By: Christopher Parrella, Esq., CPC, CHC, CPCO
Parrella Health Law, Boston, MA
A Health Care Provider Defense and Compliance Firm

A new letter from the American Academy of Family Physicians (AAFP) should serve as a wake-up call for every physician practice in the country. In a formal request to the Federal Trade Commission, the Department of Justice, and CMS, the AAFP is demanding a federal investigation into health plan downcoding, calling it anti-competitive, non-transparent, and financially devastating for independent practices. The letter is detailed, forceful, and points directly at payers for using opaque algorithms to reduce provider reimbursement.

If you think this is only happening to primary care, you are mistaken. Every specialty, behavioral health, SUD treatment, mental health, PT/OT, medical groups, hospital outpatient clinics, and urgent care, is exposed to this same “silent siphon” of revenue.

The letter lays out a simple truth: health plans are systematically lowering E/M levels without reviewing documentation, without speaking to the clinician, and without offering any standards for providers to follow. Practices usually discover it only after noticing unexplained underpayments. And appealing those underpayments costs real money. According to AAFP, administrative costs average $47.77 per Medicare Advantage claim and $63.76 per commercial claim, making it nearly impossible for small practices to fight back.

AAFP also raises a far more serious allegation in that selective or coordinated downcoding may violate federal antitrust laws, including the Sherman Act and Clayton Act. The concern is that as insurers acquire practices and vertically integrate, they can use downcoding to financially damage independent competitors and shift market share toward their own entities. Even worse, the letter suggests that multiple payers may be using shared algorithmic tools or non-public data to systemically downcode claims in similar ways, which could constitute collusion.

AAFP’s recommendations are clear: federal regulators must require transparency, mandate uniform application across all providers (including payer-owned groups), enforce clear appeal timelines, and investigate whether these algorithms amount to anti-competitive market manipulation. Most importantly, AAFP argues that primary care should be excluded entirely from downcoding programs because these cuts threaten practice stability, especially in rural and underserved communities. But you cannot wait for federal intervention. Downcoding is already harming practices, and the appeals system is designed to wear providers down. The burden is shifting heavily onto clinicians, revenue cycle teams, billing partners, and compliance officers. Every provider organization should be taking steps now to defend claims and protect revenue.

Here is your call to action. Start auditing your claims for downcoding trends especially unexplained E/M reductions. Document every instance where you billed one level and the plan paid another. Push payers to disclose their methodology, including any algorithm used to override clinician coding. Strengthen your documentation so it is bulletproof, especially for complex patients and multi-problem encounters. Train staff to spot underpayments early, before large volumes of claims fall outside timely-filing windows. Consider filing provider complaints with state regulators when downcoding appears systematic or discriminatory. And if your practice sees consistent patterns across plans, seek legal counsel.

If you have any questions or comments about the subject of this blog, please contact Parrella Health Law at 857.328.0382 or Chris directly at cparrella@parrellahealthlaw.com.