The US Department of Justice (DOJ) recently filed court documents showing that the Children’s Hospital of Philadelphia and Children’s Hospital of Pittsburgh allegedly used a fraudulent billing code to obtain insurance coverage for “gender” treatments.

The billing code, intended for children with precocious puberty, was allegedly misused for 250 patients aged 10 to 18 from 2017 to 2024. According to the DOJ, the treatments covered were not intended to treat precocious puberty, but rather used as GAC on the basis of a claimed “gender identity.” In other words, the DOJ claims these providers committed insurance fraud by using the wrong billing code for the patients’ diagnosis.

Penalties for insurance fraud add up quickly. Civil penalties under the Medicare and Medicaid False Claims Act [31 U.S.C. § § 3729-3733], which collects settlements from fraud billed to federal programs, and includes fines of up to three times plus $11,000 (inflation-adjusted) for each fraudulent claim.

To provide an example of how steep these penalties can get, Endo Health Solutions, which is now in bankruptcy, was fined $475.6 million for claims related to the opioid crisis, and Walgreens was fined $106.8 million for billing for prescriptions that were never picked up.

It doesn’t end there. In addition to civil penalties, insurance fraud can incur criminal penalties [18 U.S.C. § 287] as well. Providers may lose their license to practice, be banned from participating in federal programs such as Medicare, Medicaid, and TRICARE, or even spend time in prison.

What makes a case around this particular billing code stronger than others is the lack of ambiguity around the diagnosis of precocious puberty. For instance, another common code frequently used to justify coverage for GAC, endocrine disorder, unspecified, covers a wider diagnostic range. This code could be used for many conditions, including diabetes, high cholesterol, and hypothyroidism—incidentally, all conditions that some people may develop due to adverse effects of GAC. As a result of this broad range, providers could argue the code was used for one or more of these conditions if the patient already has a diagnosis. Cases centered around its misuse would thus be harder to prove.

To make a stronger case, providers could also argue that if someone’s hormone levels are outside the normal range of the sex they identify as, this constitutes an endocrine disorder, so that by their framing, which the author does not agree with, “endocrine disorder, unspecified” would be the appropriate billing code.

Precocious puberty, however, has unambiguous diagnostic criteria. There is no reasonable justification for using this billing code if the patient does not meet these criteria.

As is sometimes the case with fraud, other infractions may be uncovered as the investigation unfolds. For instance, if hospitals if providers received kickbacks for referrals to generate business that is covered by health care programs, that would constitute a violation of the Anti-Kickback Statute [42 U.S.C. § 1320a-7b(b)]. Penalties for violating this statute may include fines, prison terms, and exclusion from participation in federal health insurance programs. Under this statute, providers who pay or accept kickbacks face penalties of up to $50,000 per kickback plus three times the amount they earned because of the referrals.

This development will likely impact how willing providers are to offer these interventions, even before any determination. Additionally, the Federal Trade Commission, whose role is partly to protect consumers from fraud, continues to investigate deceptive advertising and practices related to GAC. Stay tuned.

Cici is a registered nurse who works in the utilization management department, also known as the authorization department, of an insurance company.