Monitoring for fraud by payers is now a significant component of healthcare-related payment integrity programs. Some of the most problematic items that are under intense scrutiny by payers are downcoding and upcoding.
Upcoding results in overpayment due to the overreporting of the level of care. Downcoding leads to underpayment due to the underreporting of the level of care. Although the practices differ in terms of their impact, they both create issues with accurate billing and compliance. Such practices in billing involve manipulating the codes submitted to Medicare, Medicaid, or private insurers to inflate reimbursement. Payers employ structured observation in the monitoring and correction of this process.
This blog highlights how the payer utilizes data and analytics to detect and monitor any fraudulent practices, identify the key indicators that lead to audits, and demonstrate how accurate payment decisions can be made with the help of clinical validation documents. Furthermore, how monitoring techniques are changing for payers and what providers can do to minimize exposure is also discussed in this blog.
Coding Frauds in Healthcare
What is Upcoding?
A medical billing practice, “upcoding,” is when a provider submits a billing claim using the CPT code that represents a higher degree of service, complexity, or severity than the service that was actually rendered or the complexity recorded as per the ICD-10.
Example
Exaggerating the visit complexity: It includes giving a code for a comprehensive visit to a simple office visit that had a narrow focus.
Overstating the procedure: documenting the code that shows a complex invasive surgery was done while the procedure was simple or non-invasive.
Reporting more time spent: the evaluation and management codes were applied to a small encounter visit.
Misuse of Modifiers: Use of modifiers to indicate separate or additional service when they are part of the basic service.
Importance
Upcoding is regarded as incorrect billing and leads to a larger reimbursement. It is categorized as healthcare fraud when it is done intentionally, and when done unintentionally, it leads to:
Claims denial
Recoveries of payments
Risk of compliance and audits
What is downcoding
Down-coding is a form of medical coding where a provider assigns a code for a service or complexity that is lower than that which was provided and documented. Resulting in receiving a payment that is less than the service provided.
Example
A complex evaluation and management visit will be reimbursed similarly to a lower-level office visit.
A procedure requiring advanced care will be coded as a basic service.
Importance
Although downcoding can lead to decreased payments from Medicaid or other insurance companies, downcoding also poses various issues, like, for example,
Distort Utilization Data and Quality Data
Affect risk adjustment and quality metrics
Indicate compliance gaps, workflow issues, or payer-driven behavior.
Why Payers Monitor Coding Fraud
Financial Influence on Healthcare Payments
Improper coding directly impacts health care expenditures. Due to upcoding, overpayments occur by the payers; when it comes to downcoding, there are underpayments along with incorrect cost information.
For the public programs like Medicare and Medicaid, there are also issues regarding the sustainability of taxpayer-funded healthcare due to improper payments.
Compliance and Regulatory Requirements
Payers have the power to detect and prevent fraud, waste, or abuse (FWA). The key governmental organizations that require health plans to have fraud monitoring programs include the Centers for Medicare & Medicaid Services (CMS) and the Office of Inspector General (OIG).
Lack of monitoring for coding practices may result in regulatory findings, penalties, and corrective action plans for the payers.
Impact of Frauds
On practices
For healthcare organizations, errors in coding lead to elevated risks of audit, denial, or recoupment of payments. Organizations with practitioners exhibiting uniform errors in coding will heighten risks of prepayment audit, documentation inquiry, or strained relationships with insurers.
The administrative burden will also increase because of the additional staff time that will go into responding to audit inquiries and appeals.
On Patients
Inaccurate coding can impact patient records, quality reporting, and care analytics. Inaccurate coding can contribute to inaccurate risk scores, missed gaps of care, and incorrect cost-sharing estimates. Inaccurate coding over a period of time can impact coverage decisions and care management strategies.
How Payers Monitor Upcoding and Downcoding
Claims Data Review
Claims data serves as the main source for fraud monitoring by payers. The payers analyze billing codes, usage rates, and payment rates to spot anomalies. The analysis revolves around shifts in coding practices, usage rates for high-level codes, and consistency.
The claims are assessed both on an individual basis and in the aggregate to look for patterns rather than random errors.
Rules-Based Claim Edits
Edits based on rules involve automated tests used during claims adjustments. Such edits point out the problems, such as illogical code sequences, excessive use of modifiers, and services exceeding limits of frequency and medical necessity.
Claims that do not meet these tests may be rejected, suspended, or forwarded for reconsideration.
Peer Benchmarking
This benchmarking assesses the provider’s coding practice in comparison to those of similar providers in terms of specialty, geographic area, and practice types. Providers whose coding intensity or volume varies considerably compared to their peers who have similar patients will receive consideration for review. In many cases, this variation is also linked to gaps in provider enrollment and payer credentialing compliance.
Benchmarking allows payers to differentiate between normal variation and possible fraudulent activity.
Common Red Flags Payers Look For
Frequent Use of High-Level Codes
Consistently billing the highest-paying E/M or procedure codes (CPT) is always a red flag, especially when case complexity does not support the use of the code.
Unusual Coding Patterns Compared to Peers
Providers with a coding pattern that varies significantly from peer benchmarks may be identified for further review, whether the codes are higher or lower than average.
Documentations That Do Not Support Codes
Claims are considered unsupported when the medical record does not contain sufficient detail to support the service billed or the code used. One of the most frequent reasons claims fail review is because of documentation gaps.
Clinical Validation and Record Review
Role of Clinical Reviewers
The clinical reviewers, including nurses and certified coders, evaluate whether the medical records support the use of the codes billed. The responsibility of the clinical reviewers is to confirm medical necessity, level of severity, and complexity of services according to specified coding standards.
Documentation Requirements and Gaps
Many findings of fraud are the consequences of poor documentation rather than fraudulent activities. In the case of missing documentation related to the time, judgment, or status of patients, results in claims being denied or incomplete reimbursement.
Complete and accurate documentation leaves less room for audit problems.
Strong record keeping inside the EHR helps prevent repeated errors caused by EHR documentation workflow issues.
Pre-Payment and Post-Payment Monitoring
Pre-payment Claim Edits & Holds
Incorrect payments are prevented through prepayment review. Payment claims that generate automated edits or identify errors or incomplete information are denied and are put on hold until the proper documentation is received.
It helps to curb overpayment but might cause a delay to the provider.
Post-Payment Audits and Recoupments
The process of monitoring happens after the payment of the claims. The payers carry out a retrospective audit, medical records inquiry, and the reimbursement of payments in case of inappropriate coding of the claims.
Often, post-payment audits are required for risk adjustment and high-cost service reviews.
What can be done to reduce risk
Interior Audits & Self-Monitoring
Regular coding audits allow healthcare providers to discover mistakes prior to the discovery of these errors by insurance companies. The process of comparing claims to supporting documentation ensures accuracy and uniformity in the billing process.
Healthcare Providers’ Education and Accuracy in Documentation
Continual education will help keep practitioners knowledgeable about documenting requirements and up-to-date code requirements. Good documentation practices will aid in relevant code selection to withstand audit challenges.
Clinical Documentation Improvement for Compliance
Code review, Clinical Documentation Improvement (CDI), and compliance staff work together to make sure that documentation accurately reflects the care given and meets the needs of payers and regulators.
Outsourcing Medical Coding Services
Hiring outside companies to do medical coding work, done by trained and certified coding specialists, can help reduce risks. Third-party medical coders are experts, know the most up-to-date medical coding standards, and are an unbiased source for quality review.
Consequences of Coding & Billing Errors
Claims Review and Request for Records
When there are suspicious claims, the insurance company requests the medical records for further verification. The providers are asked to provide the records within specified time limits.
Payment Adjustments or Denials
Concerns about improper coding will likely result in insurers denying payment, adjusting payments, or recouping overpayments that eventually increase aging accounts receivable in medical practices. This could result in continued monitoring or further audit investigations if persistent errors are identified.
Conclusion
Payers are now more systematic and data-driven when it comes to keeping an eye on upcoding and downcoding fraud. By using rules-based edits and clinical documentation reviews to look over claims data, payers can make sure that payments are made correctly.
From a provider perspective, risk reduction begins with accurate coding and good documentation to support it. As more targeted monitoring is being implemented, elements such as transparency and quality of documentation remain important to maintain accurate payment processes.
FAQ’s
What is reimbursement?
The reimbursement is the process where the providers, practices, and hospitals are paid by the payers for the services they render to the patients registered with them. The payers are the third party: private (e.g., UnitedHealthcare or others) or government (Medicare).
What is the difference between upcoding and downcoding?
Upcoding is a situation where more services are billed for than provided, resulting in an overpayment. Downcoding is where fewer services are billed for than are provided, hence affecting the data.
What are the differences between payer fraud monitoring and traditional claim reviews?
Payer fraud analysis is more focused on analyzing patterns of fraudulent billing, while traditional claims analysis typically analyzes claims individually to check whether they meet certain minimums of validity. Fraud analysis uses analysis, benchmarking, and clinical validation to spot systemic risk.
What are the usual documents assessed in a payer audit?
The medical records are reviewed by the payers for the clinical notes, treatment plans, and diagnosis results, as well as time-based documentation, in order to check if the services are in line with medical necessity and coding rules.
How does payer monitoring impact programs in value-based care?
Accurate coding enables reliable risk adjustment, quality, and performance measures. Unsound coding may impair outcome measures as well as cost measures within value-based payment models.
What is the role of outsourcing medical coding in supporting the efforts for compliance?
Outsourcing the coding processes results in decreased errors and increased audit readiness owing to the expert and up-to-date knowledge of individuals in coding guidelines and independent quality checks.
