The Trump administration’s crackdown on fraud, waste and abuse continues, with the Justice Department last week launching a new initiative targeting health care fraud.
The DOJ deployed a strike force targeting health care fraud in Arizona, Nevada and Northern California. The new strike force – which the DOJ calls its “West Coast” health care fraud strike force – comes seven months after the department launched a similar striking force tackling healthcare fraud in Massachusetts. Florida is not yet on this list, although it has a reputation for healthcare fraudbut maybe it will be next time.
Experts believe the new strike force reflects the federal government’s broader efforts to tailor its fight against fraud to industries that are increasingly data and technology-driven by the day.
Why these regions?
The new West Coast strike force is an expansion of a long-standing enforcement model that dates back to the late 2000s, according to Meredith Williams. She is currently a lawyer at Barnes & Thornburgbut before that, Williams spent two decades working as a senior attorney for the HHS Office of Inspector General.
Williams said these strike forces were created to quickly deploy federal prosecutors and investigators to areas reported as fraud hot spots, and this model has long been used by agencies like the DOJ, FBI, DEA and HHS-OIG to pursue large-scale criminal health care fraud schemes.
The Trump administration launched its first health care fraud task force in Massachusetts because the state is one of the nation’s largest health care and life sciences hubs. And of course, its latest decision to deploy its personnel to Arizona, Nevada and Northern California wasn’t random either.
The DOJ recently prosecuted several massive fraud cases in Arizona related to Medicaid Billing, sober homes And wound care programs it would have cost taxpayers billions of dollars. And in Nevada, federal authorities have been investigating a sharp increase in suspected cases. Medicare and hospice fraudfueled in part by the rapid growth of the state’s elderly population.
According to the most recent annual report that the Medicare Payment Advisory Commission (MedPAC) provides to Congress, the growth of hospice providers has exploded in a handful of states, including Arizona, Nevada, and California, at a rate that far exceeds that of the rest of the country.
The report highlighted several red flags that regulators typically associate with fraud, including sudden increases in providers despite no corresponding increase in patient need, patients staying in a hospice for an unusually long time, groups of providers operating out of the same address, and patients frequently leaving the hospice alive. California has become such a concern that the state temporarily stopped issuing new hospice licenses and strengthened oversight laws, the report notes.
As for Northern California in particular, the region is the epicenter of new AI tools that are increasingly being integrated into the US healthcare system. As AI and advanced technologies continue to play a significant role in fraud, the DOJ is sending more law enforcement agents to the region to try to detect and disrupt complex schemes earlier and at scale, Williams said.
She also noted that federal regulators are seeing an increase in fraud schemes that span multiple states, including controlled substance cases involving telehealth companies prescribing medications across state lines.
The strike force model is designed to inject resources into these regions, such as additional prosecutors, investigators and data analysts. By doing so, the DOJ aims to dismantle large-scale health care fraud schemes sooner, Williams said.
If the DOJ ends up launching another regional health care fraud task force, Florida could be the next target. Williams noted that the Trump administration spear an investigation into fraud in the state’s Medicaid program in March.
Put the industry on alert
Williams pointed out that the Justice Department is currently focused on egregious criminal behavior, such as pill mills and sham operations charging for nonexistent services. So she doesn’t think legitimate digital health companies have much to worry about, as long as they can demonstrate compliance with the law. Williams added that advanced claims analytics helps authorities distinguish between bad actors and compliant providers.
“It’s a reminder to providers and digital health companies that this is a highly regulated landscape and they need to have a strong compliance program. They need to be aware of the laws and regulations that they’re operating under, and they need to have the right policies and processes in place – like internal audit, for example – to make sure they stay on track. I think that’s really the message,” Williams remarked.
She noted that the new strike also builds on the DOJ’s recent investments in data-driven law enforcement, including last summer’s launch of the Healthcare Fraud Data Fusion Centerwhich was created so that the DOJ, FBI, DEA, and HHS-OIG could share analysis and identify fraudulent schemes more quickly.
Another legal expert — Ty Howard, a former federal prosecutor who is currently a partner and chairman of law enforcement and government investigations at Bradley Arant Boult Cummings — noted that government and industry are becoming more sophisticated in the use of data analytics.
In his view, this strengthens the DOJ’s enforcement capabilities, but could also increase oversight of vendors whose billing models or compliance practices may appear unusual, even if legitimate.
“The problem with data analytics is that some very legitimate uses and billing models will continue to get attention. So be prepared for that,” Howard said.
Because the DOJ will review the data on such a scale, not all reported anomalies or trends will necessarily indicate wrongdoing — some might simply reflect actual clinical variation or business growth that appears atypical in aggregate data sets but is entirely appropriate in practice, he explained.
Howard thinks the biggest short-term impact of the new strike force will likely be deterrence. He thinks digital health providers and companies will be more likely to review their own compliance programs, consult legal counsel and audit their internal operations — because even being flagged for review can result in real business costs, Howard said.
He believed the DOJ’s growing focus on health care fraud could raise the compliance bar for the industry, particularly in areas like telehealth and e-prescribing, where regulatory lines may be less clear and federal oversight is intensifying.
A new type of fraud risk
The launch of the new strike force is good news for Mary Inman, partner at Whistleblowing partnerswho represents whistleblowers in health care fraud cases. Coordinated strike forces increase the likelihood that whistleblowers’ allegations will be investigated and action taken, she noted.
She noted that healthcare fraud is enhanced by AI, which allows nefarious schemes to grow faster and become more complex – making enforcement efforts of this type all the more necessary.
Inman also highlighted that a major emerging risk area is healthcare providers, where companies are rapidly developing and then commercializing AI tools for tasks such as coding, billing and compliance. Sometimes these startups overestimate their capabilities or lack a true understanding of regulatory requirements, she said.
“I call it ‘AI washing’ – many vendors are trying to gain a competitive advantage by saying, ‘We’re applying AI,’ when sometimes they don’t even have that capability. And more importantly, they may not have the industry knowledge, but they’re using AI and the trappings of AI to try to attract more customers,” Inman remarked.
She noted that this is a type of health care fraud that hasn’t received much attention from the federal government, but could begin to change if the DOJ continues to step up its enforcement efforts.
This can create new compliance risks for providers and payers using AI-based billing software, particularly if human oversight is removed and coding decisions are automated, she added.
Max Voldman, another Whistleblower associate, recalled a case he worked on in which New York payer Independent Health was accused of using a “rudimentary natural language processing” tool to automate risk adjustment coding.
“He would select things like ‘does not suffer from depression’ as ‘depression’ because he can’t read (the qualifiers) and only gets keywords. He would submit them to the government for reimbursement,” he said.
This matter was finally settled almost 100 million dollars in 2024. Voldman believes this type of fraud – the kind that results from AI providers overselling their technology – will only get worse in the years to come.
Inman agreed, pointing to the rapid influx of investment dollars into healthcare AI startups.
“A lot of people who may not have had the means to launch a new startup can do so because there is so much enthusiasm among investors for this type of technology, which is why Northern California is definitely ground zero,” she noted.
In many ways, the West Coast strike force could be a warning shot aimed at the industry’s next frontier in tech fraud.
As investors devote more resources to AI automation in healthcare and these tools become more deeply integrated into healthcare clinical and administrative workflows, regulators are attempting to scale their application efforts at pace.
Photo: Neal McNeil, Getty Images
