Insurance Fraud and Misrepresentation of Services in Billing

in Psychotherapy, Counseling and Social Work

By Ofer Zur, Ph.D.

Psychotherapists, social workers, counselors and marriage and family therapists, not infrequently, submit inaccurate insurance bills. Some of the most common justifications for such imprecise billing is to help therapists get paid at a higher rate and to help clients get insurance reimbursements for psychotherapy. One of the methods commonly used to achieve this is when therapists provide CPT and DSM codes that do not accurately reflect the actual services they provided. Adding to that is that many therapists, for very understandable and real reasons, rail against the reimbursement policies of insurance and managed care companies. However, fraudulent billing practices or inaccurate insurance bills are substandard care, unethical and illegal. As false billing practice has become very common, some therapists are not even aware that they are involved in what some people call “theft by deception.”

Following is a quick reminder of what psychotherapists should avoid.


Examples of False Accounting of Services:

    • Using a ‘reimbursable’ individual therapy CPT code, such as 90834, while providing couple or family therapy, which often is not reimbursed by insurance.
    • Using an ICD diagnostic code that is likely to be reimbursed rather than a code that would not. A common example is using the code of Generalized Anxiety Disorder (ICD-10 F41.1) rather than a Personality Disorder which would probably not be covered by the insurance company.
    • Using a reimbursable ICD Code when a diagnosis does not actually exist. An example is a perfectly healthy client who seeks therapy to explore normal and healthy existential, spiritual or familial concerns but is given an ICD diagnosis so it can be reimbursed.
    • Some clients express understandable concerns regarding the possible negative effects to their employment, health insurance, life insurance or security clearance due to having mental health records indicating that they suffer from a “mental illness.” Examples of problematic diagnoses might include: substance abuse, major depression, bipolar or personality disorders. In response to these valid worries some therapists record less severe or more elusive diagnostic codes, such as Generalized anxiety disorder or Anxiety disorder NOS.

NOTE: I, O.Z., often explain to clients that submitting insurance invoices poses potential dangers to them in regard to current or future employment, health insurance, life insurance or security clearance. I further explain to them that keeping confidential mental health information on a company’s computer always runs the risk that authorized or unauthorized people may access it legally or illegally. I end by informing them that in order to protect their privacy, I choose to work on a fee-for-service basis outside of managed care. More information

  • Recording CPT codes for sessions that did not take place is another form of insurance fraud. If therapists decide to include missed sessions, the records must clearly indicate that services were not provided on these certain dates due to client’s late cancellation or due to client’s not showing up to a session.
  • Therapists who inflate fees in the insurance bills that are significantly higher than their standard full fee are also involved in insurance fraud. Obviously, therapists who have contracts with managed care or insurance companies will be reimbursed at the contracted fee level.
  • Finally, therapists are advised not to automatically waive clients’ co-payments. If you choose to waive clients’ co-payments, do not do it in advance. It is important that you do not automatically waive co-payments for all clients, that you make a reasonable attempt to collect the co-payments, and that you document the rationale and the process by which you forgave balances (debts) the client has left unpaid. Sliding scale fees are definitely an option, which can reduce clients’ co-payments to a more affordable level. If you offer a sliding scale fee make sure that you bill the insurance company at the sliding scale fee, not at your full fee.


Additional Resources on Insurance Fraud

For an informative and helpful resource on insurance practices, go to:
Navigating the Insurance Maze: The Therapist’s Guide to Working With Insurance — And Whether You Should by Barbara Griswold, LMFT.

Principles of Business Ethics

Theft by Deception. Journal article by Bruce Gross; Annals of the American Psychotherapy Association, Vol. 7, 2004

Additional Resources on Insurance Fraud

Private Practice Handbook:
This instant download will help you develop and maintain a Fee-For-Service Private Practice Outside Managed Care

Essential Clinical Forms:
Including Office Policies, which explain to clients the hazards of managed care and insurance billings

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