Healthcare Leaders Are Increasingly Concerned About Upcoding. Medical Coding Outsourcing Companies Could Be Your Best Answer.

The risks around upcoding have incentivized many healthcare providers to consider medical coding outsourcing companies, and a recent survey proves that these concerns are only getting more severe. Healthcare fraud continues to be a primary concern for healthcare leaders, presenting not only an ethical challenge, but also forcing them to make strategic decisions around their revenue cycle operations to reduce the risk of upcoding and address any potential downstream impacts. 

Upcoding and the Benefit of Medical Coding Outsourcing Companies
Black Book Market Research released a survey just ahead of the 2025 American Health Information Management Association (AHIMA) Conference. The survey questioned health information management professionals around critical medical coding challenges in Q3 of 2024. It revealed multiple controversies in USA medical billing, particularly upcoding and fraud – a full 90% of respondents to the survey identified these two issues as a “major ethical dilemma for staff coders” [1]. 

Upcoding is an issue that impacts multiple stakeholders in healthcare, including patients and clinicians. For example, surgeons at the University of Virginia Hospital say that their administration has been pressuring them to bill in ways that overcharge patients. Surgeons spoke out about some difficult conversations [2].

“The message was, ‘You guys don’t bill enough, and there’s clear evidence that you could be billing more because this other group bills a ton. They bill double what you guys are billing…For us to bill more would be fraud, because we’re already billing more than we think we should’.”

This situation highlights the benefits of medical coding consulting and medical coding outsourcing companies – having external input to fill gaps in knowledge and awareness. 

Understanding the Source of Upcoding
Not all upcoding is the same. This type of medical coding error falls under two categories of abuse and fraud. Upcoding fraud is intentional, often for the financial benefit of the provider or an individual. Abuse is an unintentional mistake, but still a grave issue for the healthcare revenue cycle. This form of upcoding is often a case of someone billing for a service that is more complex than what was actually performed and can be traced back to a misunderstanding of how the coding system works. The root cause can go back to training or a misunderstanding of legality. 

Identifying Upcoding in Your Revenue Cycle
Upcoding is often discovered through whistleblowers (like the surgeons at the University of Virginia Hospital) or through medical coding audits, one of the services we offer at 3Gen Consulting. 

One of the key benefits of conducting regular medical coding audits through medical coding consulting vendors is uncovering upcoding issues and risks before they become a legal issue. 

Upcoding Risk Exists in Multiple Areas
The Black Book survey revealed multiple areas of coding challenges and complexity that could potentially contribute to upcoding risk. 

ICD-11 Means Increased Coding Complexity
The coming ICD-11 coding system presents new levels of complexity for all providers, including in home health coding, hospital billing, and physician billing services. It will feature about 17,000 unique codes and over 120,000 codable terms [3]. 

The survey found that 80% of respondents reported anxiety over training and the risk of increased coding errors. But still, only 11% of provider organizations have increased preparations, even while 87% are worried about readiness. 

Value-Based Care Coding Prompts Questions
Value-based care has left 64% of survey respondents with questions around just how adaptable their current coding practices are. This system requires proper documentation and 29% of the providers responding to the survey reported being challenged by aligning systems with this new model of reimbursement of billing and coding. 

Bundling is Controversial
Bundling services was a key concern for survey respondents, with 55% stating a belief that bundling under a single code actually underestimates the true scope of care. The answer, unbundling, often maximizes reimbursements but also increases the risk of being accused of fraudulent medical billing practices. 

AI Might Not Be Accurate
While artificial intelligence is touted by many as an ideal solution for coding, there is valid concern about its accuracy. A full 94% of survey respondents said they were worried about the nuance and accuracy of AI-generated codes, with 97% fearing the loss of human oversight. 77% also related concerns over the potential of AI to perpetuate biases in access to healthcare and medical billing and coding. 

Audits Are a Pressing Issue
The survey also revealed many respondents questioning the fairness of medical coding audits, largely due to the complexity of the coding system. 

85% of providers said that discrepancies identified during medical coding audits often lead to denials or demands for repayment. 

Addressing Upcoding in 2025 and Beyond
As medical billing and coding in healthcare become more complex, revenue cycle leaders should know that this trend will only continue. Adapting and adjusting to these changes will require a proactive approach, and one that considers the position of medical coding outsourcing companies and medical coding consulting. 

Leaders will also need to rethink their strategic use of tactics like third-party audits to identify root cause issues of upcoding and keep their revenue cycle functions at the highest level possible. We specialize in providing expert third-party support at 3Gen Consulting and invite you to start a conversation about your options with us today

 

References
[1] Black Book Research, “Medical Coding & HIM Industry Faces Mounting Challenges, According to Black Book’s Latest Poll Ahead of AHIMA 2024 Conference,” 18 October 2024. Available: https://www.newswire.com/news/medical-coding-him-industry-faces-mounting-challenges-according-to-22444692.
[2] E. Hemphill, “UVa surgeons detail ‘upcoding’ they say allowed health system to fraudulently bill patients,” The Daily Progress , 17 October 2024. Available: https://dailyprogress.com/news/local/business/health-care/uva-surgeons-detail-upcoding-they-say-allowed-health-system-to-fraudulently-bill-patients/article_192f0aa2-8b20-11ef-af72-2ba2dd7bf174.html.
[3] World Health Organization, “ICD-11 2022 release,” 11 February 2022. Available: https://www.who.int/news/item/11-02-2022-icd-11-2022-release.

Providers Are Pushing Back on Denials in Medical Billing. Is it Your Time to Join?

Healthcare providers across America burned almost $20 billion dollars in 2022 on medical billing accounts receivable – and it all went to chasing down denials and delays with payers [1]. The numbers look even more disheartening with a focus on private plans. 

What’s worse is over half of that spend was wasted on claims that should have been paid when the claim was submitted – payers are burning provider resources as a stall tactic. A survey of 516 acute care hospitals found that almost 15% of all claims submitted to private payers are denied from the beginning. 

This is money, time, and effort that can be better spent. Healthcare providers face the most complex revenue cycle environment in history, with advancements like AI being used against them – which is why now is the time providers should consider taking a new kind of action. 

So, I was glad to see the news in July that The Health Equality Network stepped up to send a letter to CMS about the problem of medical billing denials, also including a range of congress members. Here are some of my favorite points [2]: 

  • “Claims are often denied without cause and lead to financial and emotional distress for individuals already burdened with the stress of healthcare issues.”
  • “Medicare Advantage plans…are now inundated with prior authorization requirements and coverage denials.”
  • “They (UnitedHealthcare) were sued last year for using an artificial intelligence algorithm to wrongfully deny elderly patients care.”
  • “Insurance denials and prior authorization requirements affect minority and lower-income populations at a much higher rate.”

The main takeaway is that providers should focus now on tracking denials in medical billing and understanding the impact of how much money and staff time is being wasted. As more providers push back on this disturbing trend, everyone should be able to make a case for how they, their staff, and their patients are being impacted

For many providers, doing this in an accessible and accurate way will mean outsourcing medical billing by working with a third-party vendor who has perspective on whether their investment is normal or whether they’re being taken advantage of. I am proud that 3Gen can offer this kind of support during times like these.

References
[1] D. Muoio, “Providers ‘wasted’ $10.6B in 2022 overturning claims denials, survey finds,” Fierce Healthcare, 22 March 2024. Available: https://www.fiercehealthcare.com/providers/providers-wasted-106b-2022-overturning-claims-denials-survey-finds.
[2] Healthcare Equality Network, “HEN Sends Letter to HHS Secretary Becerra and CMS Administrator Brooks-LaSure On Coverage Denials,” 3 July 2024. Available: https://www.healthcareequalitynetwork.com/hen-writes-letter-to-hhs-cms.

 

Hemant Apte, Chief Executive Officer in

Hemant Apte, Founder & Chief Executive Officer of 3Gen Consulting, is a seasoned executive leader with deep domain expertise in US healthcare management practices. He founded 3Gen Consulting in 2006 and has been instrumental in offering thought leadership to his clients and providing services and solutions that are unique in the market.

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