HomeBe Aware: Medical Coding and Billing Offenses Pose Costly Consequences

Be Aware: Medical Coding and Billing Offenses Pose Costly Consequences

Author: Christine Cooper, CEO of aequum LLC 

To err is human, but costly. To defraud is unfortunately also human, and even more costly.  

It’s not an exaggeration to say that most of us have received questionable medical bills. That’s because some 80% of medical bills contain errors, and many in healthcare believe that number is rising.  

Then there are added losses from healthcare fraud. The National Heath Care Anti-Fraud Association estimates conservatively that health care fraud costs the nation about $68 billion annually — about 3 percent of the nation’s $2.26 trillion in health care spending. Other estimates range as high as 10 percent of annual health care expenditure, or $230 billion. The Federal Bureau of Investigation estimates that fraudulent billing—the most serious of program integrity issues—constitutes 3% to 10% of total health spending, contributing to inefficiency, high health care costs, and waste. 

Mistakes – whether they are honest errors or calculated fraud – commonly lead to overcharges, claim denials, delayed reimbursements, excessive administrative hours and litigation, to name just a few of the costly consequences. These offenses cause financial and emotional pain across the healthcare spectrum. Patients carry the heaviest load. Billing errors lead to delayed payments from the insurance companies, denied claims, causing increased stress at the very time a patient needs to be stress-free. Additionally, in just the past two years, one-third of insured adults ages 18-64 say they have received an unexpected medical bill of $1000 or more. Known variously as “balance billing” and “surprise billing,” these practices are excessive in many cases, yet unaware patients still wind up paying the balance.  

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Although complex problems require multi-faceted solutions, a foundational step is to understand and eradicate some of the most common coding and billing errors. 

Medical Coding and Billing: A Complex Process with Costly Consequences for Errors 

The healthcare revenue cycle revolves around medical coding and billing. Medical coding identifies billable services from a patient’s medical record and clinical documentation, then applies codes for reimbursement. The medical biller’s job is to submit claims based on these codes to the patient’s payer, typically Medicare or private health insurance, and ensure that the provider is reimbursed. Fees for medical service not covered by the payer are usually sent directly to the patient as a balance bill.  

Medical coding and billing require accurate and full clinical documentation for claims adjudication, the process where the insurance company reviews a claim and either settles or denies it after due analysis and comparisons with the benefit and coverage requirements. Insurance will approve, deny or reject payments based on codes. Denied claims are claims that the payer has processed and deemed unpayable. A rejected claim usually is the result of a clerical error and will be returned to the biller with an explanation of the error. These claims are then corrected and resubmitted or denied claims can be appealed. This process can be time-consuming and, therefore, costly.  

Here are some of the most common – and costly – coding errors. Knowledge of each of these errors can aid in identifying and addressing them in a more efficient and cost-effective manner. 

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1. Incorrect Procedure and Billing Codes (CPT)   

Every medical procedure has a billing code called the CPT code or Current Procedural Terminology. Providers use these codes when submitting claims to insurance companies or Medicare. The code determines how much a provider will be paid. Because there are thousands of billing codes, mistakes can happen. Inaccurate medical coding will cause reimbursements to get delayed, denied or only partially paid. The AMA has several resources to help accurately bill procedures and services with the Current Procedural Terminology (CPT) and Healthcare Common Procedure Coding System (HCPCS) codes. 

2. DRG Coding Errors 

Diagnosis-related groups (DRGs) categorize inpatient hospital stays into clinically similar patient groups, allowing hospitals and providers to optimize the delivery of care and better manage resources. DRG coding errors are common. Whether intentional or unintentional, DRG coding errors can have a substantial impact on the revenue cycle.  

3. Impatient and Outpatient Care Coding  

Inpatient care is more expensive than outpatient care, which earns the provider a higher reimbursement rate. Billing errors may incorrectly code outpatient care as inpatient, driving up the cost of a medical bill. 

Common Fraud-Related Offenses  

1. Phantom Billing 

“Phantom billing” is a specific kind of Medicare fraud, as well as the most common. Phantom billing occurs when healthcare providers submit claims for reimbursement to the government for services or procedures they did not perform, or for higher-priced products or services than those provided to their patients. Further, phantom billing can occur when healthcare providers submit claims for procedures that were medically unnecessary, which they administer to patients who are either healthy or never required the procedure in the first place. 

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2. Duplicate Claim / Double-Billing 

Duplicate bulling occurs when the same provider bill is submitted multiple times when the test or procedure was performed only once. This can create a huge headache for billers and payers alike. 46% of provider fraud cases were due to duplicate billing errors The Centers for Medicare and Medicaid Services (CMS) defines duplicate claims as “any claims paid across more than one claim number for the same beneficiary, CPT/HCPCS code and service state by the same provider.” In double billing, duplicate claims are rejected with denial reason codes suggesting ‘exact’ and ‘suspect’.  

3. Unbundling 

Some codes are meant to include a group of procedures commonly done together. Unbundling is illegally billing multiple procedure codes for a group of procedures normally covered by a single, comprehensive CPT code. This increases the presumed cost of service, which means a greater reimbursement. When there is a single code available that captures payment for the component parts of a procedure, that is what should be used.  

4. Upcoding 

Assigning an inaccurate billing code to a medical procedure or treatment to increase reimbursement. Upcoding occurs when a healthcare provider submits codes to Medicare, Medicaid or private insurers for more serious (and more expensive) diagnoses or procedures than the provider actually diagnosed or performed. The doctor or other health care provider provides a service but lists a billing code for a more complicated or lengthy procedure that pays more. By using codes for more serious procedures with higher rates of payment, providers can significantly increase how much they are paid. 

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Honorable Mention – Surprise, Balance Billing 

While not a billing error, it is certainly offensive! Some medical bills leave patients literally surprised after receiving a statement from an out of network provider. Balance billing, also known as “surprise” billing, is another source of excessive healthcare charges. These unexpected and often high-dollar costs are the difference between what an out-of-network provider charges and the covered amount under a health plan. It is a surprise because the participant receives a bill after they have paid their regular point-of-purchase cost sharing – deductibles, copayments and coinsurance. This then exceeds the participant’s expectations regarding out-of-pocket costs that become part of additional financial liabilities.  

A New Generation of Medical Billing and IT Support  

There has been a steady conversion to electronic formats with an adoption of standards across different HIPAA-compliant transaction types. More than 95% of health systems today are compliant with electronic medical billing systems. Part of that system is a process for healthcare provider or third-party billing company to submit a bill or claim electronically to a patient or third-party payer. Digitizing every step of the claims process, from data input to payment, has the potential to streamline claims management, as well as boost its efficiency and accuracy.  

Information technology and data-driven solutions can help health plan administrators and their members by identifying sources of electronic billing errors and potential fraud, and overall mitigation of risk. For example, payment integrity systems review claims data against medical records, helping payers identify potential errors with greater accuracy. Additionally, online data analytic tools can provide a degree of price transparency and by harnessing price data electronically – allowing fee comparisons that identify fair and reasonable prices. 

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Finding the Right Medical Billing Partner 

Medical billing is such a complex process that many health plans outsource medical billing companies for extra support. A medical billing partner can help health plans achieve fairness by leveling the playing field of medical billing and render significant cost savings. Many billing support services have legal resources to support and defend clients through adjudication. This is the legal process by which an arbiter or judge reviews a disputed medical billing case, including legal reasoning set forth by opposing parties or litigants, to come to a decision which determines legal rights and obligations between the parties involved. 
In today’s digitally driven healthcare system, the right medical billing partner is a tech-driven agent of change, one that embraces innovation as well as tenacity to advocate for “what is fair and just” in the marketplace. The right billing partner also provides value-added services through turnkey solutions, administrative support and legal representation – acting as an extension of a health plan focused on the defense and resolution of errored, fraudulent and disputed medical bills. 

Christine Cooper is the CEO of aequum LLC and the Co-Managing Member of Koehler Fitzgerald LLC, a law firm with a national practice. Founded in 2020, aequum serves third-party administrators, medical cost management companies, stop-loss carriers, employer-sponsored health plans and brokers nationwide, defending medical balance bills and delivering savings to employer-sponsored health plans. Find aequum at aequumhealth.com.