Brought down by upcoding

For years William King ran a successful medical practice, but when his patients left his office, the Philadelphia, Pennsylvania, doctor had a practice of a different sort — a medical billing scheme known as upcoding. Fraud Magazine examines how King perpetrated a yearslong upcoding scheme that defrauded an insurance company of hundreds of thousands of dollars and details how fraud examiners can detect similar schemes.

On Feb. 5, 2008, inside a windowless room of the U.S. District Court for the Eastern District of Pennsylvania in Philadelphia, a grand jury was empaneled, busy deliberating whether to charge gynecologist William King on multiple counts of mail fraud, health care fraud and making false statements. That day, the grand jury decided to indict the doctor on 82 charges connected to a medical billing scheme that defrauded an insurance company of more than $750,000.

King’s case is emblematic of upcoding, a scheme in which a medical provider assigns a more expensive billing code for a procedure than necessary to receive a higher reimbursement from a third-party payer. We’ll dissect the scheme King perpetrated over the course of five years and learn how to detect this fraudulent practice that’s been on the rise in recent years. According to a study by health care research firm, Trilliant Health, the share of emergency care, urgent care and office visits coded at higher intensities rose between 2018 and 2023, suggesting that the practice of upcoding has grown.

The complex consultation code

King began his medical career in 1985 when he graduated from Wayne State University Medical School in Michigan. In 1990, he joined the clinical faculty at the now-shuttered Hahnemann University Hospital in Philadelphia, where he worked until 1999. King then took a position at the Health and Welfare Clinic, which provided medical services to labor union members and contracted with health insurance company, Independence Blue Cross (IBC). King’s specialty was in obstetrics and gynecology (OB/GYN), and as was customary at the clinic, he and other specialists submitted claims for payments through the mail, directly to IBC.

But it was after his patients left the clinic that King’s medical services departed from standard practice. He regularly billed routine office visits as complex consultations. The more complex the medical procedure, the higher his reimbursement from IBC.

He spent his days caring for women, providing routine exams and prescribing medications. There wasn’t anything special about these services; his patient consultations were often brief. But it was after his patients left the clinic that King’s medical services departed from standard practice. He regularly billed routine office visits as complex consultations. The more complex the medical procedure, the higher his reimbursement from IBC.

“Upcoding” is a type of inflated billing scheme generally perpetrated by medical providers to seek more money from third-party payers. A doctor might meet with a patient for a basic yearly physical; nothing extraordinary, just a routine check-up. But then the doctor bills the patient’s insurance company for something much more involved that didn’t occur during the visit. In King’s case, he’d employ the Current Procedural Terminology (CPT) code 99245 for complex consultations when the patient might’ve only received a contraceptive injection — a straightforward task usually administered by a nurse. He also used the complex consultation code for simple things like refilling prescriptions or providing patients with their test results. King used CPT code 99245 to bill the insurance company even if the patient missed an appointment. (See the sidebar “Decoding medical billing codes” at the end of this article for details on these codes.) 

In some instances, King used the complex consultation code for the same patient multiple times. Assuming the first consultation with the patient genuinely required a complex service, that would render any subsequent bill with that code redundant. For example, if he’d recently conducted a thorough examination with the patient, he wouldn’t need to get the patient’s detailed medical history during the next visit. King used the complex CPT code to bill IBC 23 times over a three-year period for one patient, including four instances in just one month. He used the code 32 times over a four-year period for another patient.

According to the indictment, King’s patients would complete a one-page form that recorded their personal information, including the date of the visit and their insurance information. He then wrote a diagnosis on the form. Patients were also required to sign an “HMO Encounter Referral Form” for each billed visit (or he did it himself). Data analysis later revealed that no other practitioner at the clinic used these forms.

Each doctor at the clinic was responsible for their own billing. King’s wife, Carolyn, acted as his office manager, filing the paperwork with IBC. Although King practiced medicine in Philadelphia, Carolyn lived almost 100 miles away in Baltimore, Maryland. She used the Baltimore home as an office, operating a software system to generate the U.S. Centers for Medicaid & Medicare Services’ (CMS) claim form for reimbursement from IBC. This form, known as CMS 1500, contains the doctor’s name and National Provider Identifier (NPI) number — a unique identifier for each provider, assigned by CMS — the patient’s name and the CPT procedure code for the service(s) rendered. By submitting the CMS 1500 code, the provider certifies that all information on the claim form is accurate.

Breaking the code

Internal auditors for IBC were the first to identify a possible problem with King’s bills. According to prosecutors, auditors noticed that King had used the CPT code 99245 significantly more than other providers in the greater Philadelphia area. IBC decided to launch an audit of King’s bills in late 2003. In April 2004, IBC’s auditors requested access to King’s medical and billing records.

Following months of haggling and negotiation, King and his wife agreed to meet with IBC’s auditors and provided 10 of the 40 patient records that IBC had requested. The audit team, which comprised experienced registered nurses, found the files oddly “pristine” — a sign of likely fabrication. Prosecutors detailed the auditors’ experience with King:

The IBC personnel looked through the 10 files presented to them, and quickly noted the pristine nature of the files, which made them suspect that the files were not in fact the original working patient files. They noted the absence of requests for consultation from other doctors and made a chart of the missing dates of service. In all, 115 days of service which had been billed to IBC for these ten patients were missing from the files provided.

When the auditors asked for the rest of King’s records, he denied them access and they left his office. Upon their return to IBC’s office, the audit team notified the insurance company’s special investigations unit of their suspicions, and the unit began a full-scale review of King’s billing and medical records.

Data tells the story

Data analytics was in its infancy in the early 2000s when King was perpetrating his scheme, but IBC’s investigators were able to piece it together. According to the government’s pretrial memorandum, IBC’s records showed that it had paid King more than $1 million for the complex consultation billing code 99245 between Oct. 19, 1999, and Nov. 21, 2003. Compared to other local providers, King used this CPT code extensively. According to IBC’s records, in 2000, King used the complex consultation code 2,616 times for 898 patients — the next highest provider billed with that code 89 times that year.

To compare, IBC’s investigators reviewed another OB/GYN from King’s clinic and determined that she never used CPT code 99245 between January 2000 and November 2003. Like other physicians, she billed using a variety of codes, including various office visit codes for established patients — just not the complex consultation code. See Table 1 below for a breakdown of the total number of complex consultation codes used by King and the other gynecologist for comparison.

Table 1

Source: Adapted from the U.S. District Court for the Eastern District of Pennsylvania’s trial memorandum. 

Two search warrants

On Feb. 18, 2005, authorities executed a search warrant at King’s office in Philadelphia. Two postal inspectors, two FBI agents, two IRS agents and an FBI digital forensics expert went to King’s home in Baltimore to conduct a search there. Carolyn King was home at the time and signed the consent forms to allow law enforcement to search the Kings’ computers with the billing records.

The trial memo indicated what authorities found — and what they didn’t find — during their searches of King’s home and office:

A large volume of medical records were recovered from the defendant’s office, but the recovered records did not include a medical chart for any of the 40 patients whose files Blue Cross had requested to inspect in June of 2004. The records for these 40 patients were also not found at the defendant’s home. At the time of the execution of the warrant, the government served a grand jury subpoena for these records upon the defendant, who, through both counsel in Baltimore and counsel in Philadelphia, represented that he did not have those records.

While we don’t have a copy of the search warrant affidavit or a list of materials the government sought from King, this 2019 search warrant from a similar case involving a doctor in Michigan describes the types of documents that investigators might’ve been interested in obtaining:

• Medical files: Patient charts, files, records, treatment cards, prescription records, patient ledger cards, patient complaints, patient scheduling records and sign-in sheets, physician notes, nursing notes, medical assistant notes, physical therapy records, physical therapist notes, and original patient or referral source listings.
• Billing records: Bills, invoices and claims for payment or reimbursement for services billed to insurance companies, including Medicare, for any patients.
• Financial records: Bank statements, payment card information, tax forms, contracts, billing agreements, professional service agreements or contracts, and incorporation documents.
• Current- and former-employee documents: Personnel files, employee rosters, names, addresses, telephone numbers, email addresses, time cards, expense reports, training information, certification verification, salary and compensation information, disciplinary records, licensure records, job applications, job descriptions, employment agreements and W-2 forms.
• Insurance documents: Medicare handbooks, manuals, newsletters, training materials, certificates of attendance and other Medicare publications.

When upcoding is suspected, these records can help investigators show that the billed codes don’t correspond with the actual treatments patients received or that a suspected perpetrator falsified patient records. Documentation is essential in these cases; medical providers are required to maintain accurate records to ensure the appropriate standard of care. They can also help determine whether a doctor billed for any ghost patients — patients that only exist on paper. Schedules, time sheets, diaries and calendars are vital to creating a timeline of patient visits and days out of the office when it would’ve been physically impossible to meet with patients.

The trial

King opted for a trial. His defense attorney had originally sought to dismiss the charges, arguing that they were outside the statute of limitations. However, federal prosecutors disputed the defense’s argument, countering that the statute of limitations for mail fraud occurs from the date of the mailing and that “Schemes [to defraud] include actions to prevent detection, and if such were necessary, the government could provide such evidence in this case, but that is not necessary here since the claims which the defendant submitted, and the checks that were mailed in furtherance of the scheme, are themselves well within the statute of limitations.”

The court concurred with the prosecutors’ argument and denied the defendant’s motion.

King’s trial began on Oct. 6, 2008, and concluded nine days later with the jury convicting him on all charges. Transcripts from the trial aren’t available, but according to the pretrial memo, prosecutors planned on questioning the following people during the trial:

• Employees and records custodians of the insurer, IBC.
• Nurses, doctors, medical technicians and records custodians from the clinic.
• Former patients.
• The CPT coder who trained King.
• People who assisted King and his wife with billing, including King’s daughters.
• A CPT coding expert who reviewed King’s patient files.
• Federal law enforcement agents and forensic computer examiners who investigated the case, executed search warrants and conducted interviews.

During the investigation, Carolyn King hired her own attorney and refused to testify before the grand jury, citing her Fifth Amendment right to remain silent. She was called to testify at her husband’s trial by his counsel, according to the appeals court decision.

The sentence

Failing to prevail at trial, King’s defense attorney called his client’s actions merely administrative, implying that only the insurance company was harmed and didn’t affect the care he provided to his patients.

King’s attorneys had requested a lower sentence, but prosecutors argued that his actions required strict punishment. During the sentencing hearing, the lead prosecutor told the judge, “When the defendant was called for an audit, he deliberately created, whole cloth, a new set of medical records, not the ones that he normally kept, three pages which included very, very detailed information that he made up to put on those records to give rise to the auditor’s belief that they were actually patient visits and this is what he did during the portion of the visit.”

The judge agreed with prosecutors. “The offenses did involve the use of medical training to concoct diagnoses for both overbilled and ghost visits,” the judge said during sentencing. “He created patient files, and the medical training was required in order to commit and conceal that offense.”

“These were flagrant; no misunderstanding here. The doctor knew what he was doing. They were almost all for code 99245 and that happens to be one of the higher [rates of] reimbursement. It resulted in a vast overbilling,” the judge concluded.

At sentencing, King’s attorney informed the court that King had Hepatitis C and asked the court to take that into account while sentencing him. The defense noted that, left untreated, it would kill him. He’d started treatment, but the U.S. Bureau of Prisons didn’t supply the medication he needed. King’s attorney asked the court to delay his sentence until his treatment was completed. The court agreed and allowed him to self-surrender to the Bureau of Prisons in January 2010.

On July 24, 2009, the judge sentenced King to 36 months in prison, three years of supervised release, restitution of $780,151, a fine of $12,500, and special assessments of $8,200 — in addition to the $639,578 forfeiture amount.

Aftermath and reinstatement

King voluntarily surrendered his Pennsylvania medical license in early December 2009. The consent order noted that it was a permanent surrender and the State Board of Medicine found that his conduct was also a violation of Pennsylvania state law.

In April 2019, nearly 10 years after his conviction, King requested that his medical license be reinstated by the State Board of Medicine. Documents available online provide a unique insight into his conduct: “Although [Dr. King] attributes his actions to not looking at the billing very carefully, he acknowledges his responsibility as ‘captain of the ship’ and without seeking to evade accountability, realizes that he should have paid more attention to the billing work done by others.”

King acknowledged that the consequences of his actions were “devastating” to him and his family; his wife lost her job, and in June 2010, King received even more bad news: The U.S. Department of Health and Human Services Office of Inspector General excluded him from participating in any U.S. health care programs, including Medicare and Medicaid.

After serving his prison sentence, King conducted unpaid medical research at Duke University, participating in “Grand Rounds,” which are large medical treatment discussions of patient issues. He also worked as a patient advocate without providing treatment or medical advice to people.

King’s medical license was restored after a state board special examination, with the board stipulating that King had to be monitored by a fully licensed physician. He said that he hoped to provide gynecological services at a clinic that served low-income people without access to health care or insurance.

Examining the doctor’s case

King’s case is a classic example of the Fraud Triangle at work: opportunity, financial pressure and rationalization merged, creating the right conditions for fraud. King had the financial pressure of owning two homes — one in New Jersey and the other in Baltimore. Court records also showed that King was having an extramarital affair with a nurse at the clinic. His position as a doctor handling the billing for his practice provided the opportunity to release his financial pressures. He could use his medical knowledge and understanding of medical billing codes to seek higher reimbursements from the insurance company. King rationalized it all because he likely felt taken for granted, according to court records. During an interview, he told an FBI agent that he hadn’t been paid the money he felt he was owed by the clinic and that he suspected that the union contracting with the clinic was corrupt.

Look for the red flags

IBC’s audit team was perplexed by the pristine nature of King’s documents — they lacked any handwriting. And none of those files contained documentation for billing CPT code 99245. When IBC auditors requested 30 specific files from King, he stalled and delayed handing them over to the insurance company. When IBC investigators visited the clinic unannounced, seeking three extra patient records, he avoided them at first, then said he didn’t remember one of the patients, and couldn’t find any of those patient records despite billing IBC 28 times for services. All these instances were red flags to IBC that King wasn’t being truthful.

Question the process

Understanding a subject’s operational and business processes establishes a baseline that fraud examiners can use to help identify any deviations from policies and procedures. Questioning the subject on these points during an interview is crucial during an examination.

In this case, King had received information from IBC about the proper way to submit claims and what the CPT codes would pay. Investigators documented IBC’s claims process, and the specific items required to bill for high-order consultations. Investigators discovered that to qualify as a medical consultation, the physician must receive a referral from another physician regarding a patient and that this information must be documented in the patient’s records. In addition, the consulting physician’s opinion, report, services provided and any other relevant material must be documented in the patient’s medical history. CPT 99245 also requires that doctors spend about 80 minutes with patients. King didn’t do any of these things, but for investigators, learning about the required documentation was crucial to the case against the doctor.

Organization is key

Putting together a thorough and well-organized case file is essential for both civil and criminal cases. Prosectors and judges need to understand the full scope and breadth of the evidence against a defendant to make appropriate decisions about the case.

In their appellate brief, prosecutors wrote, “Not one of the approximately 2,000 patient files seized from the defendant’s medical office contained the documentation necessary to support billing for a high-level consultation.” With all that evidence put together, prosecutors were clearly able to see there was nothing to support King’s complex consultation claims. Ultimately, the painstaking work of gathering King’s documents and patient records produced a clear, coherent case that showed how King’s conduct wasn’t an accident or poor judgment but a deliberate scheme to fabricate and falsify information for more money.

Colin May, CFE, 3CE, INCI, is a professor of forensic studies and criminal justice at Stevenson University in Owings Mills, Maryland. He’s a member of the American College of Healthcare Executives and has spent the past 20 years in oversight, investigations and compliance. The views expressed in this article are the author’s own and are not intended for legal or accounting advice. Contact him at cmay3231@stevenson.edu.

Decoding medical billing codes

Dr. William King used his extensive knowledge of medical billing to defraud insurance company Independence Blue Cross; he knew which billing codes to assign for his patients’ visits that would give him the highest reimbursement rates.

Medical coding is “the transformation of health care diagnosis, procedures, medical services, and equipment into universal medical alphanumeric codes,” according to the American Association of Professional Coders. These codes are, in essence, a shorthand way to describe medical procedures that can be easily translated to insurance companies for billing purposes. Professional medical coders are specially trained to understand information in medical records to ensure that the codes used to bill insurance companies and other third parties are correct.

Medical procedure and service codes generally fall into three types or categories:

• Current Procedural Terminology (CPT) codes are overseen by the American Medical Association. CPT codes standardize and classify each medical procedure or the time that the doctor spends with the patient for “evaluation and management” (E/M).
• International Classification of Diseases, 11th Edition, Clinically Modified (ICD-11-CM) is overseen internationally by the World Health Organization (WHO), and the U.S. Centers for Medicare and Medicaid Services (CMS) and the National Center for Health Statistics (NCHS) in the U.S.
• Health Care Procedural Coding System, Level II (HCPCS Level II) is maintained by CMS for billing under Medicare in the U.S. It covers more services than CPT, such as prosthetics and academic studies.