Medical providers use a standardized system of numerical codes for patient services, required by Medicare, Medicaid, and other Government programs. In this way, insurers and the Government do not have to decipher what services were provided from myriad records or from thousands of different types of coding or billing systems. You have probably seen many of the more common codes in an ordinary receipt from your own physician. Of course, in a hospital setting or other specialized area of medicine, there are many more applicable codes than those that appear pre-printed on the bill from your outpatient visit to the family doctor. Misuse of these standardized codes to obtain more money than is allowed by law is commonly termed “upcoding” or “upcharging.”

Each Medicare billing code is tied to a particular group of services and will eventually result in a reimbursement to the physician or other provider (hospital, psychologist, chiropractor, etc.) based upon the code entered by the provider. Providers—or the organizations for which they work--have financial incentives to “upcharge” or increase the bill by exaggerating or even falsely representing what medical conditions were present and what services were provided. The more serious the medical conditions, the more medical conditions listed as being present or treated, and the more extensive the services rendered, the greater the Government payment.