Illegal Medical Billing Practices You must Know

illegal medical billing practices

Security is crucial in every field of life. In the field of medical billing, ethical medical billing practices are the foundation of upholding the integrity of the healthcare system. As medical billing is a complex field, maintaining the security of this system is also a complicated task. Nowadays Medicare fraud is one of the fastest-growing crimes in the United States. Every year a number of service providers have been accused of healthcare fraud that cost billions. Last year over 600 individuals were forfeited for healthcare fraud in the U.S. involving over $900 million in false and unethical medical billing practices.

Illegal practices are any unethical and unlawful activities that not only affect the financial resources of healthcare providers but also erode the trust in healthcare providers and their organizations. Let’s move into more detail to know how unethical medical billing practices happen in healthcare practices and what precautions healthcare providers need to take if illegal billing arises then how you can overcome it to clear your billing system and maintain the trust of your patients. We’ll cover everything so let’s start it!

Understanding unethical billing

Let’s discuss the whole scenario of billing from the start so you can better understand how unfair billing practices occur in the medical billing field.

  • When the patients get ill and need medications, they visit healthcare providers. The medical billing process begins when a healthcare provider performs a procedure or service for a patient. Documentation is made in which the medical record of each patient is described with each service they get.
  • Every procedure or service performed has an associated billing code known as Current Procedural Terminology (CPT). These codes are standardized by the American Medical Association and are very important to know how much a provider will be reimbursed by insurance companies.
  • After assigning the necessary CPT codes, healthcare providers send claims to insurance companies. These claims provide specific information about the patient, the services performed, and the applicable CPT codes. Accurate coding ensures that suppliers get paid accurately for their services performed.
  • Insurance companies review the submitted claims and reimburse healthcare providers using the CPT codes. Proper use of codes results in fair payment, while inconsistencies can lead to complaints or audits.

How illegal practices occur

Now you see the process, which is very structured and maintained, still unethical billing practices occur when healthcare providers change the billing system using various methods to increase their profit.

Medical billing fraud refers to upcoding and intentionally manipulating medical billing claims to betray the payers. In recent years, healthcare fraud has become a major issue, because of the increasing healthcare cost, the rise of private “whistle-blowers,” and the change in the concept of fraud to include a developing concern about quality care.

The violations of health care fraud laws lead to serious consequences that comprise:

  • Imprisonment and fines
  • Civil fiscal penalties
  • Loss of licensure
  • Loss of staff privileges
  • Elimination from involvement in federal healthcare programs

So, ethical and legal violations can land an offender in hot water. Now let’s discuss different forms of unethical billing practices that you should monitor and report. The top 10 unethical medical billing practices are:


The first thing to know here is, what upcoding is. Upcoding is an illegal billing practice by which extra CPT codes are added to the reimbursement claims and are submitted for the services that were not made. There are many ways by which healthcare providers can fraudulently get reimbursements, causing enormous damage to the healthcare industry and payers.

By using codes for more serious procedures with a higher payment, providers can significantly increase how much they are paid. The health care provider submits exaggerated bills to payers with procedure codes that were never performed or include unnecessary procedures that were never required to treat the injury. The doctor or other health care provider provides a service but lists a billing code for a procedure that pays high.

Duplicate charges

A duplicate charge is also a form of overbilling. It means when one provider billed twice for the same procedure or when two providers charged for the same single procedure. For example, if a glucose test was given to you and both the doctor and nurse noted that then the billing section might issue two separate bills.
In such cases go directly to your medical provider and ask for corrections. In case you’re being billed by an outside billing company (more common and affordable nowadays), call the doctor to communicate with their medical billers on your behalf to make corrections.

Phantom charges

The most common type of medical fraud including almost half of all health care provider cases is phantom billing. Phantom billing is sending bills by a medical provider to Medicare for procedures, kits, and services that were either not performed or were not needed.
The US spent $3.6 trillion on medical care in 2018. This accounts for almost 18% of GDP. Medical providers seek reimbursement for services and prescription drugs by billing the government’s Medicare, Medicaid, and Tricare programs. Experts believe that almost 10% of these medical bills contain some sort of fraud like phantom billing.


Unbundling refers to the separation of charges that should have been billed under the same procedure code. In this scenario, multiple CPT codes are used instead of a single code that captures payment for the parts of a procedure, either due to misunderstanding or to increase payment.

This type of mistake can be tricky to identify unless you’re a certified medical bill coder.

Sometimes it happens that some medical services are billed together which costs less. For example, treatment of fever, cough, and cold are billed together. Unbundling occurs here instead of one code, three separate bills are submitted for each procedure using three separate codes for fever, cold, and cough.

Incorrect quantities

What if an extra “0” is placed at the end of a number by the billing department? “Yes’ ‘, the mistake could be as simple as this. Medical billing is based on different codes which consist of numbers. And if they misplace those numbers it completely changes the whole bill. So, make sure that you weren’t charged extra because an unethical medical biller could charge extra by incorrectly inflating the number of items or medications.

Medical equipment frauds

It is a common kind of intentional act of medical fraud on the part of the healthcare professional. Durable medical equipment (DME) refers to healthcare devices that are important for a patient’s treatment. It includes equipment like a private bedroom, mobility scooters, motorized, etc. The wheelchair scam was also recently reported and gained a lot of media attention. In this scenario the provider bills for devices and equipment that the patient has never received. And the healthcare providers distract the funds to their wallets. Medical equipment fraud is one of the major types of illegal billing practices that cost the government’s main healthcare assistance program millions of dollars.

Misrepresenting service dates or locations

Healthcare providers or clinics sometimes represent incorrect, improper, or false records of services. This happens in the following ways:

Misrepresenting Dates of Treatments

Such false claim violation occurs when fewer visits occur but offices submit claims for multiple visit dates. This is to create more billable events. Multiple services are provided to the patient in just one visit.

Misrepresenting Location of Services

In this false claim violation, medical providers make claims of services given at their clinics. But actually, the treatment might have been conducted outside the clinic.

The Medical provider knows by claiming the service took place on separate dates and locations they can make more money.

Medicare fraud and abuse

Medicare is a Federal health care plan funded through payroll taxes for people over the age of 65. Under the False Claims Act, the violation must be against a Federal or State Healthcare Program for Reporting Healthcare Fraud and Abuse. 

Medicare fraud and abuse happen when someone betrays Medicare by:

  • Using another Medicare card/number.
  • Billing for services not received
  • Billing for services is different from those that are received.
  • Billing for rented medical equipment after the return.
  • Perform unnecessary services

Waiving of deductibles or co-payments

Although it may appear harmless to satisfy a waiver request, the law clearly states that physicians can only waive co-payments and/or deductibles in certain situations. But routine waiver of co-payments and deductibles may be considered fraudulent in most government health care plans and insurance companies.

The basis is that if patients have to pay something to see doctors, they’ll only seek care if they need it. It is also a way to balance some of the expenditures. Regardless, some providers submit false claims to insurance companies after waiving patients’ deductibles or co-payments.

Billing Services not provided

Claiming for the treatments that were not performed. Medicaid and Medicare only reimburse for approved procedures. In this case, the provider cannot bill for tests and treatments which are not approved.

However, by manipulating the diagnosis, healthcare providers added procedures that were not essential and were provided only to increase reimbursements.

These are common unethical medical billing practices and are a serious violation of the Healthcare Act. It often goes unnoticed, since many patients don’t examine their EOBs and bills closely.

So, in such cases, call the doctor’s office for correction. If they’re unwilling to correct it, then report them to your insurance company.

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The Impact of Illegal Billing Practices in the Medical Industry

You are reading this blog if you belong to a healthcare system like a patient, a healthcare provider, or an insurance company. The illegal practice always affects those entities and their consequences are very severe. So if you want to maintain billing integrity and compliance it is important for you to understand the consequences of these unfair medical billing practices for all stakeholders. 

Impact on Patients

When healthcare providers engage in upcoding, unbundling, or billing for unnecessary services, it often leads to an increasing number of medical bills which surprise the patients and also put a financial burden on them. 

Then the most important thing between a patient and healthcare provider is trust. When this trust erodes, the patient refuses to take medical care which damages the patient’s health. 

Impact on Healthcare Providers

Fraudulent billing practices have a direct influence on healthcare providers’ reputations, resulting in patient losses, lost revenue, and greater regulatory scrutiny. In addition, they suffer legal consequences such as fines, imprisonment, and license suspension. This might potentially lead to the end of their career.  

Then, healthcare providers face operational challenges in implementing greater regulatory scrutiny and the need to execute effective compliance processes. This correct and ethical billing necessitates more resources, time, and effort, making it difficult for providers to give their entire focus to patient care.

Impact on Insurance Companies

Fraudulent billing practices also affect the insurance companies. When the false claims are submitted by the providers the insurers are forced to pay out more than necessary. As a result, the increasing costs are passed on to consumers in the form of higher bills which also make healthcare a less affordable option for all other patients. Then, to conduct an inquiry, insurance companies must need expenses and personnel to monitor and audit billing practices, which also increases administrative expenses and affects the insurance operations’ efficiency. 

Furthermore, if insurance companies employ stricter claim processes to check the accuracy of filed claims, reimbursements can be delayed and the billing process becomes more complicated, frustrating both providers and patients.

Legal and Regulatory Frameworks

There are several legal and regulatory frameworks to handle illegal billing practices. These include:

The False Claims Act (FCA)

A federal statute known as the U.S. False Claims Act (FCA) allows for the prosecution of any organization or individual that files fraudulent or false claims to receive funding from government organizations. Under this law, it is illegal to intentionally submit fraudulent claims for payment or make any false statement. This law also includes “whistleblower” security measures. These enable people to file a lawsuit to recoup payments received for fictitious claims if they have proof of fraud against government programs.

The Health Insurance Portability and Accountability Act (HIPAA)

HIPAA ensures the availability, confidentiality, and integrity of all e-PHI (electronic protected health information). It not only protects patient privacy but also provides protocols to prevent healthcare fraud. HIPAA has established a fraud detection and prevention program. For example, HIPAA restricts billing for procedures that have not been completed. HIPAA also prevents doctors from misrepresenting diagnoses to prevent unethical medical procedures and treatments. Furthermore, HIPAA emphasizes preventing inappropriate payment methods for non-insured services.

The Anti-Kickback Statute

Healthcare providers are restricted by law from accepting gifts, bribes, payments, or other financial incentives in exchange for referrals, prescriptions, or other medical services when those services will be partially or fully funded by Medicare, Medicaid, or other government-funded health programs. This is known as the Anti-Kickback Statute. The Anti-Kickback Statute bans both the offering and the actual exchange of advantages as incentives, even in cases when the bribe or payment is never made.

The Stark Law

Initially implemented in the early 1990s, the Stark Law was limited to a certain category of physician referrals for clinical laboratory services covered by Medicare. However, after that, the legislation has undergone several revisions.

The Stark Law prohibits physician self-referral, specifically referrals of Medicare or Medicaid patients to entities with which the physician (or an immediate family member) has a financial relationship. This law is designed to prevent conflicts of interest that could result in overbilling.

How to Monitor and Report Abuse

Medical care fraud and abuse can lead a service provider to criminal and civil accountability. Although intentionally committed frauds are impossible to stop, if you think about how to report incorrect medical billing then there are certain internal and external systems and processes that can be executed to better detect and deter future fraud and abuse.

One can monitor and report fraud and abuse in billing claims by:

  • Training and Education
  • Executing computer-assisted coding.
  • Validating members’ ID cards before rendering services.
  • Confirming accuracy while submitting claims.
  • Avoid unnecessary prescription/treatment
  • Contacting appropriate Compliance Departments to report all suspicions of fraud.

Outsourcing medical billing can significantly reduce billing and coding errors. It saves time and money in addition to improving patient satisfaction with accuracy in medical bills. Medical billing companies ensure that there are no coding errors before submitting which reduces denial risks and speeds up payment. Having expertise is essential to build patient trust and stay compliant with evolving healthcare industry regulations.

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