In the year 2024, $2.76 billion worth of health care fraud was recorded. Sadly, 76 healthcare professionals were involved in these fraudulent activities. Though all defendants faced severe penalties and criminal charges leading to imprisonment and loss of medical licenses, some accused were unaware of their wrongdoing and now face audit trials that could defame them.

To prevent such actions, organizations like the OIG and FCA perform healthcare audits. In this article, we will discuss in detail the reasons Medicaid audits are triggered so you, as a healthcare provider, can avoid them and operate your practice smoothly.

What is Medicaid Fraud?

Intentionally deceiving Medicaid with false information to get improper payments for healthcare services constitutes Medicaid fraud. This raises red flags for auditors, so healthcare providers must take care to accurately report treatments and bill properly. This will help them avoid Medicaid audits.

Medical Billing Frauds that Trigger a Medicaid Audit

There are many reasons that trigger Medicaid audits for which healthcare providers may face court trials. In simple words, you as a provider, practitioner, and nurse, etc. should avoid committing these fraudulent activities for surviving audit trails without becoming accused of any fraudulent activity.

Here are the common factors that trigger a Medicaid audit:

1). Billing for Unnecessary Services or Items

Billing for services or items which are unnecessary is a serious form of healthcare fraud that can lead to an audit. In other words, you can say that healthcare providers face an audit procedure when they bill for medically unnecessary services because they are committing healthcare fraud which can bring severe consequences as a result of serious violation of healthcare regulations. This act falls under the Federal Civil False Claims Act (FCA).

After the audit, if a healthcare practice found involved in a fraudulent activity, it may face legal implications i.e.:

➜ Violations of the False Claims Act (FCA): The FCA is federal law to battle healthcare frauds. Healthcare providers face severe penalties for intentionally submitting false claims. These fines can be up to triple of the claim submitted wrongly.

➜ Criminal Charges: Submitting false claims is part of serious crimes. Practices doing so can face criminal charges i.e. theft, fraud, etc.

➜ Civil Penalties: After charging for fraudulent activities by the OIG, the healthcare practices may face civil penalties besides criminal charges. These may include high penalties and the possibility of exclusion from federal healthcare programs. The purpose for these sanctions is to prevent further misuse of the system and facilitate the public with fair services.

➜ Reputational Damage: After providers found guilty of healthcare fraud due to the practice of billing for unnecessary medical services, they can suffer severe reputational damage. As a result, they can also lose patients’ trust which they might have earned spending years, bear revenue loss, and drop future operations of their practice.

2). Billing for Services or Items Not Provided

Billing the government for services, procedures, or items which were not provided actually is one of the most common forms of Medicaid fraud that can indicate a red flag for a practice, and consequently the facility faces an audit process. Usually, these types of frauds include billing for blood tests, x-rays, dental filling, or home healthcare hours when actually none of the services are provided to the patient.

Some other examples of billing for services or items not provided, are:

➜ Ambulance Fraud – The practitioner allegedly submits claims for reimbursement on behalf of family members who never received ambulance transportation services.

➜ Chiropractor Fraud – Submitting claims to insurers for chiropractic services that were never provided.

➜ Dental Fraud – Submitting false claims to Medicaid for providing root canals on patients who have no teeth. 

➜ Diagnostic Tests – Creating false charts stating that each patient received comprehensive exams in fact, no test was ever performed.

➜ Mental Health Fraud – Submitting claims to Medicaid for psychotherapy services that were not provided.

➜ Pediatric Fraud – Billing to Medicaid for wound-repair treatments on children that were never provided.

3). Upcoding

Upcoding is a common cause of Medicaid audits for healthcare practices. It happens when providers bill Medicaid for a more serious or costly diagnosis or treatment than what was actually provided.

For example, a patient sees their doctor for a routine checkup. The correct CPT code for this visit reimburses $100. However, the provider bills Medicaid $160 by using a code for a more complex service.

When coding, doctors may pick a code indicating they did a complex procedure when they only did a simple treatment. Billing Medicaid with the wrong CPT codes on purpose violates the False Claims Act. It can lead to fines of up to $250,000.

Healthcare providers upcode medical bills to get higher payments from Medicaid. They use the wrong CPT codes instead of the right ones for the care they gave patients. Billing for services they did not provide may get them more money. But, it also makes it more likely Medicaid will audit them. As a result, providers could face steep penalties.

4). Unbundling

Unbundling is a fraudulent billing practice that can trigger a Medicaid audit. Unlike upcoding, which overcharges for services, unbundling bills separately for parts of a complex procedure instead of using a single code. Providers unbundle to get higher reimbursement for the same service.

Unbundling, also called fragmentation, uses multiple codes to bill for steps of a procedure that should have one code. For example, there may be a single code for a whole surgery, but providers bill each part separately. That’s unbundling.

Submitting improper claims just to get more money is illegal and can lead to audits.

For instance, say a provider does a total hip replacement. The right code is 27130 for the full surgery. But unbundling bills separately for the hip socket (27132) and thigh bone part (27134) to get more payment. That would be considered fraudulent. And it may trigger a Medicaid audit against your healthcare facility.

Mistaken fraud claims happen. This means a medical doctor may face accusations of unbundling fraud, even when innocent. Here are some of the actions you can take after becoming accused of fraudulent activities to prevent potential damage and penalties:

➜ Thorough Documentation: Submitting supporting documents that can prove that the services billed separately were necessary.

➜ Unintentional Error: Showing proofs that the act of including additional codes was unintentional e.g. clerical mistake or not understanding complex structure of codes.

➜ Lack of Knowledge: Submitting an appeal that the fraud was committed by any of the employees, and you were unaware of the fraudulent activity.

5). Card Sharing

When a patient uses another person’s coverage or a provider bills for someone not actually treated, it steals resources from those relying on programs like Medicaid. The patient gets care they don’t qualify for. Providers bill Medicaid knowing the patient’s not eligible. If caught, providers repay money. They also pay big fines. For instance, a doctor treated patients using family members’ Medicaid cards. An audit made the doctor pay back every penny.

We must protect Medicaid’s promise of access to care. Healthcare providers can do their part through eligibility checks, billing integrity and refusing participation in any unethical behavior. Patients too must use only their own coverage.

6). Collusion

Basically, collusion is a secret agreement or cooperation for the sake of illegal or deceitful acts. In healthcare, collusion is an act of fraud when healthcare providers collaborate with beneficiaries to submit false claims for receiving high reimbursements.

Committing such types of fraud can make healthcare practices bear severe consequences. The FCA can charge heavy penalties and restrict accused practices from participating government healthcare programs. Also, the accused can face criminal charges.

Provider collusion is not only harmful for the government as it is an act of theft, but also impacts negatively on patients.

Here are some of the disadvantages of collusion.

• Limited access to care
• Poor quality of care
• Financial burden 
• Vulnerability to fraud
• Limited treatment options

7). Kickbacks

In general terms, Kickback is an illegal payment or transfer of something of value in exchange for getting favor from the receiver known as referrals. Kickbacks in healthcare means paying other patients or healthcare providers as a reward who can help you in driving more patients to your practice. Seemingly, it is a legal act but it is not. Your healthcare services may not be of the standard which patients need to receive. So, in this case, you are committing fraudulent activities to get patients just by paying others who refer you.

Here are some of the examples of Kickbacks in healthcare:

➜ Gifts

If a healthcare provider gifts something of value i.e. food, event tickets, or gift cards in exchange of referrals is considered as healthcare kickback.

➜ Bribes

Bribes is the most common type of kickback in which payment of something of value is provided for the purpose of any healthcare illegal activity.

➜ Overbilling

Another form of kickback is overbilling. Providers submit false claims by collaborating with a corrupt employee of Medicaid payor.

➜ Diverting business to vendors

Pharma companies pay physicians and healthcare providers to prescribe their products. In the result, providers do not decide on the patients’ condition but only seek their financial benefits.

So, as a healthcare provider if you receive payments in any of the forms, strictly say no to stay away from the audit procedure.

Conclusion

After learning about the potential triggers for a Medicaid audit, we hope you are taking steps to avoid them. If you are selected for an audit and believe it is unfair, you should take steps to protect yourself and your practice. Our team at Best Medical Billing Company is well versed in assisting you in ensuring your rights are protected. We will help you to prepare for the audits.