What is downcoding of claims?

“Downcoding” occurs when a health insurer unilaterally reduces an E/M service level. The typical scenario occurs when a practice submits a claim for a patient visit based on a CPT code definition (for example, new patient visit code
99204—a “level 4”) and the insurer automatically “downcodes” the claim to a lower level (for example, new patient visit code 99203—a “level 3”) and then reimburses at a lower rate. Typically, the physician receives no explanation for the change but simply receives lower reimbursement. Occasionally the EOB form might include an ambiguous explanation such as “level of service
(or procedure) has been adjusted” but more typically the only way to detect that downcoding occurred is to be familiar with the fee schedule and compare that to the amount received on the EOB form.

Sometimes health insurers downcode based solely on the diagnosis code. In other words, the insurer assumes (most likely through a software system) that when a patient presents with certaindiagnoses, the clinical evaluation can never be more complicated than a certain E/M level, regardless of the specifics of the individual case. This assumption has no clinical basis. In order to appeal the decision, the practice is stuck with the administrative burden of having to submit additional justification for the level of service performed.

A new twist on downcoding involves additional documentation requirements for some E/M services. This has appeared in two forms, with some health insurers either: 1) adopting a policy that all level 4 and 5 claims will automatically be
downcoded, and then physicians will have a window of time to submit additional documentation to support the claim; or 2) requiring substantial
additional documentation for all level 4 and 5 claims initially. In addition to the administrative burden, these requirements can complicate physician
efforts to file claims electronically.

Moreover, requiring all physicians to provide substantial additional documentation does not further the alleged goal of the health insurers,
which is to identify physicians who overuse these codes without clinical justification. Instead, it penalizes physicians across the board, particularly
those with a sicker, more complex patient mix, and seems designed to save money. The AMA has successfully worked with the Federation
to advocate with some insurers that they pull back and place limits on these documentation requirements.

The practice of downcoding claims is another important reason for physicians to assure that the medical record supports the level of services reflected in the claim. Any appeal of a claim that has been downcoded will require submission
of supporting documentation from the medical record. CMS has developed detailed guidelines to provide physicians and claims reviewers with advice about preparing or reviewing documentation for E/M services in the Medicare program.

While these guidelines are specific to Medicare, some private payors use them, and they are one resource for physician office staff. To the extent
the medical record complies with these guidelines, it should be a very strong argument in support of the physician’s position. Those guidelines are available on the Internet at http://cms.hhs.gov.

For reporting purposes, contractors need to differentiate automated, routine and complex prepayment review of claims. Contractor systems must maintain the outcome (e.g., audit trail) of prepayment decisions such as approved, denied, or partially denied. When downcoding, contractors must retain a record of the HCPCS codes and modifiers that appeared on the original claim as submitted.

Downcoding – Use of GK and GL Modifiers on Claims for Upgrades

GK and GL modifiers are used on claims for upgraded DMEPOS items. An upgrade is defined as an item that goes beyond what is medically necessary under Medicare’s coverage requirements. An item can be considered an upgrade even if the physician has signed an order for it.

Use of the GK and GL modifiers allows the DME MAC to automate the downcoding at the time of the initial determination. The advantage to suppliers is that they will not receive a total denial at the time of initial determination. Therefore the claim will not have to be sent through the appeals process in order to be paid comparable to the least costly alternative. Some examples (not all-inclusive) of situations in which this would be used are downcoding between different types of power wheelchairs, different types of hospital beds, different type of prosthetic components, or from a bi-level positive airway pressure device to a CPAP.

The GK and GL modifiers are used and the following instructions apply only when suppliers provide an upgrade – i.e., an item that goes beyond what is covered by Medicare.

The descriptions of the modifiers are:

GK Reasonable and necessary item/service associated with a GA or GZ modifier

GL Medically unnecessary upgrade provided instead of non-upgraded item, no charge, no ABN

If the beneficiary does not meet the coverage criteria specified in the medical policy for the item that is provided but does meet the criteria for a different type device, the GK or GL modifier must be used. Suppliers decide which modifier to use depending on whether or not they want to collect the difference between the submitted charge for the  upgraded item and the submitted charge for the item that meets coverage criteria from the beneficiary. 

Payment was reduced (down coded) for E/M services because the documentation was not legible to the reviewer. What should I include in an appeal request?


In order for the service to be accurately scored, documentation must be legible to the clinician. In this case, you could submit a typed version of your notes for the visit. It would assist the reviewer in determining the specific services performed that day.

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