The Rise and Fall of Offshore Coding

by | Jan 23, 2017

Sun halfway disappearing on the horizon

U.S. healthcare providers have been utilizing offshore medical coding for over 10 years. Its relevance and benefits parallel our healthcare market dynamics. But once where there were reliable-quality offshore coders working at considerably lower rates than domestic coders, now we are encountering less reliable, less experienced and more expensive offshore coding plus an increased availability of quality onshore coders. Let’s see how we got here and where it may lead.


The majority of early users of offshore coding were physician and radiology groups who were seeking cost savings for relatively simple and repetitive coding functions. Around 2012, healthcare executives began to look more closely at cost savings to offset the looming expense of ICD-10 preparation. One of the drivers was salaries and benefits of staff employees, which could easily be reduced by employing offshore coding. Domestic coding vendors were challenged to find an international partner, and offshore coding companies began to experience an increase in demand for their services.

As the U.S. healthcare industry moved closer to ICD-10 implementation in 2013, and again in 2014, the concern for reduced coder productivity led to the realization that there were not enough domestic coders available to prevent massive backlogs of uncoded charts. Possible revenue cycle interruptions, cash-flow worries, and the lower cost led to an unprecedented use of offshore coding in 2015 and 2016. Offshore companies were not asked to just supply coding support for simple diagnostic and professional fee coding; they were also charged with the more complicated emergency room, ambulatory surgery, and inpatient cases.

In contrast to ICD-10 implementation in other countries, U.S. coder productivity, which was reduced by half immediately following ICD-10 implementation on 10/1/2015, recovered rapidly. This was mostly due to massive expenditures by providers to improve workflow applications and infrastructure. Also, the U.S. Health Information Management community really stepped up with an extensive advanced-training effort. Offshore coders, however, have not undergone the same improvement. Why?


Offshore coders are predominantly former nurses or other fairly well-educated candidates. Although the offshore coding staff are highly intelligent and speak the English language, they are not well trained in chart interpretation. Their ability to self-interpret documentation in the medical record is low and results in frequent coding mistakes. When offshore companies onboard new coders, they typically begin by placing them in a classroom for two to three months and then release them to on-the-job training, followed quickly by live production. This is in contrast to seasoned coders in the U.S., who are expected to have at least three years’ experience before they are considered to be proficient enough to be productive and accurate.

Who’s Really Doing Your Offshore Coding?

Many offshore coding companies falsely represent a higher level of coding quality by utilizing a “bait-and-switch” technique. The initial coders assigned to work for you are their best and most experienced. After several weeks of proving their expertise and quality, they are replaced by inexperienced coders who utilize the login of the first coder in order to maintain the work assignments. Your contract and confidentiality agreement are still in place. The original login is still in place. But you really do not know who is coding for you. All that you see are massive errors, and you don’t really know whom you are auditing.

The OCR will get you.

It is impossible for an offshore-coding vendor to be in 100% compliance with HIPAA guidelines. You can’t prove the physical workspace is secure. You cannot prove that the coders went through privacy and security training. You cannot prove that the user’s equipment has the proper Endpoint Security and monitoring software. Finally, you cannot be sure that the actual coder signed the Workplace Physical Safeguards Acknowledgement, HIPAA Compliance Acknowledgement, or the Business Associate Agreement.

In your quest for coding cost savings, please don’t overlook increasingly stringent U.S. health information security requirements. These regulations are in effect to protect personal privacy at all levels, from institutional to individual. Violators will be prosecuted.


Cost: Offshore coding is ostensibly still less expensive, but the pricing gap is much narrower now due to the fast ICD-10 recovery in productivity by domestic coders. You’re no longer paying a premium for a limited supply of domestic coders.

Other mitigating cost differential factors include the increased amount of auditing that must be done on offshore coding to prevent billing errors, the increase in denied claims that must be reworked, and the lower level of reimbursement received because of poorly coded claims. When you add all of these up, the offshore cost savings evaporate quickly.

Staffing: The large offshore coder population proved valuable in our early throes of ICD-10 implementation. We all needed additional coding staff to help us take care of business while we brought our own coders up to speed. Offshore coders could handle basic, repetitive charts, thus freeing up domestic coders to become ICD-10 productive on more complex, time-consuming charts.

As mentioned previously, domestic coder productivity since the implementation of ICD-10 has improved so rapidly that there are sufficient domestic resources to supply all providers’ needs. Outpatient coding productivity is, in many cases, higher than that of ICD-9 due to workflow enhancements. Inpatient coding is still lagging behind at about 85% of initial ICD-10 performance levels, due to the higher complexity of ICD-10-PCS. But it’s still less expensive than offshore inpatient coding, all things considered.

The offshore staffing advantage of yesteryear has faded, as the coding pendulum has swung back to a more available, more experienced, more qualified domestic coder population. Your staffing needs can be met easily with a healthy network of domestic coders.

Efficiency: Due to time zones, you can send records to be coded offshore at the close of business in the U.S. and get coded results back when business starts the next day. However, many coding questions on documentation issues, payer requirements and coding policies occur in real time as the coding is performed. The time zone “advantage” makes timely communication on important questions impossible. Coding is completed without the opportunity to ask for clarification. This can negatively impact your coding results.

Quality: Most offshore coders have very little experience and have no knowledge of the differing requirements among payers. Most do not have a coding certification from AHIMA or AAPC. Self-auditing by offshore vendors is often done by the same or similar coders that are coding for you, so, in effect, your charts are not benefiting from any higher review. Many U.S.-based providers have found that the standard of 95% accuracy is impossible to attain offshore and have accepted lower standards for offshore. This is a risky business on many levels.

Compliance: You have no guarantees that a coding business overseas is HIPAA compliant or even if there is a clear understanding of HIPAA and HITECH guidelines at all. Even if they claim HIPAA compliance, how can you verify that information? To counter this, many offshore coding companies will offer to include contract language that indemnifies you for any HIPAA breaches and the resultant penalties. But if a breach occurs, obtaining a judgment against the outside entity is next to impossible. There is no history or precedent of the OCR litigating an offshore entity. The most likely scenario is that the domestic provider will be held accountable.

U.S. coding standards compliance is growing some teeth. If you think it’s wise to continue to be casual about your offshore coding company’s standards, prepare to get bitten.

Offshore coding served its purpose for the U.S. market. It helped us through the ICD-10 conversion and the accompanying cost crunch–especially in routine, basic charts. But it’s a different domestic arena now. A readily available core of excellent domestic coders can handle your broad spectrum of coding requirements with fast turnarounds, high accuracy and more appropriate reimbursement. If you factor in the performance and compliance liabilities of offshore coding, it’s likely you’d be money ahead to keep your coding right here at home.