What to Do When a Payer Says You're Underbilling

You Got a Letter Saying You're Billing Too Low. Now What?

It arrives as a letter or a message in your payer portal: your coding patterns are "below the expected range" for your specialty. Maybe it's from Optum, maybe UnitedHealthcare, maybe your state's Medicaid managed care plan. The language is polite but pointed: you appear to be underbilling compared to your peers.

Your first reaction might be panic. Are you being audited? Did you do something wrong? The short answer: probably not. But you should understand what the letter actually means, why the payer sent it, and what, if anything, you should do about it.

What an Underbilling Letter Actually Means

An underbilling letter (sometimes called a "coding pattern notification" or "documentation opportunity letter") means one thing: your E/M code distribution is statistically lower than other providers in your specialty and region. For example, if the average family medicine provider bills 99214 for 50% of established visits, and you're billing it for 25%, you'll get flagged.

The letter is not an audit. It's not an accusation. And it's not a demand. It's a notification that your coding pattern is an outlier on the low end.

What It Doesn't Mean

• It doesn't mean you're doing anything wrong
• It doesn't mean you must change your coding
• It doesn't mean your records will be requested or reviewed
• It doesn't require a formal response

Why Payers Send These Letters (It's Not What You Think)

Here's the part that surprises most providers: payers actually want you to bill higher. It sounds backwards. Why would the entity paying you want to pay more? The answer is risk adjustment.

In Medicare Advantage, Medicaid managed care, and ACA marketplace plans, payers receive capitated payments from the government based on the acuity of their enrolled population. Higher E/M codes signal higher patient complexity, which translates to higher risk adjustment scores, which means the payer gets more per-member revenue from CMS or the state.

The math works in their favor: if your 99214 upgrade adds $40 to their reimbursement to you, but it increases their risk-adjusted revenue by $200+ per member, the payer comes out ahead. That's why they're encouraging you to code higher: your higher codes support their higher revenue.

Should You Actually Worry?

In most cases, no. But treat the letter as a useful data point. Ask yourself two questions:

1. Is your coding accurate? Are you billing the E/M level that your documentation actually supports? If you're spending 35 minutes on a visit with 3 chronic conditions and billing 99213, you're not being conservative; you're under-coding.
2. Is your documentation complete? Sometimes providers do the work of a 99214 but document like a 99213. If your notes don't reflect the complexity of what you're doing, the code won't either.

Important: Never change your coding just because a payer letter told you to. Change your coding only if a self-audit reveals that your documentation supports higher levels than what you're billing.

How to Evaluate Your Own Coding Patterns

Instead of reacting to the letter, use it as a prompt to do your own analysis. Here's how:

Step 1: Pull Your E/M Distribution

Ask your billing team or EHR to generate a report showing your E/M code distribution for the last 6 months. You want to see what percentage of your established patient visits fall into each level:

• 99212: Should be rare (under 5%), as these are minimal-complexity visits
• 99213: Typically 30-40% of visits for family medicine
• 99214: Typically 45-55% of visits for family medicine
• 99215: Typically 8-12% of visits for family medicine

If your 99214 rate is below 30% or your 99215 rate is below 3%, you likely have a coding gap.

Step 2: Audit 20 Charts

Pull your last 20 established patient visits. For each one, re-evaluate the MDM level and the total time documented. Ask: does the documentation support the code I billed, or does it support a higher code? Track how many you'd upgrade.

Step 3: Compare to Specialty Benchmarks

CMS publishes Medicare Provider Utilization Data annually, broken down by specialty and code. You can see exactly where the average family medicine provider falls. If you're significantly below the average, your letter is probably right, but the fix is documentation and coding accuracy, not arbitrary upcoding.

Underbilling Letter vs. Audit Notice: Know the Difference

These are two very different things, and it's critical to distinguish them:

• Underbilling letter: Informational. No records requested. No investigation. No penalties. No required response. The payer is nudging you to code higher.
• Audit notice: Formal request for medical records. May be pre-payment or post-payment review. Can result in recoupment (paying money back) if documentation doesn't support the billed code. Requires a timely response.

If you receive an audit notice, take it seriously. Pull the requested records, have your compliance officer or billing manager review them, and respond within the deadline. If the audit is large or the stakes are high, consult a healthcare attorney who specializes in billing compliance.

When to Act vs. When to Ignore

Act If:

• Your self-audit shows you're consistently under-coding relative to your documentation
• Your 99214 rate is below 30% for established patients
• You never bill 99215 despite managing complex multi-condition patients
• You're not billing add-on codes like G2211 that your visits qualify for

Ignore If:

• Your self-audit confirms your coding matches your documentation
• Your patient panel is genuinely less complex (e.g., young, healthy population)
• You're already within the normal distribution for your specialty

Action Steps: What to Do This Week

1. Don't panic. An underbilling letter is not an audit. File it, but don't ignore it.
2. Pull your E/M code distribution for the last 6 months. Compare your 99213/99214/99215 percentages to the national benchmarks above.
3. Audit 20 charts. Re-evaluate whether the documentation supported the code you billed. Count how many you'd upgrade.
4. If you find a gap, fix your workflow, not your coding. The fix is almost always better documentation habits (recording total time, documenting data reviewed, listing all conditions addressed) rather than simply picking higher codes.
5. Use D3 to benchmark your practice. D3 compares your coding distribution to same-specialty peers and shows you exactly where the gaps are, with dollar amounts attached.

An underbilling letter is a signal, not a sentence. Use it as motivation to make sure your billing accurately reflects the work you're doing every day. If it does, you have nothing to change. If it doesn't, you have revenue to recover.