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Telehealth Fraud and Abuse

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Overview: Telehealth Fraud and Abuse

Telehealth refers to the delivery of health services and clinical information remotely using telecommunications technologies. Its rapid expansion — particularly during the COVID-19 pandemic — has enhanced access to care, but as with any form of healthcare care delivery, there are opportunities for fraud, waste, and abuse within the U.S. health care system. Federal agencies such as the Department of Justice (DOJ), Office of Inspector General (OIG), and Centers for Medicare & Medicaid Services (CMS) have prioritized identifying and prosecuting abusive practices that exploit telehealth modalities and reimbursement flexibilities.

What Constitutes Fraud and Abuse in Telehealth

Fraud and abuse generally involve intentional deception, misrepresentation, or unfair practices that result in unauthorized benefits, often tied to federal or state health care program reimbursement. Specific conduct that may constitute fraud includes but is not limited to the following common schemes:

  • Billing for services not rendered or medically unnecessary
    Telehealth providers or entities may submit claims for virtual services that were not performed or for services beyond clinical necessity.
  • Misrepresentation of service levels or patient interactions
    Up-coding (billing at a higher reimbursement level than justified) or claiming telehealth visits occurred when they did not can trigger investigations.
  • Illegal remuneration and kickbacks
    Offering or receiving payments, gifts, or other benefits to induce referrals of telehealth services or prescriptions can violate federal fraud laws such as the Anti-Kickback Statute.
  • Telemarketing-driven schemes
    Fraud often begins with call centers or online solicitations targeting beneficiaries, followed by unnecessary orders for durable medical equipment, diagnostic testing, or prescriptions without appropriate clinical assessment.
  • False documentation or referrals
    Suppliers may obtain electronically signed orders or prescriptions without valid patient evaluations and use them to bill Medicare, Medicaid, or private insurance.

Key Federal Laws and Compliance Considerations

Telehealth providers must be aware of major federal statutes that govern fraud and abuse in health care. These include the following:

Anti-Kickback Statute (AKS)

The AKS prohibits knowingly offering, paying, soliciting, or receiving compensation to generate referrals for items or services reimbursable by federal health care programs. Telehealth arrangements that tie compensation to referrals, high volumes of orders, or other impermissible incentives can trigger violations.

Stark Law (Physician Self-Referral Law)

The Stark Law prohibits physicians from referring Medicare/Medicaid patients to entities with which they have a financial relationship for designated health services, except under specific exceptions. Post-pandemic regulatory changes have re-emphasized compliance with Stark provisions in telehealth contexts.

False Claims Act (FCA)

False claims for reimbursement — such as billing for unrendered telehealth visits — can trigger FCA liability, with potential civil and criminal penalties.

OIG Special Fraud Alerts

The OIG has issued alerts outlining "suspect characteristics" of telehealth fraud, including arrangements where patients are recruited by third parties rather than seeking care directly, and providers are paid based on volume of prescriptions or orders rather than the quality of clinical care.

How Policy Nuances Affect Fraud & Abuse Risk

State telehealth policy affects compliance risk in a few key ways:

  1. Telehealth Coverage Parity Laws
    States requiring parity for telehealth services (e.g. Maine), meaning all services that are covered in-person are also covered if delivered by telehealth, reduce risk that providers inadvertently submit non-covered claims. Lack of parity or unclear coverage can potentially increase exposure if claims are billed without documented eligibility. Check out the Center for Connected Health Policy’s State Summary Chart to learn whether your state has coverage parity for telehealth services.
  2. Documentation & Medical Appropriateness Standards
    Many states embed quality and documentation expectations into telehealth reimbursement rules. Insufficient documentation — such as failing to justify that telehealth was medically appropriate or secure — can serve as a basis for fraud allegations or payment denials.
  3. Coding & Modality Requirements
    Differences in state-level billing standards (including use of audio-only modifiers, place of service codes, or secure platform standards) mean that errors can trigger audits, recoupments, or fraud investigations.
  4. State Oversight & Claims Monitoring
    Agencies such as state Medicaid fraud units or inspector general offices routinely review telehealth billing patterns. States like New York explicitly reserve authority to examine telehealth claims for potential fraud, waste, and abuse as part of routine monitoring.

Enforcement and Case Examples

While not all enforcement actions are region-specific, the examples below illustrate how telehealth fraud and abuse schemes are investigated and prosecuted:

Federal Health Care Fraud Takedown — Northeastern U.S.

A coordinated DOJ action in 2019 resulted in charges against dozens of defendants in telemedicine-related schemes across multiple Northeastern federal districts. Defendants were accused of submitting more than $160 million in fraudulent claims to Medicare and diverting opioids through “pill mill” clinics and telemedicine networks.

National Telehealth Fraud Cases

In nationwide actions, federal authorities charged entities and individuals with large-scale schemes involving telemedicine and durable medical equipment fraud. One 2022 enforcement action charged 36 defendants in 13 federal districts in connection with more than $1.2 billion in alleged fraud involving telemedicine companies, laboratory owners, and equipment suppliers; illegal kickbacks for medically unnecessary orders were central to the schemes.

High-Profile Telehealth Startup Enforcement

A recent case involving a telehealth company that facilitated online prescribing of controlled substances (e.g. ADHD medications) resulted in federal charges and prosecutions; leaders are alleged to have generated millions of dollars in improper prescriptions and fraudulent insurer claims by exploiting relaxed telehealth prescribing rules during the COVID-19 pandemic.

Mitigation and Best Practices

Leading telehealth policy groups and resource centers recommend several strategies to minimize the risk of fraud and abuse:

  • Rigorous documentation and adherence to clinical standards to ensure telehealth services are medically necessary and appropriately coded.
  • Formal compliance programs that include training on fraud laws and internal audits of billing practices.
  • Careful contract vetting for telehealth partnerships to avoid arrangements that could resemble kickbacks or incentives.
  • Ongoing monitoring of regulatory changes, especially as telehealth policy evolves beyond COVID-19 emergency flexibilities.

Regional telehealth resource centers such as the Northeast Telehealth Resource Center (NETRC) offer education, technical assistance, and best practice tools for providers in the Northeast states (including Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont). These resources help support compliant telehealth implementation and awareness of legal obligations.

Summary

Telehealth fraud and abuse encompass a range of deceptive practices that can harm patients and undermine trust in public and private health care programs. While the vast majority of telehealth services are delivered legitimately and benefit patients, regulators are vigilant about enforcement, particularly where billing, reimbursement, and clinical standards may be misused. Understanding applicable statutes, recognizing common fraud schemes, and implementing proactive compliance measures can help telehealth providers deliver effective care while lessening legal risk.

Key Telehealth Policy and Compliance Resources

Below are links to resources that can be used by providers, compliance officers, and policymakers seeking reliable, up-to-date policy references:

National & Policy-Focused Resources


Regional Support & Implementation

  • Northeast Telehealth Resource Center (NETRC) - regional assistance, training, technical help, and telehealth toolkits (covers CT, ME, MA, NH, NY, RI, VT). https://www.netrc.org/

Practice & Compliance Guidance

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