What Is Medical Billing Fraud?

Medical billing fraud is the inclusion of false statements on a bill submitted to a patient or insurance provider for payment. The inflated statement results in a larger payout, unless the customer or insurance company conducts an investigation and determines that the bill is false. This activity is illegal, and government agencies with concerns about fraud may investigate care providers accused of fraud in order to collect information they can use to prosecute medical billing fraud. This information can also help with the identification of fraudulent billing patterns in the future.

One example of medical billing fraud is the inclusion of services never rendered. A doctor's office might bill for a blood test that never occurred, for example, or a pharmacist could bill for medication she did not dispense. More commonly, care providers engage in an activity called upcoding, where they upgrade the services provided to a billing code that results in a higher payment. For instance, a patient might arrive complaining of seasonal allergies, and the bill will declare that the patient was seen for asthma.

Doctors can also misstate the nature of a procedure so that it will qualify for insurance coverage. Insurance companies usually do not cover voluntary medical procedures like cosmetic surgery. If the surgeon can find a similar covered procedure, she may swap out the billing codes, committing medical billing fraud to get the insurance company to pay for the surgery. For example, if a patient gets cosmetic surgery to change the structure of her eyelids, the doctor might bill it as a necessary surgery to treat drooping lids.

Unnecessary services are also a part of medical billing fraud. Doctors can order additional tests or procedures to inflate the bill. They may also accept kickbacks for referrals or make false referrals to care providers with the goal of overstating practice statistics. For example, a patient attending appointments at a pediatrics practice might get a “referral” to a partner in the practice. This allows the practice to inflate its insurance bills.

Patients can work to avoid medical billing fraud by carefully examining their bills and disputing anything that does not belong. They should also ask why a procedure is recommended, and can get information about what would happen if they opt out. Patients may also want to be alert to discrepancies between bills sent to the insurance agency and what the doctor actually provided. If medical billing fraud is suspected, patients can report it to their insurance companies as well as law enforcement agencies.