In this Article
By: Kendall Upton
Professional insights: Amy Jenkins
Medical billers and coders are key players in the healthcare revenue cycle. In simplest terms, medical coders translate doctors’ notes into billable codes that billers then use to submit insurance claims. When done correctly, healthcare providers get reimbursed on time for the services they provided to a patient.
Despite how straightforward it sounds, there are a lot of steps in the process where things can go wrong. Mistakes could be fraudulent whether or not people commit them intentionally, which can lead to serious financial and legal consequences for the employee, employer and patients. Taking the time to understand some of the more common forms of healthcare fraud can help medical billers and coders avoid these costly pitfalls.
What is phantom billing?
“[Phantom billing] is the act of submitting claims for patient services that didn’t actually happen,” said Amy Jenkins, Clinical Assistant Professor in Health Systems and Population Health at the University of Washington School of Public Health. “The reason why that’s a problem is because the False Claims Act specifically prohibits that.”
If a chiropractor sees a patient once a week but bills them for three visits per week, that’s one example of billing for phantom services. Believe it or not, people try to game the system through phantom billing all the time.
Phantom billing real-world examples
Instances of phantom billing occur every year. Here are just a few examples:
- In 2021, Cigna sued multiple healthcare companies in Connecticut for submitting claims for medical equipment that were “not ordered by patients, not delivered to patients and not even prescribed by their physicians.” Cigna claimed that the defendants received over $18.7 million as a result of these fraudulent insurance claims.
- A New Jersey physician billed Medicare and Medicaid over several years for physical therapy services that were not provided to patients, as well as and services that were performed by unlicensed providers.
- In 2023, a group of Michigan residents took part in a massive scheme to defraud Medicare for over $61.5 million for services they never provided.
What is upcoding?
Upcoding is when someone bills insurance for a more expensive service than the patient actually received.
“Upcoding is more like, ‘Hey, I did this procedure. I know that Medicare and Medicaid call it this, but I’m going to upcode it one level, or instead of it being the basic procedure, I’m going to include to the more extensive procedure, even though I know I didn’t do that,’” Jenkins said. “That’s also fraud. It’s essentially getting reimbursement for the more expensive procedure.”
Jenkins said that abdominal ultrasounds are a good way to illustrate upcoding.
“We have both a limited and an extensive ultrasound. If you did a limited ultrasound and charge for an extensive one, it’s upcoding whether it was intentional or not.” When someone does this intentionally and repeatedly, it’s considered fraud.
Upcoding examples
- An orthopedic surgeon in Massachusetts upcoded visits that only lasted five minutes or less and billed them as longer appointments, sometimes 60-90 minutes. He was sentenced to 16 months in prison.
- A Houston hospital had to pay back $6.4 million for “improperly submitted claims, specifically by automatically appending certain Evaluation and Management (E/M) codes and modifiers to medical services.”
- University of Colorado Health had to pay $23 million to resolve allegations that their billing software automatically used the most expensive evaluation and management (E/M) codes for ER visits, which resulted in Medicare overpaying the system by millions of dollars.
What is unbundling?
Unbundling can get a little more complicated.
“Procedures are oftentimes captured with a single code,” Jenkins said. This is known as code bundling. For instance, you may have one code for a particular surgery which bundles the cost of the preoperative care, the surgery itself and the postoperative care.
Unbundling separates the components of a procedure and bills for them separately. There are instances where unbundling is necessary, but it can be tricky.
Jenkins cited general surgeons as a way to explain how bundling and unbundling works. These surgeons often need to perform lysis of adhesions to gain access to a surgical site. Because it’s so common, lysis of adhesions is usually bundled into the primary surgical procedure. Unbundling the lysis of adhesions could be necessary if complications arose or if the surgeon required significant extra effort, but in most cases, you can’t charge extra for this component.
“If the provider decided to separately bill for the incision, bill for the procedure and bill for the lysis of it of adhesions, that’s separating out all of those components and billing them separately to gain higher reimbursement,” Jenkins said.
Unbundling examples
- A urology group practice had to pay a $1.85 million settlement for routinely using Modifier 25 over a several year period to “improperly unbundle routine E&M services that were not separately billable from other procedures performed on the same day,” thus resulting in a higher reimbursement from Medicare.
- In addition to other forms of fraud, a Michigan vascular surgeon was sentenced to 80 months in prison and agreed to pay over $43 million for improperly using Modifier 59 to unbundle services that should have been billed together.
- A Connecticut psychiatrist and practice had to pay several hundred thousand dollars for misusing Modifier 25 on claims for pain injections when, in reality, no separately identifiable E/M services were provided. Even after officials notified them of their misuse, they continued to do it anyway.
Fraud vs. abuse
Let’s acknowledge for a moment that honest mistakes in medical billing and coding do happen. Even the most experienced billers and coders are not immune to human error. So at what point do mistakes cross the line into fraud?
Put simply, fraud is intentional. If you are performing phantom billing, upcoding or unbundling with the intent to receive more reimbursement payouts, that’s fraud. Honest mistakes, on the other hand, are more likely to be classified as abuse.
That said, it’s important to understand that even unintentional mistakes could count as fraud. The occasional coding or billing mistake probably won’t be a career-ender, but if these mistakes accrue over time, the consequences could be severe. It really depends on the seriousness and frequency of the mistakes that occur. That’s why it’s crucial to have an exceptional attention to detail and commit to continuous learning to prevent negligent errors in the first place.
Consequences of medical billing and coding fraud
Medical billing and coding fraud can have grave consequences for healthcare organizations and individuals alike.
“The healthcare organization can have to pay back the money that they charged for those claims. They can also have costly fines in addition to the money they’ve had to pay back,” Jenkins said. “Plus, they could have sanctions such as a Corporate Integrity Agreement (CIA) where they have to prove that they are compliant with their billing for a number of years, which can be incredibly costly.”
Healthcare fraud, even on a small scale, also affects the healthcare industry at large.
“When we’re making these mistakes in favor of the organization, it’s not just a problem for Medicare, it’s a problem for healthcare overall. We’re talking about making it more expensive for everybody,” Jenkins said. Healthcare fraud can raise health insurance premiums and increase taxes, for instance.
When we’re making these mistakes in favor of the organization, it’s not just a problem for Medicare, it’s a problem for healthcare overall. We’re talking about making it more expensive for everybody…
Plus, those extra costs can eventually trickle down to the patient.
“If I’m a provider and I’m billing twice as much for this procedure as I deserve, that is showing that our healthcare expenditures are twice as much. And I’m only delivering half the services, so it’s making healthcare overall look more expensive. In reality, it is more expensive because somebody has to pay that bill. Is it the patient? Is it the insurance company? Do collectors write it off?” Jenkins said.
There are consequences for the biller or coder, too. That could include discipline at the organizational level or being fired. Depending on the situation, they may even have to answer for their actions in court. The truth is that people at any level of the organization could even go to jail.
Closing thoughts
The line between honest mistakes and intentional fraud in medical billing and coding may be blurry, but the consequences can be severe. Phantom billing, upcoding and unbundling not only expose individuals and organizations to fines, restitution and even prison time, they also drive up healthcare costs for everyone. By committing to accuracy, continuous learning and ethical practice, billers and coders can protect themselves, their employers and the patients who ultimately bear the weight of these financial missteps.
