Upcoding and unbundling are common types of healthcare fraud.

What is upcoding?

“Upcoding” occurs when a healthcare provider submits codes for more serious (and more expensive) diagnoses or procedures than the provider actually diagnosed or performed. When providers upcode medical bills for Medicare and Medicaid patients, they defraud all taxpayers.

What is unbundling?

Improper coding also might occur through “unbundling” or “fragmentation.” Medicare and Medicaid often will have lower reimbursement rates for groups of procedures commonly performed together, such as incisions and closures incidental to surgeries. Unbundling or fragmenting billing codes illegally increases a provider’s profits by billing bundled procedures separately, which results in higher reimbursement from Medicare and Medicaid.

The use of electronic health records (EHR) software can facilitate upcoding and unbundling. With EHR software, providers can copy and paste notes from a patient’s previous visit into each current treatment note, which can make it appear that the provider has diagnosed and treated every condition on that list. Providers also might restrict the menus on their EHR software to show only diagnoses and treatment codes with the highest reimbursement rates.

How can healthcare fraud be stopped?

The False Claims Act gives employees a way to stop healthcare fraud. With the help of an attorney, employees can file a “qui tam” lawsuit, which will trigger a government investigation. Whistleblowers may receive rewards of 15 percent to 30 percent of the amount the government recovers as a result of a qui tam lawsuit.

Upcoding and unbundling examples

There have been a number of successful whistleblower (“qui tam”) cases that have exposed fraud by healthcare providers that upcode treatment or services, or unbundle medical lab tests or groups of procedures. Generally, upcoding and unbundling are difficult to detect without the help of whistleblower insiders who oppose cheating Medicare and Medicaid.

CareAll Management LLC, a Tennessee home health provider, paid $25 million to the United States and the state of Tennessee in 2014 to settle allegations that it upcoded home health billings to Medicare and Medicaid. According to the complaint, CareAll exaggerated the severity of its patients’ conditions in order both to increase billings and to bill for medically unnecessary services.

EndoGastric Solutions, Inc., a Washington-based medical device manufacturer, returned $5.25 million to the federal government in 2014 to settle upcoding allegations. EndoGastric’s device could be implanted through two procedures, one more invasive and more expensive than the other. When promoting its device, EndoGastric advised providers to bill for the more expensive procedure, causing federal health care programs to pay more than needed.

In 2012, NextCare, Inc., an Arizona urgent care provider, paid $10 million to the federal government and several states, settling allegations that its employees inflated billings for a variety of urgent care procedures. The complaint also alleged that NextCare performed unnecessary medical procedures, such as redundant allergy testing.

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