August 22, 2016

Health Care Fraud Alert: Diagnosis Code Upcoding

By Rosie Dawn Griffin

Medicare fraud takes many forms, but a persistent scheme in the inpatient context—where the amount of government reimbursement can be based, in addition to procedure costs, on patients’ overall health—involves “upcoding” inpatient diagnosis-related-group (DRG) codes to make individual patients appear sicker, and therefore more costly to treat, than they actually are. Fraudsters profit from upcoding schemes by pocketing outsized reimbursements unwarranted by the true health of their patients. Although certain schemes can be difficult for outside observers to detect, others—for example those involving rare or unusual diseases—are more readily identifiable as fraudulent.

Take, for example, the curious recent occurrence in a single Austin, Texas hospital of 54 cases of kwashiorkor, a type of malnutrition rarely seen in the developed world. Indeed, the disease occurs primarily in poor countries, as a result of famine conditions resulting from natural disasters, armed conflict, and the like. After investigating the claims, the Office of the Inspector General for the Department of Health and Human Services (HHS OIG) determined that not a single case was correctly billed—i.e. that none of the patients had the disease.

The Austin hospital responsible for the 54 claims—worth approximately $358,000—isn’t alone in fraudulently billing for the rare disease. The OIG found similar malfeasance at, among others, hospitals in Amarillo, Texas, where kwashiorkor claims resulted in overpayments of $584,000; Gonzales, Louisiana, where overpayments for the disease were worth $465,079; and Bossier City, Louisiana, where such claims totaled $322,000.

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