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Fraud and Abuse: Incorrect Billing Practices

Major Categories of Health Care Fraud and Abuse

The surge in incidences of fraud and abuse in healthcare has been attributed to the commercialization and commodification of healthcare, insurance company reimbursement criteria, and governmental policies. For instance, Drabiak and Wolfson (2020) reported that cases of upcoding and misinterpretation of clinical information costs an upwards of $100 billion every year and can lead to unnecessary procedures and prescription (Drabiak & Wolfson, 2020, p. E221). The common categories of healthcare fraud and abuse include improper coding and upcoding, billing for services not provided, self-referral, kickback schemes, and reverse false claims among others.

Upcoding is one of the most reported cases of fraud and abuse in healthcare, which entails charging for a more expensive plan or operation than the one that was executed in an effort to gain more profit. Claims for medical services that have not been performed, as well as medications and medical equipment that have not been given to the patient, are submitted with invoicing for services not rendered. One example of this type of fraud is when a caregiver files so many claims on a single day that it is practically impossible to treat that many clients. Self-referral on the other hand, describes a fraud where patients are referred to a facility, testing service, hospital, or other entity with which the referring practitioner has a direct financial connection. Kickback schemes come in a variety of shapes and sizes. For instance, pharmacists can write a prescription with a particular brand of medications over another if the pharmaceutical firm offers a reward in return. Lastly, reverse false claims describe scenarios where unsubstantiated claims that are approved by an insurance scheme leads to a payment from the insurance company to a caregiver. Reverse false payments occur when a health-care provider owes the state money and fails to repay it on schedule (Thornton et al., 2015, p. 718-722).

Five Health Care Fraud and Abuse Laws

Complex legislation have been enacted to address fraud and abuse., and it is imperative that medical professionals understand them and their implication on practice. Violation of these laws have dire consequences that could attract criminal penalties, civil fines, removal from federal healthcare programs, and revocation of practice license by the state medical board. According to the Inspector General’s office, the five major healthcare fraud and abuse laws that applies to providers include the False Claims Act, Stark Law, Anti-Kickback Statute, Civil Monetary Penalties Law, and the Exclusion Statute (Sheppard, 2014).

Under the False Claims Act (FCA), the government is shielded against being overcharged or being paid for services that are not clinically required. This statute works in tandem with existing anti-fraud and anti-abuse legislation. If a claim is made in contravention of the Stark Law or as a consequence of kickbacks, it may be misleading or dishonest, resulting in culpability under the federal FCA and the Stark Law. Unless an exception qualifies, the Stark Law forbids providers from making referrals to institutions with which the doctor or a close relative has a fiduciary obligation in order to be granted specified medical services reimbursed by Medicare or Medicaid. Because this is an absolute liability provision, there is no need to prove clear intent to break the law (Staman, 2014). Financial penalties and expulsion from Government healthcare programs are among the sanctions imposed on doctors who break the Stark Law.

The Anti-Kickback Statute, on the other hand, is a federal law that forbids the payment of compensation to promote or incentivize patient referrals or the development of business concerning any product or a service covered by public health care programs. Financial penalties, incarceration, and banishment from national health care programs are among the repercussions. Some monetary and commercial methods, such as personal services and lease contracts, partnerships in ambulatory care clinics, and reimbursements to bona fide staff, are protected by safe harbors. As for Civil Monetary Penalties law, the Inspector General’s department is empowered to pursue civil financial penalties for a variety of actions, and to seek varied amounts of penalties and evaluations depending on the nature of infraction at hand (Staman, 2014). The fines for each infringement vary from $10,000 to $50,000.

Lastly, the Exclusion Statute holds that the Office of the Inspector General has the power to bar persons and entities from participating in government healthcare programs such as Medicare and Medicaid. Persons may be barred for one of two types of reasons: discretionary or obligatory. All kinds of services, which include managerial and supervisory services, are barred for excluded persons (Staman, 2014). These five laws are crucial to the problem of fraud and abuse in the billing of healthcare services, which has leads to high cost of healthcare, reduced quality of care, and loss of careers among individuals found culpable of these crimes. Thus, physicians and healthcare administrative assistants must be aware of these regulations and their possible implications in order to prevent the negative consequences of a breach.

Upcoding and the Law

Healthcare professionals input particular number codes called HCPCS that indicate specific services provided when filing claims to Medicare and Medicaid for compensation for services offered to patients. Upcoding is a deceptive tactic in which codes are entered that imply more expensive treatments than are actually given and are not backed up by physician verification in a patient’s clinical record. Furthermore, some codes describe a number of services that are traditionally provided jointly, such as a set of common diagnostic procedures. The False Claims Act prohibits upcoding since it defrauds government health programs such as Medicaid and Medicare. Anybody who submits a “falsified claim” for Medicare payments is in violation of the FCA. Furthermore, the FCA permits anyone with information of Medicare fraud to sue on government’s behalf to recoup the unlawfully acquired money and to receive a percentage of the amount as a reward for filing the complaints (CMS, 2021).

Although upcoding can be difficult to detect, several cases of the crime have been identified and prosecuted, aiding the government to recover billions that had been fraudulently lost. For example, GlaxoSmithKline reached a civil settlement with the Department of Justice in April 1998. The government uncovered a technique where the laboratory “lumped” a variety of blood tests into one inexpensive pricing package, telling providers that this would not increase Medicare charges, thanks to the important help of SKB staff and whistleblower Robert Marena. SKB, on the other hand, “unbundled” the package after the procedures were completed by the laboratory and charged the national program independently for each, including those that the physicians had not requested (Whistleblowersinternational, 2016). Five years later, SKB agreed to a $325 million qui tam payment. Marena and the other two principal relators were awarded $52 million in total. In June 3, 2003, the Department Of justice recovered $1.7 billion from HCA for a grand conspiracy of financial fraud that included upcoding, in what was the biggest False Claims Act documented case. John Schilling, a whistleblower, was one of 30 people who shared a staggering $151,591,500. In July 2013, Sound Inpatient Doctors reached a $14.5 million settlement with the US federal government. A qui tam award was given to Craig Thomas, the institution’s previous Executive vice president of Regional Operations (Whistleblowersinternational, 2016). These examples illustrate the significant implications of the FCA in the mitigation of upcoding, which is the most rampant form of billing fraud and abuse in healthcare.

Evidence-Based Recommendations to Address Upcoding

With a focus on education and organizations’ deployment of front-end monitoring to reduce fraud and abuse, a multi-layered approach can be beneficial in resolving program integrity challenges. The aspects of these measures should be natural extensions of established quality regulation and fraud mitigation systems and targets. Program integrity training and fraud prevention are one approach of mitigating upcoding. These must begin in undergraduate medical training and become a clear and specific feature of residency mentorship, which is the responsibility of medical school administrators, heads of departments, division directors, and instructors. Patient safety, malpractice, quality control, evidence-based care, and acceptable pricing methods might all be delicately woven into the already overburdened curricula (Chen et al., 2020, p. e60). Throughout medical school or career, a customized system could be introduced to tackle program fidelity difficulties stemming from missteps and unintended errors in EHR documentation and billing. According to the studies, there is a dearth of extensive teaching in this subject, with few medical schools providing any educational information on fraud and abuse. Some stakeholders have suggested that resident practitioner training should include topics such as compliance, billing, appropriate recordkeeping, suitable monitoring, and possible legal and criminal culpability (Drabiak & Wolfson, 2020, p. E229).

Another approach for preventing fraud is to employ front-end analytics. In the last decade, the pay-and-chase paradigm for combating severe fraud has shifted to employing advanced analytics data to evaluate the veracity of claims prior to reimbursement. The Center for Medicare Services, for example, uses specialty and practice scale to detect abnormally high payment applications, unusual practice development patterns, or abnormally high amounts of processes, as well as to highlight dubious client visit trends. CMS is also looking into cases involving whistleblowers, who are rewarded for reporting fraud under the FCA by receiving a share of any federal recoveries (Waitzberg et al., 2021). In alongside traditional risk control strategies such as employing skilled quality regulator and compliance expert and leveraging CMS provider tools that provide continuing training, it is recommended that providers adopt predictive analytics systems including those provided by leading technology consulting organizations as part of risk mitigation to look for patterns of anomalous and suspicious behavior (Drabiak & Wolfson, 2020, p. E230-231). Prior to claims filing, organizations and physician groups could use a technology that forecasts, analyzes, and flags likely incidents, allowing them to prevent accidental errors, avoid costly liabilities, and emphasize safety of patients.


Chen, Z. X., Hohmann, L., Banjara, B., Zhao, Y., Diggs, K., & Westrick, S. C. (2020). Recommendations to protect patients and health care practices from Medicare and Medicaid fraud. Journal of the American Pharmacists Association60(6), e60-e65.

CMS. (2021). Medicare Fraud & Abuse: Prevent, Detect, Report.

Drabiak, K., & Wolfson, J. (2020). What should health care organizations do to reduce billing fraud and abuse? AMA Journal of Ethics22(3), E221-231.

Sheppard, J. (2014, February). Get to Know the Five Most Important Federal Fraud and Abuse Laws Applying to Physicians. Healthcare Compliance Management.

Staman, J. (2014). Health Care Fraud and Abuse Laws Affecting Medicare and Medicaid: An Overview. Congressional Research Service.

Thornton, D., Brinkhuis, M., Amrit, C., & Aly, R. (2015). Categorizing and describing the types of fraud in healthcare. Procedia Computer Science64, 713-720.

Waitzberg, R., Gottlieb, N., Quentin, W., Busse, R., & Greenberg, D. (2021). Dual agency in hospitals: What strategies do managers and physicians apply to reconcile dilemmas between clinical and economic considerations? International Journal of Health Policy and Management.

Whistleblowersinternational. (2016, December 19). Upcoding — Health care and Medicare fraud. Whistleblowers International.


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