Home » The Economic Impact of Medical Coding Errors: Analysis and Prevention Strategies

The Economic Impact of Medical Coding Errors: Analysis and Prevention Strategies

by Ariadna

Medical coding translates patients’ medical records into universal code numbers. These diagnosis and procedure codes get further used for healthcare data analytics, claim processing and revenue cycle management. Nevertheless, incorrect coding can result in denied insurance claims, revenue loss and regulatory penalties for healthcare providers.

The Economic Burden of Coding Errors

Coding errors account for up to 75% of claim denials, leading to loss of practice income. EHR Report estimates put US healthcare revenue loss between $15-25 billion yearly owing to coding issues. With the US healthcare system already grappling with burgeoning costs, coding errors further exacerbate financial pressures. Claim denials and missed reimbursement opportunities mean reduced budgets for upgrading care delivery programs and transitioning to value-based care models promoting quality over quantity of services. 

Common Coding Errors  

The experts at Find-A-Code.com offer some examples of coding mistakes that are responsible for claim denials:

  • Picking unspecified codes instead of definite diagnosis codes.
  • Applying outdated codes no longer in use. 
  • Submitting codes not meeting payer’s clinical edit criteria.
  • Not providing supporting documentation for chosen codes.
  • Picking codes not matching rendered health services.

Other issues relating to coding errors are:  

Revenue Loss and Refiling Cost   

Denied claims lead to loss of reimbursement necessitating appeal and refiling, adding more administrative costs. Meanwhile, patients may need to be contacted for obtaining additional health data missing from records that led to claim rejection. 

Inability to Gauge Service Quality   

Inaccurate diagnosis and procedure coding prevents proper evaluation of care quality and health outcomes. That impedes development of robust clinical protocols and identifying care gaps. With rising emphasis on tying provider payments to quality metrics through value-based reimbursement models, poor data quality from coding errors hampers assessing performance goal achievement.

Regulatory Noncompliance   

Erroneous coding makes for unreliable data that facilities submit to regulators and health agencies. Such compliance issues may lead to hefty Health Insurance Portability and Accountability Act (HIPAA) fines. Coding errors can also skew key performance metrics reported to regulators, affecting community health policy decisions and pay-for-performance metrics under payment reforms.

Preventing Medical Coding Errors  

An effective medical coding compliance program should include:  

Ongoing Education  

Arming coders with the latest skill upgrades through constant training is vital to minimize coding errors. From clarifying documentation rules to applying coding guidelines accurately, regular education significantly improves coding quality. 

QI Audits   

Quality improvement audits measuring coding accuracy help uncover problem areas needing performance improvement. Audits reveal issues like poor abstracting of health records, not assigning most specific codes correctly, etc. which then get remedied through targeted training. 

Technology Use  

Integrated coding with electronic health record systems via automated selections, alerts, etc. help pick right codes. Natural language processing also automates chart data capture for coding. Such tech use enhances coder productivity and accuracy. 

Progress Monitoring   

Monitoring each coder’s error frequency and type must be done along with audits for gauging improvement with additional training. Periodic competency assessments also help gauge progress. 

Collaborative Coding  

Building a collaborative coding team environment for collective oversight encourages learning from errors to prevent repeated issues. Group case reviews also aid resolving difficult coding scenarios leveraging peer insights. 

Ongoing Quality Checks  

Concurrent quality checks validating code accuracy at regular intervals are vital for quickly catching errors before claims submission. Confirming diagnosis codes align with clinical indicators in health records minimize discrepancies. 


Accurate medical coding is fundamental for maintaining healthcare organizations’ financial health and meeting quality metrics through robust data. Preventing coding errors calls for an organization-wide approach including constant coder training, technology-enabled coding, frequent audits and building a culture of collective responsibility for coding excellence. Healthcare facilities witnessing success with sustainable coding compliance proactively invest in their coding staff and resources.

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