Healthcare Billing Fraud

Healthcare Billing Fraud

Healthcare fraud is the type of fraud most commonly prosecuted under the False Claims Act. It is estimated to cost taxpayers anywhere from $68 to $226 billion per year, and because it is so widespread it is often very difficult to identify. The government relies on private individuals to come forward with knowledge of healthcare fraud in order to recover the vast amounts of money that would otherwise be lost.

With the help of whistleblowers across the country, including some of our clients, the federal government has recovered billions of dollars in False Claims Act cases.

We have helped our whistleblower clients earn awards for reporting this fraud through extensive investigation and documentation, diligent preparation of winning whistleblower lawsuits, and our solid working relationship with government attorneys.

To give you an idea of how you may be able to benefit from filing a whistleblower claim, here are a few recent whistleblower settlements and victories:

Types of Healthcare Fraud

The most common areas of healthcare fraud are:


Fraud known as “upcoding” occurs when a healthcare provider bills for services more expensive than those actually provided. Medical procedures are individually coded by Medicare and Medicaid under the Healthcare Common Procedure Coding System (HCPCS). By changing billing codes, an unscrupulous healthcare provider can receive a reimbursement for procedures more expensive than those actually performed. Patients’ treatment records may be falsified to indicate they suffer from more serious conditions than they actually do, which not only defrauds the government but also threatens patients’ well-being. Future treatment decisions may be made on the basis of falsified records and patients may be denied insurance coverage due to fictitious pre-existing conditions. Upcoding may also occur when a healthcare provider bills work performed by nurses or other medical staff as having been performed by a doctor in order to be reimbursed at the doctor’s higher rate.

Here are some examples of upcoding claims:

  • In 2006, Tenet Healthcare reached a $900 million settlement with the U.S. government related to several qui tam lawsuits accusing it of multiple forms of fraud. More than $46 million of this award was for upcoding.
  • In 2008, a single physician settled a False Claims Act lawsuit for $461,893. Ophthalmologist Harry Stephenson (and his wife) was accused of fraudulently altering dates and treatments in the claims he submitted to Medicare. In addition to the monetary settlement, Stephenson was required to submit to billing audits for five years.


Drugs or procedures that are commonly provided together are often combined under a single HCPCS code and are reimbursed at a lower rate than the individual drugs or procedures taken separately. “Unbundling” occurs when healthcare providers intentionally bill Medicare or Medicaid for individual treatments that should be billed together in an attempt to receive higher reimbursements than those authorized under the programs. Most commonly, CBC tests and other diagnostic panels are unbundled with each distinct test billed separately. Additionally, surgeons have been found to illegally bill for post-operative care that was included in the reimbursement for the initial surgery.

Unnecessary Treatment (Falsifying diagnoses/Lack of Medical Necessity)

Statutes govern which medical treatments will be considered “medically necessary,” as established by recognized standards of care, and Medicare will pay for only those drugs and procedures that qualify. When healthcare providers bill Medicare for treatments provided, they implicitly certify those treatments as medically necessary. Physicians are obligated to familiarize themselves with the legal standards of medical necessity, and intentionally or recklessly submitting claims for unnecessary treatment is fraud.

Off-label Marketing

When the Food and Drug Administration approves a drug for public use, it gives its authorization only with regard to certain limited uses. Physicians do often prescribe drugs for conditions not approved by the FDA and they are usually permitted to do so. But while doctors may have valid reasons for prescribing a drug for unapproved uses, doing so creates unknown risks and such decisions should be made based solely on medical need. In light of those unknown risks, pharmaceutical companies are prohibited from marketing their drugs for unapproved uses, and they may not seek to influence physicians to prescribe them for off-label uses. In numerous cases pharmaceutical companies have aggressively sought to persuade physicians to prescribe their drugs, often offering them illegal kickbacks, with no regard for patient safety.

Here are some examples of off-label marketing claims:

  • In 2009, pharmaceutical giant Pfizer settled lawsuits brought by six whistleblowers under the False Claims Act for $1 billion (out of a total of $2.3 billion total settlement including both criminal and civil state and federal fines). The company was accused of illegally marketing its drug Bextra (and ten others) for uses not approved by the FDA. It was the largest healthcare fraud settlement in history and the fourth major fraud settlement Pfizer had made in less than a decade.
  • In 2005, the Swiss pharmaceutical company Serono settled lawsuits brought by five whistleblowers under the False Claims Act for $567 million. Serono was accused of illegally marketing its AIDS drug Serostim for uses not approved by the FDA, as well as non-approved diagnostic equipment. The company was also accused of paying illegal kickbacks to physicians and pharmacies to persuade them to promote Serostim, which costs over $21,000 per treatment. The government claimed that over 85% of the prescriptions for Serostim were unnecessary.
  • AstraZeneca settled two qui tam lawsuits in 2009 for a total of $520 million. One of the two lawsuits brought under the False Claims Act was for off-label marketing of the schizophrenia drug Seroquel. The federal government, which had intervened in the two cases, claimed that Seroquel was too commonly being administered to children and the elderly for non-approved uses. Various side effects including death were reported.
  • In 2010, the pharmaceutical company Allergan agreed to a $600 million settlement of lawsuits against it for its off-label marketing of Botox. Allergan was accused of promoting Botox to treat pain spasticity, headaches and cerebral palsy—uses for the drug that were not approved by the FDA—as well as instructing healthcare providers to miscode the treatments so that they would be paid for by Medicare and Medicaid. $225 million of the total settlement will go towards a lawsuit brought by five whistleblowers under the False Claims Act.

Services Not Provided

The simplest and perhaps most widespread type of healthcare fraud is simply billing for services never performed. Such fraud cannot be easily summarized, but a number of illegal practices commonly encountered are billing for diagnostic tests not performed, medical supplies not delivered, physician time when only nurses provided treatment, and sub-standard care not sufficient to warrant reimbursement.

Inflated Drug Pricing

A number of pharmaceutical manufacturers have recently been accused of illegally inflating the prices of their drugs when they provided pricing information to the government. The annual cost of pharmaceutical price inflation is in the billions and in recent years the federal government has made increasingly large recoveries—$2.5 billion in 2010 alone. Medicaid payments for prescription drugs are based on a drug’s average wholesale price. If this price can be artificially inflated, a pharmaceutical company stands to gain more than it should under law each time the program covers the cost of the drug. Given the large-scale nature of pharmaceutical fraud, whistleblowers stand to receive extremely large rewards for reporting this kind of fraud.

Medicare Part D Fraud

Beginning in 2006, Medicare Part D began providing coverage for outpatient prescription medication costs for all those eligible under the Medicare program. The new program is structurally complex, with potentially endless coverage options under approved private plans. This complexity makes Medicare Part D particularly susceptible to fraud. In particular, the so-called “Donut Hole” in Medicare Part D prescription coverage especially invites abuse by healthcare providers, pharmacies, and pharmaceutical companies.

The information provided above is a very general summary of the law of healthcare billing fraud at the time this text was prepared. Because this analysis is subject to change depending upon recent cases and legal developments, you should not rely on this summary as legal advice. As with any important legal question, you should always consult a lawyer licensed to practice in your jurisdiction.

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