Every three months, I visit my doctor for a blood pressure check. The appointment typically involves checking my blood pressure, listening to my heart and lungs, asking several questions, and concluding the visit. The actual …
Upcoding Wars: The Fight for Fair Medical Bills
Every three months, I visit my doctor for a blood pressure check. The appointment typically involves checking my blood pressure, listening to my heart and lungs, asking several questions, and concluding the visit. The actual time spent in the exam room is usually about five minutes, with additional time spent in the waiting area.
On one occasion, I reviewed the bill for my visit. The appointment was coded as 99214, which is a higher-level office visit code and results in a larger payment than a standard checkup. This raised questions about whether the level of service justified the charge.
After reaching out to the billing office and not receiving a clear explanation, I discussed the matter with my doctor. He indicated that the paperwork involved and the types of questions he routinely asks – such as inquiries about travel history and tobacco use – justify the higher billing code. These questions are asked every visit, regardless of how long ago the events occurred.
When asked if past travel or having quit smoking decades earlier made the visit more complex, the response was that coding guidelines allowed for such documentation.
“In medical billing, the amount charged often depends as much on documentation practices as on the actual care delivered.”
Jim Farley
Upon reviewing the coding rules, it became clear that office visit codes can be based on either medical decision-making or all qualifying work completed by the physician on the date of service, including time spent outside the examination room. Therefore, a brief appointment does not necessarily indicate improper billing. However, this experience raised questions about the relationship between patient care and documentation practices used for higher-level billing.
Medical Billing as a Business
Most physicians rely on external revenue cycle management companies to handle billing. These companies often promise quicker billing, improved collections, reduced administrative work, and increased revenue. Many are compensated based on a percentage of collections, typically around 8% to 10%. When higher procedure codes result in larger reimbursements, both the physician and the billing company benefit financially. This structure creates strong incentives to pursue the highest allowable reimbursement.
Practices such as upcoding (billing for a higher level of service than documented) and unbundling (separately billing services that should be grouped) are common concerns. For example, if a hospital bills separately for closing a surgical incision when this service is already included in the surgical fee, it results in unnecessary charges. Other issues, such as duplicate billing, misclassifying established patients as new, or including questionable charges in complex invoices, also occur. Some errors are unintentional, while others require careful review.
Regardless of the cause, unsupported charges should not be paid by those funding healthcare plans. Billing discrepancies have existed for decades, but the methods and systems involved have become increasingly sophisticated.
Let the Machines Do the Money Dance
Healthcare providers are adopting advanced technologies to document patient encounters and identify additional billing opportunities. Some systems generate clinical notes and highlight details relevant to billing codes. These tools can reduce paperwork and improve documentation accuracy while making it easier to capture all billable details.
According to the 2027 medical cost trend report by PricewaterhouseCoopers, a 9% increase in commercial group medical costs is projected, with technology-enabled revenue capture identified as a leading contributor. Seventy percent of surveyed health plans ranked such tools among the top three drivers of rising costs.
Willis Towers Watson projects an 11.1% increase in employer healthcare costs for 2027. These analyses, while differing in methodology, both indicate that healthcare costs are rising and that payers are struggling to keep pace.
Technology is also used by those processing medical claims. Insurers and third-party administrators utilize such systems to review coding, flag questionable charges, and verify the supporting documentation. This creates a dynamic where both billing and claim review processes employ advanced tools, each seeking to optimize their respective financial outcomes.
Tracing the True Cost of Care
Though insurance companies may pay the initial medical bills, the costs ultimately fall to employers and employees through premiums, deductibles, and other expenses. This is especially direct in self-funded plans, where the employer directly finances claims. Every dollar spent unnecessarily is a dollar not available for other uses.
In fully insured plans, medical spending influences future premiums. Insurers base pricing on past claims and projected costs, including administrative expenses. Higher claims spending results in higher renewal rates.
For example, if a family health plan costs $28,000 per year and avoidable or inflated charges represent 5% of that amount, this equates to $1,400 annually. While this percentage is hypothetical, it demonstrates how small percentages can translate into meaningful costs for families.
Scaling this issue to employers with large workforces or across the national healthcare system reveals the significant impact of repeated small discrepancies. Once such costs are factored into claims experience, they can continue to influence future plan costs.
Total healthcare spending in the United States is approaching $6 trillion. Even a small portion of unnecessary spending equates to substantial financial impact.
At the Gate of Every Healthcare Payment
At J.P. Farley, AI-based claims review is used to identify potentially improper coding before claims are paid. The technology detects patterns such as higher-level codes, unbundled charges, and other discrepancies for further examination.
When a claim appears improperly coded, it is adjusted to reflect the documentation. Providers may dispute the adjustment and submit supporting evidence. If the documentation supports the original charge, the payment is restored; if not, the higher charge is denied.
This process begins with electronic screening, requiring minimal processing time for most claims. More complex disputes receive additional review. Providers performing complex services are entitled to appropriate reimbursement, but submitting a bill alone does not establish payment eligibility.
The size of the adjustment also affects the likelihood of provider response. Smaller adjustments are less likely to be challenged, while larger ones attract more scrutiny.
Claims review technology is not expected to resolve all drivers of healthcare inflation, as numerous factors contribute to rising costs. However, unchecked questionable billing worsens the problem.
The techniques used to increase reimbursement are likely to become more advanced, as financial incentives remain strong. Each improvement in billing practices presents new challenges for those responsible for payment.
Effective management requires robust review systems, insistence on proper documentation, and human oversight for resolving disputes beyond the capabilities of automated systems. Employers have long been advised to prepare for rising healthcare costs. Some increases are inevitable due to aging populations, new treatments, and serious illnesses. These are legitimate expenses for any health plan. However, careful review of medical bills is essential to avoid unnecessary losses.
Basic questions should be addressed for each invoice: What service was provided? What does the billing code represent? Is the charge supported by the medical record? What justifies the amount requested?
These questions should be answered before payments are made.
There is no objection to fair compensation for physicians, hospitals, or billing companies. The concern arises when complex billing methods extract money from employees’ earnings without providing additional care.
Healthcare employs many skilled professionals. More of this expertise should be focused on improving patient health, rather than developing new billing strategies.
This expectation is reasonable for a sector representing nearly one-fifth of the American economy.
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We invite employers and vendors who are uncompromising about the impact of their healthcare plans to schedule a strategic conversation.
