Downcoding occurs when a payer changes the CPT codes for evaluation and management (E/M) services on a claim to a lower level of service than what was submitted or lowers the payment amount to that of a lower complexity E/M code. Downcoding of E/M services, particularly CPT codes 99203-99215, can result in reduced payment and misrepresent the service provided. This page provides practical steps to identify downcoded claims, organize and track them, audit documentation and pursue appeals to ensure accurate payment for the care delivered.

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What is Downcoding?

Claim Edits

A claim is typically downcoded using claim editing software because an algorithm indicates that the diagnosis on the submitted claim does not warrant a moderate or high level of service. Claims may be automatically adjusted in different ways: 

  • The E/M code is reduced on the claim to be a lower level than what was reported, and the resulting payment aligns with the lower-level code; OR
  • The E/M code on the claim represents what was originally reported, but the payment has been adjusted to reflect the rate of a lower-level code.

Documentation Review

ICD-10-CM codes do not alone determine the appropriate E/M level. Information on the claims submitted is insufficient to use as a determination to automatically lower the E/M level and/or contracted payment rates. Documentation review is essential to ensure coding compliance and proper payment. 

Impacts To Care

Inappropriate downcoding by payers can significantly reduce revenue and increase administrative burden for physician practices, especially when it becomes routine or when a physician becomes subject to global prepayment review.

Strategies for Addressing Downcoding

If you suspect you’ve been affected by downcoding, it is essential to take steps to identify and appeal impacted claims. 

Identify Downcoding

The first step is to recognize claims that have been impacted by downcoding. Isolate affected claims and develop a spreadsheet or other tracking system to organize this work. Review the claims for the following:

  • Claims that were changed to a lower CPT code and paid at the contractual rate for the lower code.
  • Claims that were paid at the contractual rate for a lower level of service than what was billed.
  • Remark codes indicating the E/M code has changed or that the payment has been reduced.

Check that the Coding is Supported by Documentation 

Audit the clinical documentation to ensure it supports the level of coding. Whether billing based on MDM or total time, ask yourself if the documentation would support an appeal of the downcoded claim.

If the documentation cannot be used to support an appeal, consider the following:

  • Performing an internal audit to identify which providers in your practice, as well as the billing staff, could benefit from coding and documentation education.
  • To aid in coding and documentation improvement, utilize the resources on the AAP coding and valuation page, which offers coding education on E/M services.

Appeal

If the documentation supports the submitted E/M CPT code, begin the appeal process.

  • Prepare for multiple levels of appeals. There may not be manual examination of the visit documentation and real consideration of overturning the claim until the second or third appeal.
  • Submit ALL relevant clinical documentation to support coding.
  • Ask for the payer’s response to include a written explanation for the reason for the level of service and/or payment rate being reduced. 
  • Contact the payer and ask to be removed from their downcoding program.

Provider Rights in Downcoding Disputes

When a downcoded claim is denied or upheld, it's important for providers to understand their rights and protections. 

Provider Contract

Review your provider contract and identify key clauses related to major policy changes, dispute resolution, prompt payment, and interest penalties for late payment.

State laws

Refer to the Managed Care Legal Database for information on applicable laws in your state related to payment edits or prompt payment. If necessary, consider informing your state Department of Health and Human Services or Department of Insurance.

Federal law

Appropriate use of CPT codes is covered under the HIPAA Administrative Simplification Rules. If you believe that the payer administered prepayment downcoding edits that are not in keeping with the AMA defined use of CPT codes/descriptors, consider reporting this as a code set violation to CMS.

Advocacy

The AAP advocates to payers for appropriate payment for appropriate coding. The AAP has called for payers to discontinue the practice of using diagnosis codes as justification for downcoding and supports the American Medical Association's principles on downcoding, including that it is never appropriate to automatically downcode claims without first reviewing the medical record. 

To support advocacy efforts at the individual level, the AAP has created a template letter to payers on downcoding. 

Downcoding Resources

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AMA Resources

Last Updated

10/14/2025

Source

American Academy of Pediatrics