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Protect Your Practice from Common Examples of Medicare Fraud

For physicians, providers and their practices, the term “Medicaid fraud” is an ever-changing occurrence that accounts for billions of dollars in fraud annually.  According to the Department of Justice, $3.7 billion were recovered from false claims in 2017 (Justice Department, 2017).  Per the former Chairman of the House Oversight and Government Reform Committee Darrell Issa, the government spends $125 billion in improper Medicare claims annually (Politifact, 2018). Protect yourself and your practice by fully understanding common examples and design office protocols to stop Medicare fraud before you could be found liable:

Most Common Examples of Medicare Fraud

  • Phantom billing: The medical provider submits bills to Medicare for procedures or tests that were either unnecessary or never performed.  This can also occur when the medical provider bills for equipment that is unnecessary or equipment that is billed as new but is, in fact, used.
  • Patient billing: This occurs when the patient is included on the scam.  The patient provides the medical provider their Medicare number.  The medical provider then bills for unnecessary or never performed procedures or tests.  In exchange for kickbacks, the patient agrees to report to Medicare that they did indeed receive the procedure/test.
  • Upcoding Fraud: Comparable to billing for services not performed, this is when a medical provider bills for unnecessary services.  In this instance, an insurance company exaggerates the severity of their members’ illnesses to draw additional risk adjustment payments to Medicare.  This can occur through lying about the amount of time a procedure took, who performed the procedure, the equipment involved and other exaggerated services resulting in overbillings to Medicare.
  • Unbundling Fraud: This scam is accomplished by billing for individual performances that should be bundled together.  This causes the bills to be charged to Medicare at the full cost of the individual performances versus the adjusted bundled cost of the services together. The result of unbundling is overpayments from Medicare.

Reducing Risk

With Medicare Fraud becoming more prevalent, the best way to reduce risk is by recognizing the three elements of the fraud triangle and creating strong internal controls to mitigate risks.  The three elements of the fraud triangle are Incentive, Opportunity, and Rationalization.  Although a deficiency in one element does not create a substantial fraud risk, limiting exposure to each area individually is the safest way to reduce fraud in a medical practice.

  • Incentive: Motivation to commit fraud is created from financial pressure, monetary gain or achievement. Medical providers can reduce the risk of internal fraud by creating incentives based on patient experience versus billing.  Creating achievement incentives based on patient experience mitigates the risk to extra bill based on financial motivations.
  • Opportunity: Opportunity occurs when internal controls are not sufficient to prevent fraud. The best internal control to prevent Medicare fraud is to require dual signatures on all billings, as well as supervisor review before submission.  In addition, employees and patients should be trained on current phishing schemes, as these are used by external fraudsters as a way of securing personal information for filing false claims.  Since it is in the practice’s best interest to provide employees with good technical skills, the best way to mitigate the opportunity is through separation of duties. Medical providers should ensure that those who perform procedures do not also authorize the billing for procedures. System access should also be limited based on employee’s roles and checks and balances should limit opportunities to commit fraud.
  • Rationalization: Rationalization occurs when employees justify their actions by believing they are entitled to the incentive earned through Medicare fraud. Building a strong culture where leaders encourage strong ethics allows employees to do the same and reduces this risk. Employers can also reduce risk by meeting with workers periodically and having open and honest dialogue on their job satisfaction. Another tip in prevention is proper education of employees and patients. Employees should be coached to secure Member ID cards and explain to patients the importance of securing ID cards. Medical providers and patients should be educated on the severity and pervasiveness of Medicare fraud.

Creating a corporate culture focused on strong ethical behavior, educating employees and patients along with effective internal controls are the best ways to mitigate Medicaid fraud. In an instance where fraud occurs, US laws now allow individuals reporting Medicare fraud to receive full protection from retaliation and collect up to 30% of the fines the government collects. Contact me today to discuss how your practice can protect against Medicaid fraud and ensure your policies are up to par.

Justice Department Recovers Over $3.7 Billion From False Claims Act Cases in Fiscal Year 2017. (2017, December 21). Retrieved May 27, 2018, from

Rep. Darrell Issa claims government could save $125 billion by not paying improper Medicare claims. (n.d.). Retrieved May 25, 2018, from