Upcoding

How It Works

Upcoding is a form of healthcare fraud that costs Medicare billions annually. For example, coding a patient as having pneumonia with major complications (DRG 177, weight ~1.4) instead of simple pneumonia (DRG 178, weight ~0.7) nearly doubles the Medicare payment. The Office of Inspector General and CMS's Recovery Audit Contractor (RAC) program actively audit hospitals for upcoding. Penalties can include repayment of overpayments, fines, and exclusion from Medicare. Some upcoding is intentional fraud, but some results from ambiguous clinical documentation — which is why hospitals invest heavily in clinical documentation improvement (CDI) programs.

Related Terms

• Diagnosis Related Group (DRG) — A classification system that groups hospital inpatient stays into categories based on diagnosis, procedures, and patient complexity — used by Medicare to determine how much a hospital gets paid.
• Case Mix Index (CMI) — A measure of the average complexity and resource intensity of a hospital's patients — higher CMI means the hospital treats sicker, more complex patients.
• Centers for Medicare & Medicaid Services (CMS) — The federal agency that administers Medicare, Medicaid, and the ACA marketplace — setting hospital payment rates, quality standards, and the data that HospitalCostData uses.