Complete Guide to Medi-Cal Fraud Laws in California

Medi-Cal is California’s Medicaid program, paid for with state and federal money, which is why the same billing conduct can be charged in Superior Court, in federal court, or pursued civilly. The statutes below are the ones that decide which path a case takes and what is at stake on each. Federal matching payments to state Medicaid programs are governed by 42 U.S.C. § 1396b.

For representation in an active investigation, see our Medi-Cal fraud defense attorney page. Federal cases are covered on our healthcare fraud defense and federal crimes defense pages, and beneficiary eligibility cases, which fall under Welfare and Institutions Code § 10980, on our welfare fraud defense page.

The four ways to violate § 14107

Section 14107 applies to “Any person, including any applicant or provider … or billing agent” who engages in any of four activities (§ 14107(a)):

• Presenting, “with intent to defraud,” for allowance or payment “any false or fraudulent claim for furnishing services or merchandise” (§ 14107(b)(1)).
• “knowingly” submitting false information “for the purpose of obtaining greater compensation than that to which he or she is legally entitled” (§ 14107(b)(2)).
• “knowingly” submitting false information “for the purpose of obtaining authorization for furnishing services or merchandise” (§ 14107(b)(3)).
• “knowingly and willfully” executing or attempting to execute “a scheme or artifice” to defraud Medi-Cal or another program run by the Department of Health Care Services, or to obtain its money “by means of false or fraudulent pretenses, representations, or promises” (§ 14107(b)(4)).

Each path carries a mental-state word: “intent to defraud,” “knowingly,” or “knowingly and willfully.” An honest coding mistake, a documentation gap without deceptive purpose, or a payer-rule dispute does not meet those words. That is why most defense work in these cases focuses on what the provider or biller actually knew when the claim went out (§ 14107(b)).

Penalties under § 14107

• Custody. “imprisonment in a county jail, or in the state prison for two, three, or five years” (§ 14107(c)).
• Fine. “a fine not exceeding three times the amount of the fraud or improper reimbursement or value of the scheme or artifice,” alone or with custody (§ 14107(a)).
• Injury enhancement. A scheme “likely to cause or that do[es] cause two or more persons great bodily injury” adds “a term of four years … for each person who suffers great bodily injury or serious bodily injury,” but only if the facts are “charged in the accusatory pleading and admitted or found to be true” (§ 14107(d)).
• Asset forfeiture. Anyone who engaged in the listed activities “shall be subject to the asset forfeiture provisions for criminal profiteering” (§ 14107(f)).

The statute also limits stacking: “an act or omission punishable in different ways by this section and other provisions of law shall not be punished under more than one provision,” with the penalty determined under Penal Code § 654 (§ 14107(h)). The Attorney General may also “convene a grand jury to investigate and indict” under § 14107(g).

The Medi-Cal anti-kickback law, § 14107.2

Soliciting or receiving “any remuneration, including, but not restricted to, any kickback, bribe, or rebate” in return for a Medi-Cal referral, or for ordering or recommending goods or services Medi-Cal pays for, is punishable on a first conviction “by imprisonment in a county jail for not longer than one year or imprisonment pursuant to subdivision (h) of Section 1170,” “or by a fine not exceeding ten thousand dollars ($10,000)” (Welfare and Institutions Code § 14107.2(a)). Offering or paying is punished the same way (§ 14107.2(b)).

Two features matter for defense. First, the statute defines a kickback as something given “with a corrupt intent to unlawfully influence the person to whom it is given” (§ 14107.2(d)). Second, it exempts amounts “paid by an employer to an employee, who has a bona fide employment relationship,” and discounts that are “properly disclosed and reflected in the costs claimed” (§ 14107.2(c)(1)–(2)). Marketing arrangements are often defended on those terms.

The federal statutes that run alongside

• Health care fraud. Executing “a scheme or artifice” to defraud “any health care benefit program” carries up to 10 years, 20 years if the violation “results in serious bodily injury,” and up to life if it results in death (18 U.S.C. § 1347(a)).
• Federal anti-kickback statute. Paying or receiving remuneration for referrals of items “payable in whole or in part under a Federal health care program” is a felony punishable by a fine of “not more than $100,000 or imprisoned for not more than 10 years, or both” (42 U.S.C. § 1320a-7b(b)).
• Mandatory exclusion. Program-related convictions trigger exclusion from federal health care programs under 42 U.S.C. § 1320a-7(a), generally for at least five years under § 1320a-7(c)(3)(B).

Federal health care fraud cases are usually charged by indictment; see what an indictment is, and the grand jury guarantee in the Fifth Amendment. Related wire fraud and conspiracy charges are covered on our white collar defense page.

Civil exposure under the California False Claims Act

Even without a criminal case, a person who “Knowingly presents or causes to be presented a false or fraudulent claim for payment or approval” to the state is liable “for three times the amount of damages” plus “a civil penalty of not less than five thousand five hundred dollars ($5,500) and not more than eleven thousand dollars ($11,000) for each violation,” as inflation-adjusted (Government Code § 12651(a)). Damages drop to “not less than two times” and no civil penalty applies when the person self-reports “within 30 days,” fully cooperates, and no action or known investigation had begun (§ 12651(b)). The federal counterpart is 31 U.S.C. § 3729.

Suspension from Medi-Cal

A conviction affects participation independently of the sentence. The director “shall suspend a provider of service for conviction of any felony or any misdemeanor involving fraud, abuse of the Medi-Cal program or any patient” (Welfare and Institutions Code § 14123(a)(1)). A no-contest plea counts: “a conviction following a plea of nolo contendere is deemed to be a conviction” (§ 14123(a)(2)). For a clinic or corporation, the conviction of “any officer, director, or shareholder with a 10 percent or greater interest” can suspend the organization too (§ 14123(a)(2)). Before any conviction, the director may impose a temporary suspension “prior to any hearing” (§ 14123(c)), with a hearing set “within 30 days after receipt of the notice” of defense.

Filing deadline

Felony Medi-Cal fraud is expressly listed among the discovery-rule offenses: “Felony welfare fraud or Medi-Cal fraud in violation of Section 11483 or 14107” (Penal Code § 803(c)(5)). The prosecution “shall be commenced within four years after discovery of the commission of the offense, or within four years after the completion of the offense, whichever is later” (Penal Code § 801.5). The federal limit for most fraud offenses is five years under 18 U.S.C. § 3282(a).

First steps when an audit or investigator arrives

• Preserve records. Altering records “with the intent to impede, obstruct, or influence” a federal investigation carries up to 20 years under 18 U.S.C. § 1519. Our guide to subpoenas explains how to read a records demand.
• Interviews. A “materially false, fictitious, or fraudulent statement” to a federal agent is a separate felony under 18 U.S.C. § 1001(a); a voluntary interview can be declined under the Fifth Amendment. See how to know if you are under investigation.
• Searches. Evidence seized in violation of the Fourth Amendment can be challenged; see motions to suppress under Penal Code § 1538.5.

Where Medi-Cal cases are heard

Where it happens. Federal cases in San Diego and Imperial Counties are prosecuted by the U.S. Attorney’s Office for the Southern District of California, whose main office is at 880 Front Street, San Diego. The U.S. District Court for the Southern District of California sits at the James M. Carter & Judith N. Keep U.S. Courthouse (333 W. Broadway), the Edward J. Schwartz U.S. Courthouse (221 W. Broadway) and the El Centro U.S. Courthouse (2003 W. Adams Ave). California charges are heard by the Superior Court of California, County of San Diego, which lists its court locations (Central Courthouse, Hall of Justice, North County, South County, East County and others).

Frequently Asked Questions (FAQs)

Q: Who investigates Medi-Cal fraud in California?

A: Provider fraud is investigated and prosecuted primarily by the California Attorney General’s Division of Medi-Cal Fraud and Elder Abuse, California’s Medicaid Fraud Control Unit. Federal agencies and the U.S. Attorney’s Office can also be involved because Medi-Cal is jointly funded.

Q: Is Medi-Cal fraud a felony?

A: It can be. Welfare and Institutions Code § 14107 allows either county jail or state prison for two, three, or five years, plus a fine of up to three times the amount of the fraud. How it is charged depends on the facts and the prosecutor’s decision.

Q: How long does the state have to file Medi-Cal fraud charges?

A: For felony Medi-Cal fraud under § 14107, Penal Code §§ 801.5 and 803(c) allow prosecution within four years after the offense is discovered or completed, whichever is later.

Q: Can a billing error be prosecuted as Medi-Cal fraud?

A: An honest error is not a crime, because the statutes require intent to defraud or knowing conduct. But billing errors can trigger audits, and explanations given without counsel can be used later.

Q: Can Medi-Cal fraud lead to exclusion from Medicare?

A: Yes. Certain convictions trigger mandatory exclusion from all federal health care programs generally for at least five years (42 U.S.C. § 1320a-7(a), (c)(3)(B)).

Q: Should I talk to a DMFEA investigator or DHCS auditor?

A: Speak with counsel first. A lawyer can find out the scope of the inquiry and advise on how to respond without creating new evidence.

Speak with the office about a Medi-Cal investigation

If you are a provider or beneficiary facing a Medi-Cal audit, investigation or charge, contact the office to talk with Vikas Bajaj, or call (619) 525-7005.

This page is attorney advertising and general information, not legal advice. Every case turns on its own facts.

Related guides: Medi-Cal fraud defense · Healthcare fraud defense · White collar defense · Federal crimes defense