Upcoding vs. Downcoding: Know the Difference

"Upcoding" means reporting a higher-level service or procedure or a more complex diagnosis, than is supported by medical necessity, medical facts, or the provider's documentation. For example, reporting a diagnosis of chronic bronchitis if the patient has acute bronchitis qualifies as upcoding, as would billing a level 5 evaluation and management (E&M) service (e.g., 99215) for a minor patient problem, or coding for excision of a 2.5 cm skin lesion (e.g., 11403 Excision, benign lesion including margins, except skin tag (unless listed elsewhere), trunk, arms or legs; excised diameter 2.1 to 3.0 cm) when the lesion actually measured 1 cm (e.g., 11401 … excised diameter 0.6 to 1.0 cm).

Upcoding - whether intentional, or not - is a serious compliance risk that may lead to payer audits, reimbursement take backs, and charges of abusive or fraudulent billing.

"Downcoding" is the opposite side of the upcoding coin. Typically, downcoding occurs because the provider fails to provide relevant documentation details to assign a service, procedure, or diagnosis to the optimal level of specificity. For example, diabetes is frequently undercoded. Many providers default to diabetes without complications. Whereas, correct coding requires that the provider document the type and method of control.

Some providers may downcode as a defensive strategy to avoid denied claims, audits, etc. For example, many payers now examine frequency distributions for E&M billing codes to identify "outlier" providers who bill a greater than average number of higher-level E&M services. Providers may purposely undercode in the mistaken belief that they must mirror these "E&M Bell Curves" to be compliant.

You should avoid this strategy. Regarding E&M services, in particular, not every provider whose billing patterns fall outside the average is engaged in undercoding or overcoding. A number of factors - including the provider's subspecialties, practice demographics, patient acuity statistics, administrative adjustments and denied claims analysis, and even local public health data - may legitimately affect the provider's distribution of E&M service levels. For instance, a provider may see a high percentage of patients with chronic health problems, which may skewer his billing averages.

Undercoding potentially harms patients (for instance, by under documenting a diagnosis), preempts legitimate revenue (for instance, because the service billed reimburses less than the service actually performed), and represents a compliance risk equal to that of overcoding. According to the 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 CPT code 19302 (Mastectomy, partial ..., with axillary lymphadenectomy). A physician should not report CPT code 19301 (Mastectomy, partial ...) plus CPT code 38745 (Axillary lymphadenectomy; complete)."

Periodic, internal audits of your coding, billing, and documentation practices is one of the best ways to detect and eliminate upcoding and downcoding (and many other compliance risks, in addition). For example, you might self-audit 20 records per provider, every six months, to pinpoint inconsistencies between provider documentation and the codes reported. The goal of these internal audits is to ensure that documentation guidelines are met and that services, procedures, and diagnoses are supported at the level they are billed. Medical documentation should be unambiguous (to the auditor, not only to the documenting provider) and the entire note must be legible.

Be sure to share audit results with providers, as well as with coding and billing staff, and enact education and policies (including follow-up audits) to correct errors, going forward. Quarterly audits may be even more effective to correct bad habits, and you might also consider using an external auditor, on occasion, to verify your findings.

Here's the bottom line: In every case, you should report and document diagnoses, services, and procedures to the optimal level demonstrated by provider documentation and medical necessity. Anything less is noncompliant.

G. John Verhovshek, MA, CPC, is the managing editor for AAPC's publications. He has written, cowritten, and edited dozens of coding and compliance resource manuals, including the "Part B Survival Guide" (1st edition) and "The Official CPC Certification Study Guide" (1st edition). He may be reached at g.john.verhovshek@aapc.com.