Detecting and Reporting Healthcare Fraud, Waste, and Abuse: Examples Explained

Healthcare organizations and payers lose billions each year to improper claims. This guide explains how you can spot red flags, implement practical controls, and confidently report concerns—so detecting and reporting healthcare fraud, waste, and abuse becomes part of everyday operations.

You’ll find clear examples of fraudulent conduct, patterns that signal waste, and behaviors that constitute abuse in medical billing. Each section offers concrete actions you can apply immediately in clinics, hospitals, and health plans.

Identifying Fraudulent Practices

Fraud involves intentional deception to obtain payment or other benefits. It is characterized by schemes designed to misrepresent services, diagnoses, or relationships for financial gain.

Upcoding

Upcoding occurs when a provider bills a higher-paying code than supported by the documentation, such as reporting a complex E/M level for a straightforward visit. Watch for uniformly high-level codes, time claims that conflict with schedules, and templated notes that do not match the exam.

Unbundling

Unbundling means billing components of a service separately when a single comprehensive code should be used—common with lab panels or surgical procedures. Repeated use of mutually exclusive code pairs is a strong signal.

Double Billing

Double Billing happens when the same service is submitted more than once—by the same or different entities—or billed to multiple payers for the full amount. Indicators include duplicate dates of service, identical units, and mirrored claims just days apart.

Kickbacks

Kickbacks involve offering or receiving anything of value to induce referrals or purchasing decisions. Risks include “consulting” arrangements with no substantive work, free rent or equipment tied to referrals, and volume-based “rebates.”

False Claims

False Claims include billing for services not rendered, misrepresenting medical necessity, or using false patient identities. Patterns such as weekend or holiday spikes without staffing, or claims during provider travel, warrant investigation.

Falsifying Records

Falsifying Records can include altered dates, inserted addenda to justify higher codes, or cloned documentation across patients. Look for identical phrasing, mismatched vitals, or signatures added long after the encounter.

Improper Use of Coding Modifiers

Improper Use of Coding Modifiers—such as -25, -59, or related X modifiers—can mask unbundling or inflate payment. Concentrations of these modifiers on high-value codes, without clear documentation, are high-risk.

Recognizing Wasteful Healthcare Activities

Waste reflects inefficient or poor-value care that drives costs without intent to deceive. Reducing waste improves quality and preserves resources.

Common Waste Categories

• Duplicative testing due to poor record retrieval or lack of care coordination.
• Imaging or procedures with limited clinical value for the indication.
• Brand-name drugs when clinically equivalent generics are available.
• Extended inpatient length of stay due to discharge bottlenecks.
• Over-ordering supplies and letting inventory expire or spoil.
• No-show and overbooking practices that cause idle staff time.
• Using high-cost sites of service for routine infusions or injections.

Indicators and Measures

• Generic prescribing rate, duplicate test rate, and low-value service utilization.
• Length of stay and readmission metrics adjusted for case mix.
• Claim denial reasons tied to medical necessity or code edits.
• Missed-appointment rate, overtime hours, and supply waste trends.

Understanding Abuse in Medical Billing

Abuse includes practices inconsistent with accepted medical or business standards that result in unnecessary costs. Intent may be unclear, but the effect still harms payers and patients.

Examples of Abuse

• Excessive frequency of routine services without clear clinical rationale.
• Consistently billing the highest E/M levels for minor problems.
• Billing new-patient codes for established patients after workflow changes.
• Using facility fees or prolonged services codes without documentation support.
• Patterns of referrals within a tight loop that inflate utilization.

When Abuse Becomes Fraud

Persistent abusive patterns that continue after education and warnings—combined with deceptive documentation or concealment—can indicate intent and rise to fraud. Track responses to corrective actions to assess the trajectory.

Implementing Detection Techniques

Effective detection blends people, process, and technology. Build a repeatable workflow that moves from risk signals to documented findings and corrective action.

Program Foundations

• Assign a compliance lead, define roles, and document reporting lines.
• Perform an annual risk assessment to prioritize high-impact areas.
• Maintain written policies for coding, documentation, gifts, and referrals.
• Offer targeted training to clinicians, coders, and revenue cycle staff.
• Provide a confidential hotline and non-retaliation policy.

Data Analytics and Monitoring

• Benchmark providers against peers for E/M distributions and procedure volumes.
• Identify outliers in units, modifiers (-25, -59), and time-based codes.
• Run duplicate-claim detection by patient, provider, date, and code.
• Use code-pair and medically unlikely edits to catch Unbundling and overbilling.
• Map referral networks to surface potential Kickbacks and self-dealing.
• Monitor geolocation and time stamps to catch impossible overlaps.

Medical Record Review

Conduct focused audits using statistically valid or judgmental samples. Verify that documentation supports medical necessity, code selection, and any modifiers applied; confirm signatures, dates, and attestations.

Patient and Staff Feedback

Survey patients about services received and costs; follow up on complaints about surprise bills or unreceived care. Encourage staff to escalate concerns early through defined channels.

Controls and Technology

• Enable EHR prompts for missing elements and hard stops for incompatible codes.
• Restrict roles to prevent self-approval of charges and refunds.
• Use prebill claim-scrubbing with payer policy updates.
• Log access and edits to deter Falsifying Records.

Actionable Workflow

1. Flag the risk and preserve relevant records and system logs.
2. Validate facts with a quick chart-to-claim check.
3. Quantify impact across a broader sample; document methodology.
4. Educate involved parties; implement immediate controls if harm is ongoing.
5. Escalate to compliance leadership; determine internal vs. external reporting.
6. Track remediation, repayments, and monitoring until closure.

Reporting Procedures for Healthcare Violations

Timely, well-documented reporting protects patients and organizations. Use consistent steps to ensure accuracy and confidentiality.

What to Document

• Who was involved, what occurred, where and when it happened, and how it was discovered.
• Claim numbers, dates of service, codes, units, modifiers, and dollar amounts.
• Provider identifiers, patient identifiers (minimum necessary), and payers affected.
• Copies of supporting records and a concise timeline of events.

Where to Report

• Internal channels: supervisor, compliance or privacy officer, risk management, or hotline.
• External options: government program integrity lines, state fraud control units, private payer SIUs, or licensing boards when appropriate.

How to Report

• Provide an objective statement with facts and attachments.
• Request a case or reference number and keep a personal log.
• Maintain confidentiality and avoid discussing details beyond need-to-know parties.

Protections and Good Practices

Organizations should enforce non-retaliation policies and protect whistleblowers. Do not alter or delete records; secure originals and work through authorized channels.

What Not to Do

• Do not confront suspected individuals in ways that risk evidence or safety.
• Do not access charts or systems without a legitimate need.
• Do not share sensitive details on social media or with unauthorized persons.

Legal Consequences of Fraud and Abuse

Consequences span civil, criminal, and administrative actions, affecting both individuals and organizations.

Civil Exposure

• Repayment of overcharges, multiplied damages, and per-claim penalties.
• Civil monetary penalties and mandated corrective action plans.
• Exclusion from government health programs and prepayment review.
• Corporate integrity agreements and licensing or credentialing actions.

Criminal Exposure

• Fines, restitution, and potential imprisonment for egregious schemes.
• Asset forfeiture and felony convictions that limit future practice.

Collateral Impacts

• Loss of payer contracts, reputational damage, and patient distrust.
• Recruitment challenges, increased audits, and higher compliance costs.

Prevention Strategies for Healthcare Providers

Preventive controls are the most cost-effective way to reduce risk. Focus on education, monitoring, and culture to deter misconduct.

Practical Safeguards

• Establish a written compliance program with clear oversight and reporting.
• Deliver role-specific training on coding, documentation, and referral rules.
• Use prebill and postbill audits, with second-level review for high-risk codes.
• Standardize coding queries and require complete, contemporaneous notes.
• Set policies on gifts, referrals, and vendor relationships to avoid Kickbacks.
• Test denial trends and close gaps with targeted education and workflow fixes.

Culture and Incentives

• Leaders should model ethical behavior and reward speaking up.
• Align compensation with quality and outcomes, not raw volume alone.
• Publicize hotline options and outcomes of resolved issues to build trust.

Documentation Excellence

• Ensure notes reflect medical necessity, exam details, and decision-making.
• Avoid cloned or boilerplate text that misrepresents the encounter.
• Support any modifiers, time-based services, and supplies with clear evidence.

Conclusion

Detecting and reporting healthcare fraud, waste, and abuse starts with clear standards, vigilant monitoring, and safe reporting channels. By pairing analytics with training and strong culture, you reduce risk, protect patients, and sustain resources for high-value care.

FAQs.

What Are Common Examples of Healthcare Fraud?

Common examples include Upcoding, Unbundling, Double Billing, submitting False Claims for services not rendered, Falsifying Records to justify higher payment, Improper Use of Coding Modifiers to bypass edits, and Kickbacks that steer referrals.

How Can Wasteful Practices Increase Healthcare Costs?

Waste drives costs by duplicating tests, using high-cost settings or drugs without added benefit, and allowing inefficiencies like long inpatient stays or supply spoilage. These patterns strain budgets and crowd out resources for necessary care.

What Steps Should Be Taken to Report Suspected Abuse?

Document facts (who, what, when, where, how), gather relevant claim and chart details, and report through internal channels such as a compliance officer or hotline. If unresolved or serious, elevate to appropriate external authorities while preserving records and confidentiality.

How Does Upcoding Affect Insurance Claims?

Upcoding inflates reimbursement by selecting higher-level codes than documentation supports. It increases denial risk, triggers audits, and can lead to repayments, penalties, or more severe sanctions if intent is established.