Medical coding errors cost healthcare organizations billions annually through claim denials, compliance penalties, and audit recoupments. In 2025, payers, auditors, and AI tools are all tuned to catch even small coding mistakes—and they punish sloppiness with denials, recoupments, and compliance flags.
The good news: most coding errors are preventable with proper documentation, training, and technology. This guide covers the top 10 most costly coding errors and provides actionable strategies to prevent each one.
Upcoding
Billing for a higher-level service than documented
False Claims Act violations, $250K+ fines, exclusion from Medicare/Medicaid
Common Examples
- -Billing 99215 when documentation only supports 99214
- -Coding a complex procedure when a simple one was performed
- -Billing 30-minute sessions for 15-minute encounters
Prevention Strategies
- +Document all elements required for the code billed
- +Use E/M code calculators with MDM decision support
- +Conduct regular internal audits comparing codes to documentation
Downcoding / Undercoding
Billing for a lower-level service than actually provided
10-30% revenue loss, flagged as audit outlier, up to $125K/year lost
Common Examples
- -Habitually billing 99213 for 99214-level visits
- -Defensive coding to "avoid audits"
- -Insufficient documentation for actual complexity
Prevention Strategies
- +Document thoroughly to support appropriate code level
- +Understand that undercoding can trigger audits too
- +Use AI scribes to capture complete documentation
Unbundling
Billing separately for procedures included in a single code
Claim denials, overpayment recoupment, fraud investigations
Common Examples
- -Billing individual lab tests instead of panel code
- -Separating components of a surgical procedure
- -Charging for supplies already included in procedure code
Prevention Strategies
- +Review CCI (Correct Coding Initiative) edits before billing
- +Use coding software that flags bundling issues
- +Train staff on comprehensive code definitions
Missing or Incorrect Modifiers
Omitting or misusing modifiers that affect reimbursement
Wrong reimbursement, claim rejections, delayed payments
Common Examples
- -Missing modifier 25 on E/M with same-day procedure
- -Incorrect laterality modifiers (RT/LT)
- -Overuse of modifier 22 without supporting documentation
Prevention Strategies
- +Create modifier checklists for common scenarios
- +Document why increased work (modifier 22) was required
- +Verify modifiers match payer-specific requirements
Lack of Code Specificity
Using unspecified codes when specific codes exist
Higher denial rates, reduced reimbursement, compliance risk
Common Examples
- -Using unspecified diabetes (E11.9) instead of E11.65 with complications
- -Generic "pain" codes instead of site-specific codes
- -Unspecified fracture codes without location/type
Prevention Strategies
- +Query physicians for specific diagnoses
- +Implement CDI (Clinical Documentation Improvement) programs
- +Use AI tools that suggest specific code options
Incorrect Laterality
Missing or wrong right/left/bilateral designation
Immediate claim rejection, delayed reimbursement
Common Examples
- -M25.561 (right knee pain) vs M25.562 (left knee pain)
- -Missing bilateral modifier for procedures on both sides
- -Conflicting laterality between diagnosis and procedure
Prevention Strategies
- +Always document and verify which side was treated
- +Use EHR prompts that require laterality selection
- +Cross-check procedure notes with diagnosis codes
Gender and Age Mismatches
Using codes inappropriate for patient demographics
Automatic rejection, compliance flags
Common Examples
- -N40.0 (benign prostatic hyperplasia) billed for female patient
- -Pediatric codes used for adult patients
- -Pregnancy codes without confirming patient can be pregnant
Prevention Strategies
- +Use coding software with demographic validation
- +Verify patient information before claim submission
- +Implement pre-billing demographic checks
Outdated Codes
Using codes deleted or replaced in annual ICD-10/CPT updates
Claim rejections, resubmission delays
Common Examples
- -Using 2024 codes after January 2025 updates
- -Missing new COVID-19 or telehealth codes
- -Ignoring annual E/M guideline changes
Prevention Strategies
- +Subscribe to CMS and AMA code update alerts
- +Update code databases by October 1 each year
- +Train staff on annual coding changes
Documentation-Code Mismatch
Codes not supported by clinical documentation
Audit failures, overpayment recoupment, compliance violations
Common Examples
- -"If it's not documented, it didn't happen"
- -Copying forward outdated information
- -Missing required elements for code level billed
Prevention Strategies
- +Code only what is documented in the record
- +Implement real-time documentation prompts
- +Use AI scribes for comprehensive capture
Duplicate Billing
Submitting the same charge multiple times
Overpayment demands, fraud allegations, payer scrutiny
Common Examples
- -Rebilling denied claims without correcting the issue
- -Billing from multiple systems for same service
- -Same procedure billed by different providers
Prevention Strategies
- +Implement charge capture reconciliation
- +Use claim scrubbing software
- +Establish clear rebilling workflows
2024-2025 Denial Statistics
| Metric | Value | Note |
|---|---|---|
| Initial Claim Denial Rate (2024) | 11.8%+2.4% YoY | - |
| Hospital Claims Denied (Private Payers) | 15% | Premier Inc. |
| Claims Denied from Paperwork Issues | 77% | Not medical judgment |
| Denied Claims Appealed | <0.2% | Most revenue lost forever |
| Appeals Overturned | 56% | Worth appealing when valid |
| Medicare Denial Rate | 8.4% | Lowest payer type |
| Medicaid Denial Rate | 16.7% | Highest payer type |
| Coding Accuracy (Audited Facilities) | 30% | Most code incorrectly |
Denial Rates by Insurance Payer (2024)
Sources: KFF, Experian Health State of Claims Report 2025, Becker's Payer Issues
Coding Error Prevention Best Practices
Internal Audit Program
- ✓Audit 20 records per provider every 6 months
- ✓Target 95%+ coding accuracy rate
- ✓Focus on E/M levels and high-cost procedures
- ✓Review telehealth and new vs. existing patients
Documentation Standards
- ✓"If it's not documented, it didn't happen"
- ✓Document all required elements for code level
- ✓Use real-time AI documentation assistance
- ✓Implement CDI programs for specificity
Technology Solutions
- ✓Use claim scrubbing software before submission
- ✓Implement CCI edit checking
- ✓Enable demographic validation checks
- ✓Update code databases by October 1 annually
Staff Training
- ✓Annual ICD-10 and CPT update training
- ✓Modifier usage workshops
- ✓E/M coding guideline refreshers
- ✓Payer-specific requirement updates
How AI Prevents Coding Errors
Advanced AI medical scribes like PatientNotes help prevent coding errors at the source—during documentation—rather than trying to fix them after the fact.
Complete Documentation
Captures every element of the encounter to support appropriate code levels and prevent undercoding.
Real-Time Suggestions
Prompts for missing information and suggests specific diagnoses to avoid unspecified codes.
Compliance Built-In
Structured templates ensure all required elements are documented, reducing audit risk.
Just $50/month after trial. No contracts.