Avoiding Medical Billing Fraud - How to Stay Legal

Learn about the different types of medical billing fraud and what you can do to safeguard against them.

Medical billing and medical coding fraud are problems endemic to the healthcare industry. There are a variety of ways people can defraud the system in order to avoid payment, get extra benefits or maintain benefits they no longer qualify for.

Healthcare providers can also commit fraud in order to increase their own profits by getting paid for services they did not provide.

Fraud is an act done with the knowledge that it is wrong.

Fraud in medical billing and coding costs taxpayers and medical providers millions of dollars annually.

Healthcare providers and medical billers both have the ability to commit fraud by knowingly reporting codes and procedures that weren't performed. Honesty and integrity are key elements to a good medical biller, and good medical billers play a key role in preventing fraud.

Using the medical billing and coding standards to their advantage, medical billers create uniform checklists to follow as they process claims. Anomalies in these checklists help medical billers spot fraud before any occurs.

Medical billers and coders can work together to strengthen this process further by having one person submit the claims and a second person double-check the claim and post payments or adjustments.

The more people that review that claim, the more accurate the claim will be.

Types of fraud

There many common types of medical billing fraud:

  • Upcoding assigns a diagnosis or procedure that costs more or has a higher rate of reimbursement than is medically necessary.
  • Downcoding gives the patient a lesser diagnosis and sometimes shows fake patient improvement. This can allow for extended hospital stays or allotment of benefits for recovery that would not otherwise be given.
  • Separating Procedures is the process of separating the procedures performed at one time into separate treatments or separate visits.
  • Double Billing is the practice of billing for the same treatment or visit more than once, even if the patient wasn't seen.
  • Unnecessary Treatments are treatments or services that are provided to the patient which are not medically necessary.

All of these fraudulent practices are common ways that providers can manipulate patient care in order to get additional payments from insurance companies.

Even insurance companies can be involved in fraud

Another common type of fraud is called double billing. With double billing, health care providers will bill for the same treatments or visits more than once even if the patient didn't show up.

Insurance companies can also be involved in medical billing fraud.

Insurance companies often hire medical billers and coders in order to help them manage their claims process. These companies can manipulate this process by having billers and coders make adjustments or by denying claims incorrectly, which reduces their payment amount.

The Office of Inspector General (OIG) in the U.S. Department of Health and Human Services works with medical billers to monitor fraud and abuse. The OIG has also created compliance recommendations for the health care industry to follow in order to avoid fraud.

The National Association of Insurance Commissioners (NAIC) has listings of state insurance departments to which providers, insurance companies, and individuals can report fraud.

If you see medical billing fraud while working in the industry you can report this to your local state insurance department or state medical association.

Insurance fraud is a felony: if you're caught engaging in fraud you can face prison time or steep fines.

More on medical billing laws.

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