United States: Managing Audit Demands

Last Updated: October 10 2013
Article by Elizabeth J. Hampton

Given the efforts underway to reduce the cost of health care, audits by private payers are on the rise. While that trend likely will continue, providers can and should prepare in advance to meet the audit challenge. There are a variety of best practices to employ before, during and after an audit to alleviate the stress of scrutiny that an audit notice can bring to your medical practice. Understanding why audits are initiated is the first step in successfully navigating through the process. 

Why My Practice?  

The answer to this question ranges from random selection to targeted investigation. While audits may be random, insurers tend to focus on opportunities to procure overpayment recoveries. For example, practices that maintain billing practices or patterns that vary with those of their peers may be subject to heightened scrutiny. Other audits may be initiated based on a new type of service or treatment offered and billed by the provider. Frequently, audits and investigations are triggered by a patient complaint or a disgruntled employee. Understanding the reason for the audit can be helpful but not always possible. However, if you receive an audit demand and your practice falls into one of these categories, you will have a better idea of the factors precipitating review.  

Before the Audit

The best way to prepare for a future audit is to do one before an insurer sends you a demand. Have you looked at your practice lately? Are your patient files properly documented? Are your provider policies up to date? Performing random internal audits may bring light to issues in your practice that you should address before a payer demands to take a look.  

Assuming that appropriate precautions are taken to protect private health information (PHI), outside coding experts can be retained to perform a more extensive review of your documentation and billing procedures and offer guidance from a payer audit perspective. Aside from internal documentation reviews, practices should advance efforts to ensure that staff members are properly trained and supervised. Written policies regarding patient files, communication, documentation and privacy issues should be updated, and employees should be responsible for understanding these policies and the role they serve within the practice. 

The Audit Notice  

So you received an audit notice. Now what?  Before discussing the demand with anyone, read it carefully. The contents of the notice may provide information helpful to determine the type of audit requested and the time period in which the practice needs to respond. Take note of who prepared the audit notice. Is the notice directly from a private payer or another company that may work for the payer? If the notice is signed by an investigator, he will often list the initials "S.I.U." near his signature. The "S.I.U." reference means "Special Investigation Unit," a designation maintained by individuals specifically trained in
fraud detection.  

Once you have reviewed the audit demand, consult with an attorney who has experience assisting clients in this area. Do not talk about the notice with your staff or any other third party until you have had the opportunity to speak with counsel and you are directed accordingly.  

During the Audit

Many providers are tempted to speak with the auditor at length before and during the audit. Resist the urge to do so by understanding that the auditor's goal is to find overpayments and anything you tell the auditor can be misconstrued in favor of that result. While there are appropriate ways to communicate to discover information,
do not attempt to do this discovery on your own. If an auditor has questions regarding your practice, ask him or her to put questions in writing so that you have an opportunity to carefully evaluate the questions with your counsel.  

Look for your attorney to advise you regarding the scope of the audit to ensure that you are providing only what is lawfully requested. Since most audits take place within the practice's office, designate a room in advance for the audit that will not interfere with your work.  

After the Audit

Choosing a course of action (or not) following an audit depends upon a variety of factors.  

First, has the auditor shared any findings of the audit?  Have you been advised that documentation is missing or bills have been improperly coded?  If the auditor shares information along this line, listen carefully. Minor documentation issues typically can be resolved while other more significant or pervasive problems may result in substantial liability. It may be difficult to discern whether your practice needs to correct minor issues or whether the audit finding will lead to a more extensive investigation of your practice.  

However, if your initial audit concludes and demands to examine additional records and files follow, you may expect that the insurer has directed a continuing investigation of your practice. On the other hand, and in many cases, audits begin and end without incident. Regardless of the audit response, be sure to maintain copies of each and every item requested by and provided to the auditor and consult with your attorney throughout this process.  

The development of a best practice approach to survive the audit process will help to reduce audit anxiety, yield favorable audit outcomes for providers and build stronger practices.  

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Elizabeth J. Hampton
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