Differentiating Between Improper Payments and Medical Billing Fraud

Medical practices sometimes equate improper payments with medical billing fraud. Improper payments could be unintentional where your received payment even after not meeting program requirements. While medical billing frauds are intentional where practices might through up-coding and unbundling try to receive more insurance reimbursements than allowed. For differentiating between improper payments and medical billing fraud, let’s begin by defining improper payments.

Improper Payments

Improper payments represent payments that do not meet program requirements. The vast majority of improper payments occur in situations where there was an unintentional payment error or a reviewer cannot determine if a payment was proper due to insufficient payment documentation from a state, or a provider. Improper payments do not necessarily represent expenditures that should not have occurred and can include both overpayments and underpayments where there is insufficient documentation to determine if a payment is proper in accordance with program payment requirements. While fraud and abuse are improper payments, not all improper payments represent fraud.

For example, a majority of improper payments are due to instances where the information required for payment was missing, documentation that an eligibility determination was made correctly was missing from the state system, states did not follow the appropriate process for enrolling providers, and/or states did not follow the appropriate process for determining beneficiary eligibility. However, these improper payments do not necessarily represent payments to illegitimate providers or on behalf of ineligible beneficiaries.

Had the missing information been on the claim and/or had the state complied with the enrollment or redetermination requirements, then the claims may have been payable. A smaller proportion of improper payments are instances where there was sufficient documentation to determine that payments should not have been made or should have been made in different amounts, which are considered monetary losses to the Federal Government (e.g., medical necessity, incorrect coding, and other errors).

Medical Billing Fraud

Medical billing fraud can occur in a variety of ways.  Some of the most common ones are up-coding, unbundling, and billing for services that were not provided. Many other fraudulent schemes exist, however.  When a provider submits a fraudulent bill for payment, they may be liable under the False Claims Act, and whistleblowers play a critical role in exposing this kind of fraud.

Three major medical billing frauds are as follows:

1. Up-coding Fraud

Up-coding is a kind of medical billing fraud that occurs when a provider sends a bill to Medicare or another payer for a more expensive service than the one actually performed. For example, the provider might:

  • exaggerate the time the procedure took to perform
  • misstate the equipment involved in the procedure
  • lie about the staff involved in performing the procedure
  • bill for individual therapy when group therapy was actually provided
  • simply makeup that a procedure happened
  • perform (and bill for) procedures that patients simply do not need in violation of ‘medical necessity rules

Up-coding also occurs with risk adjustment fraud committed under Medicare Part C, when a Medicare Advantage patient’s diagnostic data is exaggerated in order to draw additional risk adjustment payments from Medicare.

2. Unbundling Fraud

Unbundling is a fraudulent billing scheme accomplished by billing several different procedure codes for a group of procedures, even though the group should properly be billed under a single all-encompassing code. The sum of reimbursements for each code paid separately is higher than the reimbursement for the comprehensive code, causing an overpayment. For example, a physician might order a panel of blood tests for a particular patient. The laboratory receiving the order commits fraud if, instead of billing for the panel, it attempts to increase its income by billing separately for each test conducted.

3. Billing for Services Not Provided

The Government will only pay for medical services that are actually performed or for equipment that is actually delivered. It can be a violation of the False Claims Act to bill the Government for healthcare services, supplies, or equipment that were not performed or delivered. While sometimes bills are submitted for completely fictional services, medical billing fraud also happens when, for example, a diagnostic testing lab submits a bill claiming it has performed both a two-dimensional CAT scan and a sophisticated 3D scan and analysis, when, in fact, only the 2D scan was performed.  They are billing for a service that was not actually provided.

Small practices or solo providers might try to bill for services on their own, without a proper understanding of payer-specific billing guidelines and reimbursement policies. This could lead to improper payments and unintentional billing fraud. Whether improper payments or medical billing fraud, it might happen due to the absence of a skilled medical billing team.

Medical Billers and Coders (MBC) is a leading medical billing company. As per your billing requirements, we can provide state-specific, medical specialty-specific, and payer-specific billing and coding services. To know more about our billing and coding services, call us at: 888-357-3226 or email us at: info@medicalbillersandcoders.com.