Is Billing for services that are not medically necessary healthcare fraud?

Billing for services that are not medically necessary:

Medically unnecessary services and tests may include unnecessary inpatient admissions, advanced imaging, unnecessary tests or lab work, and other procedures. For example: the ordering of extra services that were never necessary and unrelated to the actual real reason why the patient came to see the physician. Healthcare employers and healthcare whistleblowers are on the lookout for unnecessary billing that increases in revenue dollars. 

With respect to many procedures or treatments, Medicare and Medicaid require a fixed sum be paid for a certain set of bundled services. Common among these are laboratory tests that are part of a single patient visit. The aggregate rate of reimbursement to medical providers for these services is generally less (and sometimes significantly so) than what would be paid by the government in total if each part of the bundled services were to be billed separately. For this reason, medical providers have a direct economic incentive to “unbundle” such services and bill government programs separately for their cost. This will often violate the False Claims Act.

The most straightforward and common form of health care fraud concerns fraudulent billing of Medicare, Medicaid, and other government programs by health care providers for services that are not provided or that are not necessary and proper. This type of fraud takes many forms. False Claims Act whistleblowers have brought hundreds of successful qui tam lawsuits challenging all manner of improper billing schemes.

If a medical provider bills for services that were not provided, bills for services that are not necessary and proper, bills for patient visits that are fictitious, bills at a level that is not justified by the treatment that was provided (so called “up-coding”), improperly “unbundles” charges that should be reduced through bundling, or otherwise seeks to bill in a manner contrary to law, the False Claims Act has been violated. 

Government health care plans, such as Medicare, will generally cover qualified costs of “reasonable and medically necessary” services for persons over 65. Medicare providers are required to provide services “economically and only when, and to the extent, medically necessary.” In order to be paid by Medicare for services provided, these providers must certify, on forms called CMS-1500, that the services it provided were “medically…necessary to the health of the patient.”

The mechanism by which medical providers specify the services provided to government health care program beneficiaries is through a set of universal code sets that specify every procedure or service provided. Commonly used systems include the American Medical Association's Current Procedural Terminology (or “CPT”) codes; International Classification of Disease (or “ICD-9”) codes; and Healthcare Common Procedure Coding System (or “HCPCS”) codes. These coding systems correspond to various levels of compensation that government health care programs will pay for the respective services.

Upcoding schemes can be reflective of fixed policies by providers to submit claims for certain services at a level (or code) that categorically does not apply to each (or even to any) treatment or other service provided to that set of patients. Often this type of upcoding reflects a more serious, more prolonged, or more complex set of treatments or episodes of care than was actually justified to designate based upon the services provided. Sometimes unnecessary tests or other treatment is ordered where it is not warranted.

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