Medical Billing Fraud

According to estimates from medical billing experts, the US Government loses a significant percentage of its income to medical billing scams and other fraudulent practices. This results from the broad, but sometimes, conflicting Medicare regulations, which contain numerous technicalities and loopholes.

Unscrupulous doctors and other healthcare providers often exploit these loopholes and the confusion created to make money. The situation is worsened by the inability of the average person to fully understand the paperwork involved, as well as the medical jargon contained therein.

Common Types of Medical Billing Fraud

Upcoding: This refers to the fraudulent practice of healthcare providers to falsify the current procedural terminology (CPT) codes, with the aim of inflating the medical bill. For instance, a patient treated for a sprained ankle would have his/her paperwork improperly coded to indicate a broken ankle. An example is the $1.4 million settlement paid by the Dallas-based University of Texas Southwestern Medical Center in September 2011 for alleged upcoding of Medicaid and Medicare claims.

Inflated Hospital Bills: Sometimes, healthcare providers may inappropriately exaggerate medical bills through imposing double-charges on items, gross overcharging, and/or deliberate billing mistakes. An itemized bill can be used to detect these fraudulent billing practices.

Phantom Billing: This type of fraud involves billing for services or procedures that were not actually performed. The net effect of this type of fraud is that it drives up the overall cost of health care.

Self-Referrals: This refers to the fraudulent practice, whereby healthcare providers order tests or procedures for patients, and then proceed to refer the same patients to themselves or fellow practitioners to conduct those tests. For instance, a surgeon may inappropriately recommend a surgical procedure for a patient, with the sole intention of being the one to perform the surgery. This practice is illegal since it encourages the healthcare providers to promote unnecessary tests and medical procedures on patients.

Service Unbundling: This refers to the individual billing of services and procedures that are usually billed as a bundle. Usually, the multiple procedures that are contained in a bundle are offered at special reimbursement rates. For this reason, unbundling and billing any of these procedures separately leads to an inflated invoice.

How to Prevent Medical Billing Fraud?

#1 Employee Screening: One of the best strategies for preventing medical billing fraud is to ensure that all employees undergo screening. The screening is particularly important for employees that are directly involved in medical billing. The screening process involves carrying out background checks and verification of certificates to ensure that all employees are professionally certified.

#2 Compliance Program: Implementing a compliance program aimed at detecting and preventing medical billing fraud is the other solution. Such programs are ideal for hospitals and healthcare providers, as well as medical billing companies. As part of due diligence when hiring third-party medical billing companies, hospitals and other healthcare providers should give preference to medical billers with a compliance program in place.

All personnel should be informed about the compliance program, with regard to the purpose of implementing it, as well as the consequences for breaching any of the procedures. Usually, these programs comprise of various checks and balances including an audit system, procedures, and standards for reporting abuses, and the penalties for breaches. A high-level employee should be appointed and granted authority to supervise the program.

#3 HIPPA Compliance: The Health Insurance Portability and Accountability Act provides guidelines for healthcare providers to ensure that the privacy of personally identifiable patient health information and data is maintained. Some of the information that must be protected according to this federal legislation includes patient names, addresses, SSN, and medical records.

The Act also recommends stringent security measures for healthcare providers to enable them secure patient data. These include:

  • Password protection on computers to prevent unauthorized viewing of patient information
  • Restricting physical access to fax machines for the public
  • Encryption of emails containing patient information
  • Having medical billing employees sign confidentiality agreements