BHA FPX 4006 Assessment 2 Health Care Fraud and Abuse

Major Categories of Health Care Fraud and Abuse

Fraud and abuse are major issues (BHA FPX 4006 Assessment 2) in healthcare, affecting taxpayers, patients, organizations, and other covered entities—everyone. Due to popular assumption, fraud is not a victimless crime. The National Health Care Anti-Fraud Association (NHCAA, 2023) claimed that healthcare spending was $3.6 trillion in 2018, with billions of dollars related to healthcare insurance claims. Healthcare fraud and abuse cost the United States an estimated $68 billion each year (NHCAA, 2023).

Related Assessment:
BHA FPX 4006 Assessment 1

The FBI is the primary agency in charge of investigating healthcare fraud and abuse (FBI, 2024). The Office of Inspector General (OIG), a federal office dedicated to government monitoring, employs about 1,600 people. Their major aim is to eliminate fraud, waste, and abuse while improving healthcare systems’ efficiency (Office of Inspector General, 2023).

It is critical to distinguish between fraud and abuse in healthcare. This distinction is based on unique facts, circumstances, intent, and information influencing how each scenario is handled (Centers for Medicare and Medicaid Services, 2021). Fraud is the purposeful and willful conduct of “wrongful or criminal deception” for financial or personal benefit. Fraud has become more complex as technology advances. Fraud can result in monetary fines, prohibition from charging future services to federal healthcare programs, and incarceration (Stowell et al., 2020).

Abuse is described as the improper or excessive use of an object or activity to deceive or injure an individual or organization while breaching legal guidelines (Legal Information Institute, 2021). Abuse can occur in both financial and non-financial settings. According to the Centers for Medicare and Medicaid Services (2021), the journey from an error to fraud may be divided into four stages: 

1. Mistakes cause errors. 

2. Inefficiencies produce waste. 

3. Disregarding the rules leads to abuse. 

4. Intentional deceit leads to fraud.

The major categories of healthcare fraud and abuse include phantom billing, nonexistent patients, anti-kickback violations, upcoding service claims, unbundling related services, and providing medically “unnecessary” services (Dehnavi et al., 2021).

Phantom billing refers to invoicing for services or commodities that were never provided (Leap, Terry L., 2019). This occurs when physicians file payment claims with Medicare or Medicaid for operations or services that were not performed. For example, a doctor may submit a reimbursement request for a dental filling that was never completed. Similarly, a physician may seek reimbursement for medical equipment, such as a wheelchair, that the patient never achieved.

Billing for nonexistent patients is another type of fraud. In this scam, the physician or guilty party invoices insurance companies using the identities of people who are not their patients. They charge for services that were not provided to individuals who were never seen in their office. For example, a doctor may bill Medicare for an x-ray allegedly conducted on “Mary Smith” when Mary is not a patient and did not get the x-ray or any other treatments.

Anti-kickback breaches arise when someone knowingly and deliberately provides, pays, solicits, or gets anything of value in exchange for referrals (HHS Office of Inspector General, 2021). Healthcare organizations are not permitted to make payments or give anything of economic value in exchange for referring patients to their business. In 2019, three physicians and five marketers were charged with anti-kickback violations and other offenses. The physicians were charged with conspiring to conduct fraud and accepting illicit bribes and kickbacks (DOJ USAO Northern District of Oklahoma, 2019).

Upcoding means invoicing for more expensive versions of services or procedures than were provided (Geruso & Layton, 2020). Most healthcare institutions and providers establish reimbursement levels using Evaluation and Management codes(AAPC – Advancing the Business of Healthcare, 2023). For example, sending a code for a new patient visit rather than an existing one is an example of upcoding. A new patient visit often takes longer than a visit with an existing patient, resulting in greater compensation for the physician (Alexander & Schnell, 2024).

Medically “unnecessary” services are those that are done without being required for the patient’s well-being, intending to cost them more money. According to the OIG (2019), while this may appear victimless to the practitioner, it can be harmful to patients. For example, a patient may be subjected to needless radiation from X-rays and MRIs just because the physician wants better reimbursement.

Unbundling-related services entail invoicing for each phase of a procedure that is normally invoiced as a single comprehensive service (Medical Billing Analysts, 2022). This technique also applies to office visits. For example, if a patient requires a pre-operative consultation, it might be completed in a single visit. However, a physician may divide it into three independent appointments to charge the insurance company for three office visits rather than one.

Five Health Care Fraud and Abuse Laws

Healthcare professionals who utilize federal healthcare systems such as Medicaid and Medicare for personal or financial benefit demand the adoption of regulations to combat and prevent fraud and abuse (American Academy of Pediatrics, 2021). The five most important healthcare fraud and abuse laws are the False Claims Act (FCA), the Anti-Kickback Statute (AKS), the Physician Self-Referral Law (STARK Law), the Civil Monetary Penalties Law (CMPL), and the Exclusion Statute. These statutes are enforced by the Departments of Justice (DOJ) and Health and Human Services (HHS).

The False Claims Act (FCA) is the government’s most effective instrument for addressing healthcare abuse, waste, and fraud (Bagby & Packin, 2020). The FCA safeguards against fraudulent claims made to Medicare, Medicaid, and other federally sponsored healthcare programs (HHS Office of Inspector General, 2021). According to the OIG (2021), a physician found guilty under the FCA might face a penalty of up to three times the amount lost by the program, plus $11,000 per violation. If a breach is uncovered, the covered entity must reimburse any overpayments to the government program within sixty days to avoid the FCA penalty.

The OIG presented an example of an FCA case in which a cardiologist was suspected of submitting claims that were not supported by the patient’s medical documents and did not match the Federal healthcare program’s billing standards. The physician was also accused of unbundling treatments that had previously been paid for as part of a program bundle. The physician paid $435,000 and signed a five-year Integrity Agreement (HHS Office of Inspector General, 2021).

The Anti-Kickback Statute (AKS) is a criminal legislation that forbids physicians and covered companies from soliciting or receiving money or gifts in exchange for patient referrals or business growth (American Society of Anesthesiologists, 2019). The AKS has exclusions called Safe Harbors, which shield some payments and business operations under certain terms and conditions.

According to the OIG (2021), bribes can lead to overutilization, higher program costs, manipulation of medical decision-making, patient guidance, and unfair competition. Fines, jail, and disqualification from federal healthcare programs are all possible consequences of breaching the AKS (U.S. Department of Health and Human Services Office of Inspector General, 2021). For example, the Department of Justice charged a Houston primary care physician with unlawfully certifying patients for in-home services and obtaining illicit payments for these certifications.

The Physician Self-Referral Law, also known as the STARK Law, restricts physicians from recommending patients for specific healthcare services from businesses with whom the referring physician or an immediate family member has a financial relationship. Designated health services cover a wide spectrum of healthcare services. Fines and removal from federal healthcare programs are some of the penalties for breaking the STARK Law.

The Civil Monetary Penalties Law (CMPL) gives the Department of Health and Human Services (HHS) the authority to levy civil monetary penalties for different types of Medicaid and Medicare fraud and abuse. Penalties under the CMPL range from $10,000 to $50,000 per infringement.

The Exclusion Statute enables the Office of Inspector General (OIG) to bar persons and companies convicted of specific criminal crimes from participating in Federal healthcare programs. According to the OIG (2021), these criminal charges include Medicare and Medicaid fraud, patient neglect or abuse, felony convictions for healthcare fraud, theft, or financial misconduct, and felony convictions for drugs.

Upcoding and the Law – BHA FPX 4006 Assessment 2

Upcoding is a type of healthcare fraud that involves manipulating the coding system, such as Medicare’s Evaluation and Management (E/M) codes. E/M codes are special codes that indicate the services offered by healthcare practitioners. Upcoding happens when a healthcare professional reports a higher-level E/M code, resulting in a larger compensation than the actual services provided.

Dehnavi et al,( 2021) state that upcoding can occur in two stages inside a healthcare facility. First, in clinical departments, the severity of a patient’s illness may be inflated (upcoded). Second, there may be purposeful code tampering within the coding management team to boost reimbursements (Dehnavi et al., 2021). Both possibilities lead to healthcare fraud and may result in inappropriate financial profits for the practitioner or facility involved.

Upcoding is protected by the False Claims Act (FCA), which is designed to protect the government from being overpaid. When a covered entity makes a false claim with the intent to obtain personal or financial advantage by overcharging government programs, it violates the FCA.

Upcoding often occurs when healthcare practitioners or businesses have a motive to misrepresent the severity of a patient’s condition or the services given, resulting in the submission of higher-level codes than justified (Dehnavi et al., 2021). This conduct not only constitutes fraud, but it also undermines the integrity of healthcare billing procedures, which may result in financial fines, disqualification from government programs, and other legal ramifications under the False Claims Act.

There was an example of upcoding. In August 2021, the Department of Justice sued Kaiser Permanente, a nonprofit healthcare network, claiming upcoding violations (Appelbaum et al., 2023). Kaiser Permanente was suspected of sending incorrect diagnostic codes to Medicare Advantage, resulting in increased payouts. The case, which is based on six whistleblower allegations, alleges that Kaiser Permanente physicians were urged to engage in upcoding in order to improve reimbursement rates. Estimates show that reimbursements were overstated by much to $3,000 per patient (Appelbaum et al., 2023). The lawsuit is now underway in a California Federal Court and has yet to be resolved.

Another case of healthcare fraud involving upcoding and False Claims Act breaches happened with CareWell Urgent Care Center, according to PR Newswire in 2019. CareWell agreed to pay more than $2.1 million to resolve charges that it improperly billed Medicare and Medicaid for unneeded medical services (USAO Massachusetts, 2019). CareWell clinicians were accused of invoicing for more lengthy visits and services than were medically required, including upcoding in order to receive greater Medicare and Medicaid reimbursements. This case demonstrates the substantial implications and financial penalties that healthcare professionals may face for participating in false billing practices.

Identifying and Addressing Upcoding in Health Care

The Office of Inspector General (OIG) is responsible for producing compliance materials to help healthcare providers comply with federal healthcare laws and regulations (U.S. Department of Health and Human Services Office of Inspector General, 2024). Compliance ensures that healthcare entities adhere to these rules, preventing fraud and abuse claims against people or organizations. Importantly, compliance measures assist avoid overcharging of Federal healthcare programs, reduce possible patient damage, and have the potential to save taxpayers billions of dollars. These activities are critical to ensuring the integrity and efficacy of healthcare delivery and reimbursement systems.

Identifying and correcting upcoding in healthcare is crucial for avoiding financial losses and preserving patient confidence. The Office of Inspector General (2024) provides practical solutions for ensuring compliance. 

First, healthcare providers should perform frequent internal monitoring and audits of their billing and coding procedures. These audits assist in uncovering any errors or irregularities early on, allowing for rapid remedial action. Second, it is critical to develop and implement compliance and practice standards that are consistent with federal healthcare laws and regulations. This includes explicitly outlining policies and processes to govern billing practices and assure code compliance. Third, establishing a compliance officer to manage these efforts allows for effective coordination of compliance initiatives and timely resolution of compliance problems. Fourth, continuous training and education for healthcare workers is critical. This training should include correct billing processes, coding norms, and compliance requirements to keep employees aware and cautious.

Fifth, reacting quickly and correctly to reported infractions is critical. Investigations into suspected noncompliance should be comprehensive, and corrective steps should be taken to avoid recurrence. Sixth, maintaining open channels of contact with workers enables them to report issues or suspected infractions without fear of reprisal. This facilitates the early detection and settlement of compliance concerns. Lastly, establishing disciplinary standards with clear rules ensures that the repercussions for noncompliance are widely understood and regularly enforced. This emphasizes the need to adhere to compliance and practice standards across the company. 

In terms of upcoding, the Office of Inspector General (OIG) highlights the need for proper coding, billing, and physician documentation (OIG, 2024). Healthcare providers should only bill for services and medical equipment that were actually given to patients. Medicare and Medicaid reimbursement is dependent on the honesty and accuracy of physician submissions.

Adequate training and instruction are critical for preventing upcoding practices. Training on ICD-10 and other Evaluation and Management (E/M) coding systems assists healthcare personnel in understanding and using appropriate coding concepts. This information ensures that services are accurately classified, reflecting the exact quality of care offered to patients. Healthcare organizations can promote proper coding procedures and provide continuing education to ensure billing integrity, avoid fraudulent activities such as upcoding, and comply with federal healthcare standards.

The Office of Inspector General (OIG) recommends that physicians’ paperwork be precise, full, and detailed in order to appropriately represent the services performed. This extensive documentation helps to avoid confusion and guarantees that claims are true and legitimate.

The Medicaid and Medicare programs rely on this paperwork to verify the services invoiced. If there is a concern or complaint, these programs may request that the physician’s documentation be reviewed to confirm that services were properly given and paid (Office of Inspector General, 2024). Thus, keeping correct and complete documentation not only promotes proper billing methods but also helps in proving compliance and transparency in healthcare delivery.

Conclusion – BHA FPX 4006 Assessment 2 Health Care Fraud and Abuse

Healthcare fraud and abuse are serious threats to the integrity and cost-effectiveness of healthcare systems. Fraudulent activities such as phantom billing, upcoding, and charging for medically inappropriate services not only cheat government healthcare systems but also harm patient trust and raise healthcare costs. The False Claims Act, Anti-Kickback Statute, and other healthcare fraud statutes all play important roles in preventing and combating these crimes. Effective compliance procedures, such as rigorous internal monitoring, training, and precise documentation, are critical to avoiding fraud, ensuring patient welfare, and protecting government expenditures in healthcare delivery.


BHA FPX 4006 Assessment 2: AAPC – Advancing the Business of Healthcare. (2023). What Are E/M Codes?

BHA FPX 4006 Assessment 2: Alexander, D., & Schnell, M. (2024). The Impacts of Physician Payments on Patient Access, Use, and Health. American Economic Journal. Applied Economics, 16(3), 142–177.

BHA FPX 4006 Assessment 2: American Academy of Pediatrics. (2021). Preventing health care fraud and abuse.

BHA FPX 4006 Assessment 2: American Society of Anesthesiologists. (2019). Anti-kickback Statute and Physician Self-Referral Laws (Stark Laws) | American Society of Anesthesiologists (ASA).

BHA FPX 4006 Assessment 2: Appelbaum, E., Batt, R., & Curchin, E. (2023). Profiting at the Expense of Seniors: The Financialization of Home Health Care.

BHA FPX 4006 Assessment 2: Bagby, J. W., & Packin, N. G. (2020). RegTech and Predictive Lawmaking: Closing the RegLag between Prospective Regulated Activity and Regulation. Michigan Business & Entrepreneurial Law Review, 10, 127.

BHA FPX 4006 Assessment 2: Centers for Medicare and Medicaid Services. (2021). Medicare fraud & abuse: Prevent, detect, report.

BHA FPX 4006 Assessment 2: Dehnavi, Z., Ayatollahi, H., Hemmat, M., & Abbasi, R. (2021). UPCODING MEDICARE: IS HEALTHCARE FRAUD AND ABUSE INCREASING? Perspectives in Health Information Management, 18(4), 1f.

BHA FPX 4006 Assessment 2: DOJ USAO Northern District of Oklahoma. (2019, June 13). Three Physicians and Five Marketers Charged for Violations to Federal Anti-Kickback Statutes.

BHA FPX 4006 Assessment 2: FBI. (2024). Health Care Fraud | Federal Bureau of Investigation. Federal Bureau of Investigation.

BHA FPX 4006 Assessment 2: Geruso, M., & Layton, T. (2020). Upcoding: Evidence from Medicare on Squishy Risk Adjustment. Journal of Political Economy, 128(3), 984–1026.

BHA FPX 4006 Assessment 2: HHS Office of Inspector General. (2021, September 1). Fraud & Abuse Laws. Office of Inspector General | Government Oversight | U.S. Department of Health and Human Services.

BHA FPX 4006 Assessment 2: Leap, Terry L. (2019). Phantom Billing, Fake Prescriptions, and the High Cost of Medicine. Cornell University Press.

BHA FPX 4006 Assessment 2: Legal Information Institute. (2021, December). Abuse. LII / Legal Information Institute.

BHA FPX 4006 Assessment 2: Medical Billing Analysts. (2022, June 13). What Are Bundling and Unbundling in Medical Coding?

BHA FPX 4006 Assessment 2: NHCAA National Health Care Anti-Fraud Association . (2023). The Challenge of Health Care Fraud – NHCAA. National Health Care Anti-Fraud Association.

BHA FPX 4006 Assessment 2: Office of Inspector General. (2023). About OIG. HHS Office of Inspector General.

BHA FPX 4006 Assessment 2: Stowell, N., Pacini, C., Wadlinger, N., Crain, J., & Schmidt, M. (2020). Investigating Healthcare Fraud: Its Scope, Applicable Laws, and Regulations. William & Mary Business Law Review, 11(2), 479.

BHA FPX 4006 Assessment 2: U.S. Department of Health and Human Services Office of Inspector General. (2021, November 16). 2021 Top Management & Performance Challenges Facing HHS. Office of Inspector General | Government Oversight | U.S. Department of Health and Human Services.

BHA FPX 4006 Assessment 2: U.S. Department of Health and Human Services Office of Inspector General. (2024). Healthcare Compliance | Office of Inspector General | U.S. Department of Health and Human Services.

BHA FPX 4006 Assessment 2: USAO Massachusetts. (2019, March 29). District of Massachusetts | CareWell Urgent Care Center Agrees to Pay $2 Million to Resolve Allegations of False Billing of Government Health Care Programs | United States Department of Justice.

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