15 Types of Medical Billing Fraud & Abuse

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January 4th, 2013

Medical billing fraud and abuseIt 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.

  1. 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.
  2. 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.
  3. Phantom Billing: Billing for services never performed. This also affects healthcare costs in the millions of dollars invested in tracking and prevention.
  4. 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.
  5. 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.
  6. Self-Referrals: When a provider refers themselves or a partner provider to perform a service, usually for a financial incentive.
  7. Repeat Billing:  Billing twice for the same procedure, supplies or medications.
  8. 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.
  9. 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.
  10. Time in OR:  Some hospitals charge based on an “average” time needed to perform an operation instead of the actual operation time.
  11. Keystroke Mistake:  Entering incorrect codes, resulting in significant overcharges or in some cases an undercharge.
  12. Cancelled Service:  Occasionally a medication, procedure or service that was prearranged and then canceled later but is still charged.
  13. No Medical Value:  Claims submitted for payment for poor service that resulted in a decline in patient’s health.
  14. 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.
  15. Unnecessary Treatment:  When a provider performs unnecessary tests in order to bill for them.

12 Comments

  • Amazing article! Thanks for enhancing our acumen on medical billing.

  • Elliot Barry says:

    Your mention 15 types of medical billing fraud and abuse affecting the US healthcare system are really informative. This will be help full for all physicians.

  • Susan says:

    My dermatologist recently performed an allergy test on me which was not completely ecessary and later I was billed $1300 for it, insurance only covered half. I was in shock at the bill they never mentioned the price of the allergy test and nothing ever came about it that helped me medically. Would this be considered medical billing fraud?

    • admin says:

      Susan, unfortunately that would not be considered medical billing fraud. This instance is more a case of lack of due diligence by the provider. By failing to discuss the necessity and benefits of the procedure, your provider has jeopardized the patient-provider relationship that we are hoping to develop through patient-centered medicine. Additionally, your health insurance provider should have implemented the right cost-containment solutions to ensure you were able to get the best value at the best price. Have your insurance provider contact us at info@payerfusion.com and we can ensure that next time this doesn't happen.

  • amy says:

    Hi,

    I'm not sure if this is fraud or not. I went to a physician nearly 2 years ago. I did not receive a bill until a year and 3 months later from this provider. At first glace, my EOB stated that I did not have coverage during time of service. The issue was that they billed the wrong insurance and then claimed that insurance didn't pay because I was not covered during that time.. During the time of service, I had the same insurance but with a different member ID. I found out that 3 months prior to them sending me a bill, this doctor's office billed my original insurance company (the correct one) and were rejected because of untimely billing. Several month later, they somehow got a hold of my current insurance member ID and claimed that I didnt have service during time of visit. Is this fraud? I never gave them my new member ID. What can I do? In addition to that, I suspect that this doctor performed unneccesary medical tests.

  • Sandy says:

    In our OR, we have recently begun bringing the patient back to the OR at the scheduled start time even if the physician is not in the building (also without updated H and P, or surgical site marking.) The patient waits on the stretcher in the OR room until the physician arrives and then has induction of anesthesia. Meanwhile, the patient is being charged for OR time instead of Pre-op time. Do you think this is a billing abuse or fraud? Something about this does not seem right.

    • admin says:

      Hi Sandy, this case would be an example of a very common billing malpractice. Many providers tend to bundle small line items like this one into a larger more expensive service. While there is no direct way to penalize this, it is up to the providers due diligence to use correct billing practices. However, in many cases like this, your insurance provider or it's billing agency could capture this and re-negotiate with the provider by unbundling the services correctly.

  • Pop says:

    What if Medical is being billed for exams when no exam is ever given. I have never even had my heart listen to yes the records say 10 minutes for consult on meds and 15 minutes for exam I do get the temp blood pressure and a finger prick for diabetes. then 5 minutes to get rxs I am rushed in and out if I have questions I have to demand the time. Yet every month in my med records it says my heart is checked and my abdomen is checked never happened is this billing fraud to Medical????

  • Miklos Auber says:

    However, in many cases like this, your insurance provider or it's billing agency could capture this and re-negotiate with the provider by unbundling the services correctly.

  • Wyatt Hunter says:

    Hi,

    Thanks for sharing superb article about 15 Types of Medical Billing Fraud & Abuse. This is very useful information for online blog review readers. Keep it up such a wonderful posting like this.

    Regards,
    Wyatt Hunter,
    Billing Gurus.

  • Jazz says:

    Some real nice techniques has been put up as to how medical billing flaws are there in market and how one can check what fraulte ways are used and how to safe from that..

  • Jamie says:

    My doctor billed me $40 because she called in an additional week of antibiotics for a sinus infection. I was seen 10 days prior for the infection but the first round of antibiotics were not enough, very common for me with sinus infections. I was not seen by anyone in the office when she called in the second round of the exact same medicine, there was no new or additional diagnosis. The $40 is more then my insurance even pays for an office visit per their contract with insurance. However my insurance paid zero for the calling in of the antibiotics and I am now expected to pay.
    I take several medications she frequently calls them in for refills without charging when appointments are not required. Is this legal?

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