A patient can receive necessary care, the physician can believe the claim is accurate, and the billing data can still trigger a federal investigation. That is what makes upcoding and unbundling allegations dangerous: the government first sees a pattern of codes, not the clinical judgment or billing process behind them.

A run of high-level visits, repeated use of modifier 59, or a hospital code that differs from the medical record may point to an overpayment. It can also become evidence in a criminal case if investigators believe someone deliberately turned coding choices into higher reimbursement.

At Keith & Lorfing, we defend physicians, practice owners, executives, and billing professionals facing audits and federal health-care fraud investigations. If your case involves billing fraud, false claims, coding allegations, kickbacks, or another federal healthcare offense, speak with a healthcare fraud defense lawyer before responding to investigators, auditors, or government contractors.

Upcoding and unbundling are not the same

Both allegations concern how services were reported for payment, but they describe different coding problems. Neither label proves why a code was selected or whether anyone acted with criminal intent.

Upcoding

Upcoding can involve an evaluation and management level, diagnosis code, procedure code, or inpatient diagnosis-related group. The question is whether the billed code accurately describes the documented service and applicable coding rules.

A record that does not support the billed code may establish an improper payment. It does not, without more, establish that the provider knowingly carried out a fraud scheme.

Unbundling

Unbundling means reporting components separately when coding rules require a single comprehensive code. CMS created the National Correct Coding Initiative to prevent improper Medicare Part B payments from incorrect code combinations and units of service.

Some services that are usually bundled may be reported separately when the clinical facts show they were distinct. Modifier 59 and the XE, XP, XS, and XU modifiers can communicate that distinction, but the medical record must support the modifier and a more specific modifier should be used when available.

An NCCI edit is therefore not the end of the analysis. Counsel and a qualified coding professional should examine the edit, its indicator, the operative or visit record, the modifier used, and the payer rules in effect on the service date.

How a billing pattern gets noticed

Federal program-integrity work increasingly begins with data. CMS describes its Data Analytics and Systems Group as the agency’s focal point for analytics used to prevent fraud, waste, and abuse, but an outlier is a reason to investigate—not proof of wrongdoing.

A provider may stand out because of:

• Code distribution: A larger share of high-level codes than comparable providers.

• Modifier use: Frequent modifiers that bypass procedure-to-procedure edits.

• Units billed: Repeated units above common billing patterns or Medically Unlikely Edits.

• Diagnosis patterns: Diagnoses that consistently move claims into higher-paying categories.

• Rapid change: A sharp shift after new software, staff, ownership, or compensation terms.

The defense should test whether the comparison is fair. Specialty, patient complexity, location, referral patterns, service mix, and changes in coding guidance can all affect the data.

UPIC and RAC reviews serve different purposes

Unified Program Integrity Contractors work on CMS program-integrity matters involving suspected fraud, waste, and abuse across Medicare and Medicaid. Their tools may include data analysis, medical review, interviews, site visits, overpayment development, and referrals or coordination with other agencies.

Recovery Audit Contractors perform post-payment reviews to identify and correct Medicare fee-for-service overpayments and underpayments. CMS permits both automated reviews and complex reviews that require medical records.

A RAC finding is not a criminal charge, and a UPIC request does not mean prosecutors have accepted a case. Still, records and statements produced during an administrative review may become important if the matter expands, so the response should be accurate, complete, and coordinated.

A request for records is more than paperwork

The review letter controls what must be produced and when. Before responding, the provider should identify the contractor, service dates, claims, stated issue, record deadline, and available appeal or extension procedures.

Sending an unorganized chart dump can hide the support for a code. Altering notes, creating explanations that were not contemporaneous, or giving different answers through different employees can create a much harder problem.

Extrapolation is powerful, but it is not automatic

An auditor does not always examine every claim. When CMS or a contractor properly uses statistical sampling, the findings from a sample may be projected across a larger defined universe of claims.

The Medicare Program Integrity Manual states that extrapolation generally requires a determination of a sustained or high level of payment error or documented failure of an educational intervention, subject to the manual’s procedures. The sampling plan should define the universe, sampling unit, period, methodology, and overpayment estimate, and the method must be reviewed by a statistician or someone with equivalent expertise.

A large extrapolated demand should not be treated as simple arithmetic. A defense review may examine whether the contractor used the correct claim universe, applied the same coding rule across materially different services, accounted for underpayments, followed the approved methodology, and calculated the estimate correctly.

The underlying claim determinations matter too. If the contractor wrongly denies sampled claims, correcting those decisions may change the projected amount.

When a coding dispute can become a federal criminal case

An incorrect code can lead to a denial, repayment, or administrative appeal without becoming a crime. Criminal exposure depends on the statute and evidence of intent.

Our healthcare fraud defense attorneys examine the billing records, coding decisions, audit history, employee communications, and evidence of intent before determining whether the matter is an administrative dispute, civil False Claims Act case, or potential criminal prosecution.

Facts that may attract closer scrutiny include instructions to use a code regardless of the service, cloned documentation that does not match the encounter, compensation tied to unsupported code levels, concealed coding warnings, and records changed after an audit request. None should be evaluated in isolation.

Health-care fraud under 18 U.S.C. § 1347

Section 1347 prohibits knowingly and willfully executing or attempting a scheme to defraud a health-care benefit program or obtain its money or property through false or fraudulent representations.

The ordinary statutory maximum is 10 years in prison. The maximum rises to 20 years if the violation results in serious bodily injury and to life if it results in death, although an actual sentence depends on the charges, facts, federal sentencing law, and advisory guidelines.

False statements under 18 U.S.C. § 1035

Section 1035 reaches a materially false statement, concealment, or writing made knowingly and willfully in a matter involving a health-care benefit program. The statutory maximum is five years.

This law can matter after the original claim. A false audit response or fabricated supporting record may create separate exposure even when the initial coding issue was defensible.

Wire fraud under 18 U.S.C. § 1343

Section 1343 covers a scheme to defraud that uses interstate wire communications. Electronic claims, messages, and payment transmissions may supply the wire, but prosecutors must still prove the required fraudulent scheme and intent.

The ordinary statutory maximum is 20 years. A 30-year maximum and higher fine may apply when the violation affects a financial institution or involves specified disaster or emergency benefits.

The civil False Claims Act

The False Claims Act can impose civil liability for knowingly presenting or causing a false claim, using a material false record, or knowingly avoiding an obligation to repay the government. Its definition of “knowingly” includes actual knowledge, deliberate ignorance, and reckless disregard, and it does not require proof of specific intent to defraud.

Potential remedies include three times the government’s damages and an inflation-adjusted penalty for each claim. A private relator may also bring a sealed qui tam action on the government’s behalf.

The standards are not interchangeable. Health-care fraud and Section 1035 expressly require knowing and willful conduct, wire fraud requires fraudulent intent, and the civil False Claims Act uses its own knowledge standard.

The current 60-day overpayment rule

Section 1128J(d) of the Social Security Act requires certain Medicare and Medicaid overpayments to be reported and returned by the later of 60 days after identification or the date a corresponding cost report is due. Retaining a known overpayment beyond the applicable deadline can create False Claims Act risk.

The current Medicare regulations changed the identification standard and added time for a related-claims investigation. Under 42 C.F.R. § 401.305, a provider identifies an overpayment when it knowingly receives or retains it under the False Claims Act knowledge standard.

When a provider identifies an overpayment but has reason to believe related overpayments may exist, the 60-day period may be suspended during a timely, good-faith investigation. The suspension ends when the investigation concludes or 180 days after the initial overpayment was identified, whichever comes first, unless another qualifying suspension applies.

This does not create 180 days to ignore the issue. The investigation should start promptly, be properly scoped, and preserve the work needed to quantify and return the affected overpayments.

Building the defense from the claim level up

The most useful defense work usually begins with the disputed claims rather than a broad statement that the practice acted in good faith.

• Reconstruct the coding decision: Identify who selected the code, what information was available, and whether an EHR or billing rule affected the choice.

• Test the clinical support: Compare each sampled claim with the complete medical record and the coding rules in effect on that date.

• Separate error from intent: Look for mixed coding, undercoding, internal questions, training, corrections, and other evidence inconsistent with a deliberate scheme.

• Review the data model: Determine whether the government’s peer group, time period, code universe, and assumptions fairly describe the practice.

• Challenge extrapolation carefully: Analyze the sample frame, denied claims, methodology, confidence calculations, and treatment of underpayments.

• Map each legal standard: Keep administrative repayment, False Claims Act knowledge, and criminal intent separate.

A complete defense may require qualified coding, billing, clinical, and statistical professionals when the disputed issue calls for that expertise. 

Mistakes that can make the case worse

A provider should not treat the audit response as an ordinary customer-service exchange. The wrong response can add an intent or credibility problem to a claim that began as a coding dispute.

• Changing the historical record: Do not backdate, overwrite, or “complete” notes after learning they are under review.

• Giving an improvised interview: Do not guess about coding decisions or speak for another employee without reviewing the facts.

• Ignoring the deadline: Determine whether the request, demand, or appeal has a fixed response date and preserve available rights.

• Assuming one lawyer represents everyone: The organization, physician, coder, and executive may develop different interests.

• Refunding without defining the issue: A rushed payment may not address related claims, the correct reporting channel, or the investigation the current rule expects.

• Destroying routine data: Suspend deletion policies that could remove emails, EHR logs, coding notes, claim files, or audit records.

An internal corporate investigation can help counsel preserve evidence, define the claim universe, and decide whether a refund, appeal, disclosure, or defense response is appropriate.

If your practice has received a UPIC or RAC request, subpoena, overpayment demand, or notice of suspected billing fraud, contact Keith & Lorfing before submitting records or giving an informal explanation.

West Texas defense for federal billing allegations

Keith & Lorfing focuses its practice in West Texas, with offices in Abilene, Lubbock, Midland, and San Angelo. Our team includes multiple former federal and state prosecutors, and Russell Lorfing previously served as a federal prosecutor in Lubbock.

Our attorneys have more than 75 years of combined experience and more than 500 jury trials. We use that trial background to test what the records actually prove instead of allowing an unusual billing pattern to stand in for intent.

We represent clients in matters involving audits, subpoenas, target letters, Stark Law and Anti-Kickback Statute allegations, telemedicine fraud investigations, and pill mill investigations.

Frequently asked questions

Is upcoding always a crime?

No. An unsupported code may create an overpayment or administrative dispute, but a criminal health-care fraud charge requires proof of a knowing and willful scheme.

The civil False Claims Act uses a different knowledge standard, so an absence of criminal intent does not automatically end every form of exposure.

Does an NCCI edit mean the claim was fraudulent?

No. An NCCI edit identifies code combinations or units that may not be separately payable under the applicable rules.

The analysis should address the edit indicator, documentation, date-of-service rules, and any modifier used. A denied claim is not by itself proof that the provider intended to defraud a program.

Can the government estimate an overpayment from a sample?

Yes, CMS contractors may use statistical sampling and extrapolation when the governing requirements are met. The claim universe, sample design, individual denials, and calculations may still be disputed through the proper review and appeal process.

Can I correct records after receiving an audit request?

Do not alter the original record. If clarification or a permitted late entry is appropriate, it should follow the applicable recordkeeping rules, remain transparent about when and why it was created, and be discussed with counsel.

Does returning an overpayment prevent criminal charges?

Not necessarily. A timely, accurate refund may satisfy a repayment obligation and become relevant to intent, but it does not erase earlier conduct or guarantee that an agency will close an investigation.

Counsel should determine the amount, affected claims, reporting method, explanation, and whether related overpayments require further investigation.

Do I need a lawyer for a UPIC or RAC review?

Representation is not required merely because a contractor requests records. Early legal advice may be valuable when the request involves a large sample, extrapolation, payment suspension, suspected fraud, employee interviews, or facts that could create civil or criminal exposure.