Physicians and their billing/coding staff have an established history with, and an acute awareness of upcoding and overpayments. In fact, unless they’re operating within a fraudulent billing scheme, they’re avoiding the practice of upcoding all together. Upcoding is arguably the most common red flag in both audit selections and audit results, making it a serious offense for providers who value payment integrity. So much attention is dedicated to avoiding upcoding, that many fail to acknowledge upcoding’s dangerous sibling: downcoding.

Upcoding and downcoding are two sides of one very expensive coin.

Upcoding involves billing and/or reporting a higher-level service, or a more complex (expensive) diagnosis than what is reflected in the patient’s true treatment plan. These higher service levels are not supported by medical necessity, facts, or even provider documentation. Medicare pays for physician services with Evaluation and Management (E/M) codes, which rely heavily upon medical necessity being confirmed for each level of service reported. Upcoding has proven to be an issue in Evaluation and Management audits because the reporting of high levels of service equals more money in the provider’s pocket.

In regards to upcoding, CMS has provided an insightful example:

“Another example of upcoding related to E/M codes is the misuse of modifier -25. Modifier -25 allows additional payment for an E/M service provided on the same day as a separate procedure or service. Upcoding occurs if a provider uses modifier -25 to claim payment for an E/M service when the patient care rendered was not medically necessary, was not distinctly separate from the other service provided, and was not above and beyond the care usually associated with the procedure.”

Downcoding, on the other hand, is often utilized as a means of avoiding red flags or suspicion of fraud. This method is counter-intuitive, as downcoding is often just as damaging as upcoding – though for some different reasons. Downcoding occurs because of insufficient documentation that fails to assign levels of services to the highest levels of specificity. This is often practiced as a defensive tactic against denied claims, E/M audits, and (incorrectly) non-compliance designations. Many payers analyze the frequency in which some E/M codes are reported, and use this frequency data to identify outliers, or providers who bill inordinate amounts of high-level E/M services. Downcoding can skew this data, and blanket providers beneath the illusion of compliance. Of course, this is only an illusion, as reporting data below (rather than above) the national average can also signify a problem in billing practices, resulting in an audit.

Downcoding may not be financially harmful to payers, but it does lead to the misallocation of funds.

Downcoding is an unwise course of action that can backfire. For example, practitioners who downcode might be more likely to be flagged for an audit if their services are consistently below average. Or, if the patient needs more extensive treatment later, the practitioner could be questioned—even sued for malpractice—for not documenting accurate details of the treatments in a complicated condition. Cases involving diabetes are notorious for being riddled with downcoding techniques. For example, some providers may report “diabetes without complications” by default, but this diagnoses requires that the specific type of diabetes and the control methods are fully documented. For this reason, it could be suggested that accidental downcoding is an easier mistake to make. Physicians and their billing teams should be extremely vigilant in checking documentation across the full spectrum to ensure there are no instances of upcoding, downcoding, and everything in between.