What Is Upcoding?

January 11, 2023

Upcoding is becoming more common in hospitals, healthcare, and Medicare fraud. Unless you work in healthcare, the concept of upcoding may be new to you. Learn what upcoding is, what it looks like, why it is illegal, and what to do if you have been affected by medical upcoding. 

Upcoding: Medicare Fraud and Abuse Is on the Rise

Medicare fraud and abuse via upcoding have increased dramatically over the past several decades. In 2015, Medicare fraud was responsible for up to $60 billion in overpaid claims. Many hospitals are billing Medicare for more complex treatments, even though the data indicates their patients are less sick today than in past decades. 

The Office of the Inspector General (OIG) for the Department of Health and Human Services (HHS) is the government watchdog agency responsible for the HSS's roughly $2.4 trillion program portfolio. The OIG found that the severity of hospital stays that involve Medicare is increasing while Medicare's low severity stays are decreasing. On the face of it, this data gives the appearance that either U.S. hospital patients are becoming sicker or hospital coding teams are attempting to optimize reimbursements. 

The OIG investigated the patients' length of stay, which should increase if patients are becoming sicker. However, the medical records showed that patient stays decreased, even for the most complicated issues. The OIG determined that Medicare paid hospitals nearly $5 billion more for short stay claims between 2014 and 2019 than had the claims been billed at the next lower severity code. Some hospitals claim they have undercoded for years, while watchdog agencies claim that upcoding abuse costs significant taxpayer dollars.

What Is Upcoding and Why Is It Illegal?

What is upcoding in healthcare?

When a sick person visits a hospital, medical coders assign a billing code to the patient's necessary medical procedures or treatments. Many procedures and treatments have different levels of severity. For example, it costs a medical facility more to treat a severe lung infection, like emphysema, than it costs them to treat common pneumonia in an otherwise healthy patient. 

The hospital should use the appropriate code to charge for the appropriate severity of the patient's illness. However, some hospitals have begun purposefully using the diagnosis codes for more severe illnesses than the patients actually have. This habit is called upcoding. 

So, what is upcoding, and why is it illegal?

Upcoding is the habit of knowingly assigning an incorrect billing code to a medical charge to increase the monetary reimbursement rate from the patient, Medicare, or a private insurance provider. The entity responsible for reimbursing the medical provider is charged for a more serious and expensive procedure than was performed. 

Upcoding can sometimes also occur via unbundling or fragmentation. Medicare often has a lower reimbursement rate for procedures commonly performed or bundled together in a diagnosis-related group. An example of a bundle could be incisions, stitches, and pain medication. Unbundling causes the cost of each procedure to rise artificially.

Upcoding is illegal because the hospitals are falsely telling Medicare that they delivered more expensive medical services and treatments than they did. This causes Medicare to over-reimburse the hospitals for these false treatments. The result is potentially billions of taxpayer money being falsely diverted to these fraudulent healthcare providers. 

Upcoding is a violation of what law?

Upcoding is an illegal practice. Unethical healthcare providers who engage in upcoding violate the federal False Claims Act (FCA). This can result in federal fraud charges for overcharging a product or falsely inflating its price. These federal charges can result in severe penalties, including expenses, damages, civil monetary penalties, and even criminal penalties.

Submitting Billing Codes That Seek Higher Reimbursement

Common types of upcoding include submitting billing codes that seek higher reimbursement than what the patient needed. This may be the most common form of upcoding, like submitting a code for a complex and higher-paying procedure when only a simple procedure was necessary and performed.

Submitting medical codes that seek higher reimbursement is wrong because the procedure did not cost more. The provider is falsely increasing the patients' medical bills to increase profits.

Submitting a Procedure Code for More Visit Time

Sometimes, a doctor may provide a simple treatment or procedure and use the wrong code. If the code they use indicates that they provided a more complicated and expensive service, it likely qualifies as upcoding, a type of fraud. This upcoding error should be apparent on your medical records.

Submitting a procedure code for more visit time is unethical because the healthcare provider is claiming additional money for services they did not provide. Additionally, Medicare may unnecessarily waste U.S. taxpayer money on healthcare providers who did not perform the services they claim to have performed. This diverts tax money away from other urgent uses.

Showing Additional Services That Are False Claims

Healthcare providers sometimes add on additional services that never existed. These are not upcoding substitutions. Instead, they add additional services to your electronic health record that must be reimbursed. These services were never provided, even in a less complicated manner. 

This practice is blatantly charging additional money for services that were never even provided. This upcoding practice qualifies as a type of fraud committed by healthcare providers.

Charging for Inpatient Stays at a Higher Severity

Different levels can be charged when a patient needs to stay overnight as an inpatient. These levels coincide with the severity of the patient's medical problem. Sometimes hospitals charge inpatients for stays at a higher severity than the patient exhibited. 

This type of upcoding is unethical and results in more expensive services being charged to Medicaid, the patient, or a private insurer. Any time these medical services are upcoded to a false but higher rate, they may be guilty of committing federal fraud. These actions should be taken very seriously and met with legal action.

Challenge Medicare Fraud By Healthcare Providers

If you have been the victim of Medicare fraud by your healthcare provider, you can find relief. Medicare fraud is not a victimless crime. An experienced Medicare lawyer at McEldrew Purtell can help answer your questions and explain your legal rights. Contact us today to arrange a free consultation.