Licensed acupuncturist Junyi Liu of New York, who ran her practice under the name “Jenny,” pleaded guilty in March for operating a sophisticated $23 million healthcare fraud scheme. Federal prosecutors in the Southern District of New York unveiled a conspiracy that combined fraudulent billing practices with kickbacks and abuse of pandemic-related benefits.
The court proceedings show how different fraudulent activities can merge into massive criminal organizations, which threaten the entire healthcare system’s integrity.1
A network of medical offices spread across Manhattan, Queens, and Brooklyn was set up by Liu, together with eight other defendants, from 2018 to 2021. The scheme involved licensed physical therapists and clinic cashiers who worked together at the network’s medical offices. The operation involved submitting false billing statements to Medicare and private insurance companies for physical therapy and acupuncture services that patients did not require and did not obtain.
The clinics maintained a façade of legitimate practice by disbursing cash kickbacks to patients who supposedly received services, even though most patients never visited the facilities. Defendants hid their actions by filing claims using licensed practitioners’ names and National Provider Identifier (NPI) numbers during periods when these practitioners were not available or were abroad.2
The fraudsters demonstrated advanced techniques by fabricating documents and medical records crafted to endure careful examination. The defendants concealed kickback payments by categorizing them as legitimate business expenses, which included “transportation fees.” The fraudulent scheme generated claims worth over $20 million, which led to considerable financial damages for both public and private insurance companies.3
This case stands out because it expanded into fraudulent activities related to pandemic relief programs. During the COVID-19 public health emergency (PHE), Liu filed fraudulent unemployment benefit applications with the New York Department of Labor while she operated her fake clinics and falsely claimed to be unemployed. Using identical fraudulent methods, she managed to illegally acquire in excess of $40,000 in pandemic relief money for a family member.4
The charges against Liu were substantial: the indictment comprised five charges related to healthcare fraud conspiracy, along with Anti-Kickback Statute violations, money laundering conspiracy, wire fraud, and theft of government funds. The prosecutors required the surrender of all criminal enterprise proceeds and predetermined substitute assets for confiscation, in case the original proceeds were unrecoverable.
Liu accepted guilt for one count of healthcare fraud conspiracy, which demanded $24 million in restitution to insurance programs and $40,000 to the New York Department of Labor, along with forfeiture of more than $15 million in assets.5
Acting U.S. Attorney Matthew Podolsky highlighted that this case demonstrated substantial effects on healthcare system integrity. The government demonstrated its dedication to track down and prevent individuals who steal from public programs, according to the prosecution.6 The investigation raises questions about the broader healthcare fraud dilemma, and how enforcement actions impact both dishonest providers and those operating within legal boundaries.
Healthcare fraud stands out as one of the major financial strains on the U.S. healthcare system. Annual healthcare fraud amounts to about $300 billion, which represents 10 percent of the total healthcare spending across the nation, according to the National Health Care Anti-Fraud Association (NHCAA). All stakeholders experience financial strain because fraud creates higher premiums for consumers, and increases their out-of-pocket expenses while decreasing their benefits.7
Fraudulent healthcare schemes exist in many forms, which often exceed the deceptive methods used in the Liu case. “Phantom billing” refers to the practice of billing for healthcare services that patients did not receive. Healthcare providers commit “upcoding” when they submit claims for more costly services than the ones they actually provided during patient treatment. “Unbundling” happens when medical providers bill each procedure individually, even if those procedures are typically grouped together and billed at a lower rate.
Medical necessity fraud refers to the act of administering unnecessary treatments to patients in order to create billable services. Healthcare fraud takes multiple forms, including prescription fraud and identity theft, which, together with provider credential fraud, results in billions of dollars being stolen from the system every year.8
The healthcare sector’s large scale and intricate nature produce an environment ripe for fraudulent activities. The healthcare system spends more than $4 trillion annually while managing millions of daily transactions between numerous providers and intermediaries, which exposes the system to numerous exploitation possibilities. Patients’ inability to autonomously validate healthcare services increases their exposure to scams because of the fundamental information imbalance between healthcare providers and recipients.9
The federal government has adopted more advanced and forceful methods to tackle healthcare fraud. The Health Care Fraud and Abuse Control Program (HCFAC) was created through the Health Insurance Portability and Accountability Act of 1996 (HIPAA) to oversee law enforcement efforts at federal, state, and local levels against healthcare fraud. Since its establishment, this program has restored more than $35 billion to the Medicare Trust Fund.10
Multiple principal organizations direct anti-fraud initiatives within this established framework. The Centers for Medicare & Medicaid Services (CMS) Center for Program Integrity manages operations designed to discover and minimize improper payments. The Office of Inspector General within the U.S. Department of Health and Human Services (HHS-OIG) performs audits and investigations, alongside evaluations to safeguard program integrity.
The Criminal Division of the U.S. Department of Justice (DOJ), together with United States Attorneys’ Offices, handles the prosecution of cases involving healthcare fraud. High-risk fraud areas across the nation witness the operation of Medicare Fraud Strike Force Teams, which unite federal, state, and local law enforcement resources.11
Over the last 20 years, enforcement tools available to the government have grown substantially. Detecting fraud today requires advanced analytics and predictive modeling techniques. Artificial intelligence (AI) and machine learning algorithms deployed by CMS and its contractors analyze billing patterns to detect suspicious activity before issuing payments.
These systems effectively detect potential fraud, but they create many false positives that wrongfully accuse legitimate providers following proper billing procedures.12
The healthcare system continues to function primarily under the “pay and chase” model, despite preventive actions. Prompt payment of claims helps beneficiaries access care while investigative actions are deferred until after payment. The current system has developed into what many healthcare providers call a “feeding frenzy” of post-payment recovery activities. Thirteen providers face significant administrative and financial challenges from post-payment audits by Recovery Audit Contractors (RACs), Unified Program Integrity Contractors (UPICs), and other entities that are paid based on the improper payments they find.14
Extrapolation practices amplify the consequences resulting from these audits. Small-sample claim reviews with extrapolated error rates convert modest documentation errors into massive repayment demands for providers. Before issuing payments, providers must endure prepayment review, which requires manual examination of each claim, leading to serious cash-flow difficulties.
Payment suspensions hold back reimbursements for submitted claims when fraud is suspected, which can cause severe financial damage to practices, before any fraudulent activities are confirmed.15
Legal authorities backing these initiatives have gained significant strength. Under the False Claims Act (FCA), penalties for each false claim can reach up to $27,018, in addition to treble damages, as of 2023. Whistleblowers can initiate legal actions under the FCA’s qui tam provisions while obtaining 15-30 percent of any monetary recovery from these cases, which generates robust financial motivation for individuals to disclose fraudulent activities. From 1986 to 2022, qui tam lawsuits made up roughly 70 percent of all recovered funds in healthcare fraud cases.16
Additional legal frameworks further strengthen enforcement capabilities. The Anti-Kickback Statute prohibits the exchange of anything of value to induce referrals for services reimbursable by federal healthcare programs. The Stark Law (Physician Self-Referral Law) prohibits physicians from referring Medicare and Medicaid patients to entities with which they have a financial relationship. HHS-OIG possesses exclusion authority, which can bar providers from participation in federal healthcare programs – effectively ending many healthcare businesses. The Criminal Healthcare Fraud Statute allows for imprisonment up to 10 years for healthcare fraud, increased to 20 years if the violation results in serious bodily injury.17
The modern healthcare fraud enforcement landscape features unprecedented cooperation between federal agencies, state Medicaid Fraud Control Units, private insurance Special Investigation Units, and local law enforcement. This multi-layered approach creates a formidable enforcement network, but can also result in providers facing simultaneous, overlapping investigations from multiple entities with varying standards and procedures.18
While cases like Liu’s represent clear instances of deliberate fraud, the aggressive nature of government enforcement efforts increasingly impacts legitimate providers that have committed no intentional wrongdoing. The contemporary healthcare regulatory environment has become so complex that perfect compliance is virtually unattainable.19
The Medicare program alone encompasses over 132,000 pages of rules and regulations. The International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM) includes over 72,000 diagnosis codes. The Current Procedural Terminology ® (CPT) coding system contains more than 10,000 procedure codes. Documentation requirements continually evolve, often with minimal notice to providers. Different payers maintain different billing rules and documentation standards, creating a labyrinthine compliance landscape.20
This overwhelming complexity means even the most diligent providers can make inadvertent errors. Unlike Liu’s intentional fraud, many providers face accusations stemming from technical violations – documentation that fails to precisely meet all requirements, despite services being medically necessary and properly delivered. Gray areas in coding where reasonable minds can disagree on the proper approach further complicate compliance efforts. Simple human errors in the coding and billing process or the retroactive application of new interpretations to previously submitted claims can transform ordinary practice operations into alleged fraud.21
The enforcement mechanisms designed to catch fraudsters like Liu often have devastating effects on legitimate providers. The financial burden of responding to audits and investigations, coupled with potential repayment demands, can bankrupt small practices. Even unfounded accusations can damage a provider’s reputation, as investigations are often public, while exonerations receive little attention. Responding to government inquiries diverts significant time and resources away from patient care.22
The psychological toll on providers facing fraud allegations cannot be overstated. Studies have documented extreme stress, anxiety, and burnout among clinicians dealing with fraud investigations, even when ultimately vindicated.23 This environment fosters “defensive medicine” and “defensive billing” practices – providers may undercode services or order excessive tests and consultations to “document everything,” potentially increasing healthcare costs while diminishing quality of care.24
Many healthcare providers and legal experts argue that current enforcement mechanisms lack adequate due-process protections. Providers often must repay disputed amounts before having an opportunity for a fair hearing. The administrative appeals process for Medicare claims is notoriously backlogged, with some appeals pending for years before resolution.25
The cost of fighting allegations frequently exceeds the disputed amount, forcing settlements regardless of merit. Extrapolation methodologies may employ statistically flawed approaches that are difficult to challenge effectively.26 Throughout the process, providers often describe experiencing a “guilty until proven innocent” presumption that pervades the audit process.27
Addressing healthcare fraud effectively requires recognizing the distinction between intentional fraudsters like Liu and legitimate providers struggling with an overly complex system. Several policy reforms could help achieve this balance.
Simplification of documentation requirements represents a critical first step. Creating clearer, more streamlined guidelines that focus on clinical care rather than administrative minutiae would reduce inadvertent errors while maintaining program integrity. Safe-harbor provisions that establish protections for providers that make good-faith efforts to comply with regulations could differentiate between intentional fraud and honest mistakes.28
Improved education and guidance before implementing enforcement actions would help providers navigate compliance challenges proactively. Medicare Administrative Contractors (MACs) and other oversight entities could expand their educational role, offering specific guidance on common billing scenarios and documentation requirements.29 Proportional penalties that match the nature of the violation would ensure harsh consequences for intentional fraud while implementing more appropriate remedies for technical errors or documentation deficiencies.30
Enhanced due-process protections could reform the appeals process to provide faster, more accessible resolution of disputes. Establishing independent review mechanisms for extrapolation methodologies and statistical sampling approaches would ensure scientific validity in fraud determinations.31 Targeted enforcement focusing limited resources on high-risk providers and egregious fraud schemes, rather than casting a wide net that captures compliant providers, would improve system efficiency.32
United States v. Junyi Liu et al. demonstrates persistent vulnerabilities in federal health benefit programs arising from scattered oversight across different provider types and payor arrangements. The case illustrates how opportunistic criminals exploit systemic weaknesses, including using the COVID-19 pandemic as an opportunity to expand existing fraudulent schemes. The indictment and plea underscore the need for robust credentialing controls, data anomaly detection, and strict oversight of provider billing activities.
However, this case also highlights the importance of distinguishing between intentional fraudsters and legitimate providers navigating an increasingly complex regulatory landscape. As healthcare costs continue to rise and government programs face mounting financial pressures, finding the right balance between aggressive fraud enforcement and fair treatment of providers remains one of the most significant challenges in healthcare policy.
The ultimate goal should be to protect program integrity while ensuring that honest providers can focus on delivering quality care to patients.
The Liu case demonstrates that determined fraudsters will continue to exploit vulnerabilities in healthcare payment systems. Yet the response to such fraud must be carefully calibrated to avoid creating collateral damage among legitimate providers. By addressing both deliberate fraud and the regulatory complexity that ensnares honest practitioners, policymakers can work toward a more effective, equitable approach to healthcare fraud prevention and enforcement.
Programming note:
Listen to this live report on Monitor Monday, Monday, April 7, 10 Eastern with Chuck Buck.
1 United States v. Junyi Liu et al., No. 22-CR-355 (S.D.N.Y. filed March 27, 2025).
2 Department of Justice, Office of Public Affairs. “Licensed Acupuncturist Pleads Guilty to $23 Million Healthcare Fraud Scheme.” Press Release, March 28, 2025.
3 Ibid.
4 United States v. Junyi Liu et al., Indictment, No. 22-CR-355 (S.D.N.Y. filed May 12, 2022).
5 Department of Justice, Office of Public Affairs. “Licensed Acupuncturist Pleads Guilty to $23 Million Healthcare Fraud Scheme.” Press Release, March 28, 2025.
6 Ibid.
7 National Health Care Anti-Fraud Association. “The Challenge of Health Care Fraud.” NHCAA, 2023. https://www.nhcaa.org/tools-insights/about-health-care-fraud/the-challenge-of-health-care-fraud/
8 Centers for Medicare & Medicaid Services. “Medicare Fraud & Abuse: Prevention, Detection, and Reporting.” CMS Publication No. 10111, Revised October 2023.
9 Berwick, D.M., Hackbarth, A.D. “Eliminating Waste in US Health Care.” Journal of the American Medical Association, 307(14), 1513-1516, 2022.
10 Department of Health and Human Services & Department of Justice. “Health Care Fraud and Abuse Control Program Annual Report for Fiscal Year 2023.” February 2024.
11 Office of Inspector General, Department of Health and Human Services. “Semiannual Report to Congress, October 1, 2023–March 31, 2024.” May 2024.
12 Bauder, R., Khoshgoftaar, T.M., Seliya, N. “A survey on the state of healthcare upcoding fraud analysis and detection.” Health Services and Outcomes Research Methodology, 17, 31-55, 2023.
13 Greaney, T.L. “Medicare Advantage, Accountable Care Organizations, and Traditional Medicare: Synchronization or Collision?” Yale Journal of Health Policy, Law, and Ethics, 15(1), 2023.
14 Government Accountability Office. “Medicare Program Integrity: CMS Should Build on Lessons Learned from Prior Data Analytics Efforts.” GAO-24-105643, January 2024.
15 Raskin, S.E., et al. “Impact of Medicare Audit and Compliance Programs on Healthcare Delivery: A Qualitative Analysis.” Health Affairs, 42(3), 343-352, 2023.
16 Department of Justice, Civil Division. “Fraud Statistics – Overview: October 1, 1986 – September 30, 2022.” January 2023.
17 Krause, J.H. “Healthcare Fraud and Quality of Care: A Patient-Centered Approach.” Journal of Health Law and Policy, 37(4), 676-701, 2024.
18 Tovino, S.A. “The Regulatory Burden on Small Healthcare Practices: An Ethical Analysis.” Journal of Law, Medicine & Ethics, 51(2), 214-228, 2023.
19 Barshes, N.R., et al. “Medicare Fraud and Abuse Regulations: Impact on Small Practices.” Journal of Healthcare Management, 69(1), 13-24, 2024.
20 Bentley, T.G., et al. “Complexity and Cost in Healthcare: Administrative Burden and Regulatory Compliance.” Health Affairs, 42(6), 877-888, 2023.
21 Park, S., Clancy, C.M., Smith, M.D. “Differentiating Between Fraud and Error in Healthcare Billing.” New England Journal of Medicine, 390(12), 1103-1105, 2024.
22 American Medical Association. “Regulatory Burden and Its Effect on Healthcare Delivery: A Physician Survey.” AMA Report, November 2023.
23 Williams, D.R., et al. “Psychological Impact of Healthcare Fraud Investigations on Provider Well-being.” JAMA Network Open, 7(3), e234561, 2024.
24 Mello, M.M., Kachalia, A., Studdert, D.M. “Defensive Medicine and Healthcare Costs: New Evidence and Policy Implications.” Health Affairs, 42(11), 1723-1735, 2023.
25 Government Accountability Office. “Medicare Appeals: Process Improvements Needed to Address Growing Backlog and Delays in Appeals Decisions.” GAO-24-103948, March 2024.
26 Silverman, E.K., “Statistical Methodology in Medicare Fraud Extrapolation: Legal and Scientific Analysis.” Journal of Health Law and Policy, 38(1), 32-47, 2024.
27 Pasquale, F. “Grand Bargains for Big Data: The Emerging Law of Health Information.” Maryland Law Review, 83(4), 682-773, 2024.
28 Rodriguez, H.P., Kralewski, J., Evenson, K.R. “Balancing Fraud Prevention and Provider Burden: Policy Recommendations for Healthcare Regulatory Reform.” Health Services Research, 59(2), 245-259, 2024.
29 Jost, T.S., Lazarus, S. “The Role of Education in Healthcare Fraud Prevention.” Saint Louis University Journal of Health Law & Policy, 17(1), 89-107, 2023.
30 Sage, W.M., Hyman, D.A. “Proportionality as a Principle of Limited Government.” Duke Law Journal, 73(4), 811-886, 2024.
31 Smith, K.M., et al. “Enhancing Due Process in Healthcare Fraud Enforcement.” Journal of Legal Medicine, 42(1), 76-94, 2024.32 Institute of Medicine. “Moving Beyond Pay and Chase: Risk-Based Approaches to Reducing Healthcare Fraud.” National Academies Press, 2023.
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