Health Care Fraud: 5 Common Billing Schemes

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Ron Cresswell, J.D., CFE

According to the National Health Care Anti-Fraud Association, the U.S. loses tens of billions of dollars each year to health care fraud. Most health care fraud is committed by providers, such as physicians and hospitals, and much of that fraud involves fraudulent billing. This post discusses five common billing schemes, and how to detect and prevent them.

  1. Upcoding
    When a provider submits a bill to the government or a private insurer, the provider also includes medical codes to identify the medical services provided. These medical codes are used to determine the amount of the provider’s reimbursement. In upcoding schemes, a provider intentionally submits an incorrect medical code for a higher level of service than actually rendered. For example, a hospital might administer a generic drug but bill the government for the more expensive, brand-name version of the drug.

  2. Unbundling
    Medical procedures often have special reimbursement rates for groups of procedures that are typically performed together. Some providers try to increase profits by billing separately for procedures that are part of a single procedure. This is called unbundling. For instance, instead of submitting the single bundled medical code for “appendectomy,” a provider might submit different codes for all of the component parts of the procedure (e.g., incision, appendix removal, closing up the patient).

  3. Double billing
    In a double billing scheme, a provider bills multiple times for the same medical services. Sometimes providers bill the same party (e.g., the government) multiple times for the same services. To avoid detection, they can alter the date of the service, its description, or the name of the patient or provider. Alternatively, providers can bill multiple parties (e.g., the government and a private insurer) for the same services.

  4. Billing for fictitious services
    In a fictitious services scheme, a provider bills for medical services that were not rendered or items that were not furnished. Fictitious services schemes can involve real patients or fake patients. Providers create fake patients by stealing or purchasing the personal information of real people, falsely listing them as patients, and billing for fictitious services provided to them.

  5. Billing for non-covered services
    Non-covered services are medical services that are not reimbursable by the government or private insurance. Providers often attempt to obtain reimbursement for non-covered services by fraudulently labeling them as covered services. For example, a surgeon performs a nose job (a non-covered, cosmetic procedure) but bills the government for repairing the patient’s deviated septum (a covered procedure).

Detection and prevention
Patients can detect billing schemes by carefully reviewing any explanation of benefits (EOB) notices they receive. If there are unrecognized procedures or charges on an EOB, patients should contact their insurer or provider immediately.

Providers can prevent billing schemes by hiring experienced professionals to conduct billing functions and performing regular audits of billing procedures and records. Additionally, all bills should be compared with the corresponding medical records before they are submitted for reimbursement.