Reeling payers plan to increase scrutiny of providers’ coding practices

Health insurers see provider coding practices as one factor in unfavorable cost trends, several companies said during recent earnings calls.

Those cost trends, in turn, have driven substandard Q2 financial results.

“We know this adjustment is disappointing, and we’re taking concrete actions to address it,” Gail Boudreaux, president and CEO of Elevance Health said recently, referring to the company’s revised financial outlook for 2025.

“We are disappointed by this performance and frustrated to have fallen short of the financial goals we set at the start of the year,” said Sarah London, CEO of Cetene Corporation, which focuses much of its business on Medicaid and the Affordable Care Act (ACA) insurance marketplaces.

UnitedHealth Group was the latest to pass along bad news to its investors, announcing Tuesday that the company had missed its forecasted earnings-per-share by 8.9%. A key drag on performance was a year-over-year decline in operating earnings of $1.9 billion at UnitedHealthcare, primarily stemming from medical cost trends.

“As we continue to assess the state of our businesses, it is very apparent that some require a fundamental reorientation,” said Stephen Hemsley, chair and CEO of UnitedHealth Group, although he did not specify that he meant UnitedHealthcare.

Leaders also did not elaborate on a recent acknowledgment that the company is under investigation by the U.S. Department of Justice.

No letup in costs

While CMS’s crackdown on the billing practices of Medicare Advantage (MA) health plans is a central aspect of the recent difficulty, the daunting outlook at UnitedHealth also has arisen from “unprecedented medical cost trends measured in both intensity of services used as well as more aggressive care provider coding and billing technologies,” Hemsley said.

Tim Noel, CEO of UnitedHealthcare, added that in the insurer’s Medigap plans, which reflect care activity levels and cost trends in Medicare fee-for-service, costs are expected to increase by more than 11% in 2025, compared with between 8% and 9% in recent years.

As for MA, added Noel, “higher frequency of physician rounding, testing and related services of specialists and in [emergency department] settings are contributing to elevated outpatient spend.”

Elevance Health sees utilization and coding as driving two-thirds of the cost trend in Medicaid, with the remainder linked to acuity, said Mark Kaye, executive vice president and CFO. That’s a reversal from 2024 guidance. Areas where Medicaid utilization increases are especially notable include long-term services and support, behavioral health and inpatient surgery.

The higher utilization may partially result from the policy environment. Amid discussions of the rollbacks coming to Medicaid and ACA marketplace enrollment, people may be pushing to use their coverage before they possibly lose it.

“I do think that some of this idea of the coding intensity we’re seeing is a little bit of the behavioral economics byproduct of folks seeking services because of scarcity and fear of loss, and then the provider is concerned about revenue, and those two things colliding,” Cetene’s London said.

Technology deployment accelerates

AI-enabled coding tools allow hospitals to increase documented acuity, leading to higher unit costs, Boudreaux said.

“We have flagged these because we’ve been tracking those with our analytics earlier in the quarter,” she said. “And it is one potential contributor to outlier claims and higher allowed amounts. We are, though, putting those through our payment integrity process. So, it’s a bit of a catch-up game, honestly, but we’re very careful about that.”

Payment integrity seems to be a recurring phrase among payers.

At Cetene, “There are definitely very clear areas where we have seen a step-up in coding intensity, partly driven, I think, by revenue cycle activity at hospitals,” London said. “And so there are very targeted areas that we are focused on there, and making sure that if they integrate AI into the revenue cycle, we’re integrating AI into payment integrity to make sure that we are keeping pace with all of that.”

In AI deployment by providers, Elevance Health sees a difference between “what we’ll call responsible innovation and inappropriate coding,” Boudreaux said.

“We do support providers using this technology to improve their documentation and patient outcomes, and [we] actually think that’s a very good thing,” she said.

Trying to keep pace

Hospitals could argue that if any group of healthcare stakeholders is responsible for turbocharging the application of AI in the revenue cycle, it’s the payers. Regardless, hospitals see AI as a tool to bring needed efficiency to claims processing, especially at a time when rates of initial denials and other drags on payment continue to tick upward.

“We’re obviously supplementing some of those capabilities that we have today that used to be manual with AI-enabled technologies that allow us to produce more rapid automated responses to various types of disputes, based upon pattern recognition from various sources that allow us to do that more effectively,” said Saum Sutaria, president and CEO of the for-profit health system Tenet Healthcare. “That makes what we’re doing more reliable but also sort of faster.”

He added, “Adapting to the current environment from a collection standpoint is a critical capability that we have developed, and that capability has moved from being manual, when it first started to increase, to [being] much more technology-driven and workflow-automation-driven.”

Shoring up processes

More generally, Sutaria said, “It’s also important that we spend our time being committed to very accurate documentation and coding.”

To that end, Tenet’s ownership of the revenue cycle management company Conifer Health Solutions helps the organization “reduce the dispute activity to some extent from the health plans.”

HCA Healthcare, another leading for-profit hospital chain, is “not seeing any significant impact on our results from denial activities,” said Mike Marks, executive vice president and CFO. “That does reflect the significant work that we have put into our revenue cycle over the last couple of years to strengthen our organization’s management of denials.”

Amid antagonism between the two sectors, HCA also has sought to increase its level of collaboration with payers.

“Over the last year or so, we have initiated several partnership activities with our key managed-care payer partners,” Marks said. “These partnership activities focused on things like digital integration, administrative simplification and better management of disputes. I think there’s a lot of good work between us and our payer partners, and [we’re] hopeful that we can continue to manage through these things.”