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Fraud and abuse: the payer's perspective.

Fraud and Abuse: The Prayer's Perspective [1]

The health insurance financing mechanism in this country is inherently inflationary. In addition, it provides a rich source of payment for phycicians who wish to take improper advantage of it. Physician reimbursement obtained by means of fraud or abuse from health insurers is unethical and illegal. It is a waste of the financial resources of the health care sector. The problem of fraudulent and abusive billing practices has caught the attention of Congress. In the words of one senior aid, "From Congress's point of view, there is nothing more outrageous than squeezing Medicare for deficit reduction purposes and then finding out people are defrauding the system." Private third-party payers also under increasing pressure by employers to control health care costs.

Some basic definitions are in order. Fraud is intentional deception or misrepresentation that an individual makes knowing it could result in an unauthorized benefit to him or herself or to some other person. For example, a physician knowingly bills for a procedure that was not provided. Abuse is defined as incidents or practices that, although not considered fraudulent acts, may directly or indirectly cause unwarranted financial losses to insurance programs or to beneficiaries/recipients. [3] The major distinction between fraud and abuse is being able to prove intent in the former.

Some examples of abusive billing are:

Upcoding--Using CPT codes (AMA's Current Procedural Terminology) improperly, billing at a higher level of service than was actually performed. An example is billing for a comprehensive office visit when a limited office visit was provided.

Fragmenting (also known as unbundling)--Billing the components of a service instead of the global service. This is "a la carte" billing. An example is billing separately for pre- and postoperative care, oophorectomy, salpingectomy, hysterectomy, and exploratory laparotomy, instead of the global code for total hysterectomy, which includes pre- and postoperative care; abdominal exploration; and removal of euterus, ovary, and tubes.

Exploding or Hyperitemation--A technique for "gaming" the system. Involves itemizing a series of tests that are all done on a single sample; for example, billing separately each of the 12 individual tests of an SMA-12 panel instead of billing the single CPT code established for an SMA-12.

Deceptive Coding--Billing for diagnoses that do not accurately reflect a patient's condition, but that allow payment for services otherwise excluded from insurance coverage. An example of this is billing for a diagnostic hysterectomy/laparoscopy for dysmenorrhea when the services being provided are for evaluation and treatment of infertility, which may be exluded from the patient's insurance contract.

Waiver of Copayment--Involves not charging for the deductible amounts required for a given insurance contract. This is exemplified by accepting as payment in full reimbursement by the insurer. Lachs, Sindelar, and Horwitz comment on this issue. [4] While waiving a copayment may represent the highest ideals of medical altruism in selected cases, it can also represent a marketing ploy or a source of unjust enrichment for unscrupulous and greedy physicians who use health insurance as a "blank check" to secure payment for excessive and unnecessary services. An example is a physician's billing for a $2,000 "complete physical" for a healthy 30-year-old who never receives a bill for services provided. Only the insurer receives the bill.

The federal government is increasingly concerned about the effects of fraud and abuse on the Medicare program. Intensified efforts directed against these activities is readily apparent in the medical community. Recent AMA calls for the firing of Inspector General Richard Kusserow highlight the conflicts in this area.

The American Medical Association's ethical opinions generally proscribe any conduct or transactions by a physician that place a physician's financial interest above the welfare of a patient or result in thr provision of unnecessary services or overutilization of services or facilities. The above description of fraudulent and abusive billing practices represents just such an ethical dilemma.

Many physicians rationalize abusive billing practices as necessary to preserve incomes in an environment of increasingly stringent fiscal controls. Whatever the reason, the resuslts are the same--improper billing practices.

Novack et al. comment on this ethical situation in a survey condected of 407 practicing physicians. [5] The majority indicated a willingness to misrepresent a screening test as a diagnostic test to secure an insurance payment. When forced to make difficult ethical decisions, most physicians indicated some willingness to engage in forms of deception. Novack's data suggest that deceiving a third party (insurance company) to benefit patients (or the physician himself) may be quite acceptable to physicians. Claims reviews by insurers show the practice is common.

Physicians who are part of the problem can be part of the solution. Several steps are necessary. First, correct CPT coding should be learned and office staff should understand correct and ethical billing practices. The AMA and many state medical societies sponsor course on correct billing practice. However, the physician or organization is ultimately reponsible for the claims submitted. Second, conflicts or interest have to be recognized and understood. Third, limits that may exist on patients' insurance coverage have to be acknowledged. Patients purchase a defined set of benefits that may include deductibles, coinsurance, and exlusions. While it may seem expedient to artfully manipulate CPT codes or otherwise "game" the system for the patient's benefit, in the long run this pracitce leads to higher insurance premiums, which may lead to more people going without insurance entirely. Such practices will continue to erode the integrity of the medical profession in the public's eyes.


[1] Hyman, D., and others. "Fraud and Abuse--Setting the Limits on Physicians' Enterpreneurship." New England Journal of Medicine 320(19)"1275-8, May 11, 1989.

[2] Florida Medical Association Today 5(10):4, Nov. 1989.

[3] Holmquest, D. "The Essentials of Health law." Presentation at ACPE National Insurance on Health Care Leadership and Management, Nov. 13-14, 1990.

[4] Lachs, M., and others. "The Forgiveness of Coinsurance--Charity or Cheating?" New England Journal of Medicine 322(22)"1599-602, May 31, 1990.

[5] Novack, D., and others. "Physicians' Attitudes toward Using Deception to Resolve Difficult Ethical Problems." JAMA 261(20):2980-5, May 26, 1989.

Norman J. Schroeder II, MD, MBA, is Medical Director, Employers Health Insurance Co., Green Bay, Wisconsin. He is an associate member of the College's Societies on Insurance and Managed Care Organizations. The opinions expressed in this article are those of the author and do not necessarily reflect the views of Employers Health Insurance Co.
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Title Annotation:insurance companies
Author:Schroeder, Norman J.
Publication:Physician Executive
Date:Mar 1, 1991
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