Emergency medicine (EM) has always been subject to payer scrutiny, but today’s reimbursement pressure is different: it is more aggressive, more automated and less transparent. Across the country, EM physicians are seeing an increase in diagnosis-based downcoding and black box payer algorithms that have increased the financial and administrative burdens on EM groups.
The concern is not simply that claims are being reviewed. Payers have a legitimate interest in claim accuracy. The concern is that many of these reviews fail to reflect the clinical reality of emergency care. Emergency physicians evaluate and treat patients based on presenting symptoms, limited information and potential risk. They do not have the luxury of hindsight, yet payer algorithms increasingly apply retrospective logic to decisions made in real time. To understand how emergency medicine arrived at this point, it is worth looking back at how EM documentation and coding have evolved.
How did we get here?
The roots of today’s reimbursement conflict can be traced to a major shift in how EM visits are documented and coded.
- EM reimbursement in the early 90s: This was the era of paper charting, when EM physicians documented encounters on carbon-copy forms and billing companies submitted claims based on what was legible on the third or fourth copy. If the documentation could not be read, the level of service billed didn’t reflect the level of service delivered.
- 1995 coding guidelines: CMS established specific quantitative documentation requirements for the History (Hx) and Physical exam (PE) components of the E/M scoring system. If even one required element was missing, the higher severity patients’ coded acuity would be reduced by one or two E/M levels.
- Level 3 and Level 4 claims both required Moderate medical-decision-making (MDM), but the Level 4 claim had higher Hx and PE requirements and the Nature of the Presenting Problem was of higher risk.
- Evolution through the 2000s: As technology advanced and electronic medical records became more common, documentation became more complete, structured and detailed. Richer history and physical exam documentation and clearer MDM explanations contributed over time to an upward shift in billed levels of service.
- 2023 coding guidelines: Then, in 2023, new coding guidelines fundamentally changed the focus of EM documentation. Rather than emphasizing the volume of history and physical exam elements, the updated framework placed greater weight on medical-decision-making, including the complexity of the presenting problem, the amount and complexity of data reviewed and the risk of patient management decisions.
Under this model, many visits that may have supported Level 3 coding under the old framework could now appropriately support Level 4 coding. The shift did not necessarily reflect a sudden change in patient acuity; rather, it reflected a coding framework that more fully recognized the physician’s cognitive work, risk assessment, diagnostic uncertainty and management decisions.
What happened next came as no surprise. As the American Academy of Professional Coders (AAPC) predicted, the combination of these forces caused an upward shift in ED acuity distributions. And that shift raised red flags for payers, who began questioning why they were paying more for final diagnoses that appeared similar on the surface.
Impact of poor payer performance
In recent years, major payers such as Aetna, Centene and UnitedHealthcare have reported disappointing earnings, often citing rising medical costs and increased severity in billed services. The fallout has been significant, contributing to high-profile leadership changes across the payer industry, including executive turnover at Aetna and substantial management changes at UnitedHealthcare.
Faced with mounting shareholder pressure, payers publicly vowed to aggressively address these rising costs. What followed was a wave of industry reports and public relations narratives attributing the rise in healthcare costs to provider upcoding.
- The data narrative: Studies from groups like the Peterson-KFF Health System Tracker and Trilliant Health highlighted an upward shift in billing codes across certain diagnosis groupings for outpatient services.
- The allegations: These reports suggested that the increase in higher-acuity codes may be driven less by patient needs and more by systemic incentives, detailed EMR templates and revenue cycle optimization strategies.
- The double standard: Ironically, a separate Trilliant study examined the benefits of AI ambient scribing, which also resulted in an upward shift in billed acuity by diagnosis grouping. In that context, many of the same authors characterized more complete documentation and reimbursement capture as a “fiduciary obligation,” rather than evidence of provider fraud.
Together, these narratives created a convenient backdrop for payers. As higher acuity distributions drew scrutiny, payers increasingly framed the trend as a provider behavior problem rather than the predictable result of evolving documentation standards, coding rules and clinical complexity.
Diagnosis-based downcoding
Armed with the narrative of provider upcoding, payers have begun rolling out increasingly aggressive diagnosis-based downcoding policies. One primary mechanism has been the misuse of the Mercer LANE (Low Acuity Non-Emergent) list.
Originally developed in 2019, the Mercer LANE list was intended to help states manage healthcare costs and oversee Medicaid Managed Care Organizations (MCOs). In practice, the goal was to create incentives for MCOs to educate members, improve access to appropriate non-emergency care and redirect truly non-emergent cases to lower-cost settings, such as urgent care centers.
Instead, some MCOs have repurposed the list as a tool to justify automatic downcoding policies. Conveniently denying emergency physicians appropriate reimbursement for providing emergency care to their members based solely on a final diagnosis.
Some payer policies are particularly concerning. Highmark, for example, has defined certain LANE visits as encounters in which a delay of several hours would not be expected to increase the likelihood of an adverse outcome. Yet their LANE list includes clinically significant diagnoses, such as Type 1 diabetes mellitus with hypoglycemia without coma*, or severe asthma exacerbations.
Other payers, including Aetna and Cigna, have adopted policies that appear to downcode claims using vague or undisclosed diagnosis-based criteria, leaving providers with limited visibility into how payment decisions are made.
Many of these practices are inherently controversial, as adjusting the E/M level on the claims for payment based solely on the final diagnosis strongly conflicts with the foundational prudent layperson standard.
Black box algorithms
A second major trend is the use of proprietary review tools, driven by Black Box algorithms.
Under these models, an EM claim is submitted and quickly flagged through a payer portal as pending or awaiting medical records. If the record is uploaded, the provider may receive a response within several weeks. If no record is uploaded, the delay can extend up to 45 days. In many cases, the final outcome is “zero pay.” Some groups pursue reconsideration or appeal, but those pathways often produce limited success and create additional delays.
Providers are then left in a difficult position: the payer controls the opaque logic driving the decision, while the practice bears the administrative and financial burden of challenging it. Without visibility into the methodology, groups are forced to fight decisions without understanding the criteria that produced them.
Commercial claim-editing products have further accelerated this trend. Some tools are marketed as a way to move review earlier in the claim cycle, shifting payers from post-payment recoupment to pre-payment claim validation. For payers, this creates an immediate cash flow advantage: funds are retained while the claim is reviewed rather than paid and later recouped. For providers, the effect is the opposite – payment is delayed, administrative costs rise and revenue becomes less predictable.
Take action: Strategies for revenue cycle leaders
For revenue cycle leaders, passive monitoring is no longer a viable strategy. EM groups need a deliberate, data-driven approach to documentation, coding and payer performance.
Documentation education should be designed with automated payer review in mind. Physicians should be trained to use the diagnosis line and clinical documentation to tell the full story of the encounter, including presenting symptoms, differential diagnoses, clinical risk, diagnostic uncertainty and medical-decision-making. Coding teams should also be trained to use diagnosis coding strategically and accurately, ensuring that claims reflect the complexity of the care delivered.
At the same time, groups must remain mindful of the elements that automated systems are likely to flag. These may include over-templating, conflicting statements within the chart, insufficient linkage between the workup and medical decision-making, or attempts to justify a complex evaluation using only a single low-acuity symptom.
EM groups should also conduct their own payer performance analysis. By tracking denial rates, appeal success rates, payment delays, zero-pay outcomes and the true cost of delayed cash flow, practices can make more informed reimbursement decisions. These insights can help leaders determine when to pursue appeals and when to move forward with patient responsibility sooner.
Practice leaders should also request meetings with any payer that demonstrates an aggressive downcoding pattern, particularly when a contract is in place. Leaders should document any non-response, refusal to meet, or substantive information learned during those discussions. Over time, this record can support contracting discussions and advocacy efforts by helping policymakers better understand the current payer environment and its devastating impact on emergency medicine reimbursement.
The bottom line
As the reimbursement landscape becomes increasingly complex and automated, the burden of proof is increasingly falling on physician practices. EM groups must respond with highly specific documentation, continuous payer auditing, disciplined revenue cycle strategy and sustained engagement in industry advocacy.
*A diagnosis of Type 1 diabetes mellitus with hypoglycemia with coma would bypass the downcoding edit.
