How to Spot Provider Schemes?

Provider schemes start small—an oddly inflated bill, a flurry of unnecessary diagnostics, or a durable medical equipment (DME) rental that seems to outlast the injury itself. For claims professionals and nurse case managers, these signs aren’t just red flags—they’re potential gateways into deeper, systemic provider abuse.
In many cases, what we call “provider schemes” are subtle patterns hidden beneath layers of billing codes, clinical jargon, and trust.

Understanding the patterns behind fraud tactics like upcoding, unbundling, and excessive DME usage is essential not only for controlling costs but also for safeguarding the integrity of care for injured workers.

Let’s take a closer look at how these schemes operate and how you can detect them before they derail a case.

Provider Schemes: Real World Cases

Here is a recent situation where the adjuster noticed something strange: what seemed like a straightforward shoulder sprain was racking up charges more typical of a rotator cuff tear. The treating provider had billed for multiple physical therapy sessions—far above the state fee schedule—and the patient was prescribed an expensive ultrasound therapy device for home use.

When the NCM followed up, they discovered the DME was never used, and some sessions were never attended. With closer review, it was clear – the provider was inflating services, upcoding treatment levels, and prolonging the case unnecessarily.

These aren’t isolated incidents. They’re becoming more common and unfortunately, more creative.

The Big Three: Common Provider Schemes

1. Upcoding

Upcoding is when the provider bills for a more complex or expensive service than what was actually performed. In workers’ comp, this might mean charging for a Level 4 or 5 evaluation when only a quick follow-up visit was conducted. For example, a basic follow-up might be coded as a comprehensive exam, leading to higher reimbursements. This misrepresentation not only inflates costs but also misguides you and your NCMs in evaluating injury severity and treatment progression.

Pro tip: Look for patterns. Specifically for providers who consistently bill at the highest level of service or whose coding doesn’t align with treatment notes. Compare what was billed to what was medically necessary or documented.

2. Unbundling

Unbundling is when a provider separates procedures that are normally billed together under a single code (called a “bundled” code), charging separately to increase reimbursement.

Let’s say a provider performs a routine wound treatment that includes cleaning, dressing, and assessment. Rather than billing for the bundled code, they charge separately for each component. This can quickly and significantly drive up costs over time.

Use reference tools such as the National Correct Coding Initiative (NCCI) or review guidelines from the Centers for Medicare & Medicaid Services (CMS) to understand which services should be bundled – you’re not expected to figure it all on your own!

3. Excessive DME (Durable Medical Equipment)

DME fraud is one of the most commonly exploited areas in Workers’ compensation and it’s not always easy to catch. This type of scheme often involves prescribing or renting medical equipment that’s either unnecessary or used far longer than needed.
Think TENS units, back braces, or traction machines. Sometimes the injured worker doesn’t need the device or may not even know it was ordered on their behalf.

So how can you spot this? Let’s start by digging into the medical rationale:

• Is the equipment typical for this type of injury? A simple sprain usually doesn’t justify a $2,000 device.
• How long is it being used? Watch for extended rental periods with no supporting documentation of continued need.
• Is there proof it’s helping? Look for notes that show the worker was trained to use the equipment, or that it contributed to recovery.Check for connections. If the provider is affiliated with the supplier or always uses the same one regardless of the injury, it could be a red flag.

The key is making sure treatment—not profit—is making the decisions.

Nurse Case Managers and Prevention

Nurse case managers are uniquely positioned to detect and flag questionable patterns. Because they’re involved directly with injured workers and providers, they can verify discrepancies between what’s billed and what’s happening on the ground.

NCMs can:
• Validate care by asking the right questions (e.g., “Have you experienced improvement from the brace mentioned in your file?”).
• Compare clinical timelines to billing practices, if the patient’s recovery is slow but services are increasing, something might be wrong.
• Use treatment guidelines like ODG by MCG or ACOEM to assess if the care being delivered aligns with accepted protocols for that injury.

The Legal and Ethical Layer

Fraud in billing is a legal issue, and adjusters must tread carefully. Providers are still entitled to due process, and suspicion must be substantiated before taking action because the last thing you need is to deal with bad faith claims.

That is why reporting potential fraud to SIU should be done with supporting documentation, and all interactions must be professionally handled to avoid legal pushback.

Ethically, it’s also about patient care. Excessive or unnecessary treatment can prolong recovery or lead to dependency (e.g., on opioids, electrotherapy, or passive modalities). Identifying fraud doesn’t just save money but it ensures workers receive care that actually helps them recover and return to work.

Trends on the Rise

Fraud schemes are evolving. According to the National Insurance Crime Bureau (NICB), medical provider fraud remains one of the top forms of insurance fraud. With increasing financial pressures on clinics post-COVID, the temptation to boost revenue through billing manipulation has grown.
Telehealth has added another layer of complexity since virtual visits may be harder to audit for accuracy, and billing for services not rendered has become a growing concern.

Every line on a bill tells a story. And for claims professionals and NCMs, it’s your job to make sure it’s a true one. Whether it’s a back brace no one ever wore, an inflated evaluation code, or an MRI that didn’t match the injury, provider fraud can chip away at the legitimacy of your case—and the trust of your clients. But with knowledge, vigilance, and the right tools, you can spot the warning signs early and steer the claim back on course.

Stay ahead of fraud trends. Learn how to identify provider schemes and protect both your claim integrity and injured workers’ care. Click for more here.

Check out our sources.

• Centers for Medicare & Medicaid Services. “National Correct Coding Initiative (NCCI) Edits.” CMS.gov, 2023, www.cms.gov.
• National Insurance Crime Bureau. “Medical Provider Fraud: A Growing Threat.” NICB.org, 2023, www.nicb.org.
• WorkCompCentral. “Fraud Schemes on the Rise in Workers’ Compensation.” WorkCompCentral, 2022.