Health Information Management

Q&A: CMS considers "unbundling" to be fraudulent behavior

APCs Insider, May 23, 2008

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QUESTION: Do CMS and the Office of Inspector General (OIG) consider the intentional unbundling of codes to be fraudulent?  If so, where is this documented?
ANSWER: This week we will address unbundling from CMS’ perspective and next week we will talk about the OIG’s perspective.

CMS developed the National Correct Coding Initiative (NCCI) to promote national correct coding methodologies. CMS also intends the NCCI to prevent improper coding from leading to inappropriate Part B payment. CMS developed its coding policies based on coding conventions from  the following sources:

  • The American Medical Association's CPT Manual
  • National/local policies and edits
  • Coding guidelines developed by national societies
  • Analyses of standard medical and surgical practices
  • Review of current coding practices
The development of this editing logic was in part to prevent unbundling of comprehensive codes. Since CMS relies on codes to provide reimbursement for providers, it has focused on unbundling of codes as a fraudulent practice for many years.
In a 2004 Federal Register, CMS stated the following regarding incorrect coding and unbundling: 

Common and longstanding risks associated with claims preparation and submission include inaccurate or incorrect coding, upcoding, unbundling of services, billing for medically unnecessary services or other services not covered by the relevant health care program, billing for services not provided, duplicate billing, insufficient documentation, and false or fraudulent cost reports. While hospitals should continue to be vigilant with respect to these important risk areas, we believe these risk areas are relatively well understood in the industry…

In version 11.3 of its National Correct Coding Initiative Policy Manual for Medicare Services, CMS provided the following definition and examples of different types of unbundling:

Unbundling occurs when multiple procedure codes are billed for a group of procedures that are covered by a single comprehensive code. Two types of practices lead to unbundling. The first is unintentional and results from a misunderstanding of coding. The second is intentional and is used by providers to manipulate coding in order to maximize payment.... 

Empire Medicare Service (as do all FIs/MACs) defines Medicare fraud as: “Unbundling or ‘exploding’ charges.”
In addition, a South Carolina Medicare Advisory dated May 1997 appears to be the first time an FI or carrier expressly suggested that unbundling should be considered a violation of the False Claims Act. In that publication, the FI informed hospitals of Medicare Fraud Alert OIG 97-01, which referred to an investigation into laboratory billing irregularities in Ohio under the False Claims Act. 
Next week we will address the OIG’s position on unbundling.

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