The Evolution from Medicare Audits to FCA Claims: What Healthcare Providers Need to Know in 2025

Authors: Daniel Ayyash and Kelsey Clauss, Wachler & Associates, P.C

Date: 4/11/2025

Healthcare providers are well aware of the complexities and demands of Medicare audits and the havoc they can wreak. However, with careful billing, attention to detail, and thorough documentation, it is possible to turn the tide. However, a recent trend indicates that Medicare audits are being scrutinized much more closely and are quickly evolving into something far more serious—an investigation under the False Claims Act (FCA). 

The Medicare audit process typically involves a review of healthcare claims, medical records, billing codes, and supporting documentation. When alleged discrepancies are found—such as improper coding, overbilling, inaccurate claims, or inadequate documentation—providers may face overpayment allegations, repayment demands, and other related consequences, usually contained within the administrative Medicare framework and not escalated to a matter under the FCA… Until now.

What is the False Claims Act (FCA)?

The FCA is a powerful federal law designed to hold individuals and organizations accountable for submitting fraudulent or false claims for payment from the government. Originally introduced to address unscrupulous government contractors during the Civil War, the FCA has become a popular tool for prosecuting alleged healthcare fraud. Generally, the FCA imposes civil liability for knowingly submitting false claims to the government. The FCA also allows individuals to initiate the prosecution under a qui tam action, in which the government may decide to intervene and wherein the individual is entitled to a share of the government’s recovery. In the healthcare sector, the FCA is often invoked to prosecute providers who engage in perceived fraudulent billing or claims submission practices. Common allegations include submitting claims for services that were never rendered, misrepresenting the procedures or services actually provided, or inflating billing codes to increase reimbursement rates.

How Medicare Audits Lead to FCA Claims

The key connection between Medicare audits and FCA allegations lies in the assertion of alleged fraud or improper conduct during the audit process. What often starts as a routine review of documentation and patient files can quickly escalate if discrepancies or signs of fraudulent activity are alleged by the Medicare contractors. For example, if the findings of an audit assert that a provider consistently submitted claims for services that were never rendered or inadequately documented, such findings may raise red flags that trigger an FCA investigation. From that point, the financial and legal consequences can become significant.

The Financial and Legal Impact of FCA Claims

A potential violation of the FCA can be costly and carries severe consequences, including treble damages and a per-claim penalty that increases each year with inflation. The breakdown of potential penalties for providers could be as follows:

• Per-Claim Penalties: The law imposes a penalty for each false claim submitted. As of 2025, these penalties range from $13,508 to $27,018 per claim.
• Treble Damages: In addition to the per-claim penalties, violators may be required to pay up to three times the amount of damages sustained by the government due to the false claims.
• Exclusion from Government Programs: Those liable under the FCA may face exclusion from participation in federal healthcare programs, such Medicare and Medicaid.
• Criminal Charges: While the FCA is a civil statute, in the most egregious cases, it can lead to criminal charges.

Recently, the Department of Justice (DOJ) released recovered damages figures related to two significant FCA investigations involving Medicare providers, and they were not cheap. Saad Enterprises Inc. agreed to pay $3 million to settle False Claims Act allegations for billing Medicare for ineligible hospice patients. Additionally, over 17 separate cardiologists agreed to pay more than $17 million for their alleged overbilling to Medicare for diagnostic radiopharmaceuticals.

Most remarkably, the DOJ issued a stark warning in a case involving Independent Health Association and its affiliates. There, U.S. Attorney Trini E. Ross, of the Western District of New York, emphasized the government’s unwavering commitment to upholding the integrity of Medicare and the serious consequences of fraud: “To protect the integrity of Medicare and other federal health care programs, my office is committed to ensuring that each and every dollar meant for Medicare beneficiaries is spent appropriately and in accordance with the law. As this settlement makes clear, we will diligently pursue those who defraud government programs.” Independent Health Association and its affiliates ultimately agreed to settle their alleged violations of the False Claims Act. If the above statement emphasizing every dollar being accounted for doesn’t send a chill down providers’ backs, perhaps the fact that the provider in that case settled the FCA allegations for $98 million will.

At the end of the day, money comes and goes, but are providers really facing prison time for this? They very well could be. As of February 2025, a New York doctor who was found guilty of submitting over $24 million worth in fraudulent claims to Medicare for medically unnecessary laboratory tests is currently in the custody of a U.S. Marshal and is awaiting sentencing on his 10 counts of fraud-related crimes, all with a maximum penalty of 10 years in prison.

Key Trends for 2025

Utilizing the FCA as a tool to combat Medicare fraud is here to stay. Of the $2.9 billion recovered by the DOJ through False Claims Act settlements and judgments in 2024, $1.67 billion related to healthcare. At the Federal Bar Association’s (FBA) Annual Qui Tam Conference on February 20, 2025, DOJ representatives Michael Granston (Deputy Assistant Attorney General for Commercial Litigation) and Jamie Yavelberg (Director of the Fraud Section in the Civil Division) emphasized Medicare as a key enforcement priority for the FCA.

On March 11, 2025, the White House officially weighed in on the issue. With the Department of Government and Efficiency actively involved, the emphasis was on fraud, identifying Medicare and Medicaid as the primary culprits. It was reported that the Centers for Medicare & Medicaid Services (CMS) estimated over $140 billion in improper payments for 2024 alone.

Furthermore, artificial intelligence (AI) and data analytics are revolutionizing the audit process, potentially heightening the risk of FCA claims. According to Medical Coding News, Medicare auditors are anticipated to increasingly utilize AI to identify unusual patterns or anomalies—like perceived excessive billing for particular procedures or services—allowing for the swift and efficient analysis of extensive claims data. This shift toward AI-driven audits means that providers should become more diligent in ensuring their documentation is both accurate and comprehensive. Alleged errors or discrepancies in medical records, no matter how small, can be flagged by automated systems, leading to heightened scrutiny and quite possibly a heightened risk of an FCA investigation.

As 2025 progresses with numerous changes and developments in the federal government’s investigation and enforcement efforts in the healthcare industry, providers must remain vigilant in their billing practices and documentation. Ensuring compliance is the best defense against Medicare audits and FCA allegations.