You may find it hilarious and ask why a healthcare practice would downcode their services. BUT! It is a significant medical billing error that can impact the healthcare facility’s financial health, hurt patient care, and lead to legal repercussions.
Thus, we have curated this comprehensive guide to help you understand downcoding in medical billing. We will share some examples to help you better understand how it happens, the reasons behind it, and its consequences, as well as some tips to help you prevent it.
So, if you want to learn all this and more, we recommend you read this guide till the end.
What is Downcoding in Medical Billing?
Downcoding in medical billing is when you bill for a service or procedure at a lower level than the level it was rendered.
Examples of Downcoding
Some of the examples of downcoding in medical billing are discussed below:
Example # 1 – Mastectomy
The healthcare provider removed the lymph nodes along with a partial mastectomy. Now, when it was time to bill for the procedure, the surgeon used CPT code 19301 for partial unilateral mastectomy instead of CPT code 19302 for partial unilateral mastectomy with axillary lymph node dissection, which resulted in less reimbursement than the deserved amount.
Example # 2 – Colonoscopy
Another downcoding scenario is when a provider performs a colonoscopy, i.e., examines the entire colon, which requires using CPT code 44406 but only billed as a sigmoidoscopy, CPT code 45341, i.e., for the lower colon examination only.
Example # 3 – Diabetes
Billing for a generic ICD-10-CM code E11.9, i.e., for Type 2 diabetes mellitus without complications when more specific codes exist for various types of diabetes with complications, such as E11.11 for diabetic ketoacidosis with coma, is also a type of downcoding.
Example # 4 – Bronchitis
Similar to example 3, billing ICD-10-CM code J20.9 for acute bronchitis, unspecified when codes are available for various bronchitis, such as J20.0 for acute bronchitis due to microplasma pneumoniae, is also an example of downcoding.
3 Major Reasons for Downcoding
Downcoding in medical billing can be due to the following reasons:
Coding Errors
One of the reasons behind downcoding is coding errors. It not only affects your practice’s financial health but also has an immediate effect on patient care.
Think of what will happen when you use the wrong codes and then refer the patient to another physician. Chances are, the referring physician will provide care that is not compatible and may cause adverse health issues for the patients.
Thus, while coding, review codes attentively and use the ones that describe the patient’s situation in the best way possible.
Incomplete Documentation
If a healthcare provider’s notes lack the necessary information and documents supporting a diagnosis and procedure, the coding professional may choose the wrong code while submitting the claim. It can specifically happen when you deal with complex diagnoses and procedures.
Intentional Incorrect Coding
Another reason behind downcoding is intentionally wrong or fraudulent coding. Physicians provide care services to insured patients and then submit claims with codes to charge for the services. If a physician is involved in unethical practices, they may downcode intentionally. However, it may result in federal fines or penalties for deception.
Impact of Downcoding on Revenue Cycle Management
There are several consequences of downcoding on the revenue cycle management (RCM) of the healthcare facility. Some of them are discussed below:
Reduced Revenues
Downcoding can affect providers’ revenues since it results in lower reimbursement rates. It may result in strained budgets, making it more difficult for the practice to pay its bills and continue its operations.
Increased Costs
Healthcare providers may need to make themselves available from their busy schedules to appeal for downcoding decisions with the insurance payers or hire additional staff to handle it. It can result in a rise in overhead administrative costs.
Unsteady Cash Flow
Reduced revenue and increased expenses can put a burden on the cash flow, particularly for smaller practices with fewer financial buffers. As a result, payroll and other expense coverage become challenging.
Other Consequences of Downcoding
When your practice continuously makes the mistake of downcoding, it puts a financial burden on the patient and they are required to pay out of their pockets. As a result, patient dissatisfaction and complaints against your practice can jeopardize your reputation.
If you fail to handle downcoding or upcoding in medical billing, it can lead to increased regulatory scrutiny and audits. Besides, regulators may view it as dishonest underbilling.
How to Prevent Downcoding in Medical Billing?
If you want to avoid downcoding, the following tips will help you:
Perform Regular Internal Audits
Conduct internal audits regularly to identify flaws in your medical billing and coding workflow. During the audit, you can check your documentation’s completeness and accuracy. You can also review your coding practices for compliance. Moreover, you can partner with an external auditor to validate your internal audits.
Ensure Accurate Coding
Claim submission accuracy is the best way to prevent downcoding. When your billing and coding team is well-versed in your specialty’s codes and uses the code that best suits a particular diagnosis or procedure, the chances of a claim’s first pass rate increases, and the denial rate decreases significantly.
Stay Current with Evolving Regulations
The healthcare medical billing space is subject to continuous changes and updates. Thus, your team must stay up-to-date with the latest coding guidelines and regulations to ensure compliant billing and coding practices.
Train Your Staff
You need to train your staff on the consequences of downcoding and the significance of coding accuracy. You must also educate them on the importance of document completeness and accuracy to lower the denial rate and prevent legal repercussions.
Claim Monitoring
Another best practice to avoid downcoding is monitoring claims proactively. Check to see if they are being reimbursed at the correct care level. If you suspect that you are getting paid less, raise the matter with the insurance payer and implement seamless coding practices to ensure claim accuracy.
Bottom Line
Downcoding in medical billing can be a simple oversight or a fraudulent practice. Either way, it can adversely affect the practice’s revenue cycle and sustainability. However, you can follow the best practices stated above to prevent downcoding and streamline your medical billing and coding workflow.
However, if you are unsure how to handle medical billing in-house and prevent errors like downcoding, you may outsource medical billing to a professional RCM company, like MediBill MD.
