The AMA has extensive policy on payer downcoding—a practice that inflicts significant financial harm on physician practices that is often concealed by opaque payer processes—and it’s developed a robust advocacy strategy. However, the House of Delegates took steps to sharpen that advocacy by adopting the recommendations of an AMA Board of Trustees report at the 2026 AMA Interim Meeting.
“Physicians should not have to fight insurers to be paid accurately for the care they provide,” said AMA Trustee Michael Suk, MD, JD, MPH, MBA. “Today’s action builds on the AMA’s ongoing advocacy to stop unfair insurer payment practices and ensure physicians are paid accurately for the care they provide to patients. We will continue pursuing legislative, regulatory and legal solutions that hold insurers accountable and protect patients’ access to care.”
To deepen physician advocacy on the issue of downcoding, the House of Delegates adopted new policy for the AMA to:
- Communicate legislative guardrails on health plans’ downcoding policies to physician practices and provide guidance on how any payer noncompliance can be reported to the appropriate regulatory body for enforcement, doing so in collaboration with state medical associations and national medical specialty societies.
- Develop, regularly update, disseminate and widely promote guidance and educational materials for physicians regarding insurer downcoding and recoding practices, including how to document, appeal and report inappropriate payer conduct to regulators and AMA advocacy channels.
- The House of Delegates also reaffirmed existing policy to support lawsuits that seek redress from insurers engaging in inappropriate or inaccurate downcoding practices.
What’s the scope of downcoding problem?
The AMA has an educational resource for physicians to help them understand the issue. The resource, “Payer Evaluation and Management (E/M) Downcoding Programs: What You Need to Know” (PDF), includes examples of downcoding scenarios and tips to help practices recognize downcoded claims. The AMA resource also links to an informal survey in which the AMA collects information on insurer downcoding policies to identify trends and support ongoing advocacy efforts.
In the recent years, automatic downcoding has been on the rise. In 2021,changes were made to the evaluation and management (E/M) services Current Procedural Terminology (CPT®) code set that allow physicians to select the appropriate level for an outpatient E/M visit based either on the complexity of the medical decision making involved in the care delivery or total time spent on the date of service. To confirm the appropriate E/M service level is provided on the claim, it is often necessary to review documentation from the medical record.
“Many health plans downcode claims automatically, without first requesting and reviewing the underlying clinical record. Some payers use augmented intelligence (AI) software algorithms and other automated decision-making tools to downcode claim payments. In many instances, the diagnosis code reported on a claim is used as a proxy for the level of care to adjust payment,” the AMA Board of Trustees report explains. “Such methodology—and indeed any program that reduces E/M payment solely based on information on the claim—is wholly inappropriate, as documentation from the medical record is needed to confirm the level of [medial decision making] or total time spent on the date of the encounter.”
A recent survey from the Illinois State Medical Society found that 72% of physicians reported that their practices have been affected by automatic downcoding of appropriately coded and documented claims, and 77% said that automatic downcoding has increased in the past five years.
The board’s report highlights several critical problems associated with automatic downcoding:
- Significantly lower physician practice revenue that can undermine practice sustainability.
- Increased administrative burdens for physicians and staff.
- Reduced patient-care access as a practice’s financial viability is threatened.
According to data cited in a resolution introduced at the Interim Meeting, revenue erosion from algorithmic downcoding estimated to be between $28,000 and $74,000 per physician annually in family physician practice settings, and $40,000 to $180,000 each year for multispecialty physician practices.
How EHRs can help track downcoding
Another big problem, the report says, is how challenging it is for physician practices to determine that their claims are being downcoded. For example, health plans may pay E/M claims at an adjusted lower rate without changing the billed code or providing clear information on the remittance advice indicating that the service has been downcoded, making the changes extremely difficult to identify in revenue cycle audits. Often, these reduced E/M payments may go unnoticed for many months or longer due primarily to the lack of payer transparency.
To help clarify the consequences and use of payer downcoding, delegates directed the AMA to:
- Directly engage the EHR and health technology vendor community to promote additional functionality for EHR, billing and practice-management systems to automatically detect from the electronic remittance advice when a payer has adjudicated or paid a claim at an E/M service level lower than the level submitted or with different modifiers and to alert users with the original and adjudicated codes, the payer's stated reason, and the applicable appeal deadline, within the time needed to appeal.
- Use its resources to increase awareness of and challenge public and private payers, including Medicare Advantage, on the use of automated, algorithmic or AI-directed E/M downcoding without appropriate medical review.
The AMA already has a multipronged effort to fight insurers’ automatic downcoding policies. In addition to letters directly to insurers urging them to halt the practices and follow-up conversations with health plan leaders:
- The AMA created a legislative strategy to advocate on the issue, including developing model legislative language that was distributed to state medical associations and national specialty societies.
- More than a dozen states have introduced bills tackling automatic downcoding and several states have pushed bills across the finish line, including Indiana, Virginia and Illinois.
- At the federal level, the AMA congressional affairs staff have been working with lawmakers to introduce a federal downcoding bill.
Read about the other highlights from the 2026 AMA Interim Meeting.
