What Is Medical Billing & Coding Fraud?
Fraud occurs when a provider knowingly submits or causes submission of false claims for payment. Examples include:
Billing for services not rendered
Upcoding
Unbundling
Misrepresenting diagnoses to justify services
Duplicate billing
Falsifying documentation
Kickbacks or inappropriate financial relationships
Fraud ≠ error.
Fraud requires intent; an error requires correction, education, and process improvement.
✅ 1. Follow Accurate Coding Practices (CPT, HCPCS, ICD-10)
Best practices
Always code based on documentation, not assumptions or verbal input.
Choose the lowest level of service that is supported by documentation.
Never code “to get paid”; code what happened.
Use official resources:
CPT Assistant
CMS guidelines
NCCI edits
LCD / NCD documents
ICD-10-CM guidelines
Common fraud pitfalls
❌ Upcoding E/M levels (e.g., billing 99215 when documentation supports 99213)
❌ Coding a procedure that wasn’t done
❌ Assigning diagnoses “to justify” a procedure
🔎 2. Ensure Documentation Integrity
Proper documentation must be:
Accurate
Complete
Timely
Legible (including digital clarity)
Consistent across providers
Tips:
Every billed service must have progress notes, orders, results, or tracking.
No copying/pasting without updating clinical details.
Avoid “cloning” notes between patients.
If it’s not documented, it’s not billable.
🧮 3. Use Internal Audits to Detect Issues Early
A strong internal audit program prevents fraud and reduces penalties.
Audit types:
Prospective (pre-bill) – best for preventing claims errors
Retrospective (post-bill) – finds trends, coding patterns
Focused audits – high-risk areas (e.g., E/M, modifiers, imaging, telehealth)
What to look for:
Overuse of high-level codes
Modifier misuse (25, 59, XU, etc.)
Inconsistent diagnosis/procedure pairing
Missing documentation
Unusually high utilization compared to specialty norms
⚠️ 4. Understand High-Risk Scenarios Identified by OIG & CMS
Federal agencies focus on the following patterns:
High-risk fraud areas
Telehealth upcoding or billing without valid encounters
Chronic Care Management billed without 20+ mins documented
Incident-to billing misuse
Modifier 25 & 59 misuse
Durable Medical Equipment (DME) ordering without medical necessity
Labs & genetic testing with suspect orders
Behavioral health telemedicine—a major area of fraud in recent OIG reports
Regularly review OIG Work Plans and CMS Program Integrity updates.
🧰 5. Properly Manage Modifiers
Modifiers are essential but heavily abused.
Common risky modifiers
25 – significant, separately identifiable E/M
59 – distinct procedural service
GA/GX/GY/GZ – ABNs and coverage limitations
76/77 – repeat procedures
Modifier 24 – unrelated E/M during postop period
Fraud prevention tips:
Validate modifier usage with documentation.
Don’t use modifiers to “force” payment.
Follow NCCI Procedure-to-Procedure (PTP) edits strictly.
📘 6. Follow Medical Necessity Rules
Medical necessity is required for every billed service.
Ensure:
Diagnoses support billed services
LCD/NCD policies are reviewed before ordering/billing labs, imaging, or DME
Screening vs. diagnostic intent is correctly documented
Not every patient needs every annual test
Billing medically unnecessary services is fraud—even if the services were performed.
🛡️ 7. Train Staff Regularly (Mandatory to Prevent Fraud)
All team members must receive ongoing training in:
Coding updates (CPT/HCPCS/ICD-10 changes)
Compliance policies
Privacy regulations (HIPAA)
Fraud, waste, and abuse prevention
Role-based billing procedures
Training must be documented for audit protection.
💬 8. Maintain Clear Communication Between Clinical & Billing Teams
Breakdowns in communication cause errors—and errors can escalate into fraud allegations.
Tips:
Use standardized documentation templates
Clarify ambiguous documentation before billing
Schedule periodic coding-provider meetings
Provide providers with coding feedback reports
🔐 9. Implement Compliance Programs (Government-Backed Requirement)
OIG recommends — and some states require — a 7-Element Compliance Program:
Written policies & standards
Compliance officer & committee
Regular training
Effective lines of communication
Internal auditing
Enforcement & disciplinary actions
Prompt response to issues
An active compliance program can reduce penalties in fraud cases.
💸 10. Beware of Financial Conflicts of Interest
Fraud includes illegal inducements or payment structures.
Avoid:
Paying staff based on coding levels
“Kickback” arrangements with labs, DME suppliers, imaging centers
Charging patients extra above copay/coinsurance rules
Waiving copays routinely (can be considered inducement)
Follow Anti-Kickback Statute (AKS) and Stark Law guidance.
🧯 11. Technology Tools That Help Prevent Fraud
Implement:
Automated NCCI edits
Real-time claim scrubbers
EHR prompts for missing documentation
AI-driven anomaly detection
Access controls to prevent inappropriate edits
These tools reduce accidental and intentional improper billing.
🧾 12. Keep a Written Billing & Coding Compliance Manual
Should include:
Coding guidelines
Modifier usage rules
Telehealth policies
Documentation standards
Claims submission rules
Processes for error correction
Corrective action procedures
Annual review process
Documentation is your best defense in audits.
🟢 Summary: How to Avoid Fraud in Billing & Coding
✔ Bill only what is documented
✔ Follow CPT/HCPCS/ICD-10 rules strictly
✔ Maintain strong internal audits
✔ Ensure medical necessity
✔ Use modifiers correctly
✔ Train regularly
✔ Maintain a robust compliance program
✔ Avoid financial inducements
✔ Use claim-scrubbing technology
✔ Fix errors promptly
✔ Stay current on CMS, OIG, and payer rules
Learn Medical Coding Course in Hyderabad
Read More
2025 CMS Coding Changes and Updates
OIG Work Plan: What Coders Should Watch
How to Stay Compliant with Payers
The Role of Medical Coding in Audits
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