Upcoding and Downcoding: How to Avoid Coding Noncompliance

Medical billing integrity hinges on accurate coding — and yet, two pervasive issues can jeopardize both compliance and financial stability: upcoding and downcoding. Though their names suggest opposite ends of the spectrum, both represent misrepresentations of clinical care that have serious consequences.

Let’s explore the distinction between upcoding and downcoding, examine how each can erode organizational profitability, and discuss compliance pitfalls. Most importantly, we’ll show how investing in staff training — not just to minimize coding errors but also to foster a culture of accuracy — can help you steer clear of both upcoding and downcoding hazards while safeguarding both patient care and reimbursement.

The difference between upcoding and downcoding

Upcoding and downcoding are both forms of medical coding that misrepresent the medical procedures performed. They occur, however, by different means.

Upcoding is when a provider codes for a more expensive or complex service than the one they provided. When this happens, this provider would get a larger reimbursement from insurance than what they are due. When this occurs, it usually happens because of innocent errors that providers and coders can easily amend. However, if done intentionally, upcoding can lead to severe financial consequences for the practice.

Downcoding, as the name suggests, is the opposite of upcoding. Downcoding is when a provider provides a billing code that is at a lower level than the services they provided should be. This means that the billing provider will receive a lower reimbursement from insurance. While it might not sound as bad as upcoding, downcoding can be equally damaging to an organization. For example, one hospital has reported that downcoding cost them $1.6 billion a month.

Compliance consequences of upcoding and downcoding

Upcoding and downcoding are both noncompliant. If your organization is not accurately reporting the services it provides to patients, then you run the risk of falling out of compliance and incurring fines or other penalties.

According to 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 19302 Mastectomy, partial…; with axillary lymphadenectomy. A physician should not report 19301 Mastectomy, partial… plus 38745 Axillary lymphadenectomy; complete.

This description includes both upcoding and downcoding, as both are examples of a “less comprehensive code.”

Penalties for falling out of coding compliance can range from one-time fines to losing access to reimbursement from public payers (i.e. Medicare and Medicaid). Both of these outcomes will damage the profitability of your organization, impairing its ability to provide services to the community.

Leverage training to avoid upcoding and downcoding

There are several steps your organization can take to avoid upcoding and downcoding. By investing in these strategies, you can make sure your organization remains in compliance and avoids penalties that will eat into your revenue.

By far the most impactful way to avoid upcoding and downcoding, however, is training. Most of the time, coding errors happen by accident when providers or coders are unsure of how to code for a service. By providing training for all staff who have a hand in coding for services, you can ensure they are up to date on payers’ billing practices, coding requirements for newer services, industry accepted best practices, and compliance.

What’s more, by giving your staff training you are more likely to retain knowledgeable coders and providers. This base of well-trained staff will provide a bulwark against coding noncompliance.