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July 2016
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Downcoding a Health Insurance Claim: Is This One More Way for Health Insurance Companies to Squeeze Patients and Hospitals?

Unless you’ve had an overnight stay in a hospital recently, you’ve probably never heard of the health insurance practice of downcoding, but it’s yet one more health insurance matter to be aware of if you have a medical emergency. In downcoding, a health insurance company unilaterally decides after the fact to reduce charges for medical care, which reduces the reimbursements a provider (usually a hospital or doctor) can receive. Lately, we’ve been hearing more and more about health insurers downcoding short hospital stays from inpatient care to observational status (which has a much smaller reimbursement), so we thought that we’d draw a little attention to it so you’d be prepared the next time you or a loved one had to go to the hospital.

So how does downcoding work in practice? had a great description of how downcoding may happen to you:

Signs pointed to a heart attack when the man entered the emergency room complaining of chest pain, which in his case, returned roughly 12 hours after another hospital discharged him after the same symptom subsided.

So the hospital admitted him as a patient to evaluate his condition. The results determined the man had a blocked artery requiring an emergency cardiac catheterization.

But when the hospital submitted its bill, the insurer disagreed. After reviewing patient records, it decided he only needed to be medically observed for 24 hours with outpatient follow-up care. Rather than pay for several days of hospital care, the insurer reduced the charges, a process called downcoding.

This scenario happened at Doylestown Hospital, but it’s not an isolated incident. Other Philadelphia-area hospitals are also experiencing a spike in insurer denials for short hospital stays, which could potentially cost them millions of dollars as well as more out-of-pocket costs for patients.

“From the hospital’s perspective, the doctors are making a clinical determination at the time they’re assessing the patient,” said Pam Clarke, of the Delaware Valley Healthcare Council, which represents area hospitals. “They aren’t making a decision based on the financial ramification.”

From Hospitals, Insurers Battle Over Downcoding of Patient Stays

So it sounds like health insurers are squeezing hospitals, but how does affect you the patient? Well, fortunately and most importantly, downcoding should not affect the care or quality of care that you receive in the hospitals. However, unsurprisingly, it will hit you in the pocketbook with out-of-pocket costs. If you are admitted to the hospital as an inpatient, you are charged one co-pay for your hospital visit. However, if you are only under observational status, your tests and services are unbundled from your hospital stay as outpatient services, so you will have to pay a separate co-pay for every test or service and depending on your policy, different deductibles and coinsurance may apply. It’s a situation that can go from manageable to Ouch!

Health insurers argue that they are promoting more efficient use of healthcare resources, but what do you think? Tell us about it at the Forums.

Related posts:

  1. Clash of the Healthcare Titans: UnitedHealthcare vs. Continuum Hospitals in New York
  2. Fighting a Health Insurance Claim Denial: Are the Cards Stacked Against You? Is Anything I Can Do To Get My Health Insurance Claim Paid?
  3. Can Health Insurance Companies Save Money by Spending Money to Keep You Healthy?
  4. Healthcare Reform: What Do You Think Health Insurance Companies Should Have to Disclose About Health Insurance Premiums?
  5. Rising Health Insurance Premiums Squeeze California Small Businesses; Is the Economic Recovery in Jeopardy?

5 comments to Downcoding a Health Insurance Claim: Is This One More Way for Health Insurance Companies to Squeeze Patients and Hospitals?

  • 2vegasdoc

    Great blog — patients beware! In addition to downcoding, patients can get stuck over insurer denying payment on what was understood to be approved for payment. This is a real case: the insurer authorized treatment for cancer, but when the claim was submitted — only paid the hospital for administering the drug ($180) , but not for the drug ($270,000). The patient was billed $270,000, a lien was placed on her house and later settled with the hospital over the cost of the drug… OUCH!

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