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What Is Medicare Part B Fraud and How to Spot It?


A wide array of behaviors fall under the Medicare Part B fraud, waste and abuse (FWA) umbrella but they all have the same goal: personal gain.

In September 2019, the Department of Justice charged 35 people in a Medicare Part B fraud scheme that cost taxpayers $2.1 billion. Multiple telemedicine companies and cancer genetic testing labs offered kickbacks for referrals. Hundreds of thousands of beneficiaries were affected by the scheme, receiving unnecessary tests or nothing at all.

This is just one example of the wide array of behaviors that fall under the Medicare Part B fraud, waste and abuse (FWA) umbrella. Schemes vary, but they all have the same goal: personal gain.

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What Is Medicare Part B and What Does It Cover?

Medicare Part B, the medical insurance aspect of the plan, covers two main types of medical services for beneficiaries.

The first category includes "medically necessary services" which the U.S. Centers for Medicare & Medicaid Services (CMS) defines as "services or supplies that are needed to diagnose or treat your medical condition and that meet accepted standards of medical practice." Examples include doctor's visits, diabetes testing supplies, crutches and X-rays.

Part B also covers preventive services meant to prevent health issues or detect them at an early stage. This category includes services such as flu vaccines and some cancer screenings. Medicare coverage varies by state, plan and service.

CMS contracts out the medical services and supplies they provide to plan sponsors. Plan sponsors are private companies including insurance providers, unions and employers.

RELATED: What is Medicare Part D Fraud?

What is Medicare Part B Fraud?

Medicare Part B fraud is "intentionally submitting false information to the Government or a Government contractor to get money or a benefit." Below are examples of Medicare Part B fraud, waste and abuse.

Fraud Committed by Beneficiaries

  • Medical identity theft: A person steals a beneficiary's personally identifiable information (PII), such as name and Medicare card number, in order to receive services covered by Medicare Part B. This could be committed by a Medicare beneficiary whose plan doesn't cover their desired services or someone not covered by Medicare at all. Fraudsters also steal PII to obtain drugs and equipment that they can sell for profit.
  • Receiving extra services: A beneficiary receives Medicare benefits that they aren't eligible for. They achieve this "by means of fraud or deception, or by not correctly reporting assets, income or other financial information."

Fraud Committed by Doctors and Medical Providers

  • Billing for services not rendered: A provider bills for a service they didn't perform or supplies they didn't provide (phantom billing) or provides a service but bills for a more expensive service (upcoding).
  • Unnecessary services: A doctor performs unnecessary tests, orders unnecessary medical supplies or gives unnecessary referrals (ping ponging) so they can submit more Medicare claims.
  • Billing for missed appointments: A doctor bills Medicare Part B even though the beneficiary did not show up for their appointment.
  • Unbundling: A provider charges separately for services or supplies that usually come as a bundle.
  • Billing for services not covered: A provider bills Medicare for services or supplies that the beneficiary isn't entitled to under their plan.
  • Paid referrals: A doctor pays another doctor to refer patients to them.
  • Altered documentation: A provider changes information on claims forms or beneficiaries' medical records in order to receive a higher payment from Medicare Part B.

Watch this webinar to learn about emerging healthcare fraud schemes, their effects and how to detect them.

Medicare Waste and Abuse vs. Fraud: What’s the Difference?

Medicare Part B FWA is responsible for billions of dollars in losses. While fraud is knowingly cheating the Medicare program out of money, waste and abuse don't always involve that same knowledge and malicious intent.

Waste, which the OIG defines as "misuse of resources," results in unnecessary Medicare expenditures. For example, a doctor might order excessive lab tests or schedule more visits with a patient than are necessary. Even if they don't hope to make a profit from these actions, they waste resources that could be used on other beneficiaries.

Abuse of Medicare Part B is when a provider commits a fraudulent act unknowingly. For instance, a doctor could absentmindedly write the wrong code for a service on their Medicare claim.

Regardless of whether the person tried or wanted to defraud the government, Medicare Part B fraud, waste and abuse take a heavy toll on the US medical system and cost taxpayers billions of dollars every year.

RELATED: What is Medicare Part A Fraud?

Common Types of Medicare Part B Fraud

Understanding how fraud occurs is key to preventing it. Below are the most prevalent schemes affecting Medicare Part B—each designed to manipulate billing systems for financial gain.

1. Upcoding and Overbilling Explained

Upcoding involves billing for a more expensive service than was actually provided. For example, a provider may see a patient for a brief consultation but bill Medicare for a comprehensive exam. This practice artificially inflates reimbursements and is a common tactic in fraud cases. Overbilling extends to charging for services not rendered or exaggerating the time or complexity of care.

2. Phantom Billing and False Claims

Phantom billing refers to charging Medicare for services or equipment never provided. This includes submitting claims for tests, procedures, or office visits that never occurred. It’s a direct violation of billing integrity and is often uncovered during audits or after patient complaints.

3. Unbundling Services to Inflate Charges

Unbundling is the practice of billing separately for services that are typically grouped together under a single reimbursement code. For instance, a provider might split a panel of lab tests into individual codes to maximize payment. This scheme not only violates billing rules but also increases costs for the Medicare program.

4. Billing for Unnecessary Services

Some providers may perform or bill for tests and procedures that are not medically necessary. These services could range from redundant diagnostics to unjustified referrals or treatments. In many cases, the goal is to generate revenue rather than provide appropriate patient care.

How Medicare Fraud Is Investigated

Understanding the fraud detection process helps organizations align their internal controls with federal oversight efforts.

1. Who Investigates Medicare Fraud?

Multiple agencies play a role in investigating Medicare fraud. The Office of Inspector General (OIG) leads criminal and civil probes, while the Centers for Medicare & Medicaid Services (CMS) oversee claims and regulatory compliance. The Department of Justice (DOJ) often becomes involved when cases escalate to criminal prosecution or civil litigation under the False Claims Act.

2. How Investigations Begin

Investigations can originate from whistleblower tips, routine audits, data anomalies, or patient complaints. Internal compliance teams also play a crucial role in identifying suspicious patterns early.

3. Tools Used for Fraud Detection

Advanced analytics, billing pattern recognition, and AI-driven audits are key tools used by investigators. For example, outlier analysis might flag a provider whose billing volume or coding choices deviate significantly from peers. This is where a robust case management platform like Case IQ can support investigation workflows—streamlining evidence collection, task tracking, and regulatory reporting.

Real-Life Examples of Medicare Part B Fraud Cases

Examining actual cases provides insight into how fraud schemes unfold—and how they’re prosecuted.

1. Upcoding and Overbilling: Independent Health's $100 Million Settlement

In 2024, Independent Health Association, a New York-based Medicare Advantage insurer, agreed to pay up to $98 million to resolve allegations of upcoding—submitting false diagnosis codes to inflate reimbursements. Additionally, Betsy Gaffney, CEO of medical records review company DxID, agreed to pay $2 million in the settlement. Neither party admitted wrongdoing.

2. Phantom Billing: Durable Medical Equipment Fraud Scheme

In March 2025, Raju Sharma, owner of multiple durable medical equipment (DME) companies in Massachusetts, was charged with conspiracy to commit health care fraud. Sharma allegedly submitted nearly $30 million in false claims to Medicare for DME that was not provided to patients.

3. Unbundling and Kickbacks: Spectra Clinical Labs Conviction

In February 2025, the operator of Spectra Clinical Labs was convicted for a $4 million Medicare fraud scheme. The lab submitted claims for medically unnecessary tests, which were ordered in exchange for illegal kickbacks to marketers.

These cases underscore the various methods by which Medicare Part B fraud can occur, including upcoding, phantom billing, unbundling, and billing for unnecessary services. They highlight the importance of vigilant compliance and robust internal controls to detect and prevent fraudulent activities.

Red Flags to Help Detect Medicare Fraud Early

Detecting fraud early can prevent significant losses and protect program integrity.

  • Unexplained or Duplicated Charges: Repeated billing for the same service or charges for services the patient doesn’t recognize are red flags.
  • Services a Patient Didn’t Receive: If beneficiaries receive explanation of benefits (EOBs) for procedures they never had, that’s a strong signal of fraud.
  • High Billing Volumes for Rare Services: Providers who consistently bill high volumes of rarely used codes or outlier services may be exploiting the system.
  • Data Gaps in Internal Audits: Discrepancies in billing records, missing documentation, or lack of clinical justification should prompt further review—especially when paired with automated detection tools.

How to Report Medicare Part B Fraud

1. Where and How to Report?

Anyone can report suspected fraud through these official channels:

  • OIG Hotline: 1-800-HHS-TIPS or online form
  • Medicare.gov or call 1-800-MEDICARE
  • Submit through state-specific Medicaid Fraud Control Units (MFCUs)

Before reporting, gather key information: provider name, date of service, description of the questionable charge, and the patient’s Medicare number. Reports can be made anonymously, and whistleblower protections are available under federal law.

2. What Happens After You Report?

Once a complaint is received, agencies such as CMS or the OIG conduct an initial review. This may lead to data audits, interviews, or onsite investigations. If fraud is suspected, the case may be referred to law enforcement or pursued as a civil matter. Reporters are not typically contacted unless further information is needed, and confidentiality is preserved throughout.

Medicare Part B Fraud vs. Other Types of Medicare Fraud

Understanding the differences between Medicare’s coverage parts helps clarify why Part B is a frequent fraud target.

  • Part A: Covers hospital stays and inpatient care. Fraud here often involves hospital kickbacks, DRG upcoding, or medically unnecessary admissions.
  • Part D: Involves prescription drug coverage. Fraud can include pharmacy billing scams or prescribing unnecessary opioids.

Part B, however, covers outpatient services—including physician visits, lab tests, and durable medical equipment—making it highly vulnerable due to the volume and diversity of provider-submitted claims. Fraud schemes often exploit this decentralized, provider-driven model.

Frequently Asked Questions

1. What is considered Medicare Part B fraud?

Medicare Part B fraud includes any intentional deception or misrepresentation made by providers or beneficiaries to receive unauthorized benefits or payments. Common examples include billing for services not provided, falsifying diagnoses, upcoding, and unbundling services.

2. How is Medicare Part B different from Part A and Part D in terms of fraud risk?

Medicare Part B primarily covers outpatient services, which are billed directly by providers. This makes it more vulnerable to fraud schemes like overbilling, unnecessary testing, or false claims, compared to Part A (hospital services) or Part D (prescription drugs).

3. What are some examples of Medicare Part B fraud by providers?

Examples include:

  • Billing for services not rendered
  • Performing medically unnecessary procedures
  • Using incorrect billing codes (upcoding)
  • Submitting duplicate claims for the same service
  • Unbundling procedures to charge more

4. How can I report suspected Medicare Part B fraud?

You can report fraud through:

  • 1-800-MEDICARE
  • The Office of Inspector General (OIG) hotline
  • Online at Medicare.gov or oig.hhs.gov

Have details ready like the provider’s name, service date, and a description of the suspected fraud.

5. What happens after Medicare fraud is reported?

After a report is filed, agencies like the OIG or CMS review the case. If the claim appears valid, it may be investigated further, potentially leading to audits, fines, criminal charges, or recovery of funds.

6. What are the penalties for Medicare Part B fraud?

Penalties may include substantial fines, imprisonment, exclusion from federal health programs, and civil monetary penalties. The severity depends on the scale and intent of the fraudulent activity.