Coding Errors in Healthcare Fraud

How to prevent coding errors

Medical coding involves the transformation of services provided in the health care sector into billable revenue. Coding errors may arise due to incorrect procedure coding and inadequate and incorrect medical documentation. Lack of implementing ongoing CPT code training for medical orders is one of the main practices leading to miscoding (Georgiou et al., 2020). Over the current years, coding errors have led to the loss of revenue, higher claim denials, fines, federal penalties, and imprisonment. The consequences compromise the patient care treatment for example, through an incorrect diagnostic code may lead to false claims which call for legal issues.

Prevention of coding errors incorporates errors like sloppy documentation, unbundling, hurried intake, upcoding, duplicate billing, improper infusion, and undercoding. The first efficient prevention method entails the usage of claims management software to provide clean real-time claims. The software minimizes errors and maximizes reimbursements. Training the medical team on the common medical claim denial reason is also another method that can lead to the prevention of coding errors. Additionally, outsourcing emergency department coding is a prevention technique that not only has easier adherence to compliance but also has fewer errors and better focus on the staff.

What to do when you catch or see a coding error?

Patient billing is a critical part of financial health coming across coding errors whether as a healthcare provider or as billing manager the first step is to eliminate the error. Check for any mismatch in patient information, double-check the information and create accurate Electronic Health Records. This will eliminate upcoding, down coding and make sure the furnished data is complete. Additionally, in the event of coming across a coding error, the billing manager should be alerted immediately to take the necessary steps and also alert the healthcare provider in charge.

Audit Types

In healthcare, auditing is a process of assessing, evaluating, and improving the care of patients in a systematic manner to enhance the quality of patient care. There are four main medical audits that enhance the medical process. They include random audit, comprehensive audit, hybrid audit and quality improvement audit. Random audit examination is used to get an overview of the medical organization and the daily functions. The comprehensive audit is used when claims are in dispute and complete inspection goes into more detail than a random audit. The hybrid audit entails selected samples from both comprehensive and random audits. Through the combined edits thorough inspection is achieved which provide better insights. Finally, quality improvement focuses on patients and providers to give a roadmap on how to improve their services.

Medical Necessity

Medical necessity is the clinical judging of a health care service from physicians before provision to patients. Medical necessity is provided based on the diagnosis or evaluation of the disease or injury. The medical health practitioner should make a decision whether a specific health plan or test procedure is right (Monahan & Schwarcz, 2021). The services provided should also be in accordance with medical practice standards and clinically appropriate compliance policies. An example of a medical necessity is the cosmetic procedure done for the purposes of restoration especially after breast reconstruction or plastic surgery after an injury. These are procedures that are deemed clinically appropriate and are not experimental procedures.

Summary of Psychiatrist Fraud Scheme

According to the case study, Psychiatrist Sentenced to Prison for Healthcare Fraud Scheme, Udaya K. Shetty, a Virginia Beach doctor was sentenced to 27 months in prison due to fraud issues against Medicaid, Medicare and Tricare organizations. Based on the court documents provided Udaya K. Shetty was a licensed psychiatrist and had established his own Behavioral and Neuropsychiatric Group. He has engaged in fraudulent issues since 2013 when he started overbilling his clients for very short sessions. In addition, Shetty ordered his staff to double the appointment times and even sometimes triple the times leading to him working 24 hours (U.S. Department of Justice., 2020). This lead on further after he joined Quietly Radiant Psychiatric Services and engaged in a similar scheme of overbilling patients through different insurances. This led to upcoding errors and benefiting from fraud activities which led to his detainment and charge in 2020.

The first incident of the fraud issues happened when Shetty started overcharging healthcare benefit programs. This was a result of coding errors and a lack of verification of the information. There were no auditing methods implemented in his first Behavioral and Neuropsychiatrist Group, which gave him the mandate to manipulate billing information and overcharge the patients. The staff members were also responsible for overbilling as they did not report the fraudulent activities which fueled the issue.

To reduce and eliminate the fraud issues, health care should have reviewed explanations of benefits to ensure accurate dates of services. They should also have optimized a proper payment of claims to minimize billing mistakes. Adherence to compliance to fraud prevention systems like GDPR should have highly helped in preventing fraud. The health care should also have had written policies for the conduct, take corrective discipline, train and education the medical staff and Audit and monitor Centers for Medicare and Medicaid Services.


Georgiou, A., Ruston, J., Haque, S., & Woollard, A. (2020). Audit of the accuracy and remunerative implications of clinical coding in elective plastic surgery. Web.

Monahan, A., & Schwarcz, D. B. (2021). Rules of medical necessity. SSRN Electronic Journal. Web.

U.S. Department of Justice. (2020). Psychiatrist sentenced to prison for healthcare fraud scheme. Web.

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