Medical Billing

# Is the US medical billing system corrupt? A Deep Dive

- January 29, 2025
- Posted by Brian Bertrand

20 Jan

Medical billing is an integral part of a hospital’s financial sustainability and success. It gives accurate and timely reimbursement of medical care provided, which is important for hospital’s revenue cycle. Effective medical billing leads to better cash flow which allows hospitals to spend on personnel, technology and care.

The US medical billing system is widely perceived as complex, opaque, and inefficient, prompting frequent pleadings and complaints. Medical billing can be confusing and a challenge for patients, who are often overwhelmed by the fees for care. In fact, it’s important for clinicians to have clear medical billing reporting so that patients can trust the system and are able to generate more cash.

The system’s form and function are so conducive to corruption, fraud, and corruption of every kind, even as others point out that this is due to systemic inefficiency rather than intentional corruption. This article deals with the deficiencies of the US medical billing system, including the difficulty of medical billing, transparency, fraud, ethical questions, and the overall implications of these deficiencies for the healthcare system and its stakeholders.

## Problems with US medical billing

The federal government or the state government determines the payment rates for individual healthcare services for a third of US residents eligible for Medicare/Medicaid, and nothing gets negotiated (unless we include the lobbying of Congress and the executive branch by provider groups). There is a component of this payment based on the specific coverage of individual patients in the form of deductibles, coinsurance, or copays. These out-of-pocket expenses can be costly and overwhelming for many patients and their families.

## The Complexity of the U.S. Medical Billing System

One of the main problems with the U.S. medical billing system is that it is complex. Healthcare providers in the US bill all sorts of insurance companies with all sorts of reimbursement rates, policies, and coverage terms. Those are private health insurance, Medicaid, Medicare, and company insurance. Each payer sets different policies for what they will cover and how they will pay, which means medical bills are difficult for patients to comprehend.

Healthcare providers and hospitals often entrust third-party billing firms to do the back-office work of submitting claims to insurance companies. These companies have to deal with a bunch of codes of billing, insurance and laws, which make it even more complicated. Even medical codes (such as ICD-10 (International Classification of Diseases) and CPT (Current Procedural Terminology) codes) are very large and continuously revised and you have to constantly be trained and qualified.

For patients, this complexity comes at the expense of unexpected out-of-pocket expenses, which can be hard to foresee. Bills for medical services are often paid for with charges patients may not be aware of. Misrepresentations and billing mistakes happen, and patients are left struggling with incoherent bills and disputing inaccurate fees. Read the Types of Insurance Fraud and Types of Billing Systems affecting Healthcare Systems in these blogs.

## Issues in American healthcare billing

Medical billing is an integral element of any practice, but it can be difficult to keep up with. Fortunately, there are solutions for both technology and services. Here are some of the most common medical billing issues in US healthcare today and the providers working around them.

### 1. Administrative burden

Manually calculating medical billing can become a major administrative burden. Billing errors and denials, along with communication with payers to resolve them, can be a very complicated and time-consuming process. This manual labor, unfortunately, tends to accumulate and become tiresome.

For example, new surveys indicate that 64 % of physicians report experiencing burdens and administrative demands at least once a week. Unfortunately, hiring more people is not the solution. It is also a major issue in staffing, with 78 percent of physicians reporting that staffing shortages and/or bad retention are the major issues facing their hospitals. Practices around the industry are finding it difficult to recruit and keep talent for roles associated with RCM, such as medical billing.

### 2. Financial Challenges for Providers

In 2023, healthcare organizations will face major budget issues, which can impact value-based care delivery. These pressures are due to a combination of healthcare reimbursement challenges, operational costs,, and regulations.

### 3. Patient Education

Any clinician struggles to keep their patients well-informed about billing. Studies also show that the more information a patient has about their bill (balance, payment options, payment process), the more likely they are to pay. Good practice management, EHR, and billing software will make this easier for you.

### 4. Quality Customer Support

Your medical billing software vendor should have good U.S.-based support to give your team answers to any operational issues or questionable understanding that arise. For providers with limited or no access to good customer support, their software is unlikely to be optimally configured and pushed to its limit.

## Transparency in Medical Billing

With today’s rapidly developing medical technologies and changing patient expectations, healthcare is more than a collection of clinical interventions. Transparency around medical billing and healthcare expenditures is in high demand. Patients want their medical care to be cheaper and more transparent. The aim of establishing trust is to increase attention to medical billing transparency on the part of both doctors and patients. Transparency in medical billing allows businesses to provide their services effectively.

It improves patient satisfaction and a practice’s revenue. US medical billing has always been criticized as an opaque process that causes miscommunication, a surprise charge, and inefficiencies that burden patients and drive up costs. While this is a crucial point, medical billing transparency remains extremely inadequate in the US healthcare system. There are several reasons for this intransigence:

### 1. Complex and Varying Prices

The American medical billing industry is highly commoditized and divided among many different parties hospitals, physicians, insurance companies, and third-party billing firms who can have very different pricing, reimbursement, and billing policies. The cost of the same treatment can differ a lot from one location to another, one facility to another, depending on which insurance coverage the patient has and which provider is in their network.

Even in the network of a single doctor, patients might be charged different prices for the same treatment depending on coverage, caps, and discounts offered by insurance. This lack of standardization means patients don’t know what they will receive for any procedure, much less compare prices.

### 2. Opaque Billing Codes and Procedures

Medical billing is based on elaborate codes that denote services. The diagnosis is assigned using the International Classification of Diseases (ICD) codes, and the medical procedure is assigned using the Current Procedural Terminology (CPT) codes. These codes are necessary for billing purposes with insurance but can be confusing for patients. Patients often receive lengthy, in-depth bills stacked with these codes, which don’t tell them anything valuable about what their care will cost. Even if a patient read the codes, it’s possible that they wouldn’t know why some of these services were billable or whether they actually needed to be billed.

### 3. Lack of Price Transparency for Consumers

Prices for most healthcare services in the US aren’t publicly available, which makes it difficult for patients to compare between providers or estimate upfront the cost of a service. The majority of patients do not even know how much a medical procedure will cost until they get billed once the service is completed. Sometimes, insurance companies will even contract with hospitals and physicians on private arrangements, so patients don’t know what their care actually costs. Thus, many patients have to contend with financially challenging situations when medical bills pile up unexpectedly.

## Fraud in billing systems

Fraud is a sad fact of the medical billing system in the United States. Complexity and secrecy create room for fraud, both by providers and by others. Medical billing fraud can be anything from charging patients too much to billing for services that are not delivered. Medical billing fraud is an accident or a deliberate action. Physicians who want to avert medical billing fraud must understand what constitutes fraud, waste, and abuse in healthcare. Here are four of the most prevalent medical frauds:

### 1. Double billing

This is submitting more than one claim for the same service. Medical billing is where the provider invoices a patient or their insurance provider for the same service or procedure twice. For instance, if one patient receives one therapy on one visit and the provider bills them twice for it (writing two separate claims for the same treatment), that’s double billing.

### 2. Phantom billing

This form of bill-for-fake billing endeavors the payer with the cost of an unproven service. Phantom billing is the provider billing for a test, treatment, or appointment that didn’t happen or was not necessary for the patient.

### 3. Unbundling

Unbundling is a method where a provider creates billable codes for parts of a process. For instance, if a provider doing unbundling is having a common surgical procedure, he or she could enter different codes for incision and suturing, as opposed to the billable code. This can eat up a provider’s fee substantially. The law firm Price Armstrong reported on Duke University’s unbundling of cardiac and anesthesia care, normally billed together. Duke was allegedly adding a modifier to the codes to commodity anesthesia for a cardiac procedure, the Department of Justice determined. In 2014, Duke University paid a $1,000,000 settlement.

### 4. Upcoding

It entails reporting codes for the more expensive service than the patient actually had to be paid more money. An example of upcoding is a provider billing 30 or 60 minutes of patient encounters when in fact, the only time he had with patients was for 15 minutes of medication review (AMA).

## Ethical concerns in healthcare billing

Medical billing ethics can be summarized into three basic points: honesty, transparency, and fairness. These values are central to the fight against healthcare costs being too intrusive to patients’ confidence and quality. A reputable medical billing service will offer you dedicated assistance so that healthcare providers stay ethical and professional and keep the process in order. Billers and coding experts in the medical industry serve as an intermediary between doctors, insurance companies, and patients. They have to ensure that it’s accurate, fair, and timely. These ethical problems must be resolved to keep healthcare trusting and safe.

### 1. Ensuring Accuracy

Coding mistakes can cause inaccurate billing, which can overcharge patients or underbill providers. Always code correctly and don’t overload or undercode to maximize your profits. Regular training and oversight keep accuracy and moral adherence standards high.

### 2. Confidentiality and Data Security

Any healthcare practice has to be very confidential — especially in the billing and coding section. Analysts in this domain have the access to private patient data that has to be protected from theft or loss.

### 3. Discrimination in Healthcare Billing

Healthcare billing discrimination is another ethical concern that occurs when certain patient groups (i.e., patients based on race, ethnicity, or income level) are at the worst end of unjust billing practices. For instance, minorities, low-income people, and rural residents have less access to affordable healthcare and are more likely to receive unexpected bills, lack of insurance coverage, or poor education about and assistance with medical bills.

Healthcare billing is complex, and moral concerns are relevant to patients, providers, and the health system. Overcharges, surprise billing, medical debt and the commercialized US healthcare system are all fair, open and equitable. It will take systemic reform and ethical billing policies to help solve these issues that focus on patients rather than profits.

## Final Thoughts

Transparent reporting is a key element of medical billing that can increase trust among patients, provider accuracy, and reimbursement. With best practices and using tools and technologies such as EHRs, practice management systems, and analytics tools, providers can provide detailed reports and analytics to help patients know what their bills mean and make better healthcare decisions. Transparent reporting is a good investment for physicians who are seeking to improve their medical billing workflows and relationships with patients.

The US medical billing system is plagued by complexity, insecurity, fraud, and morality. All of this leads to increased medical costs, limited access, and immense financial distress for patients. It has received reform proposals, but there is still a lot of work to do to design a system that is just, transparent, and patient-centric, not profit-oriented. Policymakers, doctors, insurers and patients will need to come together to develop a more equitable and efficient healthcare system in order to meet these needs.

> Read the Affect of Illegal Billing in Healthcare Industry.

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