What Is Unbundling in Medical Billing?

Unbundling in medical billing means charging separately for procedures that should be billed together under one code. Instead of using a single combined billing code (called a "bundled" code), a provider uses multiple individual codes to get higher payment.

What Does “Unbundling” Mean?

Unbundling in medical billing is when a group of services that should be billed together as one charge is split into separate bills. This often leads to a higher total charge than if they were billed as a bundle.

Here’s a quick example:

Let’s say you go in for a surgery. That surgery includes:

• The surgeon’s time
• The tools used
• The prep work before surgery
• The recovery monitoring

All of those things are usually included in one single billing code. But in unbundling, the billing office splits them into multiple codes to charge separately for each piece.

Instead of billing it all together as one $1,000 charge, they might charge:

• $400 for the surgery
• $200 for the tools
• $150 for prep
• $250 for recovery monitoring

That adds up to $1,000 too, but here’s the catch: when insurance sees those split-up charges, it often pays more than it would for just the bundled one. This is why unbundling is considered a type of overbilling.

Why Unbundling in Medical Billing Is a Big Problem?

It happens when separate codes are used for services that should be billed together. This might look like a small change, but it can cause a lot of issues behind the scenes. That’s why it’s important to understand how unbundling works and why it matters for providers, patients, and insurance companies alike.

1. It’s Against the Rules

Insurance companies and programs like Medicare have clear billing guidelines. They expect certain medical services to be grouped together under one code. When a provider separates them into multiple codes (unbundling), it goes against these rules. Even if it’s not done on purpose, it can still cause problems with the insurance company.

2. It Can Be Considered Fraud

If a provider knowingly unbundles services just to get paid more, it’s considered fraud. This is a serious offense. It can lead to big fines, losing the ability to bill insurance, and even legal action or jail time. Even unintentional unbundling can raise red flags and trigger audits or investigations.

3. It Confuses Patients

When patients see too many separate charges on a medical bill, it’s easy to feel overwhelmed. They might not understand what each charge is for or why something costs so much. This can lead to complaints, lost trust, and even patients refusing to pay their bill.

4. It Slows Down Payment

Insurance companies use software to spot incorrect billing, including unbundled charges. If they find something wrong, they may deny the claim or ask for more information. This causes delays in getting paid and adds extra work for the billing team to fix the claim and resubmit it.

What Causes Unbundling?

Great question. It’s not always done on purpose. Here are some common reasons:

1. Lack of Training

Many billing errors happen simply because staff don’t know the rules. If the billing team isn’t trained on which procedures should be bundled together, they might bill each one separately without realizing it’s wrong. Regular training helps avoid this mistake.

2. Outdated Software

Some older billing systems don’t catch bundling mistakes. They might not alert the user when codes should be grouped. Without software updates or a claim scrubbing tool, these errors can easily slip through.

3. Miscommunication

If the doctor or medical provider doesn’t clearly explain what was done in the patient’s notes, the billing team might guess or break it into separate codes just to be safe. This is why accurate documentation is so important in medical billing.

4. Pressure to Earn More

In some cases, there may be pressure to bring in more revenue. A provider or billing department might unbundle services on purpose to increase payment. But this is risky and unethical. If caught, it can lead to audits, fines, and serious legal trouble.

What Are Bundled Codes?

Let’s pause for a second to talk about bundled codes. These are special billing codes that group services together under one charge. They’re designed to keep billing simple and fair. Instead of charging separately for every little task during a procedure, a bundled code covers the entire process.

For example:

A code for a gallbladder surgery might include:

• The doctor’s fee
• The tools used
• Anesthesia
• Post-surgery care

All under one single code.

Insurance companies use CPT (Current Procedural Terminology) codes to identify which services are bundled. These codes are created and maintained by the American Medical Association and used nationwide.

How Can Providers Avoid Unbundling from Happening?

If you run a clinic or handle billing, here are some simple and effective ways to prevent unbundling:

Use Updated Code Books and Software - CPT, HCPCS, and ICD codes change every year. Always use the latest versions of coding books and billing software to avoid outdated or incorrect codes.

Train Your Billing Team Regularly - Hold short training sessions or monthly check-ins to review coding rules, payer updates, and common mistakes. Keeping your team informed helps prevent accidental unbundling.

Use Claim-Scrubbing Tools - These tools scan your claims before submission and flag coding errors, including unbundled charges. They act as a second set of eyes to catch problems early.

Review Denials Carefully - If a claim is denied or flagged, don’t just resubmit it blindly. Investigate the reason—it may be due to unbundling. Use that information to correct future claims.

Use the NCCI Edits Tool - The National Correct Coding Initiative (NCCI) Edits Tool from CMS lets you check which codes can or can’t be billed together. It’s free and helps avoid unbundling errors.

Conclusion

Unbundling may not look like a big deal at first, but it causes real issues. It can confuse patients, delay payments, and lead to penalties for providers. The good news is it’s easy to prevent. With proper training, the right tools, and clear billing practices, clinics can avoid these mistakes. Whether you’re a provider, biller, or patient, understanding unbundling helps everyone stay informed and avoid problems. And if you don’t want to deal with the hard stuff, you can always hire a medical billing company to handle it for you.