Under Coding: Avoid At Any Cost

You may be asking: “What’s the problem with under coding? Aren’t I saving Medicare program dollars by billing lower levels of service?” CERT is a measure of improper payments. The goal of CMS is to pay claims that meet Medicare’s requirements and pay them at the proper level of service. When there is an underpayment due to under coding, Medicare did not pay the claim correctly and it is counted as an improper payment error. You are reimbursed for the higher level of service. Under coding misrepresents the true level of care provided to Medicare beneficiaries.

Under coding errors can statistically impact calculated error rates in the tens of millions of dollars. These statistics are used to calculate future Medicare payments and track trends in healthcare delivery. Patterns of under coding may be viewed as aberrant and open your practice up to audits and reviews. In addition, under coding impacts your practice revenue. You are not being appropriately paid for the level of service you provide to your patients. Correcting under-coded claims can mean costly appeals.

There are two types of under coding that can create liability for the provider:

  1. Failing to report services performed at the encounter
  2. Under-reporting the level of service provided

Failing to report services performed at the encounter

Assume a provider sees a patient and performs three services: A, B, and C. Assume also that the applicable bundling rule establishes that service C is a component of service B, and that service B is a component of service A. Assume no exclusionary modifiers are appropriate or justified. If all three services were reported, only Service A would be paid. Knowing this, the provider omits the billing for Service B. The provider, therefore, reports Service A and Service C. Not knowing that Service B was provided, the payer allows payment for both services.

In this example, the omission was the misrepresentation that induced the payer to approve the additional (but not entitled) reimbursement. If the payer had been apprised of all the facts, they would have paid less money. This is the type of misrepresentation that can create false claims liability. At a minimum, misrepresentation by omission certainly fits within the CMS definition of abuse, which is simply “misusing codes on a claim.”

Under-reporting Level of Service

An established patient whose deductible is not met presents to the physician for an E/M service. Assume that the work and associated documentation demonstrate the physician performed a level 4 service. Concerned about the cost to the patient, the provider reports a level 2 service, instead. The value of the “discount” is remuneration to the patient. Since it can be shown that one purpose of the remuneration was to influence the patient’s selection of the provider or decision to receive the healthcare service, the anti-kickback statute would be implicated.

These examples show that under coding isn’t a recommended defensive strategy; it’s a misrepresentation of services. Under coding establishes inaccurate utilization patterns, which may, at a minimum, flag a physician as an outlier and make him or her a target for an audit.

Tips to Prevent Undercoding

  • Understand claim processing:

    With thorough insurance verification, you can understand the claim processing of each insurance company better and also all the codes they accept. This will help you to make sure whether you are coding the claims correctly and providing all supporting documentation.

  • Internal audits:

    Conduct coding audits for under coding, share audit findings, incorporate the auditor’s recommendations and give subsequent education to the providers in your practice. This would prevent you from submitting claims with under-coding errors.

  • Improving documentation:

    As mentioned earlier, under coding typically occurs from not providing sufficient details of the services performed. Office visit notes alone are often not sufficient to clearly define the complexity of a patient’s medical history and the physician’s medical decision-making. As per the Supplementary Appendices for Medicare Fee-for-Service (FFS) 2015 Improper Payment Report released by the U.S. Department of Health & Human Services (HHS), established office visits top the list of 20 types of services with under coding errors.

    You need to consider all the evidence while coding for established patient visits including the patient’s past, family, and social histories, lab test results, X-ray reports, or other diagnostic services relevant to the service and any orders for these services, referrals, and consultation reports. This information should be submitted along with the claim to substantiate the service level.

  • Don’t trust billing software:

    Instead of trusting the codes that your medical billing software suggests, consider obtaining help from experienced and certified coders. You can use electronic billing to speed up the medical coding and submission process. However, you should also take advice from experts to ensure accuracy.


Over coding? Under coding? RIGHT coding!