What is Unbundling? How Splitting One Procedure Into Many Can Inflate Medical Bills

by Matthew P. Suzor and Michaela Buckley

Unbundling is the medical billing practice of using multiple procedure codes to bill separately for components of medical treatment that are typically covered under a single comprehensive code. Healthcare providers may properly bill using separate medical codes if the care was performed by different practitioners, conducted on distinct parts of the body, occurred during a separate encounter, or if coding independently results in greater transparency.

Although unbundling may sometimes be necessary or appropriate, the Centers for Medicare and Medicaid Services (“CMS”) lists unbundling as one of the most common types of Medicare and Medicaid fraud, waste, and abuse. The allegations of improper unbundling have been the subject of state and federal investigations, consumer lawsuits, and insurance disputes.

Common Risk Areas Associated with Unbundling

The Federal Bureau of Investigation found that unbundling is one of the most common forms of healthcare fraud, and that medical providers submit multiple bills for the same service in order to maximize reimbursement for medical treatment.

Common types of unbundling include unbundling of laboratory tests, surgical procedures, therapy services, and emergency department services. Laboratory tests are especially prone to improper coding because laboratories may bill individual tests instead of a comprehensive panel coded under a single service. Medical billing fraud in the form of unbundling connected to surgical procedures is also frequent; for example, a suburban Chicago physician, Dr. John Greager, was recently sentenced to six months in prison and fined $1 million for falsely billing mole-removal procedures as if performed on multiple dates, even though the doctor had performed all of the procedures on the same date.

By separating parts of a medical procedure into different codes, instead of using one comprehensive code to bill the entire service, one procedure appears as multiple different charges and is reimbursed multiple times. The aforementioned case involving Dr. Greager illustrates this; Dr. Greager removed multiple moles in a single day, but he billed each mole removal under a separate code to receive greater reimbursement.

The Impact of Improper Medical Billing

Unbundling has adverse financial impacts on patients, insurers, employers, and government healthcare programs.

By separating medical services and procedures into multiple charges, medical billing has become increasingly complex, which raises administrative costs and organizational load. The Stanford University School of Medicine estimates that the U.S. wastes more than $265 billion annually due to administrative complexity. Insurers and government healthcare programs must grapple with these effects of increased administrative load and rising costs. Unbundling can also generate unexpected costs for patients and insurers. In 2021, CMS found that 87% of patients were surprised by charges in a medical bill they received. When unbundling is done in an effort to increase payments, it raises healthcare costs for patients by forcing them to pay multiple charges for the same procedure. This drives higher insurance premiums, which can be a financial detriment to both patients and employers providing healthcare benefit plans for employees.

Healthcare fraud caused by improper medical billing and the use of fraudulent medical codes generates significant financial losses for government healthcare programs like Medicare, Medicaid, and TRICARE. In the first fiscal quarter of 2026 alone, CMS identified over $850 million in overpayments. Healthcare practices such as unbundling cause increased administrative and financial oversight for government healthcare programs due to the extensive losses resulting from fraudulent activity.

When Can Unbundling Lead to Allegations of Healthcare Fraud, False Claims Act Violations, or Whistleblower Claims?

The separation of medical billing can be considered healthcare fraud if it violates the policies outlined in the Medicare National Correct Coding Initiative’s (“NCCI”) manual. The NCCI was created to reduce the incidence of improper coding due to widespread errors that impacted Medicare and Medicaid programs.

Healthcare Fraud

The NCCI recognizes several medical billing modifiers, including modifiers 59, XE, XP, XS, which allow healthcare providers to separate procedures or services that are normally billed together but are considered medically appropriate to decouple under the given circumstances. The separation of procedures or services may be considered unbundling, and thus healthcare fraud, if providers improperly separate medical services or falsely use one of these modifiers for the purpose of receiving higher payments. Healthcare fraud occurs when healthcare providers misrepresent claims, submit false bills, or deceive the healthcare system to receive undue payments.

False Claims Act Liability

False Claims Act (“FCA”) liability can arise if a person “knowingly submits, or causes to submit, false claims to the government.” If a healthcare provider: (1) unbundled a medical service or procedure, (2) caused the claim to be submitted as separate medical bills to a government healthcare program such as Medicare, Medicaid, or TRICARE, and (3) that claim was alleged to be fraudulent, false, or misleading because it was unbundled under improper or medically unnecessary circumstances, then the provider could be liable for violating the FCA. Unbundling can defraud the government by causing inflated payments from state or federal healthcare plans to be made to healthcare professionals. In essence, an individual who knowingly submits a false or fraudulent claim, such as a bill that includes separate medical codes for the same procedure or service, with the intent to increase reimbursement may be exposed to FCA liability.

The Role of Whistleblowers

Persons with knowledge of violations of the FCA may be in a position to bring a qui tam action on behalf of the government. These whistleblowers, known as relators, can sue entities they allege to have violated the FCA by defrauding government healthcare programs. If a relator has information pertinent to potential fraudulent unbundling, they could expose improper medical billing by suing on behalf of the government. Healthcare fraud remains a leading source of FCA litigation, and whistleblowers play an integral role in recovering misused government resources.

Individuals with information about potential fraud, or those possibly impacted by unbundling, may consider speaking with counsel. Miller Shah LLP regularly represents whistleblowers in FCA litigation and has extensive experience in litigating healthcare fraud actions.