Consequences of Inaccurate Coding and Incorrect Billing in Healthcare Services

Consequence of inaccurate coding and inaccurate billing healthcare services

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Many healthcare facilities only understand the drastic effects of coding errors once it is too late. Aside from the financial troubles that this can cause, it can lead to possible legal problems and in some cases, even to the closure of your business. Instead of waiting for the worst to happen, create a plan on how to mitigate possible errors before they happen, and list some possible steps to prevent them from happening in the first place.

Key Takeaways

Key Takeaways -01

Disregarding the consequences of inaccurate medical coding leads to problems.

Key Takeaways - 02

There are ways healthcare facilities can prevent medical billing errors.

Key Takeaways - 03

Healthcare facilities should utilize companies that provide medical coding services.

Importance of Medical Coding

In medical coding, the insurance company converts patient records into a “readable” code to determine how much it should reimburse the healthcare provider for its services. Each service’s codes are associated with Current Procedural Terminology (CPT) and the Healthcare Common Procedure Coding System (HCPCS). With the help of these codes, insurance companies, Medicare, Medicaid, etc., receive claims for services.

Coding errors can result in reimbursement delays, denials, or partial payments. If you accumulate many delayed reimbursements, your emergency medicine practice will face substantial paperwork, stress, and lost revenue.

If a procedure is miscoded, this can lead to damages starting from $15 up to $15,000. However, it is not only about money.

Importance of medical coding Healthcare BPO

Common Medical Coding Errors

Inaccurate Documentation of Data and Information

Poor documentation is most frequently caused by a lack of understanding of the specific information that must be included for coding purposes.

When physicians or other healthcare providers submit sloppy documentation, medical billing specialists will take extra time to assign the correct codes and bill patients appropriately. Additionally, misreading handwriting errors may result in undercoding (another source of revenue loss).

The most common reason for misreading medical codes is sloppy handwritten medical records. This can cause some procedures to be left uncoded and unbilled. The only way to remedy this is for the medical coders to request digitized, typewritten medical records directly from physicians.

Using inappropriate medical abbreviations is also a major cause of inaccurate documentation of data and information. For example, HPN is an abbreviation for Hypertension as well as Hypotension. Medical coders must clarify these abbreviations and double-check the medical records if the agency does not respond.

Missing Information

Hospitals are high-pressure environments. As a result, patients, establishments, and sometimes insurance companies enter inaccurate information. According to our experts, around 10-15% of the time, medical records may be missing a previous diagnosis entirely. Because of these missing pieces of information, further complications are likely to arise. 

For example, a patient was diagnosed with hypertension and diabetes. For whatever reason, their physician or nurse did not document these conditions. Because of this, treatment for hypertension and diabetes, which are high reimbursement items, are not billed.


Unbundling involves using different codes for related procedures in cases where a single code exists for the group of procedures as a whole. 

An example of “unbundling” would be a hospital billing for the incision and stitches performed during a surgery separately. Blood work is another example. In most cases, blood work is performed as part of a set of blood panels (a group of tests) which are charged at a specific rate.

In effect, this illegal act increases the total amount of the claim (and inflates your profit).


Upcoding refers to adding codes for more complex or expensive procedures to simple services. This includes not only services or procedures but also testing. It is illegal to re-code to generate higher revenues by inflating prices.

An example of upcoding would be a sedative treatment billed as anesthesia, or a procedure carried out by a nurse billed as if it were performed by a physician.


In the case of undercoding, patients are not billed for all the treatment or services they receive. 

Patients may benefit from this questionable practice as they can avoid high-cost bills, or your emergency department may avoid audits due to this dubious practice. On the other hand, a healthcare provider’s revenue is negatively affected by undercoding because they are not being compensated appropriately for the level of service that they provide to their patients. Undercoding can lead to costly appeals if not corrected.

Duplicate Billings

Double billing happens when healthcare providers

  • bill for the same patient procedure, treatment, or testing on more than one occasion
  • bill for the wrong patient service
  • bill for patient services that were never performed in the first place
  • attempt to bill Medicare, Medicaid, either another private insurance company or the patient right after the procedure
  • charges more than once for the same service
  • or don’t check if they’ve already billed for a procedure

The presence of duplicate billing or “double billing” is a serious problem for healthcare providers. These healthcare providers may be charged with medical fraud if the government uncovers these cases. 

Unverified Modifiers

Modifiers are added to the Healthcare Common Procedure Coding System (HCPCS) or Current Procedural Terminology (CPT®) codes to provide additional information necessary to process a claim, such as identifying why a particular service or procedure was provided by a physician or other qualified healthcare professional.

Misusing medical billing modifiers can lead to audits that can result in hefty fines. It’s important to note that audits can extend back many years. If you bill a modifier incorrectly on a claim, you may be liable for as much as $10,000 per incident.

The pricing structures for medical services are dynamic. Compensating a medical professional for the extra time and effort is required to complete the original service. With this, establishments are required to submit proper documentation for price increases of standardized services.

The Negative Effects of Incorrect
Medical Coding And Billing

It is essential to understand that mistakes caused by inaccurate coding and billing can lead to various short and long-term problems. The most common issues that patients face when their data and bill are inaccurately coded are delays or rejection of insurance claims. The healthcare provider’s reputation might also be affected if patients discover they didn’t receive accurate medical coding and billing. Instead, they might look for other facilities to cater to their needs without botching their medical bills after their procedure.

incorrect medical coding and denied claims

There also might be legal consequences when patients file court cases due to billing issues. Fraudulent medical practices that cause monetary gains under pretenses are considered medical fraud. This is punishable by law. If found guilty, the authorities might shut down the healthcare provider. Management may be issued hefty fines and in some cases, face jail time.

How to Avoid Medical Coding
and Billing Errors

Continuously Train Your Employees

Most medical billing errors and legal troubles related to medical practice can be prevented by monitoring them before they leave your department. If you adhere to strict due diligence in medical billing, you can avoid the following denials:

  1. Missing information
  2. Service not covered by payer
  3. Duplicate claim or service
  4. Service already adjudicated
  5. Limit for filing has expired

Medical billing codes are constantly changing. Your team must train continuously to stay up-to-date on the latest codes. Doing this will reduce your denial rate.

Outsource Medical Coding Services to Third Parties

Even the most experienced teams can find accurate medical coding to be an overwhelming task. Minor billing errors can have a significant impact. This is why many organizations outsource the services of their emergency departments.

The benefits of outsourcing hospital ER billing include:

  1. Fewer errors
  2. Better focus for your staff
  3. Lower expenses
  4. Enhanced patient satisfaction
  5. Better cash flow
  6. Higher revenue
  7. Easier adherence to compliance
  8. Greater consistency

It’s worth noting that not all medical billing companies are created equal. For example, there have been many cases of patient privacy breaches that hinder the billing process because of the mishandling of data by these companies due to the lack of direct supervision and control of outsourced medical billing and collections. 

​​Because of this, healthcare providers should take the time to research and assess the outsourcing companies that they will work with to ensure that they can provide the highest quality service to their patients and stakeholders.

Final Insights

Patients are more likely to suffer poor health outcomes if their medical records are inaccurate. Providers committing coding errors could also lose credibility with payers, who will stop paying them for their services. With these, organizations should be mindful of possible errors when it comes to medical coding. Healthcare providers should examine their current business and assess how outsourcing their medical coding can help them give deliver a better service to their patients.

Frequently Asked Questions

Payers may refuse to reimburse you if you submit incomplete, delayed, or incorrect claims for payment. Even minor medical billing errors can delay reimbursement and cost you time and money.

Fraud or abuse penalties may be imposed on practices or providers with a history of coding errors.

There is no doubt that preventable medical errors contribute significantly to healthcare costs, including higher health insurance costs per person. Collaboration among health professionals is the only way to reduce the costs and injuries associated with medical errors.


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