Undercoding in Healthcare: How to Identify & Prevent Missed Revenue

Undercoding in Healthcare: How to Identify & Prevent Missed Revenue

We often hear about practices that overcode patient charts. Overcoding can be an unintentional result of improper documentation or oversight on how to correctly bill services; or an intentional action to fraudulently increase reimbursements and overvalue patient care. But what about the reverse? What are practices missing out on if they undercode charts?

undercoding in healthcare

Undercoding in healthcare is the action leaving out codes that reflect all the services and procedures performed during the patient encounter. Not only does undercoding lead to lower revenue, but it also skews the healthcare provider’s claims data. It is important to note that undercoding is just as detrimental as overcoding; in our experience, undercoding does not ensure coding compliance. While overcoding carries potential legal and regulatory ramifications, undercoding means the provider misses out on revenue.

For example, (see Exhibit 1 below) over the course of a 2-year 445 average chart audit, we found that, on average there is roughly $18,000 left on the table each quarter from undercoded cases.

Also, as seen with a larger audit sample size, (see Exhibit 2 below) over the course of a 2-year 600 average chart audit, we found that, on average there is roughly $70,000 left on the table each quarter from undercoded cases.

The primary resubmission focus for these facilities should be the quarterly overcoded averages of $6,400 in Exhibit 1 and $43,000 in Exhibit 2 to avoid legal and regulatory ramifications. In addition, it is always our recommendation to resubmit the undercoded cases as well to recover those thousands of dollars in lost revenue.

If you review the examples below, in Exhibit 1, on average there was a net revenue increase of about $11,500 per quarter after the undercoded and overcoded charts were resubmitted. While in Exhibit 2, on average there was a net revenue increase of about $27,000 per quarter.

undercoding in healthcare
Exhibit 1: Large (400-500 chart) Health System Client of YES HIM Consulting
undercoding in healthcare
Exhibit 2: Another Large (400-600 chart) Health System Client of YES HIM Consulting

A thorough coding compliance audit usually finds instances of both overcoding and undercoding. The real issue lies with the organization’s intent and why these instances occurred. It is not a red flag if our team finds overcoding, so long as the provider resubmits the charts and refunds the overcharges, which is required by law.

Why does undercoding occur?

Undercoding can occur because of several reasons:

  • Incomplete documentation that is missing services performed during the patient visit.
  • Lack of education on the most current codes, Coding Clinics, and guidelines.
  • Coders or physicians may have a “conservative” approach; where there is an intent to avoid a potential claim denial or compliance error that could lead to potential fraud.
  • A single procedure may require several services to complete, including multiple codes and modifiers that are not considered.
  • Oversight when coding the encounter, such as a missing code specificity or CC/MCC

Annual code and guideline updates can contribute to undercoding. For instance, all of the new October 1st ICD-10 codes, and some of the new April 1st ICD-10 codes, could impact DRGs. Every January 1st CPT update impacts APC payment. As a result, if the coder is not current on the updates, he or she may miss the new codes and impact the DRG.

Additionally, it is essential to note that October 1 ICD-10-CM/PCS code additions and deletions occur; January 1st CPT code additions and deletions occur. It is important to review the new code changes each year to apply them appropriately, as these codes could impact the hospital DRG or physician payment.

How can you identify and prevent undercoding in Healthcare?

undercoding in healthcare

Organizations can identify undercoding by performing regularly scheduled audits (I.e., monthly / quarterly) to pinpoint the services and procedures that are being missed. From there, an auditor or consultant can develop a custom coding quality improvement plan to prevent these scenarios in the future.

Healthcare providers can prevent undercoding by mentoring coders and properly training their staff on the applicable code sets and guidelines, including the yearly updates. Our YES HIM Education subject matter experts regularly release courses surrounding the annual updates. The ICD-10 Updates collection can be viewed here, while the CPT Updates collection is located here.

Recommendations for Next Steps – Frequent Coding Audits

As a medical coding and auditing firm, YES HIM Consulting regularly helps clients identify missed revenue opportunities from undercoding – as well as find and fix overcoding issues. In organizations where ongoing compliance audits are implemented, a quarterly average of $11,500 in smaller audit samples, or $27,000 in larger audit samples, is recouped.

Connect with one of our auditing subject matter experts to discuss how we can help you address any undercoding or overcoding issues.

JJ Crumbley, Director, Operations & Project Management, co-authored this article with Elizabeth Kelly, Director, Auditing Services.

Elizabeth Kelly

Elizabeth Kelly, RHIA – Director Auditing Services
Undercoding in Healthcare

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