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The High Cost of Undercoding


Fear of chart audits can lead billing departments to undercode -- and that may be costing you revenue. Benchmarking and analytical tools can help identify undercoding in your practice, to ensure you don't leave money on the table.

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 revenue.

Many practices error 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 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 better 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 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 in 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 percent of its office/outpatient visits under "Evaluation and Management (E/M)" code 99213 -- a 15-minute face-to-face visit. Just over 5 percent of its visits were assigned to code 99214, denoting a 25-minute face-to-face visit.

Based on appointment records, all this was appropriate. The trouble is, 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 underpayment per month.

By undercoding, this clinic was leaving nearly $8,000 every month on the table. Moreover, this was only one of several instances of undercoding at this practice that was identified 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 (ROS), exam elements, and other information in bulleted form; this data not only help accurately determine proper billing codes, but also provide a later audit trail if needed.

Like most practices, 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 financial officer, general counsel, and corporate secretary of ZirMed Inc., a Louisville-based technology company providing revenue cycle management solutions to healthcare providers. Mr. Lacy is licensed to practice law in the Commonwealth of Kentucky. Mr. Lacy welcomes responses and questions about patient responsibility, and can be reached at (502) 779-4302 or

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