Medical Billing

Physicians, medical billers, and coders have an established history and significant awareness of upcoming and overpayments. However, unless they’re operating within a fraudulent billing scheme, they avoid the practice of upcoding altogether.


Upcoding is a false-hearted medical billing audit in which a medical bill forwarded for a health service is more expensive than it should have been based on the health care service that was provided by the physician. An upcoded bill can be forwarded to third-party payers, including private health insurance companies, Medicaid, Medicare, or the patient.

Upcoding is arguably the most common red flag in both audit selections and audit results, making it a severe violation to healthcare providers who value payment integrity. So much attention is required to avoid upcoding that it may lead to greeting up coding’s dangerous sibling: “Down coding.”

Upcoding and downcoding are two opposite sides of one costly coin. Upcoding involves billing and reporting a higher-level medical service or a more expensive diagnosis than what is reflected in the patient’s health service plan. Medical necessity, facts, or provider documentation do not support these higher service levels.

Medicare pays for health care services with Evaluation and Management (E/M) codes, which depend heavily upon medical necessity being confirmed for each level of service reported. Upcoding has proven to be a problem in Evaluation and Management audits because reporting high levels of service equals more money in the provider’s pocket.

For example, diabetes is often coded. Many healthcare providers default to diabetes without complications. However, correct coding requires that the healthcare providers document the type and method of control.

Down Coding:

Down coding, on the contrary, is often utilized to prevent red flags or the notion of fraud. This procedure is counter-intuitive, as down coding is often just as hazardous as upcoding, though for different reasons. Down coding occurs because of inadequate documentation and reports that fail to assign levels of services to the highest levels of specificity. This is usually practiced as a protective approach against claim denials, Evaluation and Management audits, and non-compliance designations. Many payers analyze the regularity with which some E/M codes are reported and use this frequency data to classify outliers or healthcare providers who bill excessive amounts of high-level E/M services. Down coding can tilt this data and blanket providers beneath the compliance misconception. Hence, this is only a misconception, as reporting data below (rather than above). The national average can also indicate complexity in medical billing practices, resulting in an audit. Down coding may be beneficial to third-party payers, but it does lead to misallocating funds.

It is the foremost duty of physicians and their medical technician staff to be extremely cautious in verifying and validating documentation across the full spectrum to ensure that upcoding and downcoding do not occur.