Downcoding
Unilateral alteration by a health care payor of a service code resulting in lower payment.
How the laws define this
Both texts agree that downcoding occurs when an insurer, health maintenance organization, or health care payor alters or reduces a healthcare provider's submitted service or procedure code to a lower, less complex, or less costly level, directly resulting in a reduced reimbursement or payment amount paid to the provider. The primary distinction between the two sources lies in their explicit statutory restrictions. Under Payment of health claims, the law specifically prohibits downcoding in a manner that prevents a provider from billing for and collecting reimbursement for the actual healthcare service performed. In contrast, the Transparency in Downcoding Act frames the unilateral alteration of an evaluation and management or service code as the key focus of the act, without setting forth a specific legal prohibition on the action within its provided definition.
Synthesised from the 2 statutory definitions below. Each one is quoted in full, with its source.
How jurisdictions differ
What is distinctive in each definition, binding law in force first.
| Jurisdiction | Instrument | Status | What is distinctive |
|---|---|---|---|
| Indiana, United States | Payment of health claims | In Force | This definition explicitly prohibits downcoding that prevents providers from billing for actual services performed and bans sole reliance on AI without human review. |
| Illinois, United States | Transparency in Downcoding Act | Awaiting Entry | This definition targets unilateral alterations specifically of evaluation and management service codes or other service codes by health care payors. |
What it triggers
Definitions (2)
Downcoding is defined as the unilateral alteration by a health care payor of the level of an evaluation and management service code or other service code submitted on a claim, ultimately resulting in a lower payment to the healthcare provider. This practice is a key focus of the Transparency in Downcoding Act.
Downcoding refers to the practice by an insurer or health maintenance organization of reducing the level of service or procedure code submitted by a healthcare provider to a lower, less complex, or less costly code. This action directly results in a reduction of the reimbursement amount paid to the provider. The law specifically prohibits downcoding in a manner that prevents a provider from billing for and collecting reimbursement for the actual healthcare service performed.
Questions and answers
What does Indiana law prohibit about downcoding?
Indiana law prohibits downcoding that prevents providers from billing for actual services and bans using AI as the sole basis without human review. It mandates disclosing AI in adverse determinations.
How does the Illinois bill address downcoding?
The Illinois Transparency in Downcoding Act requires human physician review for all downcoding claim adjustments to ensure transparency and fairness.
What is downcoding in healthcare claims?
Downcoding is the unilateral change by a payor to a lower service code, reducing payment, as defined in both Indiana and Illinois instruments.