It is estimated that medical fraud and abuse accounts for $80 billion worth of healthcare costs in the US. This rampant abuse of our healthcare system is detrimental to the system as a whole and contributes to higher healthcare costs and increased costs for coverage. The vast majority of healthcare providers are honest and well intentioned. With an incredibly complex medical billing system such as ours, medical providers and organizations are bound to make occasional mistakes when coding the services provided to patients. It is this same complexity which also makes fraud and abuse easier to commit and more difficult to detect.
The terms “fraud” and “abuse” are actually two distinct terms with separate definitions as they relate to healthcare. Fraud is an intentional deception or misrepresentation of facts that can result in unauthorized benefit or payment. Examples of fraud may include submitting claims for services not provided, falsifying claims or medical records and misrepresenting dates, frequency, duration or description of services rendered. Abuse on the other hand is defined as actions that are actions that are improper, inappropriate, outside of acceptable standards of professional conduct or medically unnecessary. Common examples of abuse include improper billing practices, failure to maintain accurate records and a pattern of claims for services not medically necessary. Aside from the financial impact of these practices, fraud and abuse can result in serious harm to people who are subjected to unnecessary or inappropriate medical services.
With increased focus on healthcare costs, investigators are pursuing and prosecuting fraudulent activity much more aggressively. Individual providers, hospitals, clinical laboratories, durable medical equipment suppliers, hospices and home health agencies have all been the subject of fraud investigations. Private healthcare payers commit a significant amount of money and resources to investigate and battle medical billing fraud. It is estimated that a health plan’s anti-fraud operations save an average of $17 million annually utilizing measures such as education and awareness campaigns, use of sophisticated software, communications with policy holders and use of a dedicated investigation team.
Below we highlight 15 types of medical billing fraud and abuse affecting the US healthcare system.
- Upcoding: Typically submitting a claim for a service more severe than the actual service provided. For example, submitting a claim for a broken ankle, when the patient was only treated for a sprained ankle.
- Cloning: Using an EHR system to automatically generate a more detailed patient observation profile by copying from another patient’s file with similar symptoms to appear as if a more thorough examination was done.
- Phantom Billing: Billing for services never performed. This also affects healthcare costs in the millions of dollars invested in tracking and prevention.
- Inflated Hospital Bills: Gross overcharges for procedures and/or on equipment used on medical bills. For example, $1,500 surgical screws or $500 Tylenol pills.
- Service Unbundling or Fragmentation: Billing for multiple procedures separately, that should have been billed together in a bundle in order to forgo the bundled rate and increase profit.
- Self-Referrals: When a provider refers themselves or a partner provider to perform a service, usually for a financial incentive.
- Repeat Billing: Billing twice for the same procedure, supplies or medications.
- Length of Stay: Charges for days not in the provider facility. Most hospitals will charge for the day you arrived, but not for the day you left.
- Correct charge for type of room: For example, if you were in a shared room, make sure you’re not being charged for a private one.
- Time in OR: Some hospitals charge based on an “average” time needed to perform an operation instead of the actual operation time.
- Keystroke Mistake: Entering incorrect codes, resulting in significant overcharges or in some cases an undercharge.
- Cancelled Service: Occasionally a medication, procedure or service that was prearranged and then canceled later but is still charged.
- No Medical Value: Claims submitted for payment for poor service that resulted in a decline in patient’s health.
- Standard of Care: Billing for services in which the provider failed to meet quality standards of care and provide preventative actions to safeguard patient’s health.
- Unnecessary Treatment: When a provider performs unnecessary tests in order to bill for them.