Upcoding and unbundling are common types of healthcare fraud.

What is upcoding?

“Upcoding” occurs when a healthcare provider submits codes to Medicare, Medicaid or private insurers for more serious (and more expensive) diagnoses or procedures than the provider actually diagnosed or performed.

Healthcare providers use billing codes to identify the services and procedures that they provide to patients. Each code corresponds to a particular service or diagnosis and reflects the complexity of the work that the healthcare provider did.  Government and private insurers use these codes to determine how much to pay for the services and procedures.

When providers upcode medical bills for Medicare and Medicaid patients, they cheat those healthcare programs of needed funds.

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.

Doctors and upcoding

Doctors must document the care that they provide to patients and then bill for the procedure using standard billing codes that represent a particular service or procedure.

Doctors, including primary care doctors as well as specialty doctors (such as psychiatrists, ophthalmologists, dermatologists, orthopedists, pain management doctors, wound care doctors and others), engage in upcoding when they use codes to reflect more expensive services than the ones they actually provided.

For example, doctors may use a code to indicate that they performed a complex procedure, when they only performed a routine one.

Another type of upcoding is to bill for a visit that involved more time than it actually did.  Many services provided by doctors are billed using Evaluation and Management codes (E&M) that reflect the complexity of the patient visit. A common type of upcoding is using an E&M code for a more complex and time intensive patient visit than was actually provided.

Doctors also may use certain modifier codes that show that distinct additional services were provided during a patient visit. A common type of upcoding is to use a modifier code to indicate that additional services were provided when those services are actually covered by the standard code for the patient visit.

Hospitals and upcoding

Hospitals also can engage in upcoding lower-level charges for better-paying ones. Hospital inpatient costs are paid using pre-determined rates that vary according to the diagnosis-related group (DRG) assigned to the type of patient stay and the severity of the diagnosis. The DRG and severity level are determined by diagnosis codes (ICD codes).

One type of upcoding occurs when hospitals bill for inpatient stays at the highest severity level even though the patient’s care was actually more routine. A high severity level requires that there be at least one secondary diagnosis that is considered a major complication or comorbidity, such as acute respiratory failure and sepsis.

A hospital also engages in upcoding when it bills for care as if provided by a physician when it was actually provided by a nurse or physician’s assistant, which is a lower-paying service.

Billing care at higher levels than the care provided results in significant overcharges to federal healthcare programs.

The HHS Office of Inspector General founds that from FY 2014 through FY 2019, the number of hospital stays billed at the highest severity level increased almost 20%.

In FY 2019, hospitals billed Medicare for hospital stays at the highest severity level for 40% of all 8.7 million Medicare inpatient cases. Those inpatient stays cost Medicare $54.6 billion that year. The most frequently billed Medicare Severity Diagnosis Related Group (MS-DRG) was MS-DRG 871, septicemia or severe sepsis with a major complication. Medicare paid $7.4 billion to hospitals for those stays.

The OIG said the billing patterns suggest possible upcoding in many cases, particularly since almost 30% of the inpatient stays at the hospitals lasted a particularly short time.

“Although the complications billed suggest sicker beneficiaries, the shorter lengths of stay point to beneficiaries who are less sick,” the OIG said.

Roughly a third of stays for heart failure and shock (MS-DRG 291), pneumonia (MS-DRG 193) and renal failure (MS-DRG 682) had comparatively short lengths of stay, according to the OIG, indicating hospitals may have engaged in upcoding and caused Medicare to overpay for those stays.

Other Health Care Providers and Upcoding

Other types of healthcare providers also may engage in improper upcoding. For example, a home healthcare agency that reports more time-intensive services provided to a patient than were actually provided is a type of upcoding. An urgent care facility may engage in upcoding by billing for medical services that were more extended or complex than those provided. Durable medical equipment providers (DME) may engage in upcoding if they bill for more expensive equipment than actually provided.

How to report upcoding, unbundling and other healthcare fraud

The False Claims Act gives employees and others who know about upcoding, unbundling and other healthcare fraud a way to report it safely.

With the help of an attorney, whistleblowers can file a “qui tam” lawsuit, which will trigger a government investigation. After investigating the allegations made in the qui tam complaint, the government will decide whether to intervene in, or join, the qui tam lawsuit and pursue litigation. If the government decides not to intervene in a qui tam case, whistleblowers and their counsel may then pursue the litigation on their own and recover funds on behalf of the government.

Those who file qui tam lawsuits are protected under the provisions of the False Claims Act that prohibit retaliation against whistleblowers, such as being “discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment.”

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 many successful whistleblower 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.

CareAll Management LLC, a Tennessee home health provider, paid $25 million to the United States and the state of Tennessee 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 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.

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.

If you are aware of upcoding, unbundling or other healthcare fraud and would like to discuss with experienced and successful whistleblower attorneys how a qui tam case would work, contact Phillips & Cohen for a free, confidential consultation.

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