It’s got more than four letters, but “downcoding” has quickly become one of the dirtiest words in medicine.
Everybody, no matter the profession, wants to get paid for their work. Physicians were skeptical when insurance companies started announcing plans in 2025 to “adjust” payments for high-level evaluation and management (E/M) services in Texas. Artificial intelligence (AI) would help catch and crack down on fraud, waste, and abuse, according to the industry.
This process of adjustment, or downcoding, has become a friction point with physicians who suddenly face revenue shortfalls with no real explanation. They’re demanding answers from insurance companies. Responses have flatlined.
“The thing is, [insurers] just don’t care,” said Christopher Jimenez, MD, an orthopedic surgeon who runs a 10-member practice with three clinics in Central Texas. Even with multiple locations, Dr. Jimenez feels like “I’m not even a dot on their map.”
“Downcoding has most certainly affected our practice, and I’m sure just about any practice out there,” Dr. Jimenez said. “There’s a whole slew of negative things that are happening in the insurance realm that are making it much harder to practice as an independent office.”
Lawmakers have sure noticed. Indiana and Illinois passed laws making it illegal for insurance companies to use AI software as the sole tool to downcode a claim. Humans must review the medical records first. In March, the Maryland Insurance Administration fined Cigna $80,000 and required the company to cease automatic downcoding.
Downcoding appears to be happening in Texas, whether physicians know it or not.
A practice manager who works with Dr. Jimenez’s office says an analysis over the last six months shows insurance companies are automatically lowering the diagnosis codes. This is done with no explanation, the practice manager says.
There’s no payment denial, either. Dr. Jimenez is still getting paid something. But he’s coming up maybe $30 or $40 short on a downcoded claim. Now multiply that by tens or hundreds of claims. Suddenly, a practice operating on a thin profit margin is getting squeezed even harder.
“You’re not aware that this is happening, and by the time you go back and look at it, now you run into issues with timely filing,” the practice manager said. Oftentimes by the time one notices that something’s off and goes to file an appeal, the claim has already been adjudicated. “It’s just creating a huge administrative burden.”
Dr. Jimenez believes this is driven by AI as the payer sees a way to cut costs.
“One can only think there’s no human being behind this reading the note and saying, ‘Oh, we didn’t do the work properly.’ This is an automated process,” he said.
One administrator for a small practice told Texas Medicine in August that the practice had more than 100 claims downcoded since July. The practice went through the lengthy appeals review process with the insurer, which included sending letters, charts, and other data. Each appeal was roughly a three-week process. Almost 90% of their appeals were restored to the correct coding and repayment levels, the administrator says.
What about solo practitioners, physicians in rural areas, or specialists who don’t have a large staff? Several physicians told Texas Medicine there’s a strong chance this is happening to them without their knowledge.
Reports have surfaced that Medicare Advantage plans are also downcoding certain claims.
“It is a big deal,” said Round Rock family physician Tina Philip, DO, who runs an independent practice. Dr. Philip is a member of the Texas Medical Association’s Council on Legislation and former vice chair of the Council on Socioeconomics.
“The biggest thing is that it affects all physicians,” she said. “A lot of people just downplay it. ‘Oh, it’s a private practice thing. I don’t have to worry about it.’ More of our members are going toward employment, and they need to know it’s a big deal.”
Nusrat “Ness” Khan, MD, the chair of TMA’s Committee on Primary Care, says the practice of downcoding started gaining real traction in California in 2024.
“It exploded in 2025,” the Weatherford internal medicine physician said.
In August 2025, Cigna announced its plans in Texas to adjust higher-level E/M payments for a limited number of codes, including 99204 and 99205. TMA pushed back with a letter from then-president Jayesh “Jay” Shah, MD (tma.tips/CignaLetter). Cigna claimed the new policy would impact fewer than 3% of eligible claims.
“If this is the case, why not simply educate the small number of outliers rather than subjecting all physicians to this blanket downcoding initiative?” Dr. Shah wrote. Cigna’s policy went into effect on Oct. 1, 2025.
Blue Cross and Blue Shield of Texas announced it would implement its own policy beginning July 1, 2026. The company said its new claims editing and review process would follow the American Medical Association’s guidelines for level of service and decision-making.
In a statement to Texas Medicine, a spokesperson for America’s Health Insurance Plans (AHIP) said accurate billing by providers is “fundamental to keeping healthcare costs as affordable as possible for patients.
“Regulators and watchdogs have documented provider upcoding that increases costs without providing additional value. Health plans are committed to working on behalf of consumers to ensure what providers bill reflects the care patients receive,” the AHIP spokesperson said.
Dr. Khan says that if payers are using an AI algorithm to search for “upcoders” in their geographic region, who could be outliers anyway, they cannot downcode without looking at the notes and chart, too. “It’s a self-destructing argument,” he said.
“If you’re going to downcode and you do it purely based on the claims, then you’re actually not being fair to the participating physicians,” Dr. Khan said. “This then becomes not something that penalizes upcoders, but actually is just a structural policy to save money.”
When battling for proper payment, physicians rely heavily on administrative staff or third-party billing companies. Having a certified coding specialist or a certified professional coder on staff or at minimum on call could be critical.
“Experience is everything. If you’ve got a seasoned, experienced coder with a proven track record, I don’t care if they don’t have any alphabet soup behind their name. They’re worth their weight in gold,” said Tessa Clifford, director of revenue cycle management for a New Braunfels-based company that handles billing and payments for all practice sizes and specialties.
Ms. Clifford, a certified coding specialist, said her firm works with a Texas-based ear, nose, and throat specialist. With one insurance company, “every time he bills a level 5 or level 4 office visit, they automatically downcode him to a level 3. It doesn’t matter,” she said. “You can appeal until you’re blue in the face. These are hard to get overturned, but it can happen.”
Physicians can stay on top of their payments with specific steps, Ms. Clifford says.
“Review your documentation first. Does my chart support what I’m billing?” she said. “My second tip: Is my billing matching my medical record? Whoever is selecting those charges or codes needs to also be checked. What if your billing is upcoding you when you shouldn’t be?
“Third thing: Do the analytics. Take the time to do these samples and truly know your payer rates. That in itself is a huge issue, too.”
Ms. Clifford says every physician – or their administrator – should know how to contact their payer representatives. You won’t talk with them weekly or maybe even monthly, she says, but it helps to know who can get things done.
TMA strives to help physicians resolve insurance payment issues. As director of physician payment services, Carra Benson works directly with physicians to help examine records and offer feedback.
If a physician is coding at a higher level than their peers, chances are they will be flagged whether there’s a downcoding issue or not, she says.
Still, some physicians are shy about reaching out to TMA for help for a variety of reasons, but Dr. Khan says nobody should hold back. The more information TMA has about the issue, the stronger it can advocate with insurance companies and the Texas Legislature.
“What should happen here is that each physician who is suffering from this – and many, many people are – should [let TMA know through proper channels], so they can have information to aid in education and advocacy efforts, when appropriate,” Dr. Khan said.
Dr. Jimenez echoed that sentiment, adding, “We all have to be loud.” Those who spend the time researching their back-office payments will see it’s happening to them, too.
“What [insurance companies] bank on is not every practice is going to be doing [research],” Dr. Jimenez said. “It’s a war of attrition. The people who actually invest money into figuring this out will get rewarded.”