Reduce Fraud in Medical Billing: How the Blockchain Can Help


The healthcare industry is regulated by subjective privacy and security laws of the INDIA called the Ministry Of Health And Family Welfare(MoHFW). And it protects healthcare organizations from imposing heavy penalties for data breaches and securing personal information. 

With stringent regulations and protection of privacy from the cloud, healthcare industries are changing to blockchain technology as it streamlines the process of healthcare billing and importantly promotes data security and transparency. 

This blog covers the subject of  Medical billing fraud and the benefits and role of blockchain in preventing this fraudulent activity in detail.

Understanding Medical Billing Fraud:

There are three most common ways a Medical billing fraud can occur, they are: 

              1 Upcoding Fraud

              2 Unbundling Fraud

              3 Billing for services not provided

Upcoding Fraud:

A type of medical billing fraud known as "upcoding" happens when a clinician bills Medicare or another payer for a more expensive service than was rendered.  For instance, the supplier may overstate how long the procedure took to complete and misrepresent the equipment needed.

Making up that a procedure occurred or fabricating information about the personnel engaged in carrying out the process or billing for individual therapy when group therapy was offered and executing (and billing for) the procedures that patients blatantly do not need following the regulations governing "medical necessity".

Upcoding also happens when a Medicare Advantage patient's diagnostic data is inflated to obtain more risk adjustment payments from Medicare, which is known as risk adjustment fraud under Medicare Part C.

Unbundling Fraud:

Unbundling is a fraudulent billing strategy in which a set of treatments is invoiced under multiple individual procedure codes while, in reality, the group should only be paid under one comprehensive code. There has been an overpayment because the total of the reimbursements for each code that was paid for separately is greater than the reimbursement for the comprehensive code. For a specific patient, a doctor might, for instance, order a panel of blood tests. If the laboratory that receives the order tries to boost its revenue by paying individually for each test performed, it is engaging in fraud.

Billing for services not provided:

Only legitimately rendered medical services or supplied equipment will be reimbursed by the government. Billing the government for medical services, supplies, or equipment that was not rendered or delivered may be against the False Claims Act.

Medical billing fraud occurs when, for instance, a diagnostic testing lab submits a bill claiming it has completed both a two-dimensional CAT scan and a sophisticated 3D scan and analysis, when, in reality, only the 2D scan was completed. While bills are occasionally submitted for wholly fictitious services, this is not the only instance of medical billing fraud. They are submitting invoices for services that were never rendered.

The Role of Blockchain in Reducing Fraud:

Blockchain's attractiveness in the healthcare industry stems from its promise to completely transform data security and privacy. Healthcare institutions want to use blockchain technology to protect and keep patient data that is sensitive. The system enables the establishment of safe, transparent, and impenetrable patient care and billing records by providing a decentralized and immutable ledger.

Role of Blockchain in Reducing Fraud

Let's examine how blockchain technology's security makes it one of the most exciting new developments in medical billing and coding.

Safeguards sensitive patient information:

Integrating blockchain technology into medical billing procedures transforms efficiency, security, and transparency. Patients, doctors, and insurance companies can see more clearly and trust insurance companies because of its transparent ledger system. 

For instance, authorised parties like the patient and insurance company can access information entered by a healthcare professional into the blockchain regarding a patient's diagnosis, course of treatment, and costs to confirm its accuracy. 

By protecting patient data and granting restricted access to these key players alone, this approach protects patient privacy. A medical billing company can benefit from blockchain as well since it guarantees the confidentiality and security of critical patient data.

Smart contracts increase trust:

Blockchain technology automates predetermined agreements and norms in healthcare billing. When certain criteria are satisfied, smart contracts automatically carry out medical billing procedures. 

For example, the smart contract can, without human interaction, initiate the billing process, create invoices, confirm insurance coverage, and carry out payments when a service is rendered. 

Supply chain transparency:

Every stage of the medical supply chain, including when a product is manufactured, who purchases it, and when it is delivered, is tracked in blocks on Blockchain's distributed digital ledger. 

By connecting these blocks, an unchangeable chain of information is created. As a result, openness and authenticity in the supply chain are ensured since every person participating in a transaction can simply track a product's path from beginning to end.

Benefits of Using Blockchain in Medical Billing:

Blockchain provides many advantages to the healthcare sector, including enhanced data security, increased transparency, and more effective claims processing. Let's examine the main advantages of blockchain in more detail.

Savings on costs:

By improving interoperability, expediting data interchange, and reducing administrative tasks, the application of blockchain technology in the healthcare industry can drastically lower operating costs.

By utilising blockchain technology, healthcare providers can reduce costs by automating some labour-intensive, paper-based manual activities in the healthcare industry, like sharing medical records, managing the drug supply chain, and processing claims.

Improved protection of data:

Breach of healthcare data affects millions of individuals worldwide and is a serious problem. Over 39 million people have been affected by healthcare data breaches in just the first half of 2023, according to a Health IT Security analysis. 

This paper demonstrates the need for a more secure healthcare system. Blockchain technology can improve data security in the healthcare industry by offering a decentralized, safe platform for exchanging and storing patient information and payment details. Furthermore, the blockchain's consensus process lowers the possibility of fraudulent entries by requiring network members to agree before making any changes or adding new data.


In summary, medical billing fraud is a serious problem that not only jeopardizes patient trust but also costs billions of dollars a year. Blockchain technology presents a possible avenue for reducing fraudulent activity in the healthcare sector.

Furthermore, while preserving patient privacy and data integrity, blockchain enables the safe exchange of patient data among authorized parties. This guarantees that private medical information is shielded from manipulation and unwanted access.