Dozens of Sydney brothels are passing off sex acts as therapeutic massages and illegally billing health insurers for the services, a newspaper and an official said Monday.

Health funds uncovered the fraud after investigating a Chinese-language newspaper advertisement offering to provide "young attractive masseuse with a health fund rebate," Sydney's The Daily Telegraph newspaper reported.

Australian Health Insurance Association spokeswoman Jen Eddy confirmed the article was accurate but said she did not know whether criminal charges would be filed.

"I understand the information is accurate although I cannot identify the fund that carried out the investigation," she said.

Health Minister Nicola Roxon said her department was investigating the report because public money was involved through government subsidies to health insurance premiums.

"We are interested in public funds being used for health services, and if we have any evidence to the contrary then certainly we would look at how we could take action," she told reporters.

The newspaper said about 80 massage services in Sydney have been registered by health funds for fraudulent behavior due to the investigation, meaning they can no longer gain insurance rebates for their services.

The article did not say how many of these services were claiming rebates for sex and Eddy could not provide a figure.

Sex services which cost $39 were billed as a massage or acupuncture session and each attracted a health insurance rebate of $26, the newspaper said.

Some businesses were exposed because all their clients were men aged between 36 and 72 years who were charged for acupuncture treatments over consecutive days, the newspaper said.

Some charged insurers for multiple massages or acupuncture sessions when only one was provided so that the customer paid nothing, it said.

Click here for more on this story from The Daily Telegraph.