I. Case Background and Litigation History
In April 2026, the Intermediate People’s Court of a prefecture-level city in Zhejiang Province issued a final ruling on a case involving alleged fraud and the issuance of fraudulent invoices. This case represents one of the most significant medical insurance fraud cases in the region in recent years, characterized by a substantial amount involved and complex legal relationships. It touches upon multiple sensitive issues, including the compliant operation of private non-profit medical institutions, reforms to medical insurance payment methods (DRGs), and collaborative models between medical departments.
A legal team from Beijing King&Capital (Shanghai) Law Firm—comprising attorneys Zhang Qingsheng, Zhu Dongsheng, and Lu Xianghui—joined the case following the first-instance judgment. Through systematic defense efforts, they successfully persuaded the appellate court to remand the case for retrial on the grounds of “unclear facts.” During the retrial’s first-instance phase, pre-trial conferences and court proceedings lasted for a full month. The first-instance court’s original judgment had classified Defendant A as a principal offender, sentencing him to 11 years and 6 months in prison and a fine of 240,000 yuan. Following the retrial, the sentence was adjusted to 6 years and 8 months in prison and a fine of 170,000 yuan. The sentences for all other defendants in the case were also reduced.
Caption: In May 2024, attorneys Zhang Qingsheng, Zhu Dongsheng, and Lu Xianghui pose for a photo outside the detention center
The defense strategy employed in this case provides a significant case study for examining the judicial treatment of private medical institutions and the scope for defense in current criminal cases involving medical insurance fraud.
II. Challenges in the Interface Between Administrative and Criminal Proceedings in Cross-System Medical Insurance Fraud Cases
The hospital involved is a private, non-profit general hospital. Against the backdrop of deepening healthcare reform, poverty alleviation efforts, and reforms in medical insurance payment methods, it was accused of defrauding over 5 million yuan in medical insurance funds due to issues such as cooperative arrangements in the orthopedics department, medical consumables procurement, and the referral of patients on low-income assistance. The defense in this case faced four structural challenges:
First, the boundary between administrative and criminal liability is blurred. The prosecution characterized the hospital’s operational practices—including cooperative partnerships, medical supply pricing, medical record deficiencies, and government assistance programs—as a single act of fraud, creating significant controversy over the distinction between administrative violations and criminal offenses.
Second, the definition of joint criminal liability was overly broad. The prosecution’s logic conflated the actions of hospital administrators with those of department contractors, attempting to presume Defendant A as the principal offender through “collective attribution,” while ignoring the fundamental distinction between principal and accessory roles.
Third, the core elements of the fraud charge are disregarded. The prosecution failed to provide testimonial evidence that medical insurance auditors were misled by deceptive acts, nor did it establish a direct causal link between the hospital’s conduct and losses to the medical insurance fund under the DRGs payment policy, resulting in a broken chain of causation for the “defrauding” element.
Fourth, the case involves intertwined evidentiary and procedural disputes. It encompasses a massive volume of medical insurance settlement data, electronic ledgers, medical records, and numerous pieces of testimonial evidence, alongside procedural issues such as disputes over the authenticity of interrogation audio and video recordings, the failure of key witnesses to appear in court, and the impact of separate trials on cross-examination.
III. Defense Plan and Strategy:
A Multi-Dimensional Approach Combining Substantive, Procedural, and Policy Arguments
Faced with the aforementioned challenges, the King&Capital Law Firm team did not adopt a single-pronged strategy of defending for acquittal. Instead, grounded in evidence and the law, we constructed a three-pronged defense system integrating “procedure, substance, and policy.” We submitted nearly 100 pieces of defense evidence, nearly 100 written motions, and various written opinions to the court, totaling hundreds of thousands of words, achieving professional breakthroughs in the following dimensions:
(1) Rigorously Defending the Attribution Structure of Fraud. Demonstrating the Absence of the “Mistaken Belief” Element and the DRGs Blocking Effect
The defense counsel thoroughly applied the legal standards and principles governing fraud charges, pointing out a fundamental flaw in the prosecution’s application of the “deception” element:
1. Evidence of deception is indispensable. The core liability structure of fraud requires a sequence of “deceptive act → mistaken belief → disposition of property → resulting loss.” As the authority specifically exercising disbursement powers, the review staff of the medical insurance administration agency are the decisive actors; whether they fell into a mistaken belief due to false materials directly determines the legal nature of the disbursement. In this case, the medical insurance administration agency—the core “victim”—never provided a victim’s statement, and not a single reviewer testified in court to prove what specific false information led to their mistaken belief and subsequent disbursement of funds. In the absence of this critical testimonial evidence, the characterization of “deception” lacks a foundation.
2. The DRGs policy precludes the element of direct causation required for the crime of fraud. In this case, medical insurance payments were made under the DRGs (Diagnosis-Related Groups) policy, whereby the medical insurance fund pays a fixed amount based on disease-specific grouping standards, decoupled from actual medical costs. Under this model, even if the hospital engages in non-compliant practices regarding the procurement of medical supplies, the documentation of medical records, or the reporting of expenses, the amount paid by the medical insurance fund will not increase as long as the disease grouping remains unchanged. The disbursement actions taken by the auditors constitute an administrative confirmation based on DRG rules, rather than an individualized confirmation of consideration for specific medical treatment details. As an independent institutional factor, the DRGs policy breaks the direct causal link between the alleged conduct and fund disbursement, failing to meet the “directness” requirement of the crime of fraud, which necessitates “obtaining property through deception.”
3. The element of loss is questionable. As a property crime, fraud requires the infliction of property loss. Under the DRG framework, a hospital’s inflated billing only increases the patient’s out-of-pocket costs and reduces the portion covered by medical insurance; the hospital cannot obtain additional medical insurance funds through inflated billing. Furthermore, medical insurance settlement reports indicate that, if settled according to DRG policies, the medical insurance department would actually need to make incentive payments to the hospital. Since the disbursement amount is predetermined by disease-specific standards, the alleged “loss resulting from defrauding medical insurance funds” is non-existent.
(2) Accurate Determination of the Establishment of Joint Criminal Liability and the Type of Accomplice
The most significant achievement of the defense in this case lies in dismantling the prosecution’s logic of “collective attribution of guilt.” The defense counsel introduced an analytical framework for accomplices centered on “the principal offender, the unlawful act, and causality,” systematically arguing that:
Defendant A’s actions constituted collaborative decision-making, which occurred at a different time and place from the alleged principal medical treatment acts; Defendant A did not participate in core processes such as medical supply procurement, invoice issuance, or patient referral, and had no control over Defendant B’s specific medical procedures; the profit-sharing arrangement between the hospital and the orthopedic department was based on legitimate revenue sharing, and Defendant A did not retain any profits from the markup on medical supplies, thus lacking a causal link to the fraudulent outcome.
The retrial judgment ultimately adopted the defense’s arguments, determining that Defendant A was subordinate to Defendant B “in terms of decision-making authority, the role played, and the distributable benefits,” and legally classified him as an accessory. In a fraud case involving an exceptionally large sum, this reversal in classification from principal to accessory directly resulted in a significant reduction in the sentencing bracket, demonstrating the defense counsel’s precise application of joint criminal liability theory.
(3) Strictly Limiting the Application of the “Comprehensive Determination” Rule to Prevent Lowering the Standard of Proof
In response to the prosecution’s argument based on the “comprehensive determination” logic, the defense counsel pointed out that, according to Article 19 of the “Guiding Opinions on Several Issues Concerning the Handling of Criminal Cases Involving Medical Insurance Fraud,” “comprehensive determination” applies only to objective, quantifiable facts such as “the amount of fraud and other criminal facts,” and is premised on the condition that “it is indeed impossible to collect witness testimony on a case-by-case basis due to objective constraints.” This rule cannot be extended to apply to subjective or qualifying facts such as the characterization of fraudulent acts, the intent to illegally appropriate property, or the victim’s mistaken belief. In this case, the prosecution has applied “comprehensive determination” in a generalized manner, attempting to substitute specific proof of the causal relationship for each disbursement with an overall inference based on massive amounts of data. This effectively risks lowering the standard of proof and undermining the integrity of the trial proceedings. The defense insists that the prosecution bear the strict burden of proof for the complete chain of “deceptive conduct → mistaken belief → property loss.”
(4) Upholding the Minimum Standards of Procedural Justice: Securing a Remand for Retrial
In the initial appeal, the defense systematically addressed procedural disputes, including substantive discrepancies between interrogation transcripts and synchronized audio-visual recordings, issues regarding the verification of verbal evidence, flaws in the authenticity of electronic data, and the failure of key witnesses and staff from the victimized entity to appear in court. After review, the appellate court determined that “the original judgment was factually unclear on certain points,” ruled to overturn the original judgment, and remanded the case for retrial, thereby laying the procedural foundation for subsequent substantive defense arguments.
(5) In-Depth Analysis of the Boundaries Between Administrative and Criminal Law
The defense counsel did not confine their analysis to the provisions of the Criminal Law but instead examined the case within the policy context of the state’s encouragement of private healthcare, protection of the private economy, and DRGs reform in medical insurance:
Private non-profit medical institutions legally enjoy the right to set their own prices, and there is no such thing as “artificially inflated medical supply prices.” By extending the zero-markup sales policy—which applies only to public medical institutions—to designated non-public medical institutions, local medical insurance authorities effectively negated the latter’s statutory right to set prices. Using such policy interpretations as the basis for criminal conviction blurs the line between administrative violations and criminal offenses, violating the principle of legality in criminal law.
Medical assistance initiatives are exploratory efforts to implement the national poverty alleviation policy and should not be directly presumed to constitute criminal preparation. Even if there were issues such as deficiencies in medical record documentation or irregularities in consumable management, these did not alter the amount paid by the medical insurance fund under the DRGs model. Such matters should be resolved through administrative penalties or breach-of-contract proceedings, rather than through criminal measures.
IV. The defense team worked in unison, achieving significant results
This case spanned nearly four years, progressing through the original first-instance trial, a remand by the appellate court, a retrial at the first-instance level, and a second appellate review. The Tongcase and King&Capital Law Firm teams remained steadfast on the front lines throughout, ultimately achieving the following substantive outcomes:
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Defendant A’s status was downgraded from principal offender to accessory, resulting in a four-year-and-ten-month reduction in sentence; Defendant E achieved a fundamental change in the charges against him; and Defendants C and D, as accessories, both received reduced sentences. Given the severe circumstances involving exceptionally large sums of money and statutory sentences exceeding ten years, these outcomes fully demonstrate the value of effective defense.
V. The Vulnerable Position of Private Hospitals in Medical Insurance Cases,
Risk Areas, and Risk Warnings
The handling of this case also highlights the structural vulnerability of private medical institutions in the current interface between medical insurance regulation and criminal justice. The following risk points warrant close attention from the industry:
(1) Severe Asymmetry in Policy Interpretation Authority and the Risk of Criminalization of Autonomous Pricing Rights
Private hospitals’ understanding and implementation of medical insurance policies rely heavily on the interpretations provided by medical insurance administrative departments. Once administrative departments issue interpretations of policies that are unfavorable to hospitals, judicial authorities often directly adopt them. In this case, local medical insurance authorities erroneously extended the “zero markup” policy—intended for public medical institutions—to private hospitals, using this as the basis for determining “inflated prices,” which directly formed the normative foundation for the criminal conviction. The lawful pricing practices of private hospitals face direct criminal scrutiny in the absence of administrative confirmation procedures, indicating a severe lack of buffer mechanisms in the interface between administrative and criminal proceedings.
(2) Criminalization Risks Associated with Departmental Cooperative Management Models
To compensate for insufficient specialized capabilities, private hospitals often adopt cooperative management or departmental contracting models to bring in external medical teams. However, such models are highly susceptible to being classified as “illegal contracting,” thereby becoming a gateway for criminal prosecution. Once operational flaws—such as irregularities in medical supply procurement, medical record management, or patient referral practices—arise within a department, hospital administrators face the risk of being collectively held criminally liable. This case demonstrates that even in the presence of written cooperation agreements, judicial authorities may still apply the logic that “what is nominally a cooperation is in fact a contracting arrangement” to include hospital administrators within the scope of joint criminal liability.
(3) Arbitrariness in the Determination of “Losses” Under the DRGs Policy
Under the DRGs payment system, medical insurance fund expenditures are pre-determined based on diagnosis-related groups (DRGs) and are decoupled from actual costs. However, in judicial practice, some rulings still equate formal “non-compliant claims” directly with “fraud,” elevating administrative violations and management oversights to criminal fraud, while ignoring the blocking effect of the DRGs policy on the elements of directness and loss required for fraud charges. Any loophole in medical record management at private hospitals may be used as the primary basis for fraud charges.
(4) The Risk of Misinterpreting the Nature of Public Welfare Patient Recruitment Activities
Free physical examinations and free treatment activities conducted to implement targeted poverty alleviation and medical assistance policies are, in essence, a manifestation of private hospitals fulfilling their social responsibilities. However, within the framework of medical insurance fraud charges, such activities are highly susceptible to being characterized as patient recruitment tactics involving “fabricating facts and concealing the truth.” In this case, the hospital’s use of a medical assistance fund to cover out-of-pocket expenses for patients on low-income assistance was deemed “fraud under the guise of free services.” The line between a private hospital’s charitable motives and criminal intent is extremely blurred in judicial determinations.
(5) Structural Weaknesses in Evidence and the Expansive Application of the “Comprehensive Assessment” Rule
Medical insurance cases typically involve massive amounts of electronic data, financial ledgers, and medical insurance settlement records, yet private hospitals often lack comprehensive compliance audit and evidence preservation systems. Once criminal proceedings begin, hospitals are at a distinct disadvantage in terms of evidence collection, preservation, and cross-examination. Particular caution is warranted regarding the tendency to broadly apply the “comprehensive assessment” rule in practice: the prosecution may cite “numerous witnesses” as grounds to rely on only a small number of witness statements, combining them with data from medical insurance systems and bank transaction records to make a blanket presumption regarding the “amount defrauded” or even the “fraudulent act” itself, thereby circumventing the need to provide specific proof of the causal relationship for each individual disbursement. The defense must strictly insist that comprehensive assessment applies only to objective, quantifiable facts such as the amount involved, and must not be extended to core elements such as the characterization of conduct, subjective intent, or mistaken belief.
(6) Deficiencies in Medical Records and the Presumption of Fraudulent Medical Practices
Irregularities in medical record documentation (such as copy-and-paste entries by interns, discrepancies in the description of surgical procedures, or incomplete records of consumable usage) are common flaws in medical quality management. However, in medical insurance fraud cases, these are easily presumed to constitute “fabricated medical records” or “fictitious medical procedures.” In this case, the hospital provided authentic objective evidence—such as imaging results and surgical records—for a patient on low-income assistance, yet certain medical record deficiencies were still treated as the primary basis for the fraud allegations. Any lapse in medical record management at a private hospital can potentially become a point of entry for criminal prosecution.
VI. Regrets Regarding the Outcome of the Defense
As defense counsel, we must candidly state our position: from a legal perspective, this case was not a successful defense, but rather a result fraught with regret.
Within the framework of evidence and law, Defendant A should have been acquitted. Not a single reviewer from the medical insurance administration agency appeared in court to testify that they had been misled by the hospital’s claims and disbursed funds accordingly; The DRGs payment policy fundamentally severed the causal link between the alleged conduct and the expenditure of medical insurance funds; under the fixed-payment system based on disease groupings, the chain of causation required to establish the element of “fraud” could not be closed; The autonomous pricing authority of private non-profit medical institutions is explicitly supported by national-level documents such as the National Development and Reform Commission’s Price [2014] No. 503. Using discrepancies in local policy interpretations as a normative premise for criminal conviction blurs the line between administrative violations and criminal offenses; Furthermore, issues such as deficiencies in medical records and non-compliant management of medical supplies fall, at most, within the scope of medical quality management or administrative penalties and should not be directly elevated to the level of fraud.
However, these significant doubts regarding the elements of the offense were not adequately addressed by the court. When the interpretation of administrative policies can be directly transformed into grounds for criminal conviction, when the baseline of procedural justice is strategically compromised during litigation, and when the rule of “comprehensive determination” is broadly applied to circumvent the need for specific proof of causality for each disbursement, we are forced to confront a regrettable reality: what the court ultimately accepted was not pure legal logic, but rather a balancing of outcomes that transcends legal norms.
Criminal defense is never a battle where one can claim a complete victory. The defense counsel did everything in their power, conducting the most thorough analysis and argumentation across dimensions such as the theory of joint criminal liability, the attribution structure of fraud offenses, rules of evidence and adjudication, and the interpretation of medical insurance policies, thereby achieving reductions in sentencing, such as downgrading the defendant from principal to accessory and changing the charge. Yet these technical breakthroughs cannot obscure the fundamental regret at the level of legal characterization—a defendant who should have been acquitted is still bearing the heavy burden of a guilty verdict. This regret stems both from the failure to rigorously apply evidentiary scrutiny throughout the case and from the current special campaign against medical insurance fraud...
