Note: In April 2023, Virginia’s downcoding policy was ruled by a federal judge to be in violation of federal law and the prudent layperson standard. The state is in the process of repealing the ruling; see the June 29 bulletin issued by the Virginia Department of Medical Assistance Services (DMAS). More detail in the timeline on this page and in this article. This page was originally created in 2020 and will remain in place for informational purposes.

a virginia policy gutting er funding and access to quality care.

Since 2020, Virginia’s budget has inappropriately and automatically cut Medicaid reimbursements for emergency department visits that are on a list of 800 emergency conditions for Medicaid patients — many of them common and acute diagnoses.

This diagnosis list of codes was intended to help managed-care organizations identify patients that are visiting the ED so frequently that they need additional assistance getting connected to other providers, like primary care and behavioral health. Instead, this list is being used to penalize emergency departments while doing nothing to aid patients with high ED utilization. 

Most of these common and acute diagnoses can be medically serious and life-threatening, and emergency physicians cannot and should not turn these patients away without providing appropriate evaluation and care. Based solely upon the patient’s final diagnosis, if the condition falls on the list, Virginia cuts Medicaid reimbursements to a paltry $15.45 per visit. That is not sustainable.

what is downcoding?

Downcoding by Medicaid and insurers is a growing problem that threatens quality and access to care, as well as fair emergency physician reimbursement. “Codes” are numbers used by doctors and medical professionals to identify a diagnosis, which is then used to determine the medical bill. Downcoding lowers the value of these codes and shortchanges providers for delivering quality care to their patients.

Virginia’s Downcoding Provision violates existing federal statutes and regulations, and is in clear conflict with a policy adopted by the federal government that no claim for payment of a service rendered in the emergency department can be denied, in whole or in part, based solely on the final diagnosis. The cost determination must be based on all pertinent documentation and focused on the presenting symptoms — and must take into account that the legal standard regarding the decision to seek emergency services is based on whether a prudent person would reasonably consider the situation to be an emergency. The Downcoding Provision has the exact opposite effect.

Here’s why this policy is no good. It:

  • Threatens access to emergency care for low-income Virginians, most of whom already struggle with access to care issues

  • Penalizes emergency physicians, emergency department staff, and hospitals by $40 million every year in state and federal dollars for patients they are required to see by law

  • Is at odds with federal law requiring emergency departments to treat all patients seeking care

  • Runs counter to guidance from the U.S. Centers for Medicare & Medicaid Services, stating that no claim for payment of a service rendered in the emergency department can be denied, in whole or in part, based solely on the final diagnosis

  • Is inconsistent with Virginia’s Medicaid managed care contract, which bars retroactive claim denials for emergency medical conditions

  • Penalizes healthcare providers to the financial benefit of Medicaid managed care organizations, many of which saw record profits during the pandemic

The ER penalty in Virginia’s budget is not only fiscally unnecessary, but shows an astounding level of disregard for the frontline physicians and teams who have battled the COVID-19 pandemic for nearly two years.

 

timeline

July 2020: Policy in Gov. Ralph Northam’s budget goes into effect, automatically slashing physician reimbursement on 789 diagnoses.

July 2020: The Virginia Hospital & Healthcare Association (VHHA), joined by VACEP and the Medical Society of Virginia (MSV), filed a complaint against the Virginia Department of Medical Assistance Services (DMAS), which is charged with enforcing these budget items. Our complaint, filed in the federal U.S District Court for the Eastern District of Virginia, sought to declare the items invalid and unenforceable, and commanded DMAS to stop enforcing them.

October 7, 2020: The Court dismisses the case. The Court’s decision did not get to the merits of the case or make a ruling on the policy itself; instead, the case was dismissed “without prejudice” based on jurisdictional grounds.  “Without prejudice” means it is a temporary dismissal and plaintiffs are allowed to re-file, alter the claim, or bring the case to another court. 

January 2021: VACEP attempts to remove the budget item int he general assembly and promotes a replacement plan that would lower annual medical expenditures for a cohort of 1,500 high-utilizer Medicaid patients. We anticipate a 40% reduction in costs within a year of the program, equating to $36 million in savings.

July 2021: The Biden administration releases an “interim final rule” outlawing balance billing and prohibiting insurers from retroactively denying emergency department claims. That month, VACEP and allies wrote a letter urging urge CMS to reject Virginia’s Downcoding Provision.

December 2021: Despite a huge surplus in the Medicaid program, Governor Ralph Northam’s introduced 2022-2024 biennial budget preserves the harmful policy.

December 24, 2021: Despite VACEP and allies’ urging, CMS approves the ED Downcoding Provision in the Virginia budget.

March 2022: VACEP learned CMS’s Medicaid Managed Care division was surprisingly unaware of the policy in Virginia (managed-care organizations are responsible for 96% of Virginians on Medicaid). They agreed with us: that CMS policy states that MCOs cannot downcode based on a list or on final diagnosis and must code according to prudent-layperson standards (EMTALA). We are awaiting the results of CMS reaching out to DMAS.

April 2022: Unsuccessfully petitioned Gov. Glenn Youngkin’s office to remove the item from the budget.

May 2022: We amended our lawsuit with VHHA to add the Centers for Medicare and Medicaid (CMS) and Health and Human Services (HHS) as parties, per the judges’s request. In addition, we reached out to Gov. Youngkin’s administration to urge resolution between CMS and Virginia’s Department of Medical Assistance Services (DMAS).

October 2022: The Virginia legislative branch’s Joint Commission on Health Care released a report, Reducing Unnecessary Emergency Department Utilization. It was sent to General Assembly members and Gov. Glenn Youngkin’s office, and includes six recommended options state leaders can pursue to ensure Virginians are treated in lower cost, primary care, and other preventive settings when appropriate to reduce the burden on emergency departments. VACEP advocated for removing the downcoding provision, but it was not listed in the report’s recommendations. Read the brief or check out the full report.

February 2023: The lawsuit continues. Budget amendments in the 2023 General Assembly to remove the Downcoding Provision were not included in the final budget. In addition, there was no “across the board” physician Medicaid increase, but a 5% increase for family physicians, pediatricians and psychiatrists.

April 26, 2023: A federal judge in Richmond rules in favor of hospitals and physicians, saying the Virginia policy is not in accordance with federal law and the prudent layperson standard, and should be removed. The ruling is subject to appeal by CMS and DMAS, and they have until June 26 to file. We are working with the Governor’s Administration on next steps.

June 27, 2023: DMAS and the Centers for Medicaid and Medicare Services file no appeal. Therefore, the federal judge’s ruling stands, saying that Virginia’s downcoding policy is not in accordance with federal law and the prudent layperson standard and should be removed. Operationally, DMAS is in the process of updating software to end downcoding. Once fixed, they will automatically pay for downcodes that have occurred since April 26, the day of the ruling. Medicaid MCOs are doing the same.

November 2023: VACEP writes in support of DMAS’ “Notice of Intent to Amend the Virginia State Plan for Medical Assistance” to eliminate the provision. The notice, VACEP said, is consistent with the court order.

If you would like more information, and are:

  • A legislative aide, legislator, or work in state government, contact VACEP government affairs consultant Aimee Perron Seibert

  • A member of the media or public, contact VACEP communications consultant Jeff Kelley.