Healthcare Fraud & Healthcare Abuse: How to avoid undercoding?

Medical billing and coding occupy a central position in the healthcare spectrum. Unfortunately, fraudulent practices can disrupt this system, impacting healthcare providers in rendering their services. This article explores medical billing fraud and abuse, its types, the significant consequences, and the laws of medical billing fraud and abuse. Additionally, learn preventative strategies and a reporting procedure for potential misconduct.

Healthcare Fraud and Abuse

Healthcare fraud

Healthcare fraud involves false or misleading information provided to gain undue benefits or payments from health insurance providers. It comprises activities like billing for non-performed services, falsifying a patient’s diagnosis to justify tests, procedures, or surgeries, and misrepresenting procedures done to obtain insurance payment.

Healthcare abuse

Healthcare abuse is a practice, directly or indirectly, resulting in unnecessary costs to healthcare systems, often violating standard practices. It involves overcharging for services or products, providing medically unnecessary services, or charging for services that should not ordinarily be set to healthcare providers. While it might not be legally fraudulent, such practices are seen as ethically and professionally improper.

Healthcare fraud vs Healthcare Abuse
A comparison between Healthcare fraud and abuse.

Did you know?

According to the Federal Bureau of Investigation (F.B.I.), healthcare fraud costs the United States approximately $80 billion annually.

A 2020 report by the Department of Health and Human Services (H.H.S.) showed that $2.6 billion was recovered from individuals and companies attempting to defraud U.S. federal health programs.

What is Fraudulent Billing and Coding?

Medical Billing Fraud

Medical billing fraud involves misrepresenting or altering facts to receive higher reimbursements from health insurance companies. It can include upcoding (charging for a more expensive service than was provided), unbundling (billing for each procedure stage as if they were separate procedures), and billing for services that were never rendered.

Medical Coding Fraud

Medical coding involves misusing medical codes used to document patient diagnoses and treatments to increase reimbursement illicitly. Instances of such fraud include upcoding, where a more severe diagnosis is coded than the actual one, or assigning additional codes irrelevant to the diagnosis (also known as “overcoding”). Another example is “undercoding,” which involves intentionally reporting fewer codes than necessary to avoid detection of another fraudulent activity. These fraudulent coding practices can lead to overcharging insurance providers and patients receiving incorrect medical records.

The 7 Types of Health Care Fraud and Abuse in 2023

1. Billing for services not rendered

This fraud happens for services that are never rendered. It involves duplicating the signatures who are officially associated with Medicare. It uses bribes and kickbacks to corrupt healthcare stakeholders. 

2. Upcoding of services

It charges Medicare programs for services that are priced higher than the actual procedure that took place.

3. Upcoding of Equipment

It is similar to upcoding but utilizes medical equipment like billing Medicare for any equipment by providing only a patient manual. 

4. Duplicate claims

The providers submit an altered duplicate claim instead of the original in this type, charging Medicare double for the same completed service, similar to the date. To be paid twice, the same service is billed twice rather than having a single claim submitted twice.

5. Unbundling

Piecemeal bills for a particular service are submitted, appearing to be staggered over time. When these services are combined, the price is typically lower. However, falsifying the claim causes a higher fee to be invoiced to Medicare, which increases the amount paid to the fraudster.

6. Excessive services

It happens when Medicare is billed for more than the actual care amount necessitates. This can apply to both services and products related to medicine.

7. Unnecessary services

In contrast to excessive services, this fraudulent plan involves billing for services that don’t apply to a patient’s condition, such as echocardiography for a patient with an ankle injury.

8. Kickbacks

Kickbacks are incentives like money, jewelry, free trips, getaways hosted by corporations, or other extravagant offers that trigger medical professionals to use particular medical services. For example, a pharmaceutical corporation may pay for a luxurious doctor-patient retreat or offer a little cash bonus for using an M.R.I. when promoting a specific drug’s prescription and usage is unnecessary. Paid speaking engagements at events, consulting agreements, and research grants are additional sources of compensation that can be considered unlawful kickbacks.

Consequences of Fraud and Abuse in Medical Billing

Higher Medical Costs. Fraudulent claims lead to unnecessary expenditures, inflating healthcare costs.

Increase in Insurance Premiums. As insurance companies cope with the increased costs due to fraud, they pass these on to policyholders, leading to higher premiums.

Compromise on Data Integrity. Fraudulent activities can lead to inaccuracies and misrepresentation in health records.

Exclusions from Medicare Programs. Medicare program participation may be prohibited for organizations engaged in fraudulent activities.

The Office of Inspector General (OIG) reported in 2021 that they excluded 654 individuals and entities from participating in Medicare, Medicaid, and other Federal healthcare programs.

Fraud and Abuse Laws

The United States has a robust system of laws to prevent and prosecute fraudulent activities in the healthcare sector. Here’s a list of the laws about fraud and abuse in healthcare:

  1. Federal Civil False Claims Act (F.C.A.)
  2. Anti-Kickback Statute (A.K.S.)
  3. Physician Self-Referral Law (Stark Law)
  4. Federal Health Care Fraud Statute
  5. Civil Monetary Penalties Law (CMPL)
Laws for medical fraud and abuse
Know the five major laws that safeguard patients against healthcare fraud.

Federal Civil False Claims Act (F.C.A.) 

The False Claims Act (F.C.A.), 31 U.S.C. 3729–3733, is a federal statute first passed in 1863 in reaction to defense contractor fraud during the American Civil War. It is the legal basis for many of the Fraud Section’s prosecutions. It prosecutes those who knowingly submit or cause the submission of false or fraudulent claims.

Anti-Kickback Statute (A.K.S.) 

Anti-Kickback Statute (A.K.S.) was passed in 1972. It prohibits kickbacks in connection with federal healthcare programs.

Physician Self-Referral Law (Stark Law)

Physician Self-Referral Law (Stark Law) was formulated in 1989. It forbids doctors from suggesting patients to a company with which they or a member of the immediate family is affiliated with specific medical services covered by Medicare.

Federal Health Care Fraud Statute 

In 1996, Congress passed the Federal Healthcare Fraud Statute with Title 18, United States Code, Section 1347, which defines the felony of healthcare fraud.

Civil Monetary Penalties Law (CMPL)

The Civil Monetary Penalties Law (CMPL) is part of the Social Security Act, established by the United States Congress in 1981. It imposes penalties on anyone who submits fraudulent claims.

Best Practices to Avoid Fraud and Abuse

The essential tips to combat fraud in the healthcare ecosystem.

Identify Fraud and Abuse

As a healthcare provider, your first step is identifying the type of potential fraud and abuse. Also, understand its nature and consequences as well. Bell Medex’s data analytics features let you more quickly identify fraudulent activity in medical billing. You can easily identify discrepancies, irregularities, or wrong codes when combined with auditing methods.

Ensure Data Security

Patient data security is a must-secure factor as fraudulent steal it and use it for services that are not rendered. So keep data secure and safe. Bell Medex’s robust cybersecurity solutions help ensure patient data security, a crucial aspect in preventing healthcare fraud. By employing advanced encryption techniques, secure access protocols, and continuous monitoring, Bell Medex keeps your patient’s data secure and safe from unauthorized access, reducing the risk of fraudulent use.

Implement a Compliance Program

Organizations should have a plan outlining policies and procedures for detecting and preventing fraud. Organizations should leverage Bell Medex’s strategic consulting services to develop a detailed plan with clearly outlined policies and procedures for detecting and preventing fraud. This plan can encompass regular training sessions, strict adherence to regulatory compliances, and deploying sophisticated fraud detection tools, ensuring a multi-layered approach to preventing healthcare fraud. Watch this video to learn about the compliance program.

Improve Medical Billing and Coding Process

Accurate and detailed billing can prevent misunderstandings and fraudulent charges. With Bell Medex’s Medical Billing Services, you can ensure accurate and detailed billing. The automated system minimizes errors, provides itemized billing details, and maintains transparency. This level of accuracy not only prevents misunderstandings but also helps promptly detect any irregularities or fraudulent charges.

Conduct Internal Monitoring and Auditing

Regular checks can help detect discrepancies and nip fraudulent activities in the bud. Bell Medex’s health analytics software is a crucial asset for routine inspections. It lets you see real-time differences by constantly monitoring and analyzing healthcare data. This proactive approach helps identify fraudulent activities early, allowing immediate intervention and remediation.

How to Report a Medical Fraud and Abuse?

The steps on how to report a medical fraud.

1). Identify the Issue. Recognize the signs of potential fraudulent activities.

2). Gather Evidence. Collect documentation to support your suspicions.

3). Consult Legal Counsel. Speak to a lawyer to understand the implications and the next steps.

4). Contact Your Supervisor or Compliance Officer. Report the issue to someone in authority within your organization.

5). Submit a Report to the Office of Inspector General (OIG). You can also report the issue to the federal authorities. Watch this video to learn how to report to the Office of Inspector General (OIG).

6). Notice to the Insurance Company. Inform the insurer who is being defrauded.

7). Take Preventative Measures. After reporting, ensure procedures are in place to prevent future occurrences.

Secure Your Practice with Bell MedEx

Are you afraid of medical billing fraud and abuse? Don’t worry Bell MedEx will take care of your practice’s data and patient information. Bell MedEx offers an all-in-one cloud-based EHR and Practice Management Software solution that ensures data integrity and security.

Sign up for a FREE demo today and see how we enhance your practice’s security.


The reliability and efficacy of the healthcare sector are at risk of fraudulent medical billing and coding practices, which can harm anything from insurance premiums to the integrity of medical records. All stakeholders must adopt a proactive stance to reduce the impact of these widespread unethical behaviors.

To identify and stop fraud, it’s essential to implement effective compliance systems, improve billing and coding procedures, and promote routine audits. Always remember that fighting fraud protects both patient welfare and the credibility of the healthcare system.

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