When Billing Becomes Fraudulent

Over the past decade medical costs have been steadily rising faster than inflation. There are several explanations for this, and logically one could surmise that one of them is upcoding, the practice of a health care provider or medical coder charging for a service which was not actually performed. If CMS (the Centers for Medicare and Medicaid Services) detects any instances of upcoding, the offending health care providers can face a fine of up to $10,000 per violation on top of a lawsuit.

Medical billing and coding professionals will be familiar with the five levels of seriousness, or medical necessity, resulting from contact with a healthcare provider. A level one visit is a simple patient interaction, while treatment can range to a level five which is reserved for serious medical treatment. It is easy to define upcoding as fraudulent billing, however when considering that medical providers must base the level of care they bill for on the nearly 100-page rule book issued by CMS, differences of opinion are bound to arise.

Although a recent study revealed that when it comes to average coding mistakes, just one percent of claims are upcoded compared with 44 percent that are undercoded, medical providers along with billing and coding professionals are under significant pressure not to cross the “upcoding” line. This has frustrated many, including a doctor who pointed out that he feels like he will be investigated because, after realizing he had been undercoding for some time, he made the appropriate correction which he assumes will be a red flag for the CMS.

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Based on precedents set by by previous litigation, if a claim has been submitted and is found to be upcoded because of mistakes or good-faith errors, CMS may not take legal action or issue a fine. However if claims are found to be systematically overbilled, this may result in a lawsuit, such as a recent case brought by the federal government against the John B. Amos Cancer Center in Columbus, Georgia that may well exceed $100 million. In this instance, the prosecutor alleges that certain doctors working at the center systematically upcoded their services, with their salaries linked to how much they billed CMS and other government-supported insurance programs. It is also alleged that the medical billing and coding professionals who submitted the claims often did not have access to physician notes, and that these notes may in fact have not existed.

In another case from 2002, Healthcare Corporation of America based out of Nashville reached a $1.7 billion settlement with CMS and the federal government for health care fraud; the biggest fraud settlement in US history.

CMS conducts regular audits, although with over one billion Medicare claims alone to process each year, only about two percent of all claims undergo this extra scrutiny. Another way fraudulent upcoding is detected is by whistleblowers. Current legislation allows for whistleblowers to receive damages awarded on behalf of fraud convictions. For instance the whistleblowers in the Healthcare Corporation of America case were awarded a combined $151.5 million.

The best way to avoid being prosecuted or fined for overbilling fraud is to make an effort not do it and read the CMS coding book. Health care providers who conduct regular audits of their billing using chart review as one of the measures may have an error rate within a 10.5 percent, according to CMS. And in reality, most health care providers and medical billing and coding professionals should be able to distinguish between “systematic upcoding” and “mistakes or good-faith efforts.”