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4 Major Healthcare Fraud Cases in US History: Corporate Fraud

4 Major Healthcare Fraud Cases in US History: Corporate Fraud

As experienced fraud defense lawyers in Dallas, we at Gallian Firm understand the complexities and potentially severe penalties if convicted of healthcare fraud charges. History has shown us how major healthcare cases can impact the lives of many thousands of Americans and provide further motivation for increasing fraud investigations by federal authorities.  

Gallian Firm has been successfully defending individuals and companies charged with healthcare fraud for many years, at state and federal levels, with incredible results.  Part of the reason is that as former prosecutors, we both understand optimal strategies to fight these charges and know healthcare fraud law inside and out.  

Over the past few decades, there have been several high-profile cases that have shed light on the extent of fraudulent activities within the healthcare industry and give insight into how prosecutors handle high-profile healthcare fraud cases. 

These cases can give defense attorneys insight into prosecutorial strategies and learn lessons from how these cases were navigated by the defense as well.  So let’s take a look at four of the most significant healthcare fraud cases in US history, highlighting the facts, charges, outcomes, and penalties faced by the defendants.

The HealthSouth Corporation Fraud Case in Birmingham, Alabama

In the early 2000s, HealthSouth Corporation, one of the largest providers of outpatient surgery, rehabilitation, and diagnostic healthcare services in the United States, was embroiled in a massive accounting scandal. 

As a publicly traded company, the stock price was dependent upon performance—in the form of company earnings.  The company’s executives, including CEO Richard Scrushy, were accused of inflating earnings by nearly $2.7 billion to meet Wall Street expectations.

1. What Were the Charges and the Results in the HealthSouth Corporation Case?

Scrushy faced charges of securities fraud, conspiracy, and money laundering. The final result? He was eventually convicted in 2006 and sentenced to serve seven years in federal prison. The HealthSouth Corporation scandal led to significant financial penalties for HealthSouth and tarnished its reputation in the healthcare industry.  It also put healthcare companies on notice as to the consequences for this type of fraudulent behavior. 

2. The Tenet Healthcare Fraud Case in Dallas, Texas

In 2003, Tenet Healthcare, one of the largest for-profit hospital chains in the United States, came under scrutiny for overbilling Medicare and Medicaid programs and performing unnecessary medical procedures. The company allegedly engaged in a scheme to maximize profits by admitting patients unnecessarily and performing unnecessary cardiac procedures.

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What Were the Charges and the Results in the Tenet Healthcare Case?

Tenet Healthcare reached a $900 million settlement with the Department of Justice to resolve allegations of healthcare fraud. The company agreed to pay fines and penalties and implement reforms to prevent future fraudulent activities. Several executives resigned, and like the HealthSouth case, the Tenet case served as a cautionary tale about the consequences of healthcare fraud.

3. The Enron Corporation Fraud in Houston, Texas

While Enron Corporation is primarily known for its involvement in the energy sector, it also had significant ties to healthcare through its subsidiary, Enron Broadband Services. The company’s executives, including CEO Jeffrey Skilling and Chairman Kenneth Lay, were accused of orchestrating one of the largest corporate frauds in history by manipulating financial statements and concealing massive debts.  While not viewed as a healthcare fraud case, at least one executive from Enron Broadband was charged through the healthcare connection. 

What Were the Charges and the Results in the Enron Case?

Skilling and Lay were convicted on multiple counts of conspiracy, securities fraud, and other charges related to the Enron scandal. Skilling received a prison sentence of 24 years, while Lay passed away before sentencing. The Enron scandal led to sweeping regulatory reforms and increased scrutiny of corporate accounting practices.

4. The Quest Diagnostics Fraud Case in New Jersey

In 2009, Quest Diagnostics, one of the largest clinical laboratory services providers in the United States, settled a whistleblower lawsuit alleging fraudulent billing practices. Quest was accused of submitting false claims to Medicare and Medicaid for unnecessary medical tests and services.  Submitting false claims to Medicare is a crime, and the federal government has well-funded prosecutors who aggressively pursue these types of cases. 

What Were the Charges and the Results in the Enron Case?

The Quest case ended in a settlement deal, with Quest Diagnostics agreeing to pay $302 million to settle the case. The Quest case really showed the level of federal healthcare program compliance and oversight tools to prevent fraud that the government has at its disposal. 

Understanding Healthcare Fraud and Potential Penalties

Healthcare fraud encompasses a wide range of illegal activities, including billing for services not rendered, performing unnecessary medical procedures, and falsifying medical records. Convictions for healthcare fraud can result in severe penalties, including hefty fines, imprisonment, loss of professional licenses, and exclusion from participating in federal healthcare programs.

In Texas, individuals convicted of healthcare fraud may face additional penalties under state law, including restitution to victims and civil monetary penalties. At the federal level, healthcare fraud convictions can lead to lengthy prison sentences and substantial financial penalties.

Seek Experienced Legal Representation

If you are facing healthcare fraud charges, whether at the state or federal level, it’s crucial to seek experienced legal representation immediately. The consequences of healthcare fraud convictions can be life-altering, affecting your reputation, livelihood, and freedom. 

Contact Gallian Firm for a free confidential consultation to discuss your case and explore your legal options. Our skilled healthcare fraud defense lawyers will provide aggressive advocacy and strategic counsel to protect your rights and achieve the best possible outcome for your case. Don’t wait—call us today at (214) 432-8860 and speak with one of our attorneys. 


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