Payer Downcoding

What is Payer Downcoding?

Psychiatrists, at times, may encounter issues when submitting reimbursement claims to payers including payer downcoding of evaluation and management (E/M) codes on an otherwise properly submitted claim. This can occur when a payer reimburses at a lower-level, or for a less intensive code for a medical service or procedure than what was originally submitted without clinical validity, transparency regarding the rationale, or proper review of a patient's medical record.

Physicians can take steps to appeal automatic downcoding with individual payers, as well as to a state insurance department, which can be time and resource intensive. AACAP opposes automatic downcoding practices.

Current Downcoding Landscape

AACAP is aware that members have been deeply impacted by Blue Cross Blue Shield plans in Illinois, Montana, New Mexico, Oklahoma, and Texas that have announced new automatic downcoding policy for certain evaluation and management (E/M) codes effective July 1, 2026. Members have reported higher complexity codes have been most impacted.

While not a new practice, there may be other payers that have similarly burdened psychiatry practices with clinically questionable downcoding. If any AACAP member has experienced this from Blue Cross Blue Shield, or any other payer, please reach out to govaffairs@aacap.org.

AACAP, along with APA and our regional organizations of child and adolescent psychiatry in impacted states, have outlined our concerns to Blue Cross Blue Shield. Read the letters to:

  • See an example of the policy change from Blue Cross Blue Shield of Montana here.

Attention has been given to this questionable new policy from Blue Cross Blue Shield in the impacted five states from state lawmakers, state regulators, and local media.

The Illinois Psychiatric Society published resources related to automatic downcoding experienced by its members.

What can be done about downcoding?

State lawmakers can pass a ban on the practice of automatic downcoding. Illinois lawmakers passed a ban on downcoding in July 2026, which goes into effect in January 2028.

Psychiatrists are not alone in fighting automatic downcoding. The American Medical Association has created model state legislation to ban automatic downcoding.