Down Coding by Managed Care Payers

Overview:

Managed care payers in the United States negotiate contracts with healthcare providers, such as pediatric practices, to set payment rates for services rendered to their members. These payment rates may be based on a fee schedule or a negotiated rate.

One way that managed care payers may control costs is by “down coding” claims submitted by healthcare providers. Down coding is the practice of assigning a lower billing code to a service or procedure than the code originally submitted by the provider. This lower code results in a lower payment to the provider for the service rendered, which in turn results in lower revenue for the provider.

For example, if a pediatric practice submits a claim for a Level 4 office visit (99214) but the managed care payer down codes the claim to a Level 3 office visit (99213), the payment to the pediatric practice will be lower than if the claim had been paid at the Level 4 rate. This can have a significant impact on the pediatric practice’s revenue, especially if down coding occurs frequently.

Managed care payers may down code claims for several reasons. One reason is to control costs and keep healthcare premiums affordable for their members. Another reason is to ensure that payments are consistent with industry standards and that providers are not overbilling for services rendered.

Why Should You Care About This Topic?

As a pediatric practice owner, down coding can impact your practice’s revenue and profitability. If your claims are frequently down coded by managed care payers, you may be losing out on significant amounts of revenue that could be used to invest in your practice, provide better care to your patients, or compensate your providers.

In addition, down coding can also impact your practice’s reputation and relationships with managed care payers. If your claims are frequently down coded, managed care payers may view your practice as less efficient or less credible, which could lead to decreased reimbursement rates or a lower volume of patients.

Pediatric Practices should Minimize Impact and Risk of Down coding:

To minimize the impact of down coding on their revenue, pediatric practices should ensure that their billing and coding practices are accurate and compliant with industry standards. They should also negotiate payment rates with managed care payers that reflect the value of the services they provide. Finally, pediatric practices can appeal down-coded claims with the payer to try to obtain a higher payment.

To minimize the risk of down coding, pediatric practices should ensure that their billing and coding practices are accurate and compliant with industry standards. This includes using appropriate codes and modifiers, documenting services rendered, and properly documenting medical necessity. Pediatric practices should also ensure that their staff is trained in proper billing and coding practices, and that they stay up-to-date with changes to industry standards and regulations.

Another way to minimize the risk of down coding is to proactively communicate with managed care payers. Pediatric practices can work with payers to understand their specific billing and coding requirements, and ensure that their claims are submitted in a way that meets those requirements. Additionally, pediatric practices can negotiate payment rates with managed care payers that reflect the value of the services they provide, which can reduce the likelihood of down coding.

Pediatric practices can also appeal down-coded claims with the payer to try to obtain a higher payment. Appeals should be supported by documentation that demonstrates the medical necessity and level of service provided. This documentation may include progress notes, test results, and other relevant medical records.

Overall, minimizing the risk of down coding requires a proactive approach that includes accurate billing and coding practices, communication with payers, and appeals when necessary. By taking these steps, pediatric practices can help ensure that they are fairly compensated for the services they provide.

Reasons for Down coding by a Managed care Payer:

Managed care payers may down code claims for a variety of reasons, such as to control costs and ensure that payments are consistent with industry standards. The specific codes that are most commonly down coded may vary depending on the payer and the specialty of the healthcare provider.

However, in general, some of the most common codes that are down coded by managed care payers include:

1. Evaluation and Management (E&M) codes: E&M codes are used to report services provided during office visits, hospital visits, consultations, and other encounters. Down coding of E&M codes can occur if the payer believes that the level of service reported does not match the documentation in the medical record.
2. Diagnostic codes: Diagnostic codes are used to report the reason for a patient’s visit and the diagnosis or condition being treated. Down coding of diagnostic codes can occur if the payer believes that the diagnosis reported is not supported by the medical record or does not meet their criteria for medical necessity.
3. Procedure codes: Procedure codes are used to report services provided during surgeries, tests, and other procedures. Down coding of procedure codes can occur if the payer believes that the service provided was less complex or extensive than the code reported.
4. Modifier codes: Modifier codes are used to provide additional information about a service or procedure, such as indicating that multiple procedures were performed during the same encounter. Down coding of modifier codes can occur if the payer believes that the modifier was used incorrectly or is not supported by the medical record.

Overall, healthcare providers, including pediatric practices, should work with managed care payers to understand their specific requirements and guidelines for billing and coding, and ensure that their claims are submitted accurately and appropriately.

How Should a Pediatric Practice Owner Evaluate the Practices of Their Providers to Minimize Issues with Down Coding?

To minimize issues with down coding, pediatric practice owners should evaluate the practices of their providers to ensure that their billing and coding practices are accurate and appropriate. Here are some steps that you can take:

1. Train your providers on accurate billing and coding practices: Ensure that your providers are trained on the latest billing and coding guidelines and have access to resources such as coding books, software, and online resources. Regular training sessions can help to ensure that your providers are up to date on best practices.
2. Conduct regular audits of your billing and coding practices: Regularly review your claims to identify any patterns of down coding or errors in billing and coding. This can help you to identify areas for improvement and address any issues before they become more significant.
3. Work proactively with managed care payers: Establish positive relationships with managed care payers and work proactively with them to understand their requirements and guidelines for billing and coding. This can help you to avoid common mistakes and minimize the risk of down coding.
4. Utilize technology to improve accuracy: Consider implementing electronic health records (EHRs) and billing software to improve the accuracy and efficiency of your billing and coding practices. These tools can help to reduce errors and ensure that your claims are submitted accurately and appropriately.

In conclusion, down coding can be a complex issue for pediatric practices. However, by understanding what it is, why it matters, and how to evaluate your providers’ practices, you can minimize the risk of down coding and ensure that your practice is operating at its full potential. By investing in accurate billing and coding practices, you can improve your revenue, reputation, and relationships with managed care payers, and provide better care to your patients.