What Is Medical Upcoding? How Inflated Billing Can Trigger False Claims Act Liability

by Mark Xiao and Faaria Zubair

Medical upcoding is a form of healthcare fraud that involves billing for more expensive services than were actually provided. This practice can expose providers to liability under the False Claims Act (FCA) and has been the focus of numerous DOJ enforcement actions. Miller Shah LLP is familiar with billing fraud as they have extensive experience in litigating healthcare fraud cases.

What is Medical Upcoding?

Medical upcoding refers to fraudulent billing practices when healthcare providers submit codes for far more severe or complex conditions than a patient’s actual diagnosis in order to receive a higher reimbursement from the government. The Current Procedural Terminology (CPT) is a medical code that is used to describe medical, surgical, and diagnostical services to allow them to bill insurance companies.

Here are a few examples of medical upcoding:

• A healthcare professional bills for a higher complexity visit (such as a Level 4 or 5) when they only performed a basic evaluation (Level 1).
• A healthcare professional bills for a complex surgery when only a minor procedure was done.
• A healthcare professional intentionally makes a false diagnosis and submits a bill for early-onset Alzheimer’s disease, when the patient is actually experiencing only mild age-related memory loss.

Why is Medical Upcoding a Form of Healthcare Billing Fraud?

Upcoding has been an increasingly popular form of healthcare billing fraud, especially in government programs such as Medicare and Medicaid. Patterns of upcoding can lead to systemic fraud, where inflated billing becomes a routine procedure rather than something accidental. Healthcare providers and hospitals have abused their ability to bill in order to obtain federal health care payments to which they are not entitled.

Federal healthcare is funded by taxpayer money, which is used to support necessary services like medical treatment for seniors, low-income individuals, and people with disabilities. These programs are being exploited by providers for their own personal monetary gain. The billions of dollars lost through overpaid claims could be put toward improving patient care or expanding access to healthcare.

False Claims Act Liability for Upcoding

The FCA is designed to deter individuals or entities from submitting inaccurate or fraudulent claims to the government and its programs. However, many providers knowingly violate this law by submitting inflated or false claims, through medical upcoding, to federal programs like Medicare and Medicaid.

The FCA clearly states that any person who “knowingly submits, or causes to submit, false claims to the government” is liable for three times the government’s damages plus additional penalties. These penalties can add up quickly, as they apply to each individual false claim submitted. The law is intentionally strict to discourage this kind of fraud and protect taxpayer-funded programs from being exploited.

Role of Whistleblowers in Healthcare Billing Fraud

The FCA not only helps recover taxpayer dollars, but, more importantly, it also makes sure that government programs like Medicaid and Medicare are properly used to help the people who rely on them. Whistleblowers play a huge role in this process, since they are often the ones who first report fraud or misconduct to the government.

Because of their essential role in discovering fraud, the government offers strong incentives and protections to encourage whistleblowers to speak up. In recognition of their efforts, whistleblowers can receive anywhere from 15 to 30 percent of the funds the government recovers, and they are also protected from retaliation for reporting the fraudulent activities.

How to Report Healthcare Fraud Safely

If you believe you have witnessed healthcare fraud, such as upcoding, consider taking the following steps to protect yourself and your claim:

Document the Evidence: Gather everything you believe is relevant to your claim

Maintain confidentiality: Avoid discussing issues with others prior to receiving legal counsel

Use Secure Reporting Channels: Submit a hotline complaint to the HHS-OIG

Consult a whistleblower Attorney: An attorney can help you understand the legal process and move forward with your claim