Types of medical billing fraud

Give a thief enough time, and they’ll find countless ways to commit fraud. With healthcare, knowing taxpayer money can be involved, they can get really creative.

These actions most commonly happen during medical billing – a process in which claims are generated and submitted to insurance companies to obtain payments for medical services.  Generally, billing fraud  involves a healthcare provider billing a patient for medical services they did not provide. However, fraud can take many forms, which makes it very difficult to identify. 

You might think that this is not a big problem, after all, how much can it amount to? 

You have to know that fraud in healthcare happens on a broad scale, and it’s not very easy to recognize or prevent, and taxpayers bear the damage of over $60bn a year. 

Today, we’re going to explain the two most common methods of billing fraud, upcoding, and unbundling medical billing. Hopefully, by the end, you’ll have an easier time understanding sketchy billing practices, and ultimately, you might even be able to report them.

Upcoding refers to medical providers intentionally using an inaccurate billing code to receive an inflated reimbursement for a medical procedure. In short, they are charging for a higher level of service than the one they performed, thus fraudulently receiving more money. 

In healthcare, billing codes simplify the billing process by helping identify procedures and services provided to patients. Every code correlates to a diagnosis, a service, and ‘’describes’’ the complexity of the work that a physician provided. Insurers use these codes to more easily ascertain how much they should pay for those services.

For instance, a healthcare provider might code the removal of a small cyst as a more demanding procedure to remove a larger cyst. This results in a significant cost difference and increases the provider’s profits at the expense of healthcare programs, patients, and taxpayers.

Similar to upcoding, unbundling medical billing is a fraudulent practice in which providers bill multiple-step procedures separately when they should all be a part of the same coded procedure. With unbundling medical billing (also known as fragmenting) providers can receive a higher reimbursement by billing bundled procedures separately.

A good example of unbundling medical billing is when a provider illegally uses separate codes for routine surgery. They might use unique codes for incision and suturing instead of using the appropriate billing code with a lower reimbursement rate.

Unbundling medical billing and upcoding aren’t the only forms of fraud out there. One of the more shady ones is double billing.

As the name implies, it’s simply billing someone for the same procedure twice. It might happen when a healthcare provider bills the patient and the insurance company for the same service. Alternatively, different healthcare providers can double bill the patient for the same medical procedures on the same date.

Sometimes, providers might even take it a step further by using an individual code in the claim but then also using the bundled code.

Healthcare providers can also engage in bill padding by including unnecessary expenses to the bill such as medicine administration or consults. For instance, look no further than the provider calling in unnecessary consultations or asking for pointless examinations.

However, worst of all, providers can also include line items for services that were never provided, including visits and medicine. 

If you think these are all isolated cases perpetrated by a few bad apples, think again. Fraud such as unbundling medical billing and upcoding is everywhere, regardless if it’s a large hospital or a home healthcare agency.

Physicians can misuse evaluation and management (E&M) codes used to describe the complexity of a patient visit to bill for more time than it took in reality. They might even use wrong modifier codes that indicate that they provided additional services when in fact, the services provided are covered by the standard code.

Hospitals might bill a procedure provided by a nurse (a lower-paying service) as if it was provided by a physician. Hospitals may also bill care at higher levels than was provided. The same applies to urgent care facilities which might bill for services that were more extended than those provided.

Even durable medical equipment providers aren’t exempt from upcoding as they might bill for more expensive items and equipment than was delivered.

While isolated cases probably happen, the fraudulent practices we outlined above are generally interconnected schemes that involve more than one individual. Unbundling medical billing and upcoding is often close to impossible to detect without the help of insiders – whistleblowers.

As you might expect, widespread schemes usually involve people who aren’t actively involved in fraudulent activities. People aware of fraud are simply too afraid to expose it. In most cases, they’re keeping silent to avoid employer retaliation.

Luckily, The False Claims Act (FCA) exists. According to this federal law, people and companies who try to defraud government programs are liable. More importantly, this law provides employees with a way to report fraud without the fear of retaliation.

The FCA protects whistleblowers from suspension, discharging, demotion, threats, harassment, or discrimination in terms of employment. Additionally, whistleblowers are also rewarded if they bring a claim against a provider trying to defraud the government. They are also entitled to as much as 30% of the total recovery.

A whistleblower who wants to reveal unbundling medical billing or upcoding must file a qui tam lawsuit which triggers government investigation. Qui tam lawsuit means that an individual is bringing action against an organization on the behalf of the government. The whistleblower is considered a relator and the government is considered a plaintiff.

The government will investigate the allegations made in the complaint, and they can either join or intervene in the lawsuit. 

Nothing is set in stone, so the government might choose not to intervene in the qui tam lawsuit. In that case, the whistleblower can still pursue the case and recover the funds on the behalf of the government.

The legal team of the whistleblower might make use of medical billing and reimbursement experts such as the ones we have here at MBA to build a stronger case. These experts can testify to the value of the medical services provided in matters of improper coding or billing. 

MBA supports legal teams during the research and discovery phases, and evaluates charges from medical providers and suppliers in highly complex cases.

Call us at (800) 292-1919 or fill out our contact form , and we can help you and your attorney pull the curtain off on unbundling medical billing and upcoding in your lawsuit.