Understanding downcoding is essential to ensuring accurate and effective claim submission and timely reimbursement. Downcoding has significant implications for healthcare providers. According to medical billing industry reports, approximately 8%–10% of claims are affected by the downcoding. This percentage has increased with the latest updates in ICD10. The result is a revenue loss to the healthcare provider. In this context, it is necessary to understand what is down-coding and how it affects the healthcare provider.
This blog will help you get through these complications. Explain the reasons for downcoding, the difference between upcoding and downcoding, and some effective tips to prevent it.
Also Read: Common Medical Billing Mistakes and Their Impact
What Is Down Coding In Medical Billing?
Downcoding in medical billing refers to the practice of coding at the lower level of medical services than the services actually delivered to the patient. In other words, it is due to the assignment of a lower level of Current Procedural Terminology (CPT) code or International Classification of Diseases (ICD) code to a medical service than what was actually provided to the patient. This results in financial loss to the healthcare provider.
Downcoding examples
Here are some real time examples of downcoding in medical billing:
Surgical Procedures
A surgeon has performed a very complicated surgery that includes many tests, but the medical documents submitted do not support the complexity of the surgical procedure or the higher-level codes. Thus, the procedure is downcoded.
Anesthesia Services
In anesthesia services, the coding depends on the time spent on anesthesia. If the actual time is less than the time mentioned in the documents, downcoding is there.
Evaluation and Management (E&M) Services
Downcoding occurs when the evaluation and management services are at a higher level of 4 or 5, but the medical documents do not support the complexity of the procedures. A financial loss for the healthcare provider is possible as the claim is submitted for a lower level 3.
How Downcoding Affects Medical Billing?
Downcoding can have some serious repercussions for healthcare providers, such as revenue loss, legal issues, and claim denials by healthcare payers. Here is a list of the negative impacts that downcoding has:
Reimbursement loss
The most serious repercussion for a healthcare provider is the financial loss and instability of the healthcare facility. Providers receive less reimbursement than the actual services provided to the patient.
Increased Claim Denials
Downcoding is one of the major reasons for claim denials. The documents submitted do not match the services provided to the patient. Thus, the insurance company may find it illegal and deny the claim for a valid reason.
Issues with Smooth Cash Flow
Downcoding results in a cash flow issue for healthcare facilities. Without timely reimbursement, the facility is unable to meet its operational expenses. Thus hindering the ability of the facility to provide healthcare facilities to patients.
Increased Administrative Burden
Downcoding results in an extra administrative burden for the healthcare facility. It requires additional time and a team of experts to deal with all the denied claims, appeals, and regulatory guidelines. The patient’s critical time is diverted to handling these burdensome issues.
Legal Actions
The continuous issue of downcoding grabs the attention of regulatory bodies. Payers conduct audits and reviews to find the root cause of the issue. An extensive investigation is expected, which can result in fines and penalties.
Reasons Why Downcoding Occurs
Downcoding can occur for multiple reasons, such as coding errors, documentation insufficiency, medical necessity, and regulatory changes. Here are all the important reasons that have a significant impact:
Coding Errors
Coding errors are one of the major reasons for downcoding. A coder can assign the wrong code to a service by mistake. For example, if a higher-level code is used, but on audit and review, it is examined that the specific procedure demands a lower-level code.
Lack of Documentation
Lack of documentation is the main cause behind downcoding. The submitted documents do not support the complexity of the procedures. Higher-level codes demand every detail of the services provided. Unclear documents result in lower reimbursement for the provider.
Medical Necessity
If the medical documents do not successfully depict the medical necessity of the procedures and the tests, then downcoding will occur. payers downcode it to support their guidelines and regulatory measures.
Bundling Issue
If more than one service is bundled and submitted with a single code but is billed separately, the insurance company downcodes the claims to a bundled code.
Changes in the Regulatory Guidelines
If the healthcare facility does not update itself with the latest version of the guidelines from the regulatory bodies, downcoding is possible. Providers may not be aware of the recent updates to ICD and CPT codes, which may lead to downcoding.
Upcoding vs Downcoding
The following table highlights the major difference between upcoding and downcoding.
| Aspects | Upcoding | Downcoding |
| Definition | Assigning a higher level of codes to the services, which actually demand a lower level of code. | Assigning the lower level of codes to the services that actually demand a higher level of code. |
| Financial Aspects | Upcoding results in higher reimbursements received by the healthcare provider. Overall financial benefit to the provider. | Downcoding results in less reimbursement received by the healthcare provider. Overall financial loss to the provider. |
| Main Reason | Intentionally done to increase reimbursement. | Not done intentionally but may occur due to coding error, duplication, or any other human error. |
| Documentation | Documents submitted with exaggerated services rendered to the patients | Insufficient documents were submitted that do not support higher-level services rendered to the patients. |
| Legal Concerns | Raise concerns about fraudulent activities and increase legal action against the provider. | It is generally not considered fraudulent activity, and there is no legal action against the provider. |
| Impact on Reputation | Damages the reputation of the provider and his facility as well. | It is unlikely to damage the reputation of the provider. |
Tips To Prevent Down Coding
Preventing downcoding is essential for the streamlined functioning of revenue cycle management. Here are some tips that can help you in this:
Tip 1
Use the specific and latest ICD and CPT codes for diagnosis and procedures. Don’t use general codes that can lead to down coding.
Tip 2
Make sure that the submitted documents clearly depict the medical necessity of the diagnosis and procedures.
Tip 3
Ensure that the submitted documents are comprehensive and provide every medical detail that is required for the complex procedures.
Tip 4
Give training sessions to your billing and coding staff about the latest updates regarding regulatory measures, coding, and compliance standards of American Medical Association (AMA) and Centers for Medicare & Medicaid Services (CMS).
Tip 5
Conduct internal audits and multiple reviews before submitting claims to the insurance company. This reduces the margin of error in the claims, which can lead to downcoding.
Choose Medheave as a Reliable Partner
An expert team at Medheave Medical Billing that stays up-to-date with the latest guidelines of the medical billing regulatory bodies can significantly reduce the chances of downcoding. We offer clear communication channels between billers, coders, providers, and healthcare payers. This helps ensure that the claims are submitted accurately with enough documentation that supports the timely reimbursement. Contact us today for a streamlined billing process.
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