Downcoded again? Start logging it now, before the AMA's new tools arrive

The AMA House of Delegates voted Nov. 9 to step up its fight against insurer downcoding. The AMA will now help physicians report health plan noncompliance to regulators and challenge payment cuts made without a look at the medical record. For practice administrators, the practical question is what to do before those tools exist. The answer is to start finding and logging every downcode now and to measure each one against the standard MGMA has written into its own draft legislation.

Many practices don't know how much they're losing. Shawntea "Taya" Gordon, MBA, FACMPE, CEO of Atlas & Perpetua Healthcare Consulting, told Physicians Practice in September that the first step is a simple comparison. "Run a report of the CPT codes you bill out for the last six months, and which CPT codes you got paid for that same claim ID for the last six months," she said. "If those are different, it's probably because you're being downcoded. Some payers are telling you, some payers are just doing it, and it comes through looking like a paid claim."

Downcoding happens when a payer pays an evaluation and management (E/M) service at a lower level than the one billed, often through an algorithm that never looks at the documentation. A resolution before the delegates estimated the losses from algorithmic downcoding at $28,000 to $74,000 per physician per year in family medicine and $40,000 to $180,000 a year for multispecialty practices.

What did the AMA adopt on downcoding?

The AMA's new policy, adopted at its Interim Meeting in Orlando, Fla., commits the association to three main things. It will help physicians understand new legislative protections. It will support physicians who report health plan noncompliance to regulators. It will help them challenge improper payment reductions.

Delegates also directed the AMA to write and regularly update educational resources on how to document services, appeal unjustified downcoding and report improper payer conduct through regulators and AMA advocacy channels. They reaffirmed existing AMA policy supporting lawsuits against insurers that downcode inappropriately.

One directive could change daily revenue cycle work. Delegates told the AMA to work with EHR and practice management vendors to automatically flag downcoded E/M claims from the electronic remittance advice. The alert would show the original and adjusted codes, the payer's stated reason and the appeal deadline, early enough to file an appeal.

"Physicians should not have to fight insurers to be paid accurately for the care they provide," Michael Suk, MD, JD, MPH, MBA, a member of the AMA Board of Trustees, said in the AMA's announcement.

The AMA also backs legislation that would bar automatic downcoding without clinical record review, require clear notice and an explanation when a claim is downcoded and create meaningful appeal processes. More than a dozen states have introduced downcoding bills, and Indiana, Virginia and Illinois have passed them, according to the AMA. In an Illinois State Medical Society survey cited by the AMA, 72 percent of physicians said automatic downcoding had affected their practices, and 77 percent said it had increased over the past five years.

What standard does MGMA's draft bill set?

MGMA has gone further than the AMA's principles by drafting bill language, which gives practices a concrete test for judging any downcode they receive. MGMA's Washington attorneys wrote the draft, which the association began circulating to congressional staff in September, with particular attention to the House doctors caucus. It has not been introduced.

MGMA's preferred version would ban automatic downcoding across Medicare Advantage (MA). Its fallback version would let an insurer downcode automatically only after proving that a physician upcoded above a specified rate. The insurer would also have to notify the physician, and the downcoding policy could last no more than 90 days before the physician returned to standard review. The draft explicitly covers AI and other algorithms.

Madison Hynes, MPP, associate director of government affairs at MGMA, told attendees at the MGMA 2026 Annual Conference that downcoding has "been the biggest increase that we're hearing from members on," according to Medical Economics. The same coverage noted that many MA and commercial downcoding policies say they target physicians with a history of upcoding but don't explain how insurers identify them. Practices often don't know they've been placed under such a policy.

Why does downcoding cost practices more than it seems?

Downcoding can turn a good contract into a bad one without changing a single rate. Doral Jacobsen, MBA, FACMPE, CEO of Prosper Beyond VBC, told Physicians Practice in September that two contracts can look the same on paper and pay very differently.

"You could have the same exact rate with two payers, but your outcome could be much different based on edits and payer policy, downcoding, etc.," Jacobsen said. "You could have a contract that's yielding 25 percent less than another."

She recommends tracking adjusted collections by payer and product to catch that gap. "Perhaps they are downcoding, and all of a sudden your revenue is eroding in that way," she said. "Looking at adjusted collections is going to help you determine if there are things happening from an adjudication perspective or a policy perspective that are negatively impacting you."

The tools on the other side keep getting faster. Gordon said payers' use of AI lets them "review things faster, deny things faster, and we're still pretty manual in terms of our appeals efforts."

How should practices document a downcode now?

Start with the two checks Gordon and Jacobsen describe. Compare billed codes with paid codes by claim ID over the past six months, then look at adjusted collections by payer to see where the gaps cluster.

From there, track the same data points the AMA wants EHR vendors to automate. Until that functionality exists, the billing team can build the log by hand from each remittance. For every downcoded E/M claim, record:

• The date of service, claim number and payer
• The billed code and modifiers, and the code and modifiers the payer paid
• The payer's stated reason, including the adjustment and remark codes on the remittance
• The appeal deadline
• Whether the payer requested or reviewed the medical record before adjusting the claim
• Whether the practice received advance notice or an explanation
• Whether the payer cited any finding that the physician had upcoded, and when the practice was placed under the policy

The last three fields line up with the AMA's legislative principles and MGMA's draft. If a payer adjusted the claim without asking for the record, the downcode fails the record-review test. If no notice came, it fails the notice test. If a downcoding policy has been in place for more than 90 days, it would exceed the limit in MGMA's fallback version.

The other half of the paper trail is the note itself. Since 2021, office E/M levels have been based on medical decision-making or total time on the date of service. Documentation that clearly supports either one is what makes an appeal winnable. The AMA already publishes a guide, "Payer Evaluation and Management (E/M) Downcoding Programs: What You Need to Know," with sample scenarios and tips for spotting downcoded claims.

Then appeal. Jacobsen said many practices skip that step and write the money off. "Most practices do not appeal," she said. "So what happens? Who gets to keep that money? The payer."

Where will practices report downcoding?

The AMA has not yet announced a dedicated reporting portal or a timeline for its new resources. Its policy calls for guidance on reporting payer noncompliance "to the appropriate regulator," developed with state medical associations and national specialty societies. That will look different from state to state, and even more so in states that have passed downcoding laws.

In the meantime, the AMA's downcoding resource page links to an informal survey that collects information on insurer downcoding policies. A practice log built on the fields above turns scattered complaints into patterns a regulator or state medical society can act on: which payer, which codes, how often and whether the payer ever reviewed the record.

Will Congress act on downcoding?

Federal action is possible, but not this year. AMA congressional affairs staff are working with lawmakers on a federal downcoding bill, and MGMA is shopping its draft to both parties. Hynes said MA reform will likely be a priority for the next Congress but is unlikely to come before the Dec. 11 government funding deadline.

Anders Gilberg, senior vice president of government affairs at MGMA, said in a Nov. 10 interview with Physicians Practice that the lame-duck session will show whether lawmakers can pass anything at all. "Really, just whether or not anything is going to get done," he said when asked what he's watching. "It's the number one kind of topic of discussion here in Washington."

For 2027, Gilberg expects health care to get more attention once Democrats take control of both chambers. "I do believe that this Congress will focus more on health care," he said.

Whatever happens in Congress, the work for practices is the same. A downcode that is found, logged against a clear standard and backed by documentation is ready for an appeal, a state regulator or the AMA's channels when they open. One that has been written off is gone.