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Types of Fraud and Abuse in Healthcare

Types of Fraud and Abuse in Healthcare

Types of Fraud and Abuse in Healthcare

There are different types of fraud and abuse in healthcare, but the most prevalent ones are those committed by health insurance and healthcare facilities. These two types of malpractice in the healthcare system are not propagated by the organizations only. Rather, even customers can commit healthcare fraud. 

What is fraud in healthcare? This is a crime committed by patients/customers, medical providers, medical insurance providers, and other parties to get financial or other benefits not due to them from the healthcare system. 

Types of Fraud and Abuse in Healthcare

The common types of abuse in the system include claims for services not given, for instance, a service provider charging for employee mental health while knowing they did not offer any.

It also includes giving false information in the medical records, giving false information for one to be eligible for some services. 

While there are many areas of healthcare fraud and abuse, the ones elaborated below are the most common:

1. Billing for services not rendered

Also referred to as upcoding, this is the most common medical malpractice all over the world. This type of fraud is targeted at the government, to make money illegally for services not rendered. 

It can also be a case of billing for a costlier service whereas a cheap[er cost was provided. Unless the patients recognize this kind of fraud and report it, it might be hard for the concerned authorities to know. 

As the customer, you should peruse your bill keenly looking for anomalies such as services listed, which you are sure you never received. 

If you notice such, ask about it immediately. Sometimes, genuine mistakes do happen. However, if they do not rectify the bill, you should escalate, and report the matter. 

Ignoring such mistakes can have a big ripple effect because you can be charged high health insurance premiums. 

Precisely, to upcode is to submit codes for more serious illnesses, while in actual sense, the illness treated was lesser. This creates a heavy strain on the medical systems as resources are going where they are not needed. 

2. Billing for medically unnecessary services

The doctor might provide certain services and bill for them. However, if they were medically unnecessary, that is fraud. The government is billed for a cost that should not have been there in the first place. 

The healthcare provider acts as the bridge between the federal systems such as Medicare, Medicaid, and the patients. 

The two will only pay for medically necessary services, but as suggested by the provider. Therefore, hospitals commit fraud by recommending tests and services that are hardly related to the condition you are suffering from. 

A hospital or a doctor may commit fraud by recommending medical products or services that a patient does not need. 

Perhaps they do this because a pharmaceutical company has promised them a kickback, or some other form of reimbursement. This is against federal healthcare rules and regulations. 

3. Doctor receiving kickbacks

It is illegal for a doctor to refer patients for a certain service when they know they do not need it, for a certain payment. 

To cite a case example, in 2021, National Medical Care, Inc. was charged with paying doctors and nurses kickbacks to recommend intravenous nutrition to dialysis patients under Medicare. In fact, the successor to NMC, Inc. (Fresenius Medical Care), had to pay $385 million to settle claims out of court. 

On the other hand, it is also illegal for doctors or healthcare facilities to pay others to refer Medicare patients to them. 

In Texas, the Anti-Kickback Statute imposes a criminal penalty on any person or facility that offers anything of value to solicit a referral under the government healthcare program. 

If patients discover such underhand matters taking place, or they suspect that Medicare or Medicaid is being billed for a service that was not necessary, they should blow the whistle on their healthcare provider. 

When the doctor receives a gift, cash, equity, or any other benefit in order to use a certain medical device on a patient or make any decision about the patient, that is considered a kickback. 

If it caused the doctor to act in the interests of the giver rather than of the patient, they would have to prove that it wasn’t a kickback. 

Despite many prosecutions being instigated against such schemes, kickbacks are so rampant in the medical industry and most pass undetected. 

4. Not charging patients properly for prescriptions

Many times, many healthcare providers have been found culpable of giving patients who were not under Medicare or Medicaid discounts. 

It was found that such patients would pay lower amounts for prescriptions after getting in-house discounts. At the same time, the same healthcare facility would not extend the same discounted rates for patients under Medicare and Medicaid systems. 

It is against the rules to charge patients anything above market rates for medication. It is also against the healthcare rules to charge patients under Medicaid and Medicare a higher rate than other patients. In such cases, a False Claims Act case might be instituted against the pharmacy in question. 

If found guilty, such a facility or person will be liable to pay a fine that is three times the government damages and a penalty that’s related to inflation. 

5. Nurses doing examinations yet billing the government for doctor services

Today, it has become almost routine for nurses to handle many outpatient examinations. However, this is against the federal healthcare rules to bill the government for doctor services when it was actually a nurse or other staff that did the work. 

This does not mean that it is okay for a nurse to do a physician’s work if the government is not being billed for it. It could lead to misdiagnosis as patients are more likely to be handled by under-trained staff. 

Patients are encouraged to whistle-blow on such providers if they find out that the person taking them through certain procedures is not a physician. 

6. Medical identity theft

Medical identity theft means the use of a patient’s medical identifiable information to obtain prescriptions that are not due to them. 

The identity thief then bills the government for the services rendered, pretending to be the patient whose medical ID they have stolen. 

Medical identity theft is not only about the fraudulent use of patient data. It is also a misuse of physician identifiers to write prescriptions for services and drugs. Such can also be used to falsely refer patients for procedures, or even bill for services not rendered. 

It is the mandate of the healthcare provider to keep all of their healthcare workers’ and patients’ data safe. 

Several healthcare providers are utilizing touchless biometric patient identification platforms like RightPatient. By identifying patients accurately, hospitals and health systems can red-flag fraudsters and stop them from accessing patient services – preventing medical identity theft

7. Unbundling

This is another type of fraud that is rampant in the medical industry. When a doctor offers several procedures and bills them separately rather than under one qualifiable code, that is called unbundling. 

Usually, this happens when the payment for the procedures is higher if they are billed separately than when they are billed under the “group code.” In that way, the healthcare provider makes more money than necessary. It is against the federal healthcare rules. 

Unbundling is also rampant in the laboratories that fail to bill for panels of tests in a bundle. Instead, they bill them separately to make more money. 


So much for fraud in healthcare, but what is abuse in healthcare? Abuse is any action that goes against the values of healthcare practice. 

It includes things like not keeping proper records, claims for services not rendered or rendered but not medically necessary, bad billing habits, and many others. 

Abuse and fraud in the medical and healthcare industries do tend to overlap at times. But the common denominator is that someone is benefiting financially. 

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