Medicare/medicaid Billing Fraud: Upcoding and Unbundling
Billing Medicare and Medicaid for medical services and supplies is done using a complex system of numerical codes that designate various diagnoses and procedures. Reimbursement for these procedures and supplies are based upon those codes. The coded, computerized bills submitted by providers are processed by large insurance companies (known as “intermediaries” or “carriers”) that contract with the government to pay claims using government funds.
Because different codes or code combinations produce different reimbursements from government programs, there is a financial incentive to “upcode” or bill for a more serious (and more expensive) diagnosis or procedure. Thus, a common form of fraud is for a physician, hospital or other healthcare provider to provide a particular service to a patient, but to use a more expensive “code” when billing for the service. When a physician, hospital or other healthcare provider engages in this type of conduct, they can be liable under the False Claims Act.
Medicare and Medicaid often have special reimbursement rates for a group of procedures commonly done together, such as typical blood test panels by clinical laboratories. Health care providers seeking to increase profits will “unbundle” or “fragment” the tests and bill separately for each component of the group, which totals more than the special reimbursement rates. This type of conduct is also a form of fraud and can be the basis of a claim under the False Claims Act.