Hospital upcoding leads to billions in extra payments: Study

A Rand study published Dec. 3 reveals that from 2011 to 2019, hospitals in five states significantly increased the frequency of documenting patients as requiring the highest intensity care, resulting in billions of dollars in additional payments from CMS and commercial payers. 

The study, published in Health Affairs, analyzed thousands of hospital stays for 239 conditions in Florida, Kentucky, New York, Washington and Wisconsin, finding a 41% increase in high-intensity coding over the period. Adjusted for patient demographics and other factors, researchers estimate that coding changes alone accounted for a 13% increase, contributing to $14.6 billion in payments in 2019.

Six things to know:

1. Researchers found $14.6 billion in extra payments in 2019 due to upcoding, including $5.8 billion from commercial payers and $4.6 billion from Medicare.

2. The largest increase in upcoding involved conditions such as heart failure and shock, simple pneumonia, chronic obstructive pulmonary disease and septicemia.

3. Diagnosis-based payment systems, including Medicare's diagnosis-related groups, create incentives for upcoding, which can range from accurate representation of illness severity to potential fraud, according to researchers. 

4. "These findings add to the evidence that hospitals may move patients into the highest billing category in order to increase the amount they are paid for patient care," said Daniel Crespin, lead author of the study and an economist at Rand, a nonprofit research organization. "This suggests that government programs and private payers are paying billions more each year than what would be expected based on historical rates."

5. The study highlights the need for reform in payment models to reduce distortions in healthcare costs and resource allocation. It also underscores challenges in balancing fair compensation for care delivery with controlling healthcare costs for CMS and commercial payers. 

6. Authors of the study said further research is needed to differentiate between fraudulent and accurate coding practices.

Click here for more information on the study.

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