DOJ Doubles Down on Healthcare Fraud Enforcement with New West Coast Strike Force

The Trump administration’s crackdown on fraud, waste and abuse continues, with the Department of Justice last week launching a new effort targeting healthcare fraud.

The DOJ rolled out a strike force targeting healthcare fraud in Arizona, Nevada and Northern California. The new strike force — which the DOJ is calling its “West Coast” healthcare fraud strike force — comes seven months after the department launched a similar strike force going after healthcare fraud in Massachusetts. Florida is not on this list yet, even though it has a reputation for healthcare fraud, but it might be next.

Experts think the new strike force reflects the federal government’s broader effort to adapt its fraud enforcement to industries that are becoming more data-driven and tech-enabled each day.

Why these regions?

The new West Coast strike force is an expansion of a longstanding enforcement model that dates back to the late 2000s, according to Meredith Williams. She is currently a counsel at Barnes & Thornburg, but prior to that, Williams spent two decades working as senior counsel for HHS’ Office of Inspector General.

Williams said these strike forces were created to rapidly deploy federal prosecutors and investigators into regions flagged as fraud hot spots, and this model has long been used by agencies like DOJ, FBI, DEA and HHS-OIG to pursue large-scale criminal healthcare fraud schemes.

The Trump Administration launched its first healthcare-specific fraud task force in Massachusetts because the state is one of the country’s largest healthcare and life sciences hubs — and of course, its latest decision to deploy its personnel in Arizona, Nevada and Northern California wasn’t random, either.

The DOJ has recently pursued several massive fraud cases in Arizona tied to Medicaid billing, sober homes and wound care schemes that allegedly cost taxpayers billions of dollars. And in Nevada, federal officials have been investigating a sharp increase in suspected Medicare and hospice fraud, fueled in part by the state’s rapidly growing senior population. 

According to the most recent annual report that the Medicare Payment Advisory Commission (MedPAC) provides to Congress, hospice provider growth has exploded in a handful of states — including Arizona, Nevada and California — at a pace that far exceeds the rest of the country.

The report highlighted several red flags that regulators commonly associate with fraud, including sudden spikes in the number of providers despite no matching increase in patient need, patients staying in hospice unusually long, clusters of providers operating from the same address, and patients frequently leaving hospice alive. California became such a concern that the state temporarily stopped issuing new hospice licenses and tightened oversight laws, the report noted.

As for Northern California in particular, the region is an epicenter for the new AI tools that are becoming more and more embedded into the U.S. healthcare system. As AI and advanced technology continue to play a great role in fraud, the DOJ is sending more enforcement agents to the area to try to detect and disrupt complex schemes earlier and at scale, Williams said.

She also noted that federal regulators are seeing a spike 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 surge resources into these regions, such as additional prosecutors, investigators and data analysts. By doing so, the DOJ is aiming to bust large-scale healthcare fraud schemes sooner, Williams said. 

If the DOJ winds up launching another region-specific healthcare fraud task force, Florida could be the next target. Williams noted that the Trump administration launched a fraud probe in the state’s Medicaid program in March.

Putting the industry on notice

Williams stressed that the DOJ’s current focus is on egregious criminal conduct, such as pill mills and sham operations billing for nonexistent services — so she doesn’t think legitimate digital health companies have much to worry about, as long as they can prove their compliance with the law. Williams added that advanced claims analytics are helping authorities distinguish between bad actors and compliant providers.

“It’s a reminder to providers and digital health companies that this is a very highly regulated landscape, and they need to have a robust compliance program. They need to be aware of the laws and regulations that they’re navigating, and they need to have the right policies and processes in place — like internal auditing, for example — to make sure that they stay in the right lane. I think that’s really the message,” Williams remarked.

She pointed out that the new strike also builds on the DOJ’s recent investments in data-driven enforcement, including last summer’s launch of the Healthcare Fraud Data Fusion Center, which was established so the DOJ, FBI, DEA and HHS-OIG can share their analytics and identify fraud schemes more quickly.

Another legal expert — Ty Howard, a former federal prosecutor who is currently a partner and chair of government enforcement and investigations at Bradley Arant Boult Cummings — noted that both the government and industry are becoming more sophisticated in using data analytics.

In his eyes, this strengthens the DOJ’s enforcement capabilities but could also increase scrutiny on providers whose billing patterns or compliance practices may appear unusual, even if they are legitimate.

“With data analytics, the problem is that some very legitimate uses and billing patterns are going to still get attention. So be prepared for that,” Howard declared.

Since the DOJ will be combing through data at such a massive scale, not all anomalies or flagged patterns will necessarily indicate wrongdoing — some might simply reflect actual clinical variation or business growth that look atypical in aggregate datasets but are fully appropriate in practice, he explained.

Howard thinks the new strike force’s biggest near-term impact is likely deterrence. He believes providers and digital health 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 carry real business costs, Howard said.

He believed the DOJ’s increasing focus on healthcare fraud could raise the compliance bar for the industry, especially in areas like telehealth and e-prescribing, where regulatory lines can be less clear and federal scrutiny is increasing.

A new type of fraud risk

The launch of the new strike force is welcome news for Mary Inman, a partner at Whistleblower Partners, which represents whistleblowers in healthcare fraud cases. Coordinated strike forces increase the likelihood whistleblower allegations will actually be investigated and acted on, she noted. 

She pointed out that healthcare fraud is being supercharged by AI, which allows nefarious schemes to scale more quickly and become more complex — which makes enforcement efforts like this all the more necessary.

Inman also highlighted a major emerging risk area is the healthcare vendor space, where companies are rapidly developing and then marketing AI tools for tasks like coding, billing and compliance. Sometimes, these startups overstate their capabilities or lack a true understanding of regulatory requirements, she said.

“I call it ‘AI washing’ —  a lot of vendors are trying to get a competitive advantage by saying, ‘We’re applying AI,’ when sometimes they don’t even have that ability. And most importantly, they may not have knowledge of the industry, but they use AI and the trappings of AI to try and get more customers,” Inman remarked.

She noted that this is a type of healthcare fraud that hasn’t received much federal attention, but that could start to change if the DOJ continues to scale its enforcement efforts.

This can create new compliance risks for providers and payers using AI-enabled billing software, especially if human oversight is removed and coding decisions are automated, she added. 

Max Voldman, another partner at Whistleblower, recalled a case he worked on in which New York-based payer Independent Health was accused of using a “rudimentary natural language processing” tool to automate risk adjustment coding.

“It was picking up things like ‘does not have depression’ as ‘depression’ because it can’t read [qualifiers] and just picks up keywords. It was submitting those for reimbursement from the government,” he explained.

That case ended up being settled for nearly $100 million in 2024. Voldman believes this type of fraud — the kind that arises from AI vendors overselling their technology — is only going to get worse in the coming years.

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 roll out a new startup can do that because there’s so much enthusiasm among investors in this kind of technology, which is why Northern California is definitely ground zero,” she remarked.

In many ways, the West Coast strike force could be a warning shot aimed at the industry’s next frontier of tech-enabled fraud.

As investors pour more resources into healthcare AI automation, and as these tools become more deeply woven into healthcare’s clinical and administrative workflows, regulators are trying to evolve their enforcement efforts at the same pace.

Photo: Neal McNeil, Getty Images