Do you know your state’s approach to downcoding?

AAOS is very concerned about new policies from many large commercial health insurance carriers regarding downcoding of Evaluation and Management (E/M) codes.

These policies imply that payers will automatically adjust the physician-submitted E/M down a level until supplemental medical records are submitted to substantiate the complexity and the medical decision making (MDM) or time associated with the reported E/M visit at the higher level originally submitted.

Given how private insurance is regulated, states will be critical to reigning in these downcoding policies. States attempting to tackle downcoding have sought different avenues for addressing these issues, including regulatory and legislative solutions. In California, for example, state medical societies acted to persuade CIGNA to temporarily pause a novel and controversial downcoding policy in 2025 that would have automatically downcoded any higher-level E/M services. Other states have opted to pursue legislation to pass reforms (like those discussed previously around prior authorization) that attempt to make the process fairer and more transparent.

Recently, legislation specifically barring automatic or AI downcoding and creating a fairer process for physician appeals was sent to the governor in Virginia. The bill, SB 164, will specifically bar the use of AI systems in reviewing and resolving all downcoding dispute decisions. In addition, it will disallow insurers from downcoding claims without considering relevant patient data documented by the billing provider on the claim submission.