In recent times, one of the fastest growing crimes in the United States is health care fraud. Health care fraud is the knowing and willful production of false information to receive some benefit, typically monetary, from another within the health care industry.
Health care fraud investigations generally revolve around six main schemes:
- Phantom billing,
- Billing for unnecessary services,
- Double billing, and
- Giving or receiving kickbacks.
The present article deals with the fraudulent scheme of upcoding, which is the act of billing for medical procedures that are more complex, and thus more expensive than were actually performed by the medical professionals.
Up-coding is a type of fraud in which healthcare providers submit inaccurate billing codes to insurance companies to receive inflated reimbursements. These false submissions indicate doctors have provided patients with treatments that were more complex, costly, and/or time-consuming than what the patient actually received.
This unlawful scheme is a violation of the False Claims Act (FCA) because it defrauds federal programs including Medicare, Medicaid, and Tricare. The scheme is also unlawful because it falls under the broad umbrella of federal health care fraud, which makes it illegal to defraud any health care provider.
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Unbundling is another common form of upcoding. This fraudulent scheme involves billing for individual procedures that are usually performed and grouped together to be billed under a single code. And In some cases, the billing codes for complicated medical operations have associated components built into their codes.
For example, hip replacement surgery may factor in the costs of the surgeons and the use of the operating room. Unbundling occurs when a healthcare provider submits each component within a code to the patient’s insurance provider separately. This creates cost redundancy, that medical professionals can unlawfully seek reimbursement for the same procedure several times over.
Human error can be a possible offense of upcoding. Clinicians can enter data into their system that is erroneous. These errors can range from small mistakes, like mistyping words, to major errors, like entering wrong numbers or inverting codes or selecting wrong items from a drop-down menu.
However, there are more than a few traits in a clinician’s behavior that can be shown attribute to their bad intentions. For example, like if a medical professional checks too many boxes that show he/she provided more medical services or tests to a patient. Since more services were billed than performed, that medical professional will receive a higher amount in return.
Similarly, selecting a code for a slightly more serious condition than the patient actually has, may justify increased charges.
The Genesis of all this Mess?
After the implementation of Electronic Health Records, health care legislation has aimed to improve the quality of healthcare so it can be made available to lower income people and reduce the cost of healthcare. They did so by introducing pay-for-performance policies (P4P).
It was intended that the P4P policies would also ensure a better quality of care for patients by creating financial penalties for medical providers. In theory, the providers can be more efficient and could ensure better quality control to provide better medical care to their patients.
In practice, Medicare cannot directly monitor patient outcomes with P4P. Therefore, it must rely on the providers’ self-reporting accurate information to assess penalties correctly. In addition to self-reporting due to the lack of actual monitoring, it also creates a financial incentive for up-coding by the providers.
Coding Fraud Statistics
A report from the Department of Health and Human Services (“HHS”) released in May 2012 shows the reason for the government’s concern. The report analyzed physician billing from 2001 to 2010 and found that physicians increased their billing of higher-level codes while also decreasing their billing of lower-level codes during the years studied.
In particular, the three lowest codes for office visits decreased by 2 percent, 7 percent, and 8 percent, respectively. Conversely, the second highest billing code increased 15 percent over this period, and the highest billing code increased two percent.
The report concluded that continued education for proper billing needs to occur and the Center for Medicaid and Medicare Services (CMS) should encourage contractors to review physician billing for these types of services. The report did not conclude that these billings were inappropriate, just that the increase was suspect.
Federal Legislation that Governs You
False Claims Act
The False Claims Act makes anyone who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval” to the federal government subject to civil penalties.
A person acts knowingly if the person:
- Actually knows the claim is false;
- Is deliberately ignorant of the false claim;
- Acts with reckless disregard about the false claim.
Health Care Fraud — 18 U.S.C. section 1347
Under federal law, it is illegal to knowingly and willfully defraud any health care benefit program or to fraudulently obtain any money or other property that rightfully belongs to any health care benefit program.
A violation of this federal law carries with it a potential of up to 10 years in prison, fines of up to $500,000 or double whatever gain is made from fraudulent acts, or a combination of both a prison term and fines.
Civil Monetary Penalties Law
Further, the OIG can seek civil monetary penalties under the Civil Monetary Penalties Law for improperly filed or fraudulent claims. In addition to stiff fines, the government (Medicaid and Medicare) can seek damages of up to three times the amount billed and seek to exclude an offending provider from participation in any federal healthcare programs.
In recent years, the government has recovered billions of dollars in judgments and settlements under the FCA, and a large proportion of those dollars came from the healthcare industry.
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Up-Coding Fraud Examples
In litigation involving a psychiatrist, for example, the doctor’s billing office submitted claims for 23 patient sessions lasting 45 to 50 minutes, five sessions lasting 25 to 30 minutes, all totaling 21.5 hours of service in one 24-hour period.
The billing office simply assumed most visits were longer sessions without consulting the doctor. The court held that the doctor acted in reckless disregard of the claims’ falsity and found the doctor liable under the FCA.
Another danger for providers is unbundling, or splitting individual procedures or services from a standard grouping for billing. In the early 1990s, SmithKline Beecham Clinical Laboratories, among others, marketed a standard bundle of tests to doctors by representing that the additional tests in the grouping would not increase billings to Medicare or any other public payers.
The laboratories billed Medicare separately for each test. Consequently, in 1996, SmithKline settled an FCA action with the government for an astonishing $295 million.
Providers should also be aware that while the government sues under the FCA, they can still be subject to various recovery actions by patients and private actions by employees for receiving a share of the recovery amount from the lawsuit as a reward for whistleblowing and bringing the lawsuit. And along with civil penalties and actions, the government can pursue criminal charges.
Conviction of federal criminal charges can result in millions of dollars in fines and long prison sentences. An example of this would be a dermatologist, who told patients they had cancer when tests showed they did not was sentenced to more than ten years in prison and ordered to pay $1.475 million in restitution and fines.
The doctor had fraudulently upcoded services, performed unnecessary procedures, and improperly billed follow-up visits.
How do Medical Professionals get caught up-coding?
If you, or the medical office you work for, have been accused of up-coding, the investigation will typically start with an audit into your billing practices. The Recovery Audit Program was formed by the Center for Medicare and Medicaid Services (CMS) to deal with the increasing problem of up-coding. Warnings were also given to the hospitals by government officials at a higher level.
In 2012, then Secretary of Health and Human Services Kathleen Sebelius and former attorney general Eric Holder warned hospitals that upcoding to inflate Medicare reimbursements is illegal. Medicare also warned hospitals that cloned documentation could lead to denial of reimbursement requests and severe penalties.
Up-coding is a growing troublesome problem for the patient’s medical records and raises insurance premiums. It also stresses the financial resources of Medicaid and Medicare by taking higher reimbursements than are actually needed. The resources are for the benefit of the society, but upcoding has caused major costs to society.
Two real-life examples include: Faxton St. Luke’s Healthcare in Utica, N.Y., and Baptist Hospital in Nashville, TN, where reimbursements of the highest patient reimbursement category increased by 43% and 82%, respectively, after the adoption of EMR systems.
Due to these and other cases, the Centers for Medicare and Medicaid Services (CMS) launched a Recovery Audit Program to audit hospitals and identify overpayments, which were estimated to be over $2 billion.
In 2005, Medicare implemented the Recovery Audit Program to see if it could identify and adjust improper reimbursements. The Recovery Audit Program works as an oversight mechanism to identify and correct hospital errors. The program works by recovering additional payments made to hospitals, while allowing hospitals to be reimbursed if they have been underpaid.
The Recovery Audit Program was initially implemented in 2005 in California, Florida, and New York and subsequently expanded to Massachusetts, South Carolina, and Arizona. After the pilot program identified over $700 million of overpayments by Medicare, the Recovery Audit Program was expanded to all 50 states in the United States, and it continues today.
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How to prevent up-coding fraud in your organization?
If you are a medical professional or medical provider, there are several proactive steps you may take to ensure that you are never investigated or charged with upcoding, such as:
- Be proactive. It will also help if you do become subject to a government investigation because you will be prepared
Contact an attorney. An experienced attorney can help you create a personalized plan to prevent upcoding, as well as ensure that an investigation, if one should take place, will be finished quickly.
- Keep accurate records of all procedures, services, and tests being performed. Better data collection will create a trail leading to the clinicians who are performing upcoding and will help you track them.
Keeping correct and accurate records may also give you the ability to stop the practice of up-coding before it reaches the attention of the federal government or insurance companies. Then, you can take steps to correct any issues that have already been created.
In record keeping, it is advisable to keep as detailed as possible notes. You should make a note of the patient’s medical problem, the medical care you provided, and a short note explaining why you thought the particular procedure would be best towards the patient’s care.
If you are to come under investigation, are charged with health care fraud, or if you get sued, use these notes to identify and prove the correctness of your decision to perform that particular procedure.
Another preventative measure that can be taken is to make sure that all medical professionals and medical staff are properly educated on how to code things for the purpose of medical billing properly. Education on the ramifications of up-coding is also important. If everyone has the knowledge of just how serious up-coding is, it may decrease the chances of it happening.
On an individual basis, make sure you are writing the correct code for each procedure, and double checking it with the manual. It is better to be sure than to face criminal and civil penalties for fraud for up-coding.
Up-coding is a serious offense. One lawsuit can ruin your reputation and career, and if proven guilty it will drain your financial resources, and your entire medical career could come into question. Facing a lawsuit or criminal charges can be hard, time-consuming, and expensive. It is best to be as proactive as possible. Contacting an attorney sooner, rather than later, may be a cost preventative maneuver.
What to do if you are charged or are under investigation for healthcare fraud?
If you have found yourself as the subject of a government investigation of being charged with a crime involving upcoding, contact an experienced defense lawyer as soon as possible.
Do not panic if you become subject to a subpoena or a search warrant, instead contact your attorney and stay quiet until your counsel is present. You do not want to risk making incriminating statements, getting into more trouble, or accidentally sharing your patients’ confidential information.
It’s best to consult with an attorney with experience in healthcare related matters. Contact an attorney as soon as you discover that your organization may be the subject of an investigation or if there may be wrongdoing within your organization.