How to Avoid Common Forms of Health Care Fraud
Jake Newby
| 4 min read
Health care fraud is more common than most people think. Since 2007, the United States Department of Justice’s (DOJ) Health Care Fraud Unit has charged more than 5,400 defendants with fraudulently billing Medicare, Medicaid, and private health insurers more than $27 billion.
Fraud isn’t just committed by everyday citizens either – it commonly occurs from within the health care system. In 2024, the DOJ charged 193 defendants – including 76 doctors, nurse practitioners, and other licensed medical professionals – for their alleged participation in various health care fraud schemes involving approximately $2.75 billion in intended losses and $1.6 billion in actual losses.
The best way to avoid falling victim at the doctor’s office is to educate yourself. Here are eight common forms of health care fraud.
Durable Medical Equipment schemes: Durable Medical Equipment (DME) fraud – also known as DME schemes – are scams that involve the collaboration of medical professionals, DME companies and others. They utilize telemarketing calls to take advantage of unsuspecting disabled and elderly Medicare members in multiple ways. Some schemes involve fraudulent prescriptions and the dispensing of unnecessary medical equipment.
Some involve DME companies obtaining names and addresses of Medicare recipients and billing Medicare for equipment they never send. Members who are victimized by DME fraud lose the benefit that allows them to order supplies and equipment they need when they actually need it.
Medically unnecessary services fraud: Providers who bill the government for health care services that are not medically reasonable or necessary violate the False Claims Act. Here are some examples of medically unnecessary services fraud:
- A doctor billing for surgical procedures performed on patients who do not meet the criteria for the procedures.
- A provider or pharmacy providing and billing for an expensive drug that is not necessary.
- A provider billing for diagnostic procedures that are not reasonable or necessary for diagnosis.
- A hospital classifying a patient as inpatient, so that the hospital can bill at higher inpatient rates.
- Providing ambulance services when such transportation is not necessary.
Services not rendered: Services not rendered is similar to phantom billing. An example of this is when a doctor or health care provider buys and/or secures a patient’s medical information and bills an insurer, despite never meeting the patient before. This is another form of fraud that commonly targets Medicare or Medicaid patients, as it is relatively easy to commit.
Telehealth fraud is a relatively new crime that can occur in a few different ways. When a member receives an unsolicited phone call from someone wanting to verify family history of cancer, that is an example of telehealth fraud. This may be a telehealth doctor trying to approve members for a genetic testing kit that actually needs to be ordered by your primary care provider. Another example is when a member receives an unsolicited phone call from someone attempting to conduct a survey in order to collect insurance information that they then use to bill insurers for unnecessary services.
Phantom billing: When health care providers submit claims for reimbursement to insurance companies for services, supplies, or procedures they did not perform, that is phantom billing. Although insurers are left with the bill, patients and taxpayers are the ones who pay for these programs, because phantom billing can lead to higher health care costs for everyone.
Unbundling: Unbundling boils down to improper coding. Instead of receiving one charge incorporating your entire appointment, providers break your bill down into several small bills that requires higher individual payments than you should owe for your one appointment. A common example of this is if a hospital bills an insurer for incisions and closures – which should be lumped into one surgical procedure bill – and breaks those charges down separately.
Unlicensed service: Fraud courtesy of an unlicensed service is pretty straightforward. It occurs the provider or provider’s assistant was unlicensed while performing a service. This is also known as health care license fraud. A submission for reimbursement of federal health care funds for unlicensed care is considered both a false claim and fraud.
Upcoding is when providers use billing codes to reflect more expensive services than the ones they actually provided. Doctors of every type must document the care they provide to patients and then abide by standard billing codes to bill them. They upcode any time they purposely miscode a service. Here’s an example: You saw a doctor for 15 minutes and they billed your insurance company for 60 minutes, while also adding X-rays and other services you didn’t receive.
How CFI works to mitigate fraud
The Blue Cross Blue Shield of Michigan's (BCBSM) Corporate and Financial Investigations (CFI) team works to identify and address fraud, waste and abuse by prioritizing patient safety while protecting against financial losses that affect our customers and the health care ecosystem. The team is composed of investigators, data analysts and clinical and claims specialists.
If you suspect fraudulent activity, you can report it confidentially. Click here to file a report.
Photo credit: Getty Images
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