The High Cost of Undercoding

August 18, 2010
James S. Lacy, JD

MDNG Primary Care, July 2010, Volume 12, Issue 7

Is your practice losing thousands of dollars each month by being too cautious with coding and billing?

Is your practice losing thousands of dollars each month by being too cautious with coding and billing? Web-based billing analytics tools and other resources can help you establish a benchmark for what you should be earning and ensure that your billing is audit-proof.

Caution is a learned reaction to negative experiences and is often a wise course of action in the practice of medicine. In your clinic’s billing department, however, caution may be costing you much-needed revenue.

Many practices err on the side of caution when assigning procedure codes. In a majority of cases, the fear of a chart audit is undoubtedly near top of mind. It’s an understandable concern. But such reticence can also cause practices to undercode for a procedure. The trouble is, unless you have some way of uncovering such decision-making, you’ll never know if you’re receiving all of the income you’ve rightfully earned.

One of the best ways to identify undercoding is through the use of billing analytics and benchmarking tools. Such tools, often made available by revenue cycle management solution providers, offer benchmarks that allow you to compare your billing policies and performance against clinics in similar specialties. The benchmarks factor out geographic, practice size, and other differences to give you and potential auditors a reliable comparison. Benchmark statistics delivered via a Web-based service are also constantly updated in order to reflect the latest aggregated information.

When judging the appropriateness of billing decisions, benchmarks can be invaluable. Not only will they help you quickly identify potential points of departure from industry norms, but also, as long as your assignment of procedure codes is at the benchmark, any changes you make will be clearly defensible.

Leaving money on the table

Let’s look at how benchmarks can uncover the high cost of undercoding. In one recent real-world example, a surgical practice specializing in spine injuries and disorders was shown to be billing 94% of its office/outpatient visits under Evaluation and Management (E/M) code 99213—which is the code for a 15-minute face-to-face visit. Just over 5% of the practice’s visits were assigned to code 99214, denoting a 25-minute face-to-face visit.

Based on appointment records, all of this was appropriate. The trouble is that minutes are not the only criteria that determine accurate visit coding. For patients with high acuity or complexity levels, code 99214 can be assigned even for visits of less than 15 minutes. The difference for this provider, when compared to substantiated benchmarks and using a blended Medicaid/Medicare/commercial payment rate to estimate the underbilling, was remarkable: nearly $8,000 in lost revenue due to underpayment per month.

By undercoding, this clinic was leaving nearly $100,000 on the table each year. Moreover, this was only one of several instances of undercoding at this practice that was identifi ed by the benchmark comparisons.

Only by measuring coding practices against benchmarks can such revenue losses be fairly and justifiably recovered. Remember, this is just by meeting the benchmark, not exceeding it. When compared to the loss in income that a clinic may experience—a virtual certainty—isn’t the chance of an audit that only establishes benchmark performance worth the low risk?

If your practice uses electronic medical record (EMR) technology, you have an added coding asset. Typically, billers require documentation in three key areas (history, physical exam, and medical decision-making) to assign codes properly. EMR systems automatically capture rendered services, including review of systems, exam elements, and other information in bulleted form; these data not only help accurately determine proper billing codes, but also provide a later audit trail if needed.

Like most physicians, you no doubt labor long hours in the exam room each day, tending to your patients. What you don’t want is for income to slip away just down the hall at your billing desk. By using today’s automated record-keeping and revenue analytics tools, such losses will occur far less often.

James S. Lacy is chief fi nancial officer, general counsel, and corporate secretary of ZirMed Inc (, a Louisville-based technology company providing revenue cycle management solutions to healthcare providers. Lacy is licensed to practice law in the Commonwealth of Kentucky.