DoD FWA Explained: Definitions, Examples, and Controls for Healthcare Contractors

Definition of Fraud Waste and Abuse

Fraud

Fraud is the intentional deception or misrepresentation made with knowledge that it could result in an unauthorized benefit. In DoD healthcare contracting, fraud includes deliberate schemes that increase reimbursement, conceal noncompliance, or secure awards under false pretenses.

Waste

Waste is the careless, extravagant, or inefficient use of government funds, property, or services. It covers practices that, while not necessarily illegal, unnecessarily increase costs or reduce value delivered to beneficiaries and the mission.

Abuse

Abuse involves practices inconsistent with sound fiscal, business, or medical standards that lead to avoidable costs. Abuse may exploit loopholes or disregard accepted norms without clear intent to defraud, yet it undermines stewardship and trust.

Together, FWA erodes patient care quality, diverts resources from readiness, and exposes you to contract, civil, and criminal risk. Effective governance and Risk Mitigation Controls are essential to prevent, detect, and correct FWA.

Examples of FWA in Healthcare

Billing and Claims

• Upcoding or unbundling to inflate reimbursement.
• Billing for services not rendered, “ghost patients,” or duplicate claims.
• Submitting claims for medically unnecessary services or supplies.
• Misrepresenting provider credentials or supervision to meet coverage rules.
• Kickbacks or improper referral arrangements that distort medical judgment.

Procurement and Contract Management

• False certifications, product substitution, or nonconforming items labeled as compliant.
• Inflated pricing, cost mischarging, or improper use of government purchase cards.
• Undisclosed conflicts of interest or steering work to favored subcontractors.
• Charging the government for unallowable costs or pass-through services without value.

Operational and Workforce Practices

• Timecard fraud, unauthorized overtime, or padding level-of-effort.
• Misuse of government equipment, facilities, or pharmaceuticals.
• Poor records handling that exposes Protected Health Information or Controlled Unclassified Information.
• Improper disposal of media or samples, violating Media Protection requirements.
• Telehealth misuse, such as mass, scripted encounters that bypass medical necessity checks.

Controls for Preventing FWA

Program Design

Start with tone at the top. Establish a written compliance program, designate an empowered compliance officer, and conduct risk assessments focused on your highest exposure areas (billing, subcontracting, and data handling). Train staff and leadership on policies, reporting options, and consequences.

Risk Mitigation Controls

• Segregation of duties across ordering, receiving, billing, and cash application.
• Pre-claim edits and medical necessity checks; post-payment analytics to flag anomalies.
• Vendor due diligence, exclusion screening, and contract flowdowns that mirror DoD terms.
• Hotline reporting with anti-retaliation safeguards and rapid triage procedures.
• Targeted audits, peer review, and root-cause corrective action plans.
• Personnel Security Measures such as background checks, need-to-know access, and offboarding controls.
• Media Protection practices: encryption, secure transport, retention schedules, and verified sanitization or destruction.

Monitoring and Response

Use dashboards and data analytics to detect outliers in utilization, pricing, and timekeeping. When issues arise, investigate promptly, document decisions, refund overpayments, disclose as required, and track remediation to closure. Update policies as patterns evolve.

DoD FWA Compliance Requirements

Healthcare contractors must maintain an effective ethics and compliance program that meets contractual requirements and aligns with DoD expectations. Core elements include written standards, risk-based training, internal controls, independent auditing, and accessible reporting channels.

Maintain accurate books and records, cooperate with audits and inspections, and ensure timely self-disclosures of credible evidence of violations as required by contract clauses. Flow down applicable requirements to subcontractors and verify their adherence through oversight and periodic reviews.

Protect sensitive information handled under the contract, including Controlled Unclassified Information. Ensure your policies integrate FWA prevention with privacy, security, and quality assurance functions so operational decisions consistently support compliance.

DoD Contractor Information Security

CUI Identification and Governance

Identify where Controlled Unclassified Information resides, how it moves, and who can access it. Mark, inventory, and minimize CUI; apply need-to-know and least privilege; and maintain records of data flows and system boundaries.

Access Control and Personnel Security Measures

Implement role-based access, multifactor authentication for privileged accounts, timely provisioning and deprovisioning, and periodic access recertifications. Personnel Security Measures—such as background checks, nondisclosure agreements, and escorted access—reduce insider risk.

Media Protection and Physical Controls

Encrypt data at rest and in transit, restrict removable media, and log media movements. Use locked storage, tamper-evident seals, and chain-of-custody for backups. Sanitize, destroy, or degauss media using approved methods and document the process.

Operational Safeguards

Maintain configuration baselines, vulnerability scanning, timely patching, centralized logging, and continuous monitoring. Align retention schedules so records that support FWA investigations, Cyber Incident Reporting, and audits are preserved and retrievable.

DoD Contractor Cybersecurity Requirements

NIST SP 800-171 Baseline

When you handle CUI, you must implement the NIST SP 800-171 security requirements. Focus on access control, audit logging, configuration management, identification and authentication, incident response, maintenance, Media Protection, Personnel Security, physical protection, risk assessment, security assessment, system and communications protection, and system and information integrity.

Document your System Security Plan and track gaps in a Plan of Actions and Milestones. Prioritize high-impact fixes such as multifactor authentication, encryption, hardened configurations, and continuous monitoring to reduce exploitability.

DFARS 252.204-7012 Obligations

DFARS 252.204-7012 requires adequate security for CUI, rapid Cyber Incident Reporting to DoD within 72 hours of discovery, preservation of images and logs for forensic analysis, cooperation with damage assessments, and flowdown of these requirements to applicable subcontractors.

If malicious software is discovered, prepare to submit samples to the DoD-designated analysis center. Ensure your contracts and supplier agreements reflect these obligations and that your teams know how to execute them under time pressure.

DoD Contractor Incident Reporting

What to Treat as Reportable

Report cyber incidents that affect covered defense information or your ability to perform mission-critical services. Indicators include exfiltration, unauthorized access to CUI, ransomware events, or compromises of systems within the contract boundary.

How to Prepare and Report

• Escalate immediately to your incident response team; stabilize operations while preserving evidence.
• Determine scope: systems affected, data types (including CUI), timelines, and potential operational impact.
• Complete required fields for the DoD reporting portal and submit within 72 hours of discovery.
• Notify the contracting officer and, if you are a subcontractor, your prime contractor per contract terms.
• Provide indicators of compromise, network diagrams, and points of contact to speed triage.

Post-Report Obligations

• Preserve and protect relevant images and logs for at least 90 days to support forensics.
• Submit malicious code samples if requested and assist with DoD damage assessment activities.
• Implement corrective actions, update your System Security Plan and POA&M, and brief leadership.
• Communicate with affected stakeholders as privacy or contractual obligations require.

Conclusion

Preventing DoD FWA in healthcare requires an integrated approach: strong ethics, well-designed Risk Mitigation Controls, disciplined information security for CUI, and compliance with NIST SP 800-171 and DFARS 252.204-7012. By operationalizing these requirements and practicing timely Cyber Incident Reporting, you protect patients, the mission, and your organization.

FAQs.

What constitutes fraud waste and abuse in DoD healthcare contracting?

Fraud is intentional deception for gain; waste is careless or inefficient use of resources; abuse is conduct that violates sound business or clinical standards and drives unnecessary cost. In practice, this includes upcoding, billing for services not rendered, kickbacks, product substitution, timecard padding, and poor records handling that inflates costs or hides noncompliance.

How does DoD enforce FWA compliance among contractors?

Enforcement relies on contract clauses, audits, data analytics, and investigations. Contractors must maintain effective compliance programs, keep accurate records, cooperate with reviews, make required disclosures, and flow down obligations to subcontractors. Confirmed violations can lead to repayments, corrective action, suspension or debarment, and potential civil or criminal liability.

What are the cybersecurity requirements for DoD contractors?

If you handle Controlled Unclassified Information, you must implement NIST SP 800-171 controls, document your System Security Plan and POA&M, and meet DFARS 252.204-7012 obligations. Core expectations include access control, logging, vulnerability management, encryption, incident response, Personnel Security Measures, and Media Protection aligned to your contract scope.

How should contractors report cyber incidents to the DoD?

Escalate internally, contain while preserving evidence, and report through the DoD-designated portal within 72 hours of discovery when covered defense information or mission capability is affected. Notify your contracting officer and prime as applicable, preserve images and logs for at least 90 days, submit malware samples if requested, and support any DoD-led assessment or follow-up actions.