According to a report under the False Claims Act, upcoding crimes results in some serious consequences, such as 5 years of imprisonment and fines worth up to $250,000. These hardcore penalties grab the attention of everyone related to the healthcare industry. Upcoding needs to be avoided in the first place. For that, one must be aware of what it is and how it affects the billing process.

This blog is a complete guide to understanding what upcoding is, real-time examples, why it occurs, and reasons to avoid upcoding. It also highlights the differences between unbundling and upcoding and gives some tips for healthcare facilities.

What is Upcoding in Medical Billing?

Upcoding in medical billing is the intentional act of a healthcare provider of assigning a higher and more expensive code to the procedures and services, which actually demands a lower level of coding. It’s a fraudulent act to gain financial benefits.

Upcoding opens the door for legal action against the healthcare provider and healthcare facility. This results in penalties and heavy fines. Regulatory bodies have tried to detect upcoding with multiple audits and reviews of claims. 

According to a report published by the False Claims Act, at the end of fiscal year 2022, the Department of Justice will have received a settlement of $2.2 billion for civil cases such as fraud and false claims against the government.

Upcoding Examples in Medical Billing

Some real time examples of Medical Billing are listed below:

Common Laboratory tests billed as Specialized test

Common tests, such as blood tests and urine tests, are low in cost but billed as specialized tests, which are more expensive. The provider receives a higher reimbursement in return.

Simple Structure of wound billed as Complex Structure

A wound is closed with a simple structure but billed as a complex structure for repairing the wound to gain financial benefits.

 Regular Office Visit billed as Extended Visit

A patient visits a healthcare facility for regular checkups or minor issues related to health. But the provider bills it as an extended visit and shows complexity in the patient’s health condition.

Why does it Occur?

Why does upcoding occur?

Financial Gain

The major intent behind upcoding is financial gain. Healthcare providers use higher-level ICD10 and CPT codes for lower-level services. This results in higher reimbursement gains from health insurance companies.

Confusion about the complexity of the procedures

Healthcare providers as well as the coding staff may find it difficult to differentiate between a simple and complex kind of structure. They can mistakenly use a complex code when a simple code is sufficient.

Insufficient Documentation

The documents submitted for the coding process do not provide enough information about the medical condition of the patient. Without detailing, it is difficult for medical coders to use appropriate codes that resonate with the type of service rendered.

Pressure to Meet the Targets of Higher Reimbursement

Some healthcare facilities may pressurize their staff to maximize reimbursement for the facility. Some coders cannot handle this pressure and are forced to use higher codes to meet the targets.

Coding Software or Template Error

Some software used in the medical coding process has built-in settings and templates to default to higher levels of codes. If coders totally rely on this software and claims submitted without any review, upcoding is done.

The U.S. Department of Justice (DOJ)

Reasons to Avoid Upcoding 

Reasons to Avoid Upcoding 

Ethical Responsibility

Patients have staunch trust in their healthcare providers. Upcoding is a breach of trust between the two entities. This proves that for a provider, financial gain is more important than the cordial relationship with his patients.

Legal Actions

Upcoding is against the laws and regulations of regulatory government agencies. This results in civil and criminal penalties and fines. Those who are found guilty face some serious repercussions. The professional reputation is also damaged.

Patient’s Healthcare Safety

For upcoding, providers prescribe pointless tests and complex procedures for patients, which are totally unnecessary and put their health at risk.

Exclusion from the Government Programs

Those found guilty are excluded from government programs such as Medicare and Medicaid. Providers lose their eligibility to become members and enjoy the benefits of these programs.

Loss of Medical License 

A strict response from the state licensing board is expected, which results in the suspension of providers’ ability to practice.

In order to avoid these serious consequences, one should stay away from fraudulent activities that result in financial gain for the provider.

What is Unbundling in Medical Billing?

Unbundling is defined as an intentional act of fraud to gain financial benefits. The process is simple. Improper billing practices are initiated by submitting the components of procedures or services separately. These components need to be bundled and billed together. This artificially inflates the cost of the services rendered to the patients and demands overpayment from the health insurance companies.

Unbundling Examples in Medical Billing

Surgical Procedures

Unbundling is possible when the biller bills the whole surgical procedure separately, such as anesthesia, main surgery, and postoperative services. Accurate billing practices require a comprehensive code that includes all the details and components of the surgery.

Laboratory Testing

Unbundling occurs when the healthcare provider bills separately for every test in a panel. For example, if a blood test is bundled and one comprehensive code is used for it, the provider bills every test within the blood test separately.

 Maternity Care 

For unbundling in maternity care, the provider bills separately for each service, such as prenatal visits, delivery, and postpartum care. Accurate practice is the use of a global maternity code that covers all the stages of pregnancy.

Upcoding Vs Unbundling

Both upcoding and unbundling are intentional fraudulent acts to gain higher reimbursement. These activities must be condemned and penalize  the responsible entities. The key differences are listed in the table here:

AspectsUpcodingUnbundling
DefinitionIt is the intentional act of a healthcare provider to assign a higher and more expensive code to the procedures and services, which actually demands a lower level of coding.It is the intentional act of billing the components of the procedure separately that actually demands a comprehensive and bundled bill.
MotivationFinancial gain is the real motivation behind this fraudulent act.Higher reimbursement is the real motive. The provider bills the components separately at higher rates.
Legal ConsequencesThe fraudulent act has some serious legal consequences, such as financial penalties and, in some serious cases, imprisonment.The healthcare provider may land in hot water as they face some serious financial and legal consequences, such as fines, imprisonment, and exclusion from government healthcare programs.
ExampleCommon tests, such as blood tests and urine tests, are low in cost but billed as specialized tests, which are more expensive.For Unbundling in surgical procedure, the biller bills the whole surgical procedure separately, such as anesthesia, main surgery, and postoperative services
Regulatory bodies ResponseRegulatory bodies closely monitor the submitted claims and conduct audits and reviews to find out if there is any fraud.Regulatory bodies closely monitor every step of claim submission and detect any anomalies through multiple audits. The provider is excluded from the healthcare programs.

Tips for Healthcare Providers to Avoid Upcoding

Avoiding upcoding has significant implications for healthcare providers. This needs to be done to streamline the revenue cycle and maintain  legal compliance with regulatory bodies. Here are some tips for healthcare providers to avoid upcoding.

Tips 1

Healthcare facilities can implement a compliance program to avoid frauds such as upcoding and unbundling. This is considered to be the best approach to tackle upcoding effectively.

Tip 2

The provider should document everything that is rendered to the patient to cure him. Accurate and complete documentation of all medical services is necessary to avoid any coding errors.

Tip 3

Don’t rely too much on electronic health record (EHR) systems. Template errors and default settings need to be monitored manually.

Tip 4

Install whistleblower policies for the billing and coding staff. This encourages the employees to report any fraudulent activity conducted without the fear of being terminated.

Tip 5

Some healthcare facilities have started a campaign of incentives for those who meet the reimbursement targets. Don’t instill this kind of greediness in the healthcare staff.

MedHeave- Your Coding Partner to Help in Perfect Coding

Medheave has proven itself to be a trusted coding partner. The company reviews every detail of the process and ensures an error-free claim submission. Medheave has followed all the ethical and legal standards of regulatory bodies, such as insurance companies. We emphasize regular internal audits and ensure transparency in the process. Contact us today to safeguard your medical facility from legal action.

 FAQs

  • Is there any  law that specifically deals with upcoding in Medical billing?

Yes, fraudulent billing practices such as upcoding and unbundling  are addressed by the False Claims Act.

  • What are some red flags in the billing process that indicate fraudulent activity?

An increased use of higher-level ICD10 and CPT codes and a higher reimbursement rate for healthcare facilities  are two clear red flags for any legal authority to take strict measures.

  • Is coding intentional?

Upcoding is intentional but can sometimes be accidental due to insufficient documentation, coding errors, and a lack of the latest coding guidelines.

  • How can whistleblower policy uncover upcoding?

The whistleblower policy never reveals the identity of any employee. So any person who finds fraudulent activity within the organization can report it without any fear.