Avon LMC called on the GPC to act over what it called a 'crazy' situation that threatened GP commissioning.
Representatives from the LMC staged a protest at the LMCs Conference in Liverpool by holding up a sign spelling 'FRAUD'.
Speaking at the conference, Avon LMC chairman Dr Simon Bradley said: 'Corrupt coding will kill clinical commissioning. Inappropriate coding of hospital procedures costs commissioners maybe hundreds of millions of pounds each year, and prevents the identification of funds to follow the work into primary care. Clinical commissioning will fail if we do not correct these coding practices.'
He said an Audit Commission report had found the problem was 'widespread and system-wide', yet he said SHAs, PCTs and the regulator Monitor had been unwilling to act.
Dr Bradley said this coding practice was being used by hospitals to prop up their finances.
He said: 'I have one patient who goes daily for monitoring of her pregnancy. Because it's done on the delivery suite she's charged as an admission, but it's an outpatient procedure. That one patient has cost the commissioner £30,000, and it should only have cost a matter of a few hundred.
'I've had patients who have just had their pulse taken to make sure their heart is beating the right rhythm,' he said, explaining this is then coded as an admission. 'Crazy,' he said.
He said in the past these may have been mistakes, but from now on if hospitals continued to do this it should be viewed as 'deliberate deception' and therefore 'fraud'.
Failing to tackle the problem will undermine clinical commissioning, he added. 'The whole basis of payment by results is undermined by hospitals being able to code things not by the rules but by what serves them best financially.'
He said Avon LMC would continue to campaign on the issue.
A spokesman for Monitor, the regulator for foundation trust hospitals, said it had been recently contacted by Dr Bradley on this issue but had not received any other similar complaints.
He said problems with coding were contract management issues for PCTs and CCGs to resolve. However, if allegations are made against a specific hospital trust then it would be investigated.