Cases today and in the past have illustrated upcoding or charting for
dollars by hospitals, clinics and other institutional providers as a method for maximizing
revenues and profits. This paper takes a look at an acceptable billing procedure, what
constitutes upcoding, and the costs that Healthcare accounts for because of fraudulent
activities. Means of preventing such behavior are analyzed as well as examples of
upcoding. Healthcare reform is also mentioned to determine what actions have been and are
currently being taken to solve this issue along with Californias plan to get even
tougher on Medical fraud.
We are now living in a world of increasing Healthcare costs. Rises in
Healthcare can be attributed to several factors, one being litigation costs from
Healthcare fraud. Healthcare fraud can be attributed to various unethical means. The
Healthcare system is very complex and different aspects, such as prevalence of fraud, can
be evaluated in order to determine where costs are emerging from and what can be done to
lower them. Healthcare fraud and in particular, upcoding to maximize revenues, is a
current issue that needs to be evaluated.
The billing process for hospitals, clinics, and other services is to be
followed with extreme detail. The process involves steps such as appointment scheduling,
registration, charge collection, claims submission, payment posting, accounts receivable
management, and collections. During the charge collection step it is important to
verify that charges and associated diagnosis codes are documented on the superbill, and
the codes should be well documented in the patients chart. The claims submission
step includes verifying that all services are accounted for and entered into the billing
system accurately, that the procedure codes are attached to the appropriate diagnosis
codes and that the insurance information is accurate and complete. Following this
procedure along with using ethical guidelines will help prevent fraudulent activities from
Medical providers use a standardized system of numerical codes for patient
services that are required by government programs such as Medicare and Medicaid. This way
insurers and the government do not have to decipher what services were provided from
thousands of different types of coding or billing systems. There are several codes that
are applicable for medical procedures. The misuse of these standardized codes to obtain
more money than is allowed by law is commonly termed upcoding. Each Medicare
billing code corresponds to a particular group of services and will eventually result in
reimbursement to the physician or other provider based upon the code entered.
Providers or the organization they work for have financial incentives to increase the bill
by exaggerating or even falsely representing what medical conditions were present and what
services were provided. Greater government payment results from more serious medical
conditions, a large number of medical conditions listed as being present or treated, and
the more extensive the services provided.
An example of upcoding would be when a two-minute visit for a diagnosis
and treatment of an upper respiratory condition is upcharged from a very low reimbursement
rate code by instead intentionally using codes for a more serious condition. Thus, the
diagnosis is altered to falsely diagnose the patient suffering from a more severe
bronchitis and sinus infection, with some breathing impairment requiring nebulizer
treatment, all requiring a one-hour office visit. If these additional services were or
were not provided, but not needed medically, a fraudulent upcharge occurs.
When medical providers act upon the temptations to use higher diagnosis
codes in order to receive a larger reimbursement or even document that they provided a
service when in fact they did not, medical fraud is performed. In 2000, the U.S.
government collected more money in the form of fraud recoveries than ever before -- $ 1.6
billion. And most of that money -- $1.2 billion came from Healthcare fraud
cases, according to Dept. of Justice statistics released in November. Some
may wonder why Healthcare accounts for such a large percentage of the fraud recoveries.
For one, Healthcare programs account for nearly half a trillion dollars in
spending. The Healthcare field is flooded with contractors; physicians,
hospitals, nursing homes, pharmaceutical companies and others bill the government, which
creates many opportunities for improper billings. Another reason why Healthcare
programs are responsible for so much fraud is because of the fact that they are a growing
sector, unlike other areas the government monitors for fraud.
In effort to avoid fraudulent behavior and coding practices, coding
reviews can be enforced. A coding review involves comparing patient charts with the
codes submitted to the Department of Health and Human Services (HHS) or private insurers.
Understanding what an effective review is, when and how to set it up and how to make it
most effective can be important to the financial health of the practice. The quality of
coding is one of the most important factors determining the financial state of a practice.
If there are problems, they have to be solved quickly. But before they can be solved, they
have to be found, which is why regular coding reviews are important.
There are two types of coding reviews: an audit performed by HHS agents
and voluntary reviews performed by the physician practice. The procedures are similar, but
the effects vary between the two. The audit can be emotionally draining and financially
ruinous, however the voluntary review has the opposite effect. The voluntary review can
reveal underpayments, which would improve the practices finances, and it can help
ensure compliance with federal evaluation and management (E&M) coding rules, making
the HHS audit less frightening and ultimately less expensive.
Coding reviews are inevitable for most doctors except for the few
subspecialties that perform a small number of the same procedures every day. "There's
just too much complexity and confusion in the coding system to assume your practice is
doing it right," says Thomas Obade, MD, part of the four-doctor group Orthopedics at
Woodbury, in Woodbury, N. J. The only way to know for sure that all the doctors in
the practice, as well as the coding employees, are coding properly is to check the work on
a regular basis, says Dr. Obade, who is also chair of the Health Policy and Practice
Committee of the New Jersey Orthopedic Society.
Physicians usually do not get too involved with coding review; they are
limited to setting up and paying the bill and keeping up with clinical issues. Although
the process mainly involves administration, it is ideal to include some physician
oversight. "I think there should be one doctor who takes responsibility for it. After
all, no matter what the administrators do, it is the doctors who are legally responsible
and who will have to pay for any mistakes," says David Zehring, MD, a plastic and
reconstructive surgeon who also helps practices perform coding reviews though his company,
Spanish Peaks Healthcare Consultants in Denver.
As a precaution some clinics may feel it is necessary to undercode to
avoid fraudulent claims, however, undercoding can result in fines. As a matter of law, all
Medicaid patients have to be charged the same for the same procedure. If the practice
undercodes a procedure for one Medicaid patient and not for another, the procedures that
were coded at the higher level could be considered Medicaid fraud. So undercoding as a
precaution will not help.
When someone is considering a case of Healthcare fraud, they more than
likely will come across the 1986 Federal False Claims Act. The False Claims Act (FCA)
prohibits the submission of knowing false claims to obtain federal
funds. The United States may sue violators for treble damages, which are three
times the government's loss, plus $5,000 to $10,000 per false claim. The Act gives the
government a remedy against all of the key players in a scheme.
The law allows the U.S. to sue on its own behalf, and it also authorizes
qui tam plaintiffs, which are private persons also referred to as relators or
whistleblowers, to sue on the governments behalf as well as their own. Private
complaints must be filed in federal district court off the public record and be
accompanied by a statement, filed with the Department of Justice, disclosing all of the
material evidence the plaintiff has. The government has at least sixty days to investigate
and decide whether to take over the case. The government may obtain extensions to continue
its investigation, and if the government does take over the case, the qui tam plaintiff
continues to be a party and may recover up to 25% of the amount the government collects.
If the government does not take over the case, the plaintiff may go on and be awarded up
to 30% of the governments recovery.
The government has used the False Claims Act to investigate a wide range
of Healthcare providers, from managed care organizations, clinical laboratories,
pharmaceutical companies, and chains of hospitals and nursing homes, to physician
practices, home health agencies and durable medical equipment suppliers. The government
has also pursued the entities that assist plans and providers with Healthcare
transactions, such as billing companies, attorneys, and Medicare carriers and fiscal
Physicians practicing fraudulent behavior may feel that they are
untouchable and will not be roped into a multimillion-dollar fraud investigation.
Patsy Vargo, MD, has two words for physicians that feel that way: Think again.
In 2000, she was in her fifth year of trying to disprove allegations of upcoding.
The government sought as much as $37 million from her because of her supposed overbilling
to the Civilian Health and Medical Program of the Uniformed Services for treatment she
provided to patients at an air force base in Montana. The government contended that from
1991 to 1995, she consistently charged and claimed higher Current Procedural Terminology
(CPT) codes for medical services than allowed. They are basing their case on several
audits, one of which concluded that she was overpaid almost $8,000 for one month. The
audit included a billing for a cholesterol check as a level 4 service and treatment for a
sinus infection as a level 4 service, when those charges are usually reserved for cases
that require complex medical decision-making. Dr. Vargo refuses to settle with the
government because she thinks it would only encourage them to go after other doctors and
she feels that she did nothing wrong.
Upcoding is also occurring in New York; the Medical Society of New York is
fighting back against Oxford Health Plans demand for payments of up to $100,000 from
about 200 physicians who the insurer contends were upcoding claims. Oxford would pay the
claims, but later ask for refunds when upcoding was suspected. They informed the
physicians that the insurer would bring the issue to arbitration if they did not pay at
least three-fourths of the amount due within ten days. They did not deny claims
in the first place because they felt that it was more appropriate to ask physicians for
money back than to review and downcode claims upon their submission.
Another example of upcoding occurred in California. A jury ordered three
doctors and nine clinics to pay Allstate Insurance Co. $8.2 million after finding them
liable for billing for services they did not provide and for changing bills to justify
excessive charges. This case is the first to go to trial under a unique California
law created like the False Claims Act. The success of Allstate could lead to more people
using civil suits as a tool to pursue fraud and abuse cases. It could also lead to
other states adopting their own legislation. "This case is extraordinarily
important," said Los Angeles-based attorney Dennis B. Kass, of Manning & Marder,
Kass, Ellrod, Ramirez, who represented Allstate in the case. "Hopefully, it will
encourage more people to use the law to stop fraud. Upcoding is very, very costly. It's
unfair to good doctors." Allstate ended up settling with three of the
doctors before the trial went to court. After a six week hearing, the jury found the
doctors and clinics that went to trial liable for fraud against Allstate.
On January 17, 2002, John W. Suthers, U.S. Attorney, announced that the
U.S. had entered an agreement with the St. Marys Hospital and Medical Center in
Grand Junction, Colorado, to settle allegations that St. Marys Hospital caused false
claims to be submitted for payment by federal Healthcare benefit programs. St.
Marys Hospital is a non-profit subsidiary of the Sisters of Charity of Leavenworth
Health Services Corporation of Leavenworth, Kansas. Under the agreement, St. Marys
will pay just over $1.2 million to the United States in exchange for a release of
liability under the False Claims Act.
This agreement settles accusations that the hospital submitted claims for
inpatient treatment of pneumonia that were billed to federal payers using diagnosis codes
for more serious illness than what was actually treated. The settlement demonstrates the
hospitals willingness to meet the ethical and legal requirements to honestly bill
the government. This case was investigated by the U.S. Department of Justice and the
Inspector General for the U.S. Department of Health and Human Services as a part of a
national initiative to address upcoding of pneumonia claims by hospitals. The
government subpoenaed more than 200 medical records from St. Marys Hospital seeking
support for claims that had been submitted to either Medicare or Medicaid for the
treatment of pneumonia. An audit revealed that St. Marys had selected a
principal diagnosis that was not supported by the records. The principal diagnosis, the
main condition that caused the patient to be admitted to the hospital, is the primary
factor for classifying treatment for a hospital inpatient into a particular Diagnosis
Related Group (DRG), which is a category system that is used for reimbursement purposes in
a hospital. DRGs are based upon information reported to the payer about the patients
diagnosis, the procedures performed, and certain demographic factors.
The claims that were subpoenaed made use of principal diagnosis codes that
corresponds to pneumonia due to other specified bacteria. They were
able to obtain reimbursement under DRG 079 (respiratory infections and inflammations),
which offers a higher reimbursement from Medicare and other payers than an uncomplicated
case of pneumonia. The uncomplicated case in which the illness is not specified falls
under DRG 089 (simple pneumonia). During the years St. Marys billing procedures were
being investigated, the amount paid to them from Medicare for DRG 079 was approximately
$2,700 higher per patient than the reimbursement for DRG 089.
St. Marys denied any intentional wrongdoing in connection with claim
submission. Because they reached a settlement, the dispute was resolved without a lawsuit
being filed or admission of liability by St. Marys hospital.
A physician in Kansas, specializing in ear, nose, and throat illnesses,
performed unnecessary surgeries, billed for more costly procedures than were actually
provided, lured patients into unnecessary surgeries that caused them serious bodily
injury, and also created false documents and provided false testimony to cover up his
fraud. Out of 105 surgeries performed in 1999, an expert witness found that 40%
of those were unnecessary. From 1998-1999, all but one of the forty mastoid ear surgeries
he performed was unnecessary. It was also said that he could not have performed the
surgeries billed in the short surgery times that were recorded. The physician was
sentenced to six years in jail. He lost his license and agreed to be excluded from Federal
Healthcare programs for fifteen years after his release from prison.
One may wonder what is being done to decrease these fraudulent activities.
The federal governments approach to Healthcare fraud goes back and forth between
punishment and sanctions to education and collaboration. With Janet Rehnquist as Health
and Human Services Inspector General in the Bush administration, the attitude
shifted more toward education. Greater emphasis on compliance programs and
clearer iterations of the rules are being enforced to help physicians avoid billing
mistakes that might be mistaken for fraud. However, that could be changing; there is a
growing concern that it is time that anti-fraud measures are made stricter.
If more severe measures were enforced, it could mean a return to a time
when fear of prosecution was a major concern. This fear was not meant to lead physicians
to shortchange themselves, though. Mac Thornton, chief counsel to the Inspector General
for 12 years, who is now with the law firm Sonnenschein Nath & Rosenthal said,
"There was never a policy of going after physicians for honest mistakes. We wanted
everyone to be aware that claims were being scrutinized more closely in the 1990s, but we
didn't want to engender a degree of fear. There were some stories circulated that were
basically either not true or hyped up that seemed to illustrate that fear was
justified." The doctors worries stimulated criticism against the
federal governments enforcement policies and resulted in the OIGs effort to
improve its communications with physicians by placing a greater emphasis on education and
compliance soon after.
In February of 2003, Rehnquist expressed continued commitment to the
compliance approach. "I do realize that some continue to question the value of
compliance and whether [it] is a good investment," she said. "Compliance is more
important than ever to this industry. With new payment systems, expanding benefits,
changing regulations -- these factors all create a constantly changing environment for
Healthcare organizations, and they must have systems in place to stay on top of the
program requirements." She also said that the Center for Medicare and
Medicaid Services was working on a project in order to measure effectiveness of compliance
Some states are taking action themselves to decrease Healthcare fraud.
California officials want to get even tougher on Medical fraud, which they say costs
as much as $3 billion annually 10% of the programs $30 billion
budget. They had increased prosecutions in the past few years, but now
want to create an even more targeted and aggressive approach against individuals who abuse
the system. If approved by Legislature, the plan would result in more scrutiny for
doctors. The California Medical Association supports fair and reasonable ways to lessen
California Attorney General Bill Lockyer said, "[The plan] will help
us more aggressively detect, investigate and prosecute Medical fraud, protecting the
system for the taxpayers who pay for it and for the beneficiaries who depend on it for
vital Healthcare. He and lawmakers are suggesting reforms that would do such things
as give the Department of Health Services the right to make unannounced visits to
businesses that bill Medical to inspect records, provide monetary reward for those who
report fraud, or mail letters to Medic-Cal recipients asking them to confirm that they
received the care or products that they were reported to receive. Doctors and others would
also receive a notification for services billed under their IDs.
There are still specifications in the plan that need to be worked out.
They want to involve both providers and beneficiaries in detecting fraud. In
fiscal years 2001-2002 and 2002-2003, claims that doctors or others padded bills by
charging for goods and services that weren't provided or by upcoding visits were part of
101 complaints that the AG's office received. That constituted 43% of
complaints. The changes would not only help in discovering those who are
committing fraud, but also protect physicians who are victims of fraud, for example having
their ID stolen and someone else using it to bill the state. This legislation is important
and other states could soon follow in Californias footsteps.
In conclusion, it must be noted that Healthcare fraud is a serious topic
for Healthcare executives. Upcoding and other fraudulent actions have resulted in high
fines; for example a settlement with the University of Pennsylvania for more than $30
million and in the largest settlement to date, Columbia/HCA paid approximately $850
million. These amounts are significant and believed to be affecting the cost of
Healthcare today. Action must be taken in order to prevent fraudulent behavior from
continuing to take place, whether it be through education or by means of stricter
punishment. I believe that Healthcare fraud and abuse should not be taken lightly.
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Practice Management. © 2003 Medicalbillingandcoding.net.
 7 steps to prevent overdue payments By Karen
 Upcoding in the Medical OfficeA Big No-No
 Upcoding in the Medical OfficeA Big No-No
,  Healthcare top source of fraud recoveries By
,  Up to code: A way to ensure your financial health
By Larry Stevens
 Up to code: A way to ensure your financial health By
 Healthcare Fraud: How Far Does the False Claims Act Reach?
By Shelley R. Slade, Esq.
 Feds try new tack in charging doctor with upcoding
By Sarah A. Klein
 Oxford pressing physicians for E&M upcoding refunds
By Julie A. Jacob and Cheryl Jackson
,  California decision hits physicians for fraud against
Allstate By Tanya Albert
,  District of Colorado Press Release, John W. Suthers, US
Attorney, Dept. of Justice
,  District of Colorado Press Release, John W. Suthers, US
Attorney, Dept. of Justice
 The Department of Health and Human Services And The Department of
Justice Healthcare Fraud and Abuse Control Program Annual Report For FY 2002
,  Medicare fraud: Back to stricter scrutiny? By
 Medicare fraud: Back to stricter scrutiny? By
 California launches plan to crack down on Medi-Cal fraud
By Tanya Albert
 California launches plan to crack down on Medi-Cal fraud
By Tanya Albert
 California decision hits physicians for fraud against
Allstate By Tanya Albert
 The Law of Healthcare Administration, Schowalter, J.