Published 9/1/2011
Madeleine Lovette

Medicare Fraud and Abuse 102

Proper claims submission is essential

Last month, in “Medicare Fraud and Abuse 101,” AAOS Now reviewed the five most important federal fraud and abuse laws: the False Claims Act, the Anti-Kickback statute, the Physician Self-Referral (Stark) Act; the Exclusion Statute, and the Civil Monetary Penalties Law. This article explains how to avoid violating those laws when billing the federal government for services provided to Medicare beneficiaries.

Medicare enrollment
The Centers for Medicare & Medicaid Services (CMS) oversees the Medicare program. To obtain reimbursement for services provided to Medicare beneficiaries, healthcare providers must obtain a National Provider Identifier (NPI) and complete the appropriate Medicare enrollment application. Once an individual becomes a Medicare provider, he or she is responsible for ensuring that claims submitted for payment are accurate.

Medicare assignment rules
Most physicians “accept assignment,” or become Medicare participating providers to be reimbursed for services they provide to Medicare beneficiaries. They agree to accept what Medicare pays as full payment for their services.

Each year, CMS develops a physician fee schedule that establishes reimbursement amounts for each covered service. The federal government Medicare program pays 80 percent of the fee schedule directly to the physician and the beneficiary pays the other 20 percent, under a billing arrangement with the doctor. Participating physicians may not bill beneficiaries extra for Medicare-covered services, even if providing that service costs more than the fee schedule pays.

Physicians who do not “accept assignment” may also obtain payments from Medicare as nonparticipating providers. Unlike participating providers, nonparticipating providers do not receive direct payments from the Medicare program. Instead, they bill the Medicare beneficiary for the services rendered and the patient is responsible for filing the claim and getting reimbursed by Medicare. Although nonparticipating providers are not subject to assignment rules, they may not charge Medicare beneficiaries more than 15 percent in excess of the Medicare fee schedule.

Physicians who are part of a boutique or concierge practice—regardless of their participation status in Medicare—may not charge Medicare beneficiaries for services paid for by Medicare. In addition, charging an access fee or administrative fee to enable beneficiaries to obtain Medicare-covered services is deemed as double billing and a violation of assignment for participating physicians.

Physicians who are found guilty of assignment violations may incur severe penalties. For example, according to the Office of Inspector General for the U.S. Department of Health & Human Services (HHS), one physician had to pay more than $100,000 in restitution for charging Medicare beneficiaries an annual fee for Medicare-covered services like routine physicals.

Accurate coding and billing
Accurately coding and billing for services provided is essential to avoid accusations of fraud or abuse. If the government suspects the physician has filed a false claim or performed another fraudulent activity, or it receives a report of abuse from a provider’s staff or patient, it has the right to audit the provider’s claims. An example of a false claim is “upcoding.” Upcoding is the practice of using a higher level Evaluation and Management code to suggest that the case was more complex than it actually was in order to receive higher compensation. Another example of a false claim is the misuse of modifier 25, which permits physicians to be paid for multiple services on the same day. Submitting a separate claim for a same-day service that is not characterized as above and beyond the standard of care is a fraudulent act.

The following examples are other instances of false claims:

  • Billing for a service that a physician did not perform
  • Billing for a service that was not medically necessary
  • Billing for a service that was performed by an excluded physician
  • Billing for a service that was improperly executed
  • Billing for a service that is already included in a global claim

Physicians who submit false claims can face hefty fines and penalties. For example, a U.S. District Judge ordered an Arkansas orthopaedic surgeon who billed Medicare and private insurance companies for procedures he did not perform to pay more than $66,000 in restitution, and sentenced him to 5 months in federal prison and 5 months in home detention with electronic monitoring, followed by 3 years of supervised release.

The creation of the Health Care Fraud Prevention and Enforcement Action Team made the fight against Medicare fraud a Cabinet-level priority. New websites such as www.stopmedicarefraud.gov are also helping educate patients on how to detect and report fraud.

Physician documentation
To protect themselves from being investigated or audited, physicians should maintain records that accurately reflect the claims they submit. Physicians who perform a procedure, but do not have accurate documentation to support it, can be found guilty of submitting a false claim. For more information about maintaining accurate medical records, visit the CMS website at

Madeleine Lovette is the communications specialist in the AAOS office of government relations. She can be reached at lovette@aaos.org