Upcoding is essentially just when you bill for a medical service at a higher level than what your team actually performed. This is a type of healthcare fraud. In other words, the upcoding medical definition means charging for a more severe or expensive procedure than the patient actually needed. 

Medicare even describes it as “when a provider assigns an inaccurate billing code to a medical procedure or treatment to increase reimbursement”. Essentially, it’s a form of medical billing fraud that inflates costs. If a doctor codes a routine office visit as a higher-level visit, or lists extra procedures or diagnoses, that’s upcoding.

Why It Matters

Upcoding might sound like a technical coding issue, but its impact is real and costly. Fraudulent billing practices like upcoding cost the healthcare system billions every year. Patients end up paying more (in higher premiums), and honest providers can get caught in costly audits. 

Government healthcare programs (Medicare, Medicaid and others) closely monitor claims for suspicious billing. The False Claims Act makes it a crime to submit false claims to federal healthcare programs. For example, Tenet Healthcare Corporation agreed to pay more than $900 million under the False Claims Act. 

The DOJ found Tenet had “knowingly submitted false claims to the Medicare program and other federal health insurance programs”, including billing unsupported diagnosis codes to inflate Medicare reimbursement. 

Even Medicaid services are similarly scrutinized. No practice, large or small, is safe from this level of scrutiny. Even small discrepancies can trigger audits: if one practice’s average billing per patient suddenly spikes or every visit jumps to a higher level code, data analysis tools will flag it. 

The bottom line here is that it’s much safer to catch and correct coding errors early than to face penalties later.

How Upcoding Works

As you undoubtedly know, medical coding is complex. Providers use medical codes (CPT for procedures, ICD for diagnoses) to bill. Doctors code office visits and procedures with CPT codes, and hospitals use diagnosis-related groups (DRGs) for inpatient claims. 

Evaluation and management (E&M) codes grade the level of an office visit, and as you might expect, higher-level E&M codes pay more. 

So to reiterate, upcoding happens when the code chosen doesn’t match the actual care you provided. For example, billing a longer or more complex office visit code than is supported by documentation is upcoding. 

Hospitals can upcode too, such as by adding extra diagnosis codes or moving a stay into a higher-paying DRG. CMS explicitly warns that using modifier 25 to bill for a medically unnecessary visit is an example of upcoding.

E&M Codes

Evaluation and management codes are frequent upcoding targets. Choosing a higher-level E&M code (say 99215 instead of 99213) without justification is immediately going to raise the claim’s value. 

Similarly, coding a simple procedure as a more complex one (or listing a severe diagnosis that the patient didn’t actually have) inflates the payment. We get how this might appeal to small practices that could have issues with their cash flow, but providers should never code for services not provided or for medically unnecessary care. 

For example, billing a routine exam as if it were an extended consult is a red flag. Each code must align with the service and documentation, or it’s fraudulent. 

For clinicians, staying current on coding rules is key. Each E&M code has strict documentation requirements (history, exam, decision-making), and coding guidelines now emphasize time and complexity measures. 

So billing a 15-minute visit as if it were 30 minutes is going to be a red flag unless the record supports it. Hospitals have a similar issue: adding one extra diagnosis code to move a short inpatient stay into a high-acuity DRG is abusing the system.

Even skilled nursing facility care and outpatient clinics can be guilty of upcoding. Medicare Part A covers services like:

– Hospital care

– Hospice

– Skilled nursing facility care

And each of these needs to be billed accurately. Inflating the codes for any service breaks coding guidelines. Improper coding like this is actually just considered a form of Medicare abuse. By contrast, strictly following coding guidelines – documenting medical necessity and the services provided – keeps your practice compliant and safe.

Getting Help with Billing

That’s a lot to be wary of isn’t it? As a small practice owner, you don’t have to handle this complexity alone. PMN is a medical billing and coding company with over 20 years of experience in healthcare. 

We specialize across various medical fields and handle the paperwork and coding so you can focus on patients. We know how to match codes to the exact services delivered, which helps your practice get reimbursed promptly and reduces claim denials. 

Want to learn more about how we can simplify your medical billing and coding? Schedule a conversation at our office in Laguna Hills, Orange County, California or give our team a call!

Preventing Upcoding and Staying Compliant

Upcoding often happens accidentally when staff are confused or under pressure. We know you’re not just trying to pull a Tenet Healthcare. Prevent it with training, clear policies and checklists. 

Always ask: “Is this service documented in the chart, and does the code match it?” Follow official coding guidelines to the letter. For example, AMA’s E&M documentation rules explain exactly how to justify each office visit code. 

FAQ

What Exactly is Upcoding?

Upcoding is billing for a higher-level service than was actually performed. That basically means that the medical bill shows a more severe diagnosis or more complicated procedure code than what happened. This artificially boosts the claim’s value. Intentional upcoding is illegal because it defrauds payers and government healthcare programs.

How Can My Practice Avoid Upcoding Issues?

– Follow official coding guidelines closely

– Only bill E&M and procedure codes that match the services actually documented in the patient’s chart

– Train staff on medical necessity and correct coding

– Audit your claims regularly

Working with a billing specialist (like PMN) can help catch mistakes. Honest, well-documented coding helps you stay compliant.