Preparing Your Healthcare Practice for a Medical Billing Audit

November 25, 2014 by Antonio Arias, MBA, CHBME

Topics: Medical Billing, Revenue Cycle Management

If you’re happy with your practice’s reimbursements and you haven’t seen a recent spike in denials, you may feel like your medical billing operations are coasting along just fine. But even if that’s the case, is fine really good enough for your healthcare practice?

In a highly competitive business environment where profit margins are often razor-thin, it’s critical for practices large and small to collect every dollar they’ve earned. If you don’t periodically audit your systems, efforts, and results on the medical billing front, you’re almost certainly not operating at your optimum performance level. 

That means leaving revenue on the table, which can undermine the long-term viability of your medical practice. To identify these weaknesses and shore up potential risks, you’ll need to conduct an internal medical billing audit.

4 Steps to Conducting a Successful Medical Billing Audit

How in-depth you decide to go with an internal audit is up to you, but taking a more thorough approach will naturally produce better (and more actionable) results. This is especially true if it’s been a while since you reviewed or reassessed your billing policies and procedures. Since every medical practice is different, there’s no one-size-fits-all checklist for auditing billing and coding, but there are some general steps every office should take and key considerations along the way.

Step 1: Map Out the Scope and Process

  • Determine the scope of your medical billing audit and the manpower needed to execute it. Some things to consider at this point might be looking at how many providers are in your practice, how many payers you regularly work with, and how many billers and coders are on your staff.
  • Designate a team member or hire an outside consultant to conduct the review.
  • Brainstorm your audit tactics. The tried-and-true approach is to randomly select a certain number of charts per provider and per payer and review documentation versus what was filled out. From there, you can assess whether encounters were undercoded or overcoded and whether claims were processed appropriately.
  • Write up and circulate a formal audit plan.

Step 2: Assess the Scene

  • Review your billing reports for troubling trends or risk areas. Check them against past performances month-over-month and year-over-year to identify irregularities.
  • Look at the frequency of your physician services over a set period and compare it with that of your peers using the latest industry benchmark data. You can also run an E&M frequency report through your billing software, then compare it to the most current Medicare E&M frequency data from your Medicare carrier.
  • Run a report detailing how your CPT codes are being reimbursed. The results can be compared to your contract terms with individual payers to make sure they're paying what they owe you.

Step 3: Make Changes

  • Armed with the above information, set a target for improvement such as decreasing the percentage of your denied claims or increasing your revenue per patient.
  • Make a concerted effort to persuade payers to pay their contracted rates in a timely and accurate manner. Follow-up as much as necessary and develop a plan for dealing with delinquent payers.
  • Address any internal problems and train your staff and providers on how to improve in areas of weakness. For instance, you can’t code what isn’t documented, so make sure providers are noting all the details necessary for accurate codes to be used.

Step 4: Repeat

  • Make auditing a regular occurrence. If you do your medical billing in-house, it’s best practice to conduct an internal medical billing audit at least once per year. Large practices may conduct them as often as once per quarter.
  • Build processes into your medical billing operation to make auditing easier. Run frequent reports and monitor net collections.

Is Your Medical Practice Ready for an External Audit?

As healthcare continues to evolve with a mind for value in care and fairness in payments, medical billing audits are expected to take place at a faster and faster clip in the years to come. Medical practices should expect every aspect of their operations to be subject to scrutiny, from coding accuracy and incentive program participation to end-to-end billing and compliance.

Is your practice prepared for a potential medical billing audit? Or perhaps more importantly, do you know what areas of your operation could put you in hot water if an unexpected audit was to take place?

Preparing for an External Audit

If your answer to the above questions is “no,” then it’s time to put an action plan in place. Many healthcare consultants have noted that the government is now using predictive analytics to identify high-risk targets for fraud, financial mismanagement, and inaccurate billings.

Thanks to the ever-growing volume of administrative data at their disposal, the efforts of the Centers for Medicare & Medical Services (CMS) and regulators are growing ever more sophisticated, drilling down to the particular codes and modifiers that can be indicative of inappropriate activity. They are also taking clear steps to pin down which physicians may be abusing coding to overcharge for their medical services.

Even if you’re certain there’s no misbehavior at your healthcare practice, it’s important to identify areas of risk and respond to them now. Self-auditing can illuminate areas of risk, but it’s often done with a random selection of charts spanning all of your providers, patient groups, and staff members.

Developing a Risk-Based Audit Plan

This sort of “needle-in-a-haystack” approach can allow risk areas to go unnoticed or under-respected, even while they absorb resources that could be better spent on a targeted approach. A highly effective strategy involves looking at your data holistically, assessing it for problem areas, and then self-auditing only the most risk-saturated physicians or charts.

If you’re working with a trusted medical billing firm, your administrative data is available to you in the same manner it’s available to the government bodies who may audit you down the line should their algorithms sniff anything irregular in your billing results.

Working with a consultant or medical billing service to run your de-identified data through predictive analytics software can help you attack any areas of risk, self-report any issues you spot, and invest in the corrective measures, such as repayments or fines, that can minimize your liability.

More importantly, implementing a precision, risk-based audit plan is often less costly than an end-to-end self-audit. It will also do a better job of protecting your practice from regulatory scrutiny in the process.

Protecting Your Healthcare Practice From Payer Audits

Even if everyone at your practice loves surprises, there’s one surprise that’s unwelcome: a payer audit. Being audited by Medicare or another government payer is a top fear of many medical practices because these audits almost always feel like an existential threat to your business.

Payer audits are intimidating because so few practitioners and medical practice managers understand their origins. Armed with just a baseline understanding of the trigger factors, such as too much high-level coding or overuse/misuse of modifiers, some practices over-correct to avoid issues. But by deliberately undercoding encounters to avoid attracting unwanted payer attention, those medical practices often wind up selling themselves short.

The most obvious risk factors are, well, the riskiest. Using high level codes at a higher frequency than is typical for your specialty, or using modifiers 25 or 59 (and its new “replacement” modifiers XE, XP, XS, and XU) at a particularly high rate, are audit triggers. Some types of service are at higher risk than others, and it varies broadly by specialty and geographic region.

Guarding Against a Payer Audit

Thanks to volume, the payers have the power. Private and public payers service large populations of practices, so they have the data and systems to compare your practice against others in your same specialty. Without that advantage, it’s easy for your practice to feel like it’s in the dark.

Given the high stakes involved, it’s important for your team to assess whether your healthcare practice is at risk and to course-correct as necessary. A good place to start is with performing your own assessments internally. If there’s more than one physician in your practice, audit them against one another with an eye for their frequency of high-level visits, their use of modifiers, and their most common services performed. You can then use external resources to see how you stack up to your revenue cycle management peers. You’ll never have as much information to work with as a payer, but there are some companies and organizations that make comparative data available to help you see where your billing operations stand among your specialty.

Where to Find Comparative Data

  • Specialty Groups: Check with yours to see if they provide any reports with normative data to their members.
  • Medical Associations (especially the MGMA): Use the median relative value unit (RVU) data for your specialty as a baseline for payers’ expectations.
  • Commercial Vendors: Large healthcare technology providers often offer their data for purchase on a subscription basis.
  • The Office of the Inspector General: The OIG has reported on practices that code for the two highest levels of service in every category more than 95% of the time. Assess your clinicians’ coding practices against those noted, then review the annual OIG Work Plan. It pinpoints which medical services the government considers “of interest.”
  • Medicare: Medicare’s Comprehensive Error Rate Testing (CERT) reports identify types of services and CPT codes that have high error rates, helping you understand which codes may put you at risk for external medical audits.

Get Peace of Mind With a Medical Billing Service

One way to lessen the odds of triggering an audit and improving your revenue cycle management is to contract with a medical billing company. An experienced and proactive firm with the resources, detailed practice management knowledge, and capacity to manage all of your claims can help you spot audit-inducing issues before they happen.

With four decades of experience helping healthcare practices improve their billing and coding efficiencies, NCG Medical can help protect your practice from the potentially devastating effects of an audit. Our team of certified medical coders, MBA, and CPAs can also help you streamline your practice management to improve efficiencies, trim costs, and boost revenue. To learn more about the customized solutions we can create to meet your healthcare practice’s specific needs, contact our team today.

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