If you are a healthcare provider, receiving a letter from the PSR, Medicare Compliance, or Services Australia may feel stressful. However, it is important to remember that a billing error isn’t automatically a crime.
There’s an important difference between an administrative compliance matter and a criminal fraud prosecution. Services Australia runs two separate processes: one that recovers overpayments through the PSR scheme, and one that escalates to the Australian Federal Police and federal prosecution. Those are very different situations, with very different consequences.
This fact sheet walks you through what Medicare investigators actually look for, how civil and criminal processes differ, your legal rights at each stage, and, critically, when you need a specialist criminal lawyer.
Types of Medicare Fraud and Billing Irregularities
Medicare investigators examine billing patterns for several categories of conduct, from technical breaches to deliberate deception. Therefore, understanding which category applies to your situation is important because it affects investigation intensity and prosecution likelihood.
The different types of medicare fraud include:
Upcoding or Billing for Higher-Value Items
Billing Medicare for a more expensive item number than the service provided. For example, billing item 92 (consultation greater than 20 minutes) when the consultation was brief, or billing for specialist item numbers without specialist qualifications.
Phantom Billing (Services Not Provided)
Submitting Medicare claims for services never delivered to patients. This is considered the most serious category because it involves deliberate deception rather than misclassification.
Split Billing and Inappropriate Bulk Billing
Billing both Medicare and the patient when bulk billing rules prohibit this, or splitting bills across multiple dates to circumvent Medicare item limitations.
Misuse of Provider Numbers
Billing under another provider’s number, using numbers after deregistration, or allowing unqualified staff to bill using your credentials.
Bulk Billing Compliance Breaches
Failing to obtain written consent for bulk billing, billing in breach of safety net requirements, or billing when the patient cannot be identified.
The Two Pathways: PSR Administrative Process vs. Criminal Fraud Investigation
This is the biggest distinction. Not every referral to the PSR leads to criminal investigation, but every criminal prosecution begins with evidence of billing irregularities. Understanding which pathway you face determines your legal strategy.
| Aspect | PSR Process | Criminal Investigation | Outcomes | Criminal Lawyer Required? |
| Who Investigates | Services Australia & PSR | Australian Federal Police (AFP) & Commonwealth DPP | Civil recovery, repayment direction, conditions on registration | Not necessarily initially |
| Nature of Process | Administrative/regulatory | Criminal prosecution (s.1307 HI Act, Criminal Code fraud offences) | Criminal imprisonment, fines, restitution, professional deregistration | Yes – essential if prosecution commenced |
| Standard of Proof | Civil (balance of probabilities) | Criminal (beyond reasonable doubt) | Distinction critical – same facts, higher threshold | |
| Your Rights | Right to respond, access to PSR evidence, appeal to President | Right to silence, legal representation, bail, disclosure of evidence | Criminal law protections apply – misuse of silence attracts caution |
Critical Point: Remember, the PSR is NOT a criminal court. It is an administrative review scheme designed to assess whether practitioners have engaged in ‘inappropriate practice’ – a lower threshold than criminal fraud. However, PSR decisions can trigger mandatory notifications to AHPRA and may lead to referral to the AFP if evidence of criminal conduct emerges.
Medicare Compliance Audits: When the Investigation Begins
The first contact is typically a compliance audit letter from Services Australia. These audits may be random, but are increasingly targeted at providers identified through data analytics or referrals.
Random Audits
Services Australia conducts periodic audits of a sample of practices. These are often low-risk and may conclude quickly if records are in order.
Targeted Audits
Risk-based targeting based on billing patterns, complaints, reports from medical boards or professional bodies, or previous audit outcomes. These carry higher prosecution risk.
Your Rights During Investigation and PSR Proceedings
- Right to Respond: You must be given notice of allegations and a fair opportunity to respond before a PSR makes a determination.
- Access to Evidence: You are entitled to see the evidence Services Australia relies upon, including audited records and patient files.
- Legal Representation: You may be represented by a lawyer at PSR proceedings and should seriously consider this if allegations are complex or serious.
- Right of Appeal: If the PSR determines inappropriate practice, you have a right of appeal to the President of the PSR.
- Right to Silence (Criminal Cases Only): If criminal charges are laid, you have the constitutional right not to incriminate yourself. However, silence in PSR proceedings may be used against you.
- Professional Privilege: Communications with your lawyer are protected and need not be disclosed.
When Does a Billing Matter Become a Criminal Prosecution?
As previously mentioned, not every billing irregularity attracts criminal investigation. The threshold for referral to the Australian Federal Police is evidence suggesting dishonesty, intentionality, or deliberate conduct – not just errors.
Indicators of Criminal Risk
- Pattern of Billing: Isolated errors are unlikely to trigger prosecution. Systematic, recurring breaches suggest knowledge and intent.
- Value of Overpayment: Higher overpayments attract greater scrutiny. Historically, prosecutions involve amounts over $100,000.
- Phantom Billing: Claims for services never provided are treated as especially serious and are more likely to trigger prosecution.
- Deliberate Concealment: Failure to correct known errors, destroying records, or falsifying documentation all suggest dishonesty.
- Breach of Previous Undertakings: If you’ve previously been warned by Services Australia about compliance and the new audit relates to similar conduct.
Relevant Criminal Offences
Section 1307 Health Insurance Act 1973 (Cth): It is an offence to knowingly make or present a false or misleading statement to obtain Medicare benefit. Maximum penalty: 10 years imprisonment or 600 penalty units (or both).
Criminal Code Act 1995 (Cth) – Fraud Offences: If you dishonestly obtain a financial advantage (Medicare benefit) by deception, you may be charged with fraud (s.135.1 CC). Conspiracy to defraud is also prosecutable. Maximum penalty: 10 years imprisonment.
Conspiracy: If you conspire with staff, other practitioners, or business associates to defraud Medicare, all conspirators face equal criminal liability.
Impact on Professional Registration
A finding of inappropriate practice by the PSR triggers a mandatory notification to the Australian Health Practitioner Regulation Agency (AHPRA). AHPRA may have its own registration process, separate from criminal proceedings.
Possible AHPRA Outcomes
- Closure with no action (if facts do not establish misconduct)
- Conditions imposed on your registration (e.g. audit requirements, supervised practice)
- Undertaking to comply with specified requirements
- Caution or reprimand on your public record
- Suspension of registration (temporary or during investigation)
- Cancellation of registration (permanent deregistration)
Critical: Even if criminal charges are withdrawn or you are acquitted, AHPRA may still proceed with registration action on the lower civil standard of proof. A criminal acquittal does not guarantee your registration remains untouched.
When to Seek Specialist Criminal Legal Advice
Your medical defence organisation is valuable for regulatory and disciplinary matters, but they are not specialists in criminal defence. The moment you face potential criminal exposure, you need a specialist criminal lawyer in addition to your MDO.
Seek Criminal Legal Advice Immediately If:
- You receive a letter from the Australian Federal Police (AFP) or any federal agency investigating your billing
- A Services Australia letter references potential criminal conduct or mentions the AFP
- You are asked to attend an interview or provide a statement regarding alleged false billing
- Criminal charges are laid or you receive a court attendance notice
- The audit involves allegations of phantom billing, falsified records, or deliberate misrepresentation
- Multiple providers or staff are implicated (suggests organised conduct or conspiracy)
- The value of disputed billing exceeds $50,000 (heightens prosecution likelihood)
- You have previously been warned by Services Australia about compliance and the new audit relates to similar conduct
Frequently Asked Questions
What is the PSR and how does it work?
It is an independent statutory scheme that investigates whether healthcare practitioners have engaged in ‘inappropriate practice’
The PSR is civil, not criminal. Services Australia refers cases to the PSR; the PSR Director conducts an investigation and may hold proceedings where the practitioner and Services Australia present evidence. If inappropriate practice is found, the PSR President may recommend repayment of benefits, undertakings regarding future conduct, or referral to AHPRA. The findings are not criminal convictions but may have serious professional consequences.
Can I be criminally charged for Medicare fraud?
Yes. If evidence suggests you knowingly made false statements to obtain Medicare benefit or dishonestly obtained financial advantage through deception, you may be prosecuted.
Criminal charges may include imprisonment, fines, and criminal conviction. Criminal prosecution is rare but is pursued in cases involving large overpayments, phantom billing, or systematic deception.
What if I made billing mistakes accidentally?
Isolated, unintentional errors are unlikely to result in criminal prosecution.
However, if the errors are systematic (occurring across many claims), large in value, or occur after you have been warned about compliance, they may trigger more serious investigation.
Can I lose my medical registration?
Yes. AHPRA can suspend or cancel your registration if it is satisfied that you have engaged in conduct that is inconsistent with fitness to practise.
A PSR finding of inappropriate practice triggers a mandatory notification to AHPRA and will likely prompt a separate AHPRA investigation. Even if criminal charges do not proceed or you are acquitted, AHPRA may still take action on the lower civil standard of proof.
Take Action Now
If you have received any correspondence from Services Australia, the PSR, AHPRA, or the Australian Federal Police regarding billing irregularities, do not delay in seeking legal advice. The earlier you engage a specialist criminal lawyer, the more options are available to you.
Contact us today for a confidential consultation by calling us on 02 9261 4281 or complete the form below.
