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What Is Upcoding & Unbundling?

How to Recognize this Common Fraud Pattern

Upcoding and unbundling are examples of healthcare billing fraud that involve the improper use of billing codes by health care providers.

Billing codes (known as CPT codes) are a part of the Medicare healthcare program. The program uses a set of tables to determine how much a provider should be compensated for each type of procedure. Fraud occurs when providers manipulate these codes to maximize compensation.

It’s important that all healthcare workers understand these types of fraud because being involved in either of them can expose you to serious criminal liability. Reporting them, on the other hand, can make you eligible to receive a portion of all the funds that are recovered from the fraud.

In this short guide, you’re going to learn what upcoding and unbundling are. You’ll also get to review some examples of this fraud, along with real cases that have involved them. Let’s start by taking a deeper look at upcoding.

What is Upcoding?

Upcoding fraud occurs when a healthcare provider applies an inaccurate billing code to a procedure in order to increase reimbursement.

In many cases, the more expensive code replaces one that is similar in nature. Due to the number of codes that exist and the similarities between them, even the patient may not know which service they received. That can make this type of fraud very difficult to detect.

Whistleblowers inside the healthcare system have the most insight into when this type of fraud is taking place, and public health programs depend on their honesty.

If you suspect that upcoding may be taking place at your healthcare organization, it may take the form of one of the following examples.

Examples of Upcoding

Imagine that an elderly patient visited their doctor for a standard checkup. This service involves a simple physical and perhaps some minor tests. It is compensated by Medicare accordingly.

However, if a patient believes that something is wrong with them, they will request a much more extensive checkup. The doctor may need to perform additional tests that can rule out the possibility of severe health issues. Medicare compensates providers more for these kinds of checkups to cover the extra time and resources involved.

In this example, upcoding fraud would occur if the doctor performed the simple checkup but added the billing code for the more extensive checkup to the Medicare invoice.

Upcoding fraud can happen in many other ways. For example:

  • If a patient was given a simple x-ray, but the doctor uses the billing code for a set of precision x-rays
  • If a patient was provided with simple anesthesia, but the doctor uses the billing code for sedation or other advanced forms of anesthesia
  • If a patient was given a medical implant through a simple procedure, but the doctor uses the billing code for a more invasive type of procedure

Recent Cases Involving Upcoding

Consulate Health Care was accused of upcoding fraud in a case that has been moving through the courts for several years. The skilled nursing company was accused of billing for more intensive therapy services that were provided to patients. Other types of fraud were also allegedly involved.

The case was expected not to move forward when the U.S. government declined to join the case, but as of July 2020, the courts have applied a verdict of $255 million against the company. Pending any other action that may affect the case, the whistleblower and her lawyers will be awarded a portion of this fine.

What is Unbundling?

Unbundling fraud (also known as fragmentation) occurs when healthcare providers charge separately for procedures that were part of the same operation.

It is referred to as unbundling because Medicare bundles certain procedures together when they involve the same preparation. The program reimburses at a lower rate for each part of a bundled procedure because it compensates providers for the entire operation.

Examples of Unbundling

Imagine that a patient needed a serious operation—such as a knee replacement—performed. This operation will involve many different services, including the use of a surgery room, the application of anesthesia, surgical cutting, stitching, and observation after the surgery.

Fraud would occur if the healthcare provider split up all of these services and invoiced for them one-by-one. This type of fraud is often done by treating the services as if they came from different patients or were services that happened across different dates.

Recent Cases Involving Unbundling

Stanford Hospital was accused of unbundling fraud in a case that is still being decided as of 2020. The accusations are based on actions that were taken starting in 2008. They are accused of exploiting a new medical billing system to unbundle services on a massive scale.

The lawsuit claims that Stanford Hospital instructed medical billers and coders to always bill at the maximum level and fees, regardless of the performed services. The hospital is further accused of ignoring warnings about continuing this behavior.

The lawsuit is being brought by a whistleblower who will be entitled to whatever part of the $500 million is recovered if the case is successful.

How to Report Upcoding or Unbundling

You need to understand how to report medicare fraud if you want to make a difference. Whistleblowers are necessary to deal with fraud, but reporting bad behavior—and collecting the rewards—requires careful action.

The first step is to collect any records of malfeasance and speak to a lawyer. These cases can be incredibly complex, and help from a whistleblower lawyer may be necessary to secure the best outcome.

There are laws that protect whistleblowers that you can depend on while the case is moving forward. Your lawyer can help to explain your options in more detail.

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