AAFP urges feds to investigate downcoding as threat to primary care
Dec. 10, 2025, News Staff — The AAFP is taking action on a growing threat to physician compensation and the viability of small and independent family medicine practices: insurers’ growing use of downcoding to reduce payment.
“Payer-initiated downcoding programs are not new, but they are spreading, and it’s time to get a handle on it” said Stephanie Quinn, the Academy’s senior vice president for external affairs and practice experience.
The Academy’s Nov. 21 letter urged the Department of Justice, the Federal Trade Commission and CMS to investigate with the aim of ensuring transparency, accountability and fair competition.
“Instead of denying a claim outright, which is obvious and can be appealed, insurers have begun simply paying for primary care and other services at a lower rate,” Quinn said. “They’re making these determinations using algorithms that are applied to the limited information submitted on a claim form, without meaningful input from doctors.”
While the AAFP supports accurate and fair billing, Quinn said the lack of transparency about downcoding programs raises questions about whether they are uniformly applied for all physicians. Following years of vertical integration, downcoding could create unfair advantages for payer-owned sites of care.
“Beyond the risks downcoding poses to fairness and competition in a health care marketplace already suffering from the effects of consolidation, we’re concerned about the losses and administrative burdens sure to be felt by small and independent practices,” Quinn said.
What is downcoding and how does it affect family physicians?
Downcoding occurs when a health insurer
- applies unilateral, likely algorithm-generated criteria, to
- assign an evaluation and management or other code that’s lower than what the physician has billed,
- without consulting the physician about the claim.
The outcome is reduced compensation, which physicians often discover only after receiving the lower payment. From there, their options are to accept the lower payment or appeal, which can take time and other resources away from patient care.
“Primary care practices have been significantly affected and may be disproportionately harmed by these programs,” the AAFP said in its letter. “A primary care visit often involves complex decision-making for numerous interrelated issues, from preventive care to management of chronic conditions to coordination of additional services with other providers and specialists.
“This is an existential threat to many practices—especially those in rural and underserved areas who may be the only health care access point for entire communities.”
An August white paper published by the health care consultancy KZA puts that threat in stark terms: “Revenue erosion can result in six-figure annual losses for practices.”
AAFP advocacy on downcoding
The Academy in recent months has been in touch with AHIP (formerly America’s Health Insurance Plans) as well as specific payers, including Blue Cross Blue Shield Association, to express concern about downcoding and to ask for clarification about the process.
The Academy told policymakers in the Nov. 21 letter, “To date, the AAFP and its members have not been able to secure any guidelines, standards or rules from payers with which physicians could educate themselves to improve their billing and documentation in order to avoid having their claims downcoded.
Downcoding resources
- FPM Getting Paid blog: Cigna’s downcoding policy gets pushback from physician groups
- FAQ: Answers to common questions about coding for evaluation and management services
- Template letter: Write to individual payers
“These programs appear to be using algorithms that lack transparency and are applied without full clinical context,” the letter added. “If these programs are designed to ensure accurate billing and prevent fraud, waste and abuse, then these policies should be transparent, fair and uniformly applied.”
“If left unchecked, this tactic could further entrench vertical integration and lead to unfair practices,” Quinn said. “The lack of transparency around downcoding so far makes it harder to ensure claims integrity and identify potential market manipulation.”
Academy calls on regulators to act on downcoding
The AAFP’s letter urged the federal agencies to
- investigate the use and impact of downcoding algorithms;
- require disclosure of downcoding criteria and ensure uniform application, including to health plan-owned practices;
- mandate streamlined, transparent appeals processes with clear standards and timelines; and
- engage physicians and regulators in oversight of these practices.
“This letter is just our opening move,” Quinn said. “We believe that primary care physicians’ unique and important role in health care should ultimately exempt them from downcoding as it’s being used right now. The financial and administrative burdens are too great, and the threat to patient outcomes is too high.”
Physicians are already speaking out against downcoding
In an NBC News story on how downcoding hurts physicians, Academy member Terry Wagner, DO, FAAFP, said, “Some computer program is deciding what my level of care is. If they question my level of care, then ask for my notes. Look at the tests I ordered. Look at my charts.”
Ryan Nadelson, MD, internal medicine department chair at Northside Hospital Diagnostic Clinic in Gainesville, Florida, wrote in a Stat editorial: “By tying reimbursement to diagnosis codes instead of the actual clinical work performed, this policy devalues physicians’ time and judgment. It assumes that complexity exists only in ‘rare’ or ‘severe’ codes, when in truth, outpatient medicine is full of nuance that cannot be captured by a single label. The result is a distorted view of patient care that punishes doctors for doing their jobs thoroughly—and ultimately undermines the quality of care patients receive.”
What AAFP members can do
Academy members can register their concerns by customizing the AAFP’s member-exclusive template letter about downcoding and sending it individual insurers.
“We plan to keep members informed about this issue, including how they can get involved in fixing it,” Quinn said.