What is upcoding and unbundling?

Upcoding and unbundling are examples of healthcare billing fraud that involve the improper use of billing codes by health care providers.

Billing codes (known as CPT codes) are a part of the Medicare healthcare program. The program uses a set of tables to determine how much a provider should be compensated for each type of procedure. Fraud occurs when providers manipulate these codes to maximize compensation. 

It’s important that all healthcare workers understand these types of fraud because being involved in either of them can expose you to serious criminal liability. Reporting them, on the other hand, can make you eligible to receive a portion of all the funds that are recovered from the fraud.

In this short guide, you’re going to learn what upcoding and unbundling are. You’ll also get to review some examples of this fraud, along with real cases that have involved them. Let’s start by taking a deeper look at upcoding.

Blowing the Whistle on Healthcare Billing Fraud

Healthcare billing fraud happens when healthcare providers—including doctors, hospitals, and nursing homes—knowingly file incorrect claims. 

The false claims may be submitted to patients or insurance companies. In most cases, however, the target is public programs such as Medicare and Medicaid. These programs don’t have the resources to audit every claim, so they rely on whistleblowers who work for these facilities.

Telemedicine Fraud

Telemedicine is the use of real time face to face telecommunication by a doctor or clinician to treat a patient at a distant site.  The live patient communication software platform is designed and provided by companies that specialize in providing services to the medical field.

For telemedicine to occur three factors must be present:

  • Different locations of provider and patient at time of treatment
  • Treatments and services completed must be clinical in nature 
  • Asynchronous (live two way) communication

Currently, for telemedicine to be lawful the physician must be at a “hub-site” (designated medical care location) and the patient at an “spoke-site” (distant origination location).  

When medical coverage is available to patients at a distant location, doctors or licensed medical practitioners can treat them clinically.  At-a-distance clinical medicine is also part of the telemedicine definition and is what differentiates it from telehealth.

Pharmaceutical Fraud

Pharmaceutical Fraud encompasses many types of fraud that may involve the manufacture, distribution, marketing, pricing, sale or prescription of drugs. Pharmaceutical fraud may include a wide variety of schemes set in place by drug manufacturers, pharmacies, or health care providers. Examples of pharmaceutical fraud schemes or activities may include marketing drugs for uses other than those approved by the FDA, providing kickbacks to physicians for promoting certain drugs over others, arbitrarily inflating the price of prescription drugs, falsifying drug manufacturing research or even funneling prescription drugs to an illegal market.

When this type of fraud results in false claims to Medicare, Medicaid, or other taxpayer funded programs the False Claims Act may be used by whistleblowers to recover damages on behalf of the government.

The False Claims Act, a federal statute, 31 U.S.C. §§ 3729-3733, provides that any person who knowingly submits a false claim to the government is liable for the government’s damages, as well as additional monetary penalties.  The statute was originally enacted  during the Civil War in response to widespread defense contractor fraud.  

The FCA allows the government to pursue perpetrators of fraud on its own, as well as allowing private citizens to act as whistleblowers in suing the perpetrators of fraud on behalf of the United States government.  Cases in which private citizens bring fraud actions on behalf of the government are called qui tam actions.  In these cases the private citizen plaintiff is referred to as the “relator.”  The act has been strengthened by Congress a number of times to encourage citizens to bring lawsuits on behalf of the United States government by increasing the amount of money the whistleblowers, or relators, can recover in False Claims Act lawsuits. 

When pharmaceutical fraud involves the misuse of public funds, private citizens can bring False Claims Act lawsuits on behalf of the United States government and receive a portion of the damages. Damages in these cases typically result in treble damages, three times the amount of money expended for each prescription, as well as civil penalties for each prescription. Whistleblowers who bring such claims on behalf of the government are entitled to thirty percent of the settlement funds.  

The majority of these settlements have included significant monetary payouts along with the institution of Corporate Integrity Agreements.  Under a Corporate Integrity Agreement the pharmaceutical company agrees to comply with certain obligations to the Office of Inspector General in exchange for being allowed to continue to participate in Medicare, Medicaid or other Federal healthcare programs.  In addition to monetaries damages, penalties and Corporate Integrity Agreements, the Office of Inspector General plans to be more aggressive in the coming years in imposing different remedies including banning fraudulent drug companies and individuals from participation in Federal health care programs. 

In 2019 the Department of Justice recovered over $3 billion in fraud and False Claims Act cases.  Pharmaceutical companies were at the center of some of the largest health care related settlements.

Hospice Fraud

Hospice care is defined by the Federal Code of Regulations as a “comprehensive set of services … to provide for the physical, psychosocial, spiritual, and emotional needs of a terminally ill patient and/or family members.” Such end of life care is often provided using taxpayer dollars through federally funded programs such as Medicaid and Medicare. Hospice care through Medicare or Medicaid is available for terminally ill patients with a life expectancy of six months or less if their illness were to run its natural course.   In order to receive hospice care a patient must be certified terminally ill by a physician.  Hospice care services can be provided in the home or at a nursing home facility and are often accompanied by palliative treatment focused on pain and stress relief. Once a patient elects hospice care they can no longer pursue curative treatments, unless they are under 21 years of age.

What constitutes hospice fraud?

The U.S. Department of Health and Human Services, Office of Inspector General recently audited Medicaid hospice providers and identified a number of transgressions ranging from inappropriate billing resulting in over-payments, poor patient care, submission of claims that did not meet care standards, medical records that did indicate terminal illnesses and providing misinformation to patients and caregivers.  When done knowingly these actions would constitute fraud against the federal government and give citizens the right to seek justice on its behalf.

Education Fraud

Each year the government and the states spends billions of dollars on education. Some of this money comes in the form of direct subsidies and some comes in the form of government backed loans. Education is not just big business for charter schools and for profit colleges; even purportedly reputable institutions are establishing new kinds of degree programs which are often no more than income generators.

Many of these institutors know that with government backed loans, they can attract students who will not be thinking about the day that he loan will come due. For unwitting borrowers,  the day of reckoning comes when the loan is due but – in contrast to yesteryear when education was a solid investment —  the return on the newer educational products that are being foisted on the market is not enough to cover the loan.

Students, faculty, and administrators could keep their eyes open for the following:

  • Compensating individuals or entities who recruit students
  • Low graduation rates
  • Low placement or broken promises about placement
  • More than 90 percent dependence on government loans for revenue
  • Misrepresentations as to the educational offerings and the quality of the programs

The U.S. Department of Education (“DOE”) provides billions of dollars in funding to help students participate in education at public, charter, private non-profit, and private for-profit schools.  Education fraud occurs when government dollars have been fraudulently obtained or used in the education sector. In order to receive government funding schools and students must meet and adhere to certain criteria and federally regulated standards. When schools or school employees violate the Higher Education Act (HEA) or other federally regulated standards in order to increase profits they are commiting fraud. 

Education fraud can be very complicated and the types of fraud involved vary greatly. The U.S. Department of Education, Office of Inspector General encourages people to report any suspected fraud or abuse involving education funds or programs.  The perpetrators of violations of Federal regulations pertaining to education programs or funding can include schools, employees, student recipients of funds, contractors, lending institutions, collections agencies, or public officials.  The types of violations that constitute education fraud are just as varied, from predatory loan practices on behalf of lenders to sham university staff positions to misrepresenting student credentials.  

The price of education fraud eventually burdens itself on taxpayers. The Office of Inspector General encourages people to speak up and blow the whistle against fraudulent practices in education that ultimately undercut young people trying to gain access to education.

Government Program Fraud

The government operates many federal programs that distribute money to companies and contractors. This money is intended to cover costs that may include research & development, education, and defense.  

These payouts amount to billions of dollars every year, and it is both difficult and expensive for the government to determine whether the funds provided were used for the intended purpose. Fraud occurs when companies or individuals submit false claims to the government in order to collect money for false purposes or for services that were never provided. 

Laws exist to fight this fraud, and one of the most important among them is the False Claims Act.

Hospital Fraud

Hospital fraud is a broad term that refers to any action a hospital may take to improperly bill the Medicare and Medicaid programs. 

This type of fraud is a serious problem. A large percentage of the billions of dollars that are distributed by public health programs every year are paid directly to hospitals for the services they provide to patients and outside treatment centers.

Fraud involving hospitals is not easy to detect. Most hospitals around the nation process thousands of transactions every day as tests are performed, drugs are provided and treatments are administered. Fraud can slip through the cracks at any large facility, even without the administrators being aware of it.

The important work that hospitals do further complicates the detection of fraud. When auditors interfere with the daily operations of hospitals, it can endanger patients. In order to avoid threats to the patients, regulators rely heavily on whistleblowers within the hospital to provide evidence that proves fraud. 

Whistleblowers are highly incentivized to reveal fraud because, under the False Claims Act, they are entitled to receive a portion of all funds that are recovered.