Medicare Billing Compliance: Complete Guide for Australian Clinics

Why should your clinic care about Medicare billing compliance right now?

The Professional Services Review (PSR) is busier than it has been in years. In its most recent annual report, the PSR flagged a sharp increase in referrals from Services Australia, with more practitioners under review than at any point in the last decade. Investigations are no longer limited to GPs billing high volumes. Allied health, specialists, and telehealth providers are all being scrutinised.

The stakes are real. A single PSR investigation can result in repayment orders exceeding $500,000, partial or full disqualification from Medicare, and referral to AHPRA. And it often starts with something small. A billing pattern that looks unusual. A spike in certain item numbers. A complaint from a patient who received a gap they weren't expecting.

This guide covers the full picture of Medicare billing compliance in Australia: how the system works, what the rules actually require, where clinics commonly slip up, and what you can do to stay on the right side of the line.

How does Medicare billing actually work?

Medicare is Australia's universal health insurance scheme, administered by Services Australia under the Health Insurance Act 1973. It subsidises the cost of medical services listed on the Medicare Benefits Schedule (MBS).

Here's the basic flow:

A registered provider delivers a service listed on the MBS
The provider claims the appropriate MBS item number
Medicare pays a benefit based on the schedule fee for that item
The patient pays any gap between the provider's fee and the Medicare benefit (unless bulk billed)

Every claim you submit is a legal statement that the service was rendered, clinically indicated, and meets the descriptor for the item number used. Getting any part of that wrong creates a compliance risk.

Key components

| Component | What it means | |---|---| | MBS item number | A code representing a specific service with defined criteria, time requirements, and clinical circumstances | | Provider number | Location-specific number linking the practitioner to a practice. You need a separate one for each location | | Schedule fee | The fee set by Medicare for each item. The benefit is typically 85% of this fee (100% for GP bulk-billed services) | | Medicare benefit | The actual amount Medicare pays towards the service | | Patient contribution | Any amount the patient pays above the Medicare benefit |

Your provider number is tied to a specific location. If you work across multiple clinics, you need a separate provider number for each one. Billing under the wrong provider number is a compliance breach, even if the service itself was legitimate.

What are the rules around bulk billing and patient contributions?

Bulk billing means the provider accepts the Medicare benefit as full payment for the service. The patient pays nothing out of pocket. The provider bills Medicare directly and agrees not to charge the patient any additional amount for that service.

Key rules:

You cannot charge a gap on a bulk-billed service. If you bulk bill, the Medicare benefit is the total fee. Full stop.
You cannot selectively bulk bill to gain a financial advantage. For example, bulk billing the consultation but privately billing a procedure at the same visit to avoid the Medicare safety net.
Bulk billing incentive items (e.g., item 10990) are available for GPs bulk billing concessional patients and children under 16. These have their own claiming rules.
Mixed billing (bulk billing some patients, privately billing others) is permitted, but your approach must be consistent and transparent.

If you privately bill, you must provide the patient with an itemised account showing the MBS item number, the schedule fee, the Medicare benefit, and the gap amount.

What are your informed financial consent obligations?

Before providing a service, you are required to give the patient enough information to understand the likely cost. This is informed financial consent (IFC), and it applies to all services, not just hospital procedures.

The Australian Medical Association (AMA) and Services Australia both set out clear expectations:

Tell patients the estimated cost before treatment, including any out-of-pocket amount
Provide written estimates for procedures or services with significant gaps
Explain what Medicare will cover and what the patient will need to pay
Update the patient if costs change during treatment

IFC is particularly important for:

Specialist consultations with high gap fees
Procedures where multiple item numbers may apply
Hospital admissions (where anaesthetist and assistant fees also apply)
Ongoing treatment plans where cumulative costs add up

Failure to obtain proper informed financial consent is both a compliance issue and a common source of patient complaints to Services Australia, which can trigger further scrutiny of your billing patterns.

What are the most common Medicare billing errors?

Most billing errors fall into a handful of categories. Some are honest mistakes. Others are patterns that, regardless of intent, look problematic to auditors.

Upcoding

Claiming a higher-value item number than the service actually warrants. The classic example is a GP recording a standard Level B consultation (item 23) as a longer Level C (item 36) or Level D (item 44). If your clinical notes don't support the complexity and time requirements of the higher item, you have a problem.

Unbundling

Splitting a single service into multiple item numbers to increase the total claim. For example, billing a comprehensive assessment as separate component services when the MBS intends it to be claimed as one item. The MBS has specific rules about which items can and cannot be co-claimed.

Billing for services not rendered

Claiming an item for a service that didn't actually happen. This includes claiming for patients who did not attend, billing for components of a service that were skipped, or claiming for a service provided by someone other than the named provider.

Incorrect use of time-based items

Time-based items require that you spend the minimum specified time in direct clinical care. Administrative tasks, writing referral letters after the patient leaves, and phone calls to other providers don't count. Your records need to reflect actual start and finish times.

Failing to apply co-claiming rules

The MBS specifies which items can be claimed together and which cannot. Ignoring these restrictions, whether through ignorance or intent, results in invalid claims. The MBS Online website publishes the full co-claiming rules for every item.

| Error type | Example | Risk level | |---|---|---| | Upcoding | Billing Level D for a 10-minute consult | High | | Unbundling | Splitting a health assessment into separate components | High | | Services not rendered | Claiming for a DNA patient | Critical | | Time-based errors | No start/finish times documented | Medium | | Co-claiming breaches | Billing items that cannot be claimed together | Medium-High |

What is the Professional Services Review (PSR)?

The PSR is the body responsible for investigating whether a practitioner's Medicare billing conduct is appropriate. It operates under Part VAA of the Health Insurance Act 1973 and is independent of Services Australia and the Department of Health.

The process works in stages:

Referral from the Chief Executive Medicare to the PSR Director
Initial review by the PSR Director, who decides whether to investigate
Practitioner's response, where you can provide written submissions
Negotiated agreement or referral to a PSR Committee
Committee hearing, where a panel of your peers reviews your conduct
Determination and sanctions, which can include repayments, counselling, or disqualification

The PSR Committee is made up of practitioners from your own profession. They assess whether your conduct would be considered appropriate by your peers. That is the test: would a reasonable practitioner in your field consider the billing conduct acceptable?

You have the right to legal representation at every stage. If you receive a PSR notice, get legal advice immediately. Do not respond without it.

What triggers a PSR investigation?

Services Australia uses data analytics to identify billing outliers. If your claiming patterns sit well outside the norm for your specialty and location, you will likely attract attention.

Common triggers include:

High volume of services per patient compared to peers in the same specialty
Unusually high use of specific item numbers, particularly higher-value items
Billing patterns that don't match your specialty profile (e.g., a GP consistently claiming specialist-level items)
Patient complaints about unexpected costs or services they don't recall receiving
Tip-offs from staff, colleagues, or other practitioners
Aberrant prescribing patterns linked to billing claims (especially for opioids and other controlled substances)

Services Australia compares your billing to the 80th and 90th percentiles for your peer group. Consistently sitting above the 90th percentile for specific items or total services is the most common pathway to a PSR referral.

It is worth noting that billing above average is not automatically inappropriate. You might have a genuinely complex patient cohort. But you need documentation to back that up. If your records don't explain why your billing is higher than your peers, the numbers alone will raise questions.

What are the penalties for non-compliance?

Penalties range from administrative to career-ending, depending on severity and whether the conduct was deliberate.

| Penalty | Details | |---|---| | Repayment | Full repayment of Medicare benefits incorrectly claimed, potentially going back six years | | Counselling | Formal counselling by the PSR Director about appropriate billing practices | | Reprimand | A formal reprimand recorded on your provider file | | Partial disqualification | Banned from billing specific MBS items for a set period | | Full disqualification | Banned from billing Medicare entirely for up to three years | | Referral to AHPRA | If conduct raises concerns about clinical competence or professional standards | | Criminal prosecution | For deliberate fraud, the matter can be referred to the Commonwealth Director of Public Prosecutions |

The financial impact alone can be devastating. Repayment orders frequently run into six figures. Add legal costs, lost income during disqualification, and reputational damage, and the total cost of non-compliance dwarfs whatever was gained from incorrect billing.

What are the telehealth billing requirements?

Telehealth billing expanded massively during COVID-19, and many of those items have become permanent fixtures on the MBS. But the rules are specific.

Current requirements for telehealth billing:

The service must be clinically appropriate for delivery via telehealth. Not every consultation qualifies.
Video consultations are preferred over phone-only for most items. Phone-only items have separate (usually lower) MBS numbers.
You must have an existing clinical relationship with the patient for phone consultations (with some exceptions for rural and remote patients).
The same documentation standards apply. Your clinical notes must reflect the same detail as an in-person consultation.
Informed consent for telehealth must be obtained and documented, including the patient's agreement to the telehealth format.
You must be located in Australia when providing the service (the patient does not need to be).

Telehealth items have their own MBS numbers. Do not claim in-person item numbers for services delivered via telehealth. This is one of the most common telehealth billing errors.

| Telehealth type | MBS item examples | Key rule | |---|---|---| | Video consultation (GP) | 91800-91809 | Must use video platform with audio and visual | | Phone consultation (GP) | 91890-91899 | Requires existing clinical relationship | | Specialist video | 91810-91840 | Referral requirements still apply | | Mental health (video) | 91171-91178 | Session duration requirements unchanged |

Check MBS Online for the current telehealth item numbers, as these are updated regularly.

What records do you need to keep for Medicare compliance?

Your clinical records are your primary defence in any audit or investigation. The standard is straightforward: if it isn't documented, it didn't happen.

For every Medicare-claimed service, your records should include:

Date and time of the service (start and finish for time-based items)
Patient identification and presenting complaint
Clinical findings from history and examination
Diagnosis or clinical impression
Treatment provided or recommended
Clinical reasoning for the service (why this item number was appropriate)
Referral details (for specialist services)
Consent documentation (particularly for procedures and telehealth)

Records must be created at or near the time of the service. Retrospective documentation, especially if created after you become aware of an audit, is treated with extreme scepticism.

Beyond clinical records, your practice should maintain:

Billing records showing the item number claimed, the fee charged, and any gap amount
Appointment books (electronic or paper) corroborating the date and time of services
Staff rosters confirming which provider was present at which location
Telehealth platform logs showing connection times for video and phone consultations

Retain all Medicare-related records for a minimum of six years from the date of service. That is the look-back period for PSR investigations.

What should be on your Medicare billing compliance checklist?

Use this as a practical starting point. It won't cover every edge case, but it addresses the areas where most clinics get caught out.

Billing accuracy

[ ] All item numbers match the service actually provided and documented
[ ] Time-based items include documented start and finish times
[ ] Co-claiming rules have been checked for every multi-item claim
[ ] Provider numbers match the location where services were delivered
[ ] Bulk-billed services have no additional patient charges

Documentation

[ ] Clinical notes are created at or near the time of service
[ ] Notes include presenting complaint, findings, diagnosis, and treatment
[ ] Clinical reasoning supports the item number claimed
[ ] Referrals are documented for specialist services
[ ] Telehealth consent and modality are recorded

Patient communication

[ ] Informed financial consent is obtained before services with a gap
[ ] Itemised accounts are provided to privately billed patients
[ ] Fee schedules are displayed or available in the practice
[ ] Patients are informed of their right to be bulk billed (where applicable)

Practice systems

[ ] MBS updates are reviewed and applied promptly
[ ] Billing staff are trained on current MBS rules
[ ] Regular internal audits compare billing patterns to peer benchmarks
[ ] A Medicare billing compliance policy is documented and reviewed annually
[ ] Records are retained for a minimum of six years

If you don't have a written billing compliance policy, that is where to start. AHCRA's compliance platform includes billing policy templates and procedure documents you can customise for your practice, covering all 12 compliance categories including billing.

Frequently asked questions

Can I be investigated even if I didn't intend to bill incorrectly?

Yes. The PSR assesses whether your conduct was appropriate, not whether it was intentional. Honest mistakes and systemic errors are treated the same way in terms of investigation. Intent may influence the severity of sanctions, but ignorance of the rules is not a defence.

How far back can a PSR investigation go?

The standard look-back period is six years. This means Services Australia can review your billing records going back six years from the date of referral. This is why record retention is so important.

What should I do if I realise I've been billing incorrectly?

Contact Services Australia's Voluntary Acknowledgment process. Self-reporting billing errors before they are identified by Medicare is viewed favourably and may reduce the severity of any sanctions. Repay any incorrectly claimed benefits promptly. Document the steps you have taken to prevent the error from recurring.

Do I need a compliance policy specifically for Medicare billing?

There is no legislative requirement to have a written policy, but having one demonstrates that your practice takes compliance seriously. It also provides a framework for training staff, conducting internal audits, and responding to any queries from Services Australia. If a PSR investigation does occur, a documented compliance framework works strongly in your favour. You can find billing policy templates on AHCRA's platform.

Are locum and contractor arrangements a compliance risk for Medicare billing?

Absolutely. The provider number holder is ultimately responsible for claims submitted under their number. If a locum or contractor bills under your provider number, you are liable for those claims. Ensure locums have their own provider numbers for your location, and that your practice agreements clearly define billing responsibilities.

Sources

Medicare billing compliance doesn't need to be overwhelming, but it does need to be deliberate. Build the systems, train the staff, and audit your own patterns before someone else does.

If you are looking for a structured approach to billing compliance, AHCRA's compliance platform includes ready-to-use policy templates, procedure documents, and staff training modules covering Medicare billing and all other compliance categories. Pair it with AHCRA's CPD courses to keep your team current on MBS changes and billing best practice.

Have questions about your clinic's compliance setup? Get in touch with us. And for more on Medicare compliance fundamentals, read our companion guide: Medicare Compliance Australia: Practical Tips for Providers.