursement, this action alone can be catastrophic, making it impossible to meet payroll, pay rent, or cover other operating expenses.
Surviving this phase requires immediate legal intervention. An attorney can challenge the basis for the suspension, argue that good cause exists to lift it, or negotiate an agreement where payments are placed in escrow pending the outcome of the investigation.
The second major risk is OIG Exclusion. A criminal conviction for healthcare fraud results in mandatory exclusion from all federal healthcare programs, including Medicare and Medicaid. Even some civil settlements may trigger exclusion.
For any licensed medical professional, exclusion is a career death sentence. It effectively bars you from treating any patient whose care is funded by federal dollars, making employment in the healthcare industry nearly impossible anywhere in the United States.
Yes. As the enrolled provider, you are ultimately responsible for every claim submitted under your National Provider Identifier (NPI). While you did not personally submit the claims, if you were found to have been recklessly indifferent to the biller’s actions or deliberately ignorant of their errors, the law can hold you responsible. Lack of supervision is not a defense.
The MDHHS-OIG handles primarily administrative and civil matters; their goal is to identify improper payments and get the money back for the state. The MFCU, which is part of the Attorney General’s office, conducts criminal investigations; their goal is to secure indictments and convictions that may result in jail time and fines. However, the OIG regularly refers cases with evidence of intent to the MFCU.
Not necessarily. While repaying an overpayment might demonstrate good faith and may be a factor in negotiations, it does not erase the fact that a false statement may have been made to the government. Prosecutors might view the repayment as an admission of guilt. This decision should only be made as part of a comprehensive legal strategy.
It is a very low threshold. A credible allegation can be triggered by many things, such as a complaint from a disgruntled ex-employee, a pattern of errors identified by data mining algorithms, or a verified tip from a patient. The state must review the facts, but it does not need proof beyond a reasonable doubt to suspend payments.
In some cases, yes. A primary objective for a defense attorney in these cases is to keep the matter in the civil arena. This may involve negotiating a settlement under the False Claims Act, which typically involves repayment, fines, and sometimes a corporate integrity agreement, but avoids the life-altering consequences of a criminal conviction.
The fine line between a clerical error and a felony conviction could come down to the quality of your defense and the speed of your response.
The government brings vast resources, data analytics, and teams of investigators to scrutinize your billing practices. You cannot afford to rely on an explanation of bad bookkeeping to protect you from a fraud conviction. You need a proactive defense that challenges the government’s evidence and narrative at every step.
If your practice is under audit or you have received a subpoena related to your Medicaid billing, call us today. We will review the allegations, preserve your rights, and execute a strategy designed to protect your professional future.
