By Ansley Franco
Across the country, healthcare providers are raising concerns about a billing practice that can quietly reduce reimbursement for services they have already provided. Known as payer downcoding, it occurs when an insurance company changes the billing code submitted by a provider to one representing a lower level of service, resulting in a lower payment.
While the difference may appear small on a single visit, the cumulative financial impact can be significant for physician practices that see dozens of patients each day.
Argenia McGennis, coding specialist with Systemedx Healthcare Technology, said the issue has become increasingly visible in recent months, particularly with Humana, which is leading the new downcoding practice. UnitedHealth Group also began requesting additional documentation before paying higher-level codes.
Together, UnitedHealth Group and Humana account for 46 percent of all Medicare Advantage enrollees nationwide last year, according to KFF, a non-profit, non-partisan organization specializing in national health policy research. In 2023, KFF found that about 507,000 Alabamians were enrolled in Medicare Advantage.
“Downcoding most often affects office visits for family, vascular and orthopedic practitioners,” Julie Zuidema, supervisor of Systemedx Healthcare Technology Billing Department, said. “These codes correspond to the complexity of a patient encounter with higher-level visits reimbursed at higher rates.”
Because reimbursement increases with each level of complexity, insurers may review those claims closely.
“I had one the other day that we had billed a 99214-office visit, and then Humana had changed it to 99213. And they automatically pay that, and then we have to fix everything on our end,” McGennis.
According to McGennis, the shift to downcoding appears to be relatively recent, beginning sometime last year. While insurers periodically adjust how claims are reviewed, some providers say they are seeing more scrutiny recently. But other instances with Humana appear to involve automated claim adjustments.
“Coding an office visit from a 214 to 213 means practitioners lose $37 per patient,” Zuidema said. “For a practice seeing dozens of patients daily, that reduction can add up quickly. Many single-physician family practices see 40 to 50 patients a day and bring in between $70,000 and $80,000 in monthly payments. Losing several thousand dollars in reimbursements can have a noticeable impact on operations, particularly for smaller clinics.”
For practices that closely review their explanation of benefits (EOB) statements, those adjustments can be identified and appealed. However, the process requires careful monitoring and additional administrative work. If a billing system does not flag the discrepancy between the billed code and the paid code the adjustment could be written off automatically without the practitioner realizing it. And for smaller practices without dedicated billing departments, the administrative burden can make it difficult to challenge every downcoded claim.
McGennis, who oversees Huntsville’s chapter of the Healthcare Leaders Association (HLA), said the issue has been widely discussed among local healthcare administrators and billing professionals. During an HLA meeting in Birmingham, McGennis has spoken with many Alabama-based practitioners who are being impacted by automated downcoding.
“We have a lot of family practice clients who are being hit by this because they have a high volume of office visits,” she said.
Appealing a downcoding claim is possible, but it requires time and staff resources, which involves writing a letter explaining the originally filled code. “Practices must also move quickly,” Zuidema said. “Claims generally must be submitted within 180 days and appeals typically must be filed within about 90 days after the insurer’s decision. Even when appeals are successful, the process can delay reimbursement for weeks or months.”
The effects of downcoding disputes are less visible for patients, but can still be significant. When insurers repeatedly reimburse services at lower levels, some practices begin reevaluating which insurance plans they can afford to accept. When practices drop insurance plans, patients may be forced to find new providers, sometimes after years of seeing the same physician. In urban areas, patients may have multiple options. However, in smaller communities, finding a new provider can necessitate considerable travel.
Insurance plan structures can exacerbate the situation for some patients. Many Medicare Advantage or replacement plans lock patients into a network for an entire year. If a physician decides to stop accepting a particular insurer midyear, patients may have few immediate alternatives. The ultimate result is that while the financial pressure of downcoding primarily affects healthcare organizations, the ripple effects can ultimately influence patient access, particularly if more practices decide certain insurance contracts are no longer sustainable.