Medical billing and coding relies on accurate coding, so healthcare services are reimbursed properly. Medical coding is one of the most important steps in the medical billing process, in which medical services are encoded with universally understood alphanumeric codes, used by all healthcare providers and insurance payers. Insurance claims are prepared and submitted using these codes to tell the insurance companies how much reimbursement the healthcare facility is owed. When medical services are not encoded or billed properly, these can result in upcoding or downcoding. These represent two different types of non-compliant coding, which can have many adverse effects on the revenue cycle of a medical office. Let’s examine what each of these terms mean, and how to avoid miscoding in the first place.
What is Upcoding?
Upcoding is when a healthcare provider assigns a medical code to a service that is more expensive or complex than the actual service provided. Whether this is done unintentionally or by design, the result is a higher reimbursement from the payer to the provider than what they are rightfully due. Though sometimes this can occur mistakenly by selecting the wrong code, if this is done intentionally, it can lead to severe consequences and penalties for the medical service provider, including audits, reimbursement reversals, and losing access to government payer programs.
What is Downcoding?
Downcoding is when a provider submits a code for a less expensive healthcare service than the one provided. This means the medical provider will receive less in reimbursement than they are supposed to earn. Downcoding can also sometimes refer to when an insurance payer downgrades the submitted code to a lower paying service, if the payer decides the service billed is incorrect. The effect of downcoding on a healthcare provider is lost reimbursement and lower revenue.
Dangers of Non-Compliance Due to Upcoding and Downcoding
Medical providers are expected to submit accurate codes, and stay in compliance with all insurance payer and government payer programs.
Internal policies, or in isolated cases, intent to commit fraud may result in upcoding. Lack of documentation may result in the medical coder submitting an erroneous code, and undercoding by default. Both should be avoided to remain in compliance.
According to National Correct Coding Initiative (NCCI) General Correct Coding Policies, Chapter 1:
Physicians must avoid downcoding. If a HCPCS/CPT code exists that describes the services performed, the physician must report this code rather than report a less comprehensive code with other codes describing the services not included in the less comprehensive code. For example if a physician performs a unilateral partial mastectomy with axillary lymphadenectomy, the provider should report 19302 Mastectomy, partial…; with axillary lymphadenectomy. A physician should not report 19301 Mastectomy, partial… plus 38745 Axillary lymphadenectomy; complete.
Both upcoding and downcoding are examples of “less comprehensive code” and should always be avoided. Lack of compliance can result in fines, penalties, and losing access to Medicare and Medicaid as payer programs. This can make it increasingly difficult for the medical facility to stay profitable and provide adequate services to the local community.
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What Causes Upcoding and Downcoding?
There are different reasons why healthcare providers end up upcoding or downcoding.
Causes of Upcoding
Taking shortcuts in complex medical fields. Some specialized fields of medicine (such as oncology) regularly have patients with complex procedures. The provider or the medical coder may always input the highest possible Evaluation and Management (E/M) service, as a matter of policy. This is regardless of the actual diagnosis of the patient. Upcoding can occur when the healthcare provider reports codes that are always at the high end of the scale for sake of simplicity.
Intentional fraud. Though this is not widespread, there are medical offices that deliberately use codes to charge more than they should. An example of this would be reporting 30 to 60 minutes sessions instead of 15 minute sessions. If a medical office gets caught submitting codes with intent to commit fraud, they can be fined thousands of dollars and be excluded from taking part in Medicare and Medicaid.
Overuse of modifier 22. This is a modifier 22, Increased Procedural Services, that indicates a procedure requires more work than usual. Use of this modifier requires an adequate amount of documentation to justify using this modifier. Overusing this code when it is not warranted can cause upcoding.
Causes of Downcoding
Downcoding is also non-compliant and can cause loss of revenue for the healthcare provider.
Insufficient documentation on insurance claims. Lack of documentation may cause claims to be denied or downcoded. If you are using a more expensive code, make sure you have the proper documentation submitted with the claim.
Payer automatically downcodes a claim. Many payers have internal policies to downcode your submitted claims if their systems think it is too high. These can be appealed, but you should use enough documentation to substantiate the codes.
Human error or incorrect coding. Using the wrong codes for a procedure or being in a hurry and not analyzing the procedure and the corresponding code is another cause of downcoding.
Downcoding, whether by error or by payer policies, can cause significant financial hardship to a healthcare facility.
How to Prevent Upcoding and Downcoding
There are processes you can follow to prevent noncompliant upcoding and down coding.
1. Proper Training for Medical Coding
Many coding errors occur due to using improper codes. Learn which codes correspond to each treatment and procedure. Stay up to date on coding practices and use the correct codes for each patient visit.
2. Accurate Documentation
Research each patient appointment and add all the required documentation for each code you use. Analyze and inspect each part of the patient visit and use the appropriate codes for each component.
3. Internal Coding Audits
Your medical facility should have a team or committee that provides oversight and inspection of medical coding and billing practices in your organization.
4. Stay up to Date on Coding Practices
Know and use current versions of ICD, CPT®, and HCPCS codes. These can be updated every so many years. Be aware of current medical coding standards.
5. Obtain Pre-Authorization for Procedures
Contact the payer and pre-authorize procedures that normally require pre-approval before setting an appointment.
6. External Audits and Independent Review
Outside organizations can audit your medical coding practices for errors or potential issues. Hire organizations with a proven track record of expertise, which deliver results, embodying high integrity and impartiality.
How to Respond When an Insurance Payer Downcodes a Claim
You should always use the most accurate medical codes for each treatment and procedure, but unfortunately, for medical specialties that tend to be more complex, some payers will try to downcode claims if their systems feel the provider is charging too much. These systems can be automated to look at the average of high-cost E/M services across the board, with outliers with more expensive claims getting flagged automatically.
The denial codes that seem to come up the most are CO-22 or N22, Coordination of Benefits; CO-155 or PR-155, Patient Refused Specific Service; OA-94, Claim Processed in Excess of Charges; and CARC-131 or CO-131, Negotiated Discount.
Your job is to always represent the services rendered as accurately and truthfully as possible. Some providers will try to “downcode in advance” to avoid getting flagged by the insurance payers and keep the reimbursements on time, but this is also non-compliant. There are other avenues you can take to contest a denied claim that a payer automatically downcodes.
- Begin the appeal process. A formal appeal will usually require detailed documentation and notes.
- Communicate with the payer to find discrepancies. Ask for clarification from the payer as to why the claim was downcoded. Find the exact reasons so you can make adjustments and resubmit.
- Double check the coding. Claims that are correctly coded can often be compensated at the correct, desired rate. If a claim is coded incorrectly, the medical facility may have to accept the downcoded rate.
- Gather necessary documentation. If a payer is challenging a claim, you may need an ample amount of documentation to get approval at the desired rate.
The insurance organizations sometimes deny claims, so it is vitally important to submit claims that are checked, scrubbed, and have detailed documentation attached.
Become a Certified Medical Biller and Coder at Campus
If you’ve been thinking about starting a career in healthcare, there’s never been a better time to become a medical biller and coder. Campus Sacramento has a fully remote Online Medical Billing and Coding training program that will prepare you for the certification exams for both medical coding and medical billing. In less than ten months, you can become fully certified as a medical biller and coder. For more information on start dates, class schedules, curriculum, and financial aid, contact our friendly Admissions team or call 888-675-2460.
