Almost all modern medical practices have experienced downcoding of their medical claims by insurance companies.  In simplest terms, downcoding describes the situation where a practice submits a claim based on a certain CPT code, but the insurance company automatically “downcodes” the claim to a code that effectively lowers the amount paid out to the physician.  The provider receives no explanation for the change, but simply receives a lower reimbursement.

In 1999, one physician sued several insurance companies to stop these practices.  In the following year, so many suits were filed that the case turned into a class action suit.  The case involved between 800,000 and 1 million physicians, and was the largest class action suit ever filed in the United States.  Nonetheless, legal efforts have done little to curb downcoding and similar unfair billing practices.

Insurance companies argue that downcoding provides them some recourse against providers who upgrade codes.  However, the practice has become so common that almost all physicians are now subject to decreased reimbursement amounts and the costs of supplying additional documentation to the insurance company in connection with downcoded claims.

The below chart provides examples of CPT codes that are consistently downcoded by insurance payers.  This chart illustrates the potential income lost by the average physician on a typical downcoded claim.

Difference in Medicare Allowed Amounts for E&M Codes

CPT Code Medicare Allowed Rate Potential Downcoding Difference
99205 $                213.60
99204 $                170.47 $                      43.13
99203 $                110.92 $                      59.55
99202 $                  76.88 $                      34.04
99201 $                  44.77 $                      32.11
99215 $                149.60
99214 $                111.39 $                      38.21
99213 $                  74.46 $                      36.93
99212 $                  44.77 $                      29.69
99211 $                  22.33 $                      22.44
99234 $                142.68
99233 $                108.67 $                      34.01
99232 $                  75.78 $                      32.89
99231 $                  42.12 $                      33.66

Healthcare providers are not completely helpless against downcoding.  There are several strategies that can be implemented by physicians to try to reduce their number of downcoded claims.

1. Monitor the staff.

One of the most important steps is to make sure that the provider’s staff is coding claims correctly and providing all supporting documentation.  All staff members responsible for coding claims must have a clear understanding of each insurance company’s claims submission process.

2.  Use electronic billing.

Using an electronic billing system can help with the coding process when the system is integrated with software that points out questionable information or empty fields.  This approach will speed up the coding and submission process and reduce the chance for errors.

3.  Document your downcoded claims.

Keep documentation of all claims that are denied, downcoded or delayed and report all inappropriate behavior to your elected representatives and your state department of insurance.

4.  Compare payments with fee schedules.

All payments received from insurance carriers should be routinely compared to the fee schedule to make sure that the correct payment has been provided.  If a claim has been filed incorrectly by the provider, but is still inappropriately downcoded by the health insurer, the physician should appeal that claim.

5. Take help from medical associations.

Physicians’ associations often provide useful resources to fight against downcoding and other unfair billing practices.  The AMA (American Medical Association), for instance, has issued a policy that strongly opposes downcoding and bundling.  Under Policy H-70.949, the AMA has undertaken to advocate and take steps to ensure that public and private payers do not bundle services inappropriately by encompassing individually coded services under other separately coded services unless specifically addressed in CPT guidelines (AMA policies can be accessed at the AMA web site, http://www.ama-assn.org).  The organization also provides a helpline called CPT Information Service, which is specifically dedicated to helping medical practices seek solutions for downcoding.