A legislative hearing in Illinois this week focused on the issue of downcoding, a practice where health insurers reduce payments to physicians by assigning lower-value billing codes than those submitted. The Illinois State Medical Society (ISMS) and other supporters spoke before the Illinois Senate Insurance Committee to support Senate Bill 3114, known as the Transparency in Downcoding Act.
ISMS representatives explained that automated systems are often used to adjudicate insurance claims based only on the final diagnosis, rather than considering all services provided during a patient visit. They gave an example involving emergency care: if a patient presents with chest pain and is later diagnosed with acid reflux, current systems may only reimburse for treating acid reflux, ignoring the physician’s efforts to rule out more serious conditions like a heart attack.
Senate Bill 3114 aims to require that physicians’ clinical notes are reviewed when making downcoding decisions. The bill would also mandate that doctors be notified when claims are downcoded and receive an explanation for the decision.
Ellen Lipe-Fliss, Director of Payer Strategy at Springfield Clinic, testified about the growing impact of automatic downcoding at her institution. She reported that from 2023 to 2024, Springfield Clinic averaged around 3,000 downcoded claims per year. In 2025, this number increased fourfold to 12,000 claims even though their total claim volume did not change.
“What makes downcoding especially insidious is that it is invisible,” Lipe-Fliss said. “The downcoded claim is not treated as a denial. The insurer simply pays us less than what we billed, and unless we catch it, the revenue is quietly lost. Every dollar spent on back-end appeals is one dollar diverted from front-end patient care.”
Lipe-Fliss estimated Springfield Clinic lost $500,000 in revenue due to downcoding in 2025 alone. She added that each appeal takes staff about two hours to process.
Joshua Levin, M.D., Diagnostic and Therapeutic Director at PediaTrust and another supporter of the bill, said his physician-owned practice spends significant time and money appealing these claims just to receive payment for work already performed.
“We have negotiated fair rates to be paid for the work that we are doing, and we are simply asking that these contracts be upheld as they were negotiated in good faith previously,” Dr. Levin said. “Failure to uphold these contracts really is disruptive to the entire system as it exists and in my opinion is not sustainable going forward.”
ISMS stated it will continue advocating for both Senate Bill 3114 and House Bill 4735 in order to establish clearer rules around health insurer practices related to downcoding.
If you have any questions regarding this issue or legislation, ISMS encourages you to contact Erin O’Brien, Senior Vice President of State Legislative Affairs.
