Medical billing experts estimate that the US Government loses 30 cents of every dollar earned from fraudulent practices and medical billing scams. With confusing Medicare regulations spanning over 45,000 pages, an endless supply of loopholes and technicalities susceptible to illegal utilization, and the average person’s inability to wade through a mountain of paperwork and medical jargon, it’s no wonder that people and the government alike lose thousands each year to medical billing fraud. Here are five of the most common types of medical billing fraud and how to avoid them.


A patient enters the hospital to undergo treatment for a sprained ankle, but the bill submitted by the hospital to the insurance company is for a broken ankle. How does this happen?

This fraudulent practice has been coined as “upcoding,” since your doctor or healthcare provider must attach a CPT (current procedural terminology) code to each procedure performed — and that code dictates how large or small the subsequent bill will be. Since its often large insurance companies who are processing thousands of computerized bills on a regular basis, many improperly coded procedures are easily overlooked.

In September 2011, The University of Texas Southwestern Medical Center at Dallas paid a $1.4 million settlement to resolve allegations of upcoding of Medicare and Medicaid claims. It was a whistleblower who brought attention to the fraudulent practices and created the lawsuit in 2007, and the care center never admitted wrongdoing — but had to pay the price for what was debatably a mistake.

Phantom Billing

“One of the most common types of Billing fraud has to do with services being billed that were not actually performed. This type of fraud impacts the cost of health care because it drives up the cost by the mere fact that the charges are not justified but there are also millions of dollars spent each year tracking and finding this fraud and stopping it from happening. The Government in the past 3 years has put in place RAC’s (Revenue Audit Contractors) who are paid a % of any fraudulent or incorrect billing practices,” said David Doyle, CEO of

In January 2012, a Maryland orthopedic practice agreed to pay $2.5 to the federal government in a settlement over allegations that they had fabricated hundreds of false bills for visits that never took place, and doubled-charged for X-rays in order to receive higher reimbursements.

Not only does this type of fraud take a massive financial toll on the government, but it can affect a patient’s health insurance as well. Fraudulent claims for procedures that never happened still show up on the patient’s medical report and can therefore affect their insurance or the way future doctors treat them.

Inflated Hospital Bills

Linda Burdick recently felt the sting of inappropriately inflated medical bills when she received a hospital bill for $60,00 after enduring a back surgery that was supposed to be covered by insurance. After hiring two billing investigators who demanded itemized accounting, Burdick discovered gross overcharges for things like six surgical screws — which cost $1,750 each.

Health care navigator Liz Osborn said “I’ve never seen a hospital bill that I thought followed all the regulations correctly. Not once.”

The hospital was barely able to defend itself, meekly claiming that there was “no evidence of overcharges in her bill” but that they would be “willing to correct any mistakes.”

It’s important for all patients to rigorously review all of their medical bills for mistakes, overcharges, and double-charges. All patients have the right to an itemized bill and can request one from the hospital where they were seen.

Service Unbundling

Unbundling happens when multiple procedures meant to be billed in a package deal are billed separately, therefore creating a higher invoice.

Unbundling is another form of upcoding, also called “fragmentation.” This usually affects patients who have Medicare and Medicaid, since both typically offer special reimbursement rates for specific groups of procedures commonly performed together, such as blood test panels that need to be sent out to the lab. Health care providers attempting to fraudulently increase profits may remove the the special package rates and bill each component of the testing separately.

Geneseee Valley Cardiothoracic Group recently shelled out $2 million to the federal government to settle a lawsuit which alleged that submitted claims for “assistant attending surgeons” during surgery were false. Because qualified cardiothoracic residents were present during those times, assistant attending surgeons did not accrue a fee under Medicare’s regulations. If it hadn’t been for whistleblowers calling attention to the issue, this highly specific type of fraud may have gone unnoticed.


Self-referral happens when a physician ordering tests on a patient refers himself or a fellow faculty member from whom he receives financial compensation in return to do the testing. For example, a surgeon who suggests and encourages a surgery that he or she would perform himself is illegal. The law prohibiting self-referral does so in an attempt to prevent the promotion of unnecessary procedure and overutilization of services.

Unlawful profits are earned from self-referrals because medical bills can be driven up due to the conflict of interest involved, and the Stark Law prohibits this type of methodology.

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