How much should your doctor get paid for an office visit? If health insurance were not pervasive, you would probably pay by the minute. However, primary care physicians’ fees are not necessarily based on time. Rather, they are reimbursed based on billing codes for various tasks while examining you. Every physician specialty has codes they typically use. A short, established patient visit for a rash is billed lower than an extended visit with multiple chronic conditions for a new patient. All told, more than 10,000 billing code exist with various enhancements.
The journal Family Practice Management explains how billing codes work. There is specific criteria for new versus established patients. There are different codes reflecting the number of health complaints addressed. Let say you see your doctor to discuss high cholesterol, but she determines you have hypertension. Then you also ask for a Mounjaro weight-loss prescription and a refill of Viagra. The number of health complaints addressed just went up, as did the cost of the visit. There are enhancements for risk (low, moderate, and high) and data analysis (X-ray, lab tests, etc.). There are also billing enhancements for prolonged services, but my explanation has barely scratched the surface.
Hospitals routinely send out billing records to an auditor whose job it is to scour the medical records to make sure everything done was billed. Over time consulting firms began to expand into billing code consulting, teaching doctors, and their office staff how to correctly (even aggressively) upcode to get the highest reimbursements. Payers soon noticed a trend where more patients were coded as Level IV rather than Level III, thus earning higher fees. This has also happened in Medicare, with some facilities appearing to have sicker patients than others because a greater proportion of their patient encounters are Level IV versus Level III or Level II.
Carefully documenting care to maximize reimbursements is legal, but embellishing the care provided to boost income is not. Payers have complained about upcoding for years and now they have opened a new front in the battle between payers and providers’ billing practices. More recently, insurance companies and payers began using third party vendors and artificial intelligence to reduce costs. Software algorithms compare treatments to averages from other physician practices automatically downcode some billing codes and pay lower fees. The following is from NBC News:
It’s a practice called “downcoding.” Insurance companies — in Wagner’s case, Aetna — automatically downgrade the claims a doctor sends them to a lower tier of reimbursement, without actually reviewing details about the visit itself.
For Wagner, that means a “level four” office visit that might yield $170 is being paid as if it’s a “level three” for about $125. That $45 difference might not seem like much, but when it’s happening on dozens of claims, and to a physician-owned practice like Wagner’s, the damage mounts. “This can really hit a small company hard, especially if you’re not catching it,” he said.
Lost in the debate is how this can affect patient care. Office visits may become rushed as doctors try to squeeze more patients into a workday. If Level IV office visits are being downcoded to Level III, doctors may stop treating Level IV (longer visits with multiple health complaints). As my old neighbor explained, her primary care physician would only treat one complaint during an office visit and make her return for another visit to discuss additional health problems.
A while back I wrote about how Obamacare’s free preventive care is a minefield of surprise medical bills. Basically, if you ask anything useful about your health it turns the free wellness visit into a costly diagnostic one. The convoluted system of billing codes can have a similar effect on other office visits. My dermatologist always gave us a great uninsured cash discount, charging the Medicare price even though we were not on Medicare. Once my wife enrolled in coverage, she discovered our dermatologist’s billing practices went from simple Level II visits to a higher level where everything discussed was billed à la carte. We were still paying the bill because our deductible was not yet met, but the costs are higher because the office billed her insurer, who denied the claim, which was then billed to us. Unfortunately, there is no going back now that our health plan information is in the dermatologist’s system. By contrast, our doctors who do not take insurance have lower prices and more flexible policies.
Read more at NBC News: Inside the fight between doctors and insurance companies over ‘downcoding’