Medicaid Contractor Gainwell Can Be Held Liable for Fraud, DOJ Says

Gainwell Technologies LLC can be held liable for aiding a $500 billion Medicaid fraud if the company knowingly processed payments for claims that were phony or violated federal and state laws, the US Attorney’s Office has told a federal judge.

The US statement of interest bolsters a False Claims Act lawsuit accusing Gainwell, the country’s largest Medicaid claims processor for states, of helping a Rhode Island state hospital defraud Medicaid by, among other things, submitting false invoices claiming that a mental hospital was operating as a nursing home.

US District Judge Leo Sorokin in Boston asked federal prosecutors to weigh in about the viability of suing a third-party fiscal agent for processing false claims. He had expressed doubts about the case, even though he indicated in court and in opinions that the plaintiffs had made a plausible case that the company knew about the years-long fraud and looked the other way.

The prosecutor’s filing came just days after President Donald Trump signed an executive order forming a task force, led by Vice President JD Vance and including the DOJ, to crack down on state-level fraud in benefit programs including Medicaid, the federal-state health insurance program for low-income and disabled individuals.

Prosecutors said Gainwell and any fiscal agent can be held responsible if it “recklessly disregards or deliberately ignores,” evidence of fraud by its client.

“The law does not cabin a fiscal agent’s liability merely to errors of commission, as Gainwell suggests,” Assistant US Attorney Steven T. Sharobem wrote in a memo filed Friday. “Rather, the case law supports holding a fiscal agent liable under the FCA if the fiscal agent gained knowledge … that a claim was false but did nothing to prevent the claim from being submitted.”

Gainwell is by far the largest Medicaid processor and fiscal agent in the country, providing services to at least 35 states. Fiscal agents, including Gainwell, are required by contract to process and proactively inspect claims before they are submitted to the federal government. Sharobem added that “ostrich-like behavior” by any fiscal agent can contribute to fraud.

“Thus, the fiscal agent’s role in processing Medicaid claims is not merely mechanical or passive,” according to the memo.

Two former doctors and an administrator at Rhode Island’s Eleanor Slater Hospital filed a False Claims Act lawsuit in 2022 after uncovering what they said was a decade-long fraud by the state to file false Medicaid invoices. The state admitted some wrongdoing and voluntarily gave up more than $100 million in Medicaid payments between 2019 and 2021, and refunded several million dollars to Medicaid.

In a statement on Monday, Gainwell said the US Attorney’s memo would have no bearing on the lawsuit.

“The court previously dismissed all but one count of the original complaint. The memorandum does not take a position on whether the Second Amended Complaint meets legal standards,” a company spokesperson wrote in an email. It said the company would file a response in court by April 10.

In earlier court filings, Gainwell has denied wrongdoing and insisted it was just following the parameters outlined in its contract with the state of Rhode Island.

Sorokin initially agreed, tossing out the lawsuit last year. But he revived the case in December after allowing the plaintiffs to file a second amended complaint.

In that order, Sorokin questioned Gainwell’s stance that it didn’t bear any responsibility for Rhode Island submitting false payments to Medicaid, even though it was required to review every submission.

“The facts in the Second Amended Complaint plausibly allege that Gainwell acted with at least reckless disregard with respect to ESH’s fraudulent Medicaid practices,” Sorokin wrote. “And the facts suggest that a simple review of ESH’s operations would have rung the alarm on ESH’s suspect nursing home designation. ... Taken together, these facts suggest that Gainwell acted beyond mere mistake or negligence.”

Reuben Guttman of Guttman, Buschner and Brooks in Washington, representing the plaintiffs, called the government’s position a “powerful statement in support of our complaint.”

Gainwell has also been accused by current and former employees of violating its contracts in an effort to win business and cut costs. The company settled lawsuits with a former compliance officer in Ohio who accused the company of falsifying its fraud detection abilities in order to win business, and with a former pharmacist who argued that the company was improperly billing and approving medication in violation of Medicaid laws.

The case is United States of Am. v. Gainwell Techs., LLC, D. Mass., No. 1:22-cv-10953, filed 3/27/26.