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Medical BillingUndercoding is as much a problem as overcoding and occurs when the CPT and HCPCS codes billed do not indicate the full scope of the work performed by the physician or facility. In addition to lost revenue, undercoding is likely to make you a target for audits. Outsourcing companies that provide medical billing services help physicians avoid these perils of miscoding by performing internal audits to identify patterns of miscoding.

Medical undercoding occurs when the physician – or an experienced medical coder – omits codes from a patient’s superbill or uses codes that under-represent the services provided to the patient. The most typical example is undercoding in evaluation and management (E/M) services. Providers must code the level service supported by their documentation.

The reasons why healthcare providers tend to undercode is because they believe that it will help them avoid audits or to reduce the patient’s costs. However, a recent AAPC report cautions that undercoding is not an audit-avoidance strategy. On the other hand, it increases the risks of fraud and noncompliance. As the CMS fact sheet states one example of Medicare fraud as “knowingly billing for services that were not furnished,” services that are purposefully undercoded fall in the category of fraud.

Providers who deliberately undercode in the hope of avoiding an audit or do so because they are unsure of the correct code are considered outliers. In addition to putting physicians at the risk of audits, undercoding:

  • Causes practices to lose thousands of dollars in revenue every year. Medicare reported that undercoding cost medical practices up to $236 million in 2008 alone
  • Increases the volume of incorrectly paid claims, that is, claims that are not paid at the proper level of service
  • Affects patients negatively, as it misrepresents the true level care that Medicare beneficiaries receive. Medicare and other payers use this data to calculate future payments and monitor healthcare delivery trends.

As in any other industry, in healthcare too, internal auditing plays an integral role in fraud prevention and detection. Experienced medical billing companies provide internal audits as part of their services to help physicians’ office identify errors that could put them at risk of a payer audit. Here are some strategies that can help physicians avoid undercoding:

  • Use of medical billing analytic and benchmarking tools: Physicians should assess the health of their practice and know what they should be earning. Providers can average their own procedures to identify miscoding, loss of revenue, and audit risk. Benchmarking data helps providers compare fees, profit, reimbursements, and number of procedures to that of their peers. For instance, an E/M utilization benchmark can be used to compare a practice’s evaluation and management (E/M) CPT code utilization to other providers in the same specialty.
  • Train coding and billing staff: Practices that perform billing in-house should train and educate their staff to avoid undercoding.
  • Use a quality EMR system: Physicians also need to use an EMR system that will help them accurately report services provided. Quality systems recommend appropriate codes for physicians to choose from, remember prior diagnoses for patients, and provide reports on billing trends.

With the focus now on value-based care, payers have become more vigilant than before. They maintain profiles on physicians in their network that help them study coding patterns and detect if miscoding has occurred. Experts estimate that an individual physician practice can lose as much as $100,000 every year due to undercoding. Relying on an experienced medical billing company is a practical option when it comes to avoiding the risks of undercoding, compliance problems, and payer audits and refunds. These companies have dedicated teams that provide error-free medical billing and coding services as well as internal audits to identify red flags that would attract payer scrutiny.