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How Health Insurance Companies Guard Against Over-Billing

How Health Insurance Companies Guard Against Over-Billing

Out-of-network providers can bill “whatever they want.” Insurers need to be vigilant.

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A major health insurance company is investigating after a New York foot doctor allegedly charged an “egregious” sum of money to fix a pair of crooked toes. The doctor’s office says the over-billing was caused by a clerical error and the incident remains unresolved. But health insurance specialists are more concerned that the incorrect bill was actually paid out, emphasizing the need address vulnerabilities in the industry.

“How does the horse get out of the barn in the first place?” asked corporate investigator and attorney Roy Mura, with Mura & Storm PLLC.

Out-of-network providers can charge “whatever they want,” one insurance fraud investigator says – a reality that is putting the onus on insurance companies to root out doctors who abuse the system by over-billing for procedures.

The Story

According to the New York Post, the podiatrist spent less than an hour correcting two hammer toes for a patient – a procedure that generally costs around $3,000 a toe. But the patient’s insurance company cut a $175,000 check for the two in-office operations, which was accidentally sent to the patient.

When the check arrived this month, the patient and her husband allege that Dr. Levine’s office repeatedly contacted them, asking for them to endorse the check over to the podiatrist. Confused by the exorbitant charges, the patient asked for a statement, which listed two installments of $86,450 for “surgical operating room charges.” The patient flagged the over-billling to her insurance company, which suspended the payment, telling the Post that “charges like these are beyond egregious.”

Holes in the Armor

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Insurance fraud investigators say non-participating (or out-of-network) providers pose the highest risk of over-billing, since they aren't obligated to charge a fixed fee for each procedure. When billing insurance companies, providers are required to use Current Procedural Terminology (CPT), but the system can be abused, says Craig Holden, president of Ober|Kaler law firm and a frequent lecturer and author on Medicare and Medicaid fraud.

To embellish claims, providers can bill under  higher-paying CPT codes that do not necessarily describe  the services rendered correctly – and the extra charges will often go unnoticed because the codes appear to legitimize the claim. It can be simple as billing a CPT code for a “level 5” patient visit, when the nature of the visit would only be considered a “level 1” under the CPT system created by the American Medical Association.