Medical billing audit is essential for Medical practices. It enables them to stay competitive and compliant in the industry. Auditing in billing services makes practices able to review their services and minimize errors in claims. In this way, they can smooth the reimbursement process and efficiently render their services. Let’s explore an in-depth understanding of billing audits in this blog.

What is a Medical Billing Audit?

Medical Billing Audit is an organized process assessing clinical documents’ trustworthiness and efficiency. The process involves a detailed examination of the medical practice’s health records. It scrutinizes the medical billing information provided to insurance payers. The objective is to identify, monitor, and correct any inappropriate billing practices within the practice. Given that billing aspects directly impact the financial bottom line, it is essential to pinpoint possible compliance issues.

Types of Medical Billing Audit

There are various ways that medical practices utilize to conduct an effective medical billing audit. Below are some major types of medical audit.

Internal Audit

Internal billing audits ensure that payments and claims are made properly and under the law. The best way to stop healthcare fraud is to check internal regulations and processes routinely. Additionally, given that healthcare crimes involve an element of intent, it provides a strong defense against any charges of such crimes.

External Audit

Professionals from the outside who are skilled and knowledgeable in billing audits are performing this audit. They provide an unbiased evaluation of a practice’s billing practices. One benefit of an external billing audit is that conflicts of interest that could endanger the doctor or internal employees are less likely to arise. Additionally, it frees up the practice of doing things independently. 

Government Healthcare Audits

Government healthcare audits are key to maintaining accountability and ensuring compliance in medical billing. Government agencies conduct these audits to ensure healthcare providers follow all regulations, accurately billing services, and do not participate in fraudulent activities. Two significant programs that undergo these audits are Medicare and Medicaid.

• Medicare

Medicare audits scrutinize medical records and billing data to ensure that claims submitted for payment are legitimate, accurately coded, and supported by proper documentation.

Medicare employs several types of audits, including random sample audits, comprehensive error rate testing (CERT), and recovery audit contractor (RAC) audits.

• Medicaid

Like Medicare, Medicaid audits analyze records to ensure that Medicaid is billed accurately for services rendered, that services are medically necessary, and that they are documented correctly.

The Medicaid Integrity Program (MIP) is a key part of these auditing procedures, and its objective is to prevent, identify, and recover improper Medicaid payments.

Medical Billing Audit Process

Conducting a medical billing audit requires careful planning and execution. The whole process comprises 6 main steps discussed below:

1). Check the Audit Scope

There are several choices, including a random audit, a thorough audit, and a hybrid audit. Random audits arbitrarily choose large and minor claims according to their dollar values. An effective audit thoroughly examines the audited claims, emphasizing asking for reimbursements. The hybrid audit examines samples of all claims types to look for gaps, combining the random and comprehensive audit methodologies. Practice should ensure the necessary resources and support (internal/external) before deciding on the audit’s scope and the number of claims to examine.

2). Determine Sample Size

A percentage of the patient experiences in the audit sample should reflect the various encounter types. If you audit too many documents, it becomes costly and time-consuming and could bias the results if you audit too few.

An audit sample size of 10 to 15 charts is considered normal. The OIG advises using five to ten charts per medical provider using RAT-STATS for statistical sampling when performing an audit involving many physicians.

Using tools like RAT-STATS enables the practices to understand the sampling techniques employed by payers. This allows the practice to collect information showing risk areas and remain proactive in compliance procedures. The possibility that a payer audit will identify hidden liabilities will be reduced if the practice recognizes these areas, audits the paperwork and coding, and offers instruction based on variations.

3). Collect Documentation

Once the sample size and charts have been determined, practices must collect evidence essential to the date of service (DOS) for the charts under investigation. The medical record for the patient interaction may include lab results, paperwork, pictures, and other auxiliary materials. To conduct the evaluation successfully, all supporting documentation is needed.

The superbill/charge ticket, patient chart, claim form, or billing record (to verify what was submitted), and the explanation of benefits (EOB) or Remittance Advice—for each patient encounter—are required for a retrospective audit.

Additionally, you may wish to become familiar with the chart’s layout and any unique forms, such as the history form, problem list, and prescription sheet.

4). Conduct the Audit

Conduct the audit with your resources and tools. Review both the coding and the documentation. Pay close attention to the instructions in the CPT®, ICD-10-CM, and HCPCS Level II coding books, and ensure the paperwork is in order. Check coding standards for services such as:

• New versus established patients
• consultation versus transfer of care (referral)
• time-based code requirements
• Emergency medical services
• Nonphysician practitioner services; hospitals

5). Analyze Audit Findings

Once the audit is complete, analyze your findings and identify problem areas, such as:

• Improper assignment of CPT® or HCPCS Level II codes for procedures or services
• E/M levels not supported by documentation
• Incorrect diagnosis codes, including ICD-10-CM codes that don’t capture optimum specificity or support medical necessity
• Missing modifiers and/or incorrect modifier usage
• Incorrect diagnosis linkage
• Services performed but not billed

6). Create the Audit Report

Put the audit results together in a brief report. Your writing should be convincing and in-depth. The reader should be able to comprehend the audit’s scope and methodology.

Determine the number of contacts that were accurately and incorrectly recorded. Take note of code trends and mistakes. Each error or risk area should be labeled to establish the category (for instance, certain CPT® codes, payers, providers, or specialties). All inaccuracies must be clarified and referenced to the relevant standard.

Finally, recommend corrective measures. Additional training or changes to the documentation processes can be suggested. Include suggestions for follow-up analysis to determine whether the disciplinary action was effective.

Federal Regulation and Compliance in Healthcare Audit

According to AAPC, two taxpayer-sponsored Medicare trust funds—the Hospital Insurance Trust Fund and the Supplementary Medical Insurance Trust Fund—must be protected by the Centers for Medicare & Medicaid Services (CMS), the country’s largest healthcare provider.

According to the U.S. Government Accountability Office report, provider organizations submit medical claims incorrectly every year, which causes erroneous payments that cost the fund tens of billions of dollars.

CMS collaborates with Part A and Part B Medicare Administrative Contractors (MACs) and Durable Medical Equipment MACs (DME MACs) to prevent improper payments from jeopardizing the Medicare trust funds. CMS collaborates with many contractors who safeguard taxpayers and prospective Medicare beneficiaries. Several CMS contractors are:

• Recovery Audit Contractors (RAC)

Recovery audit contractors examine post-payment claims to recover incorrect payments made to healthcare providers under Medicare fee-for-service (FFS) plans. Additionally, RACs look for errors to direct CMS actions (directly and via MACs) that will stop further incorrect payments. The fact that CMS pays RACs a portion of the money they recover encourages rigorous RAC investigation, and providers should recognize the chance that a RAC will audit a provider organization. Three years from the date of payer reimbursement, RACs may audit claims.

• Supplemental Medical Review Contractor (SMRC)

The country’s Supplemental Medical Review Contractor is Noridian Healthcare Solutions. Through the health evaluation of Medicare Part A, Part B, and DME claims, the SMRC is charged with minimizing the amount of incorrect payments. Noridian is a corporation designated for identifying fraud, abuse, and ineffective care in the healthcare industry. SMRC reviews that reveal fraud or incorrect payments may start a recovery payment process.

• Unified Program Integrity Contractors (UPICs)

Unified Program Integrity Contractors carry out regional operations to identify and prevent fraud, waste, and abuse of medical claims submitted under Medicare Parts A and B, Medicaid, and the Medicare-Medicaid data match program. Under Medicare, UPICs also target DME, home health, and hospice. The Zone Program Integrity Contractor (ZPIC), Program Safeguard Contractor (PSC), and Medicaid Integrity Contractor (MIC) contracts were replaced with UPIC contracts, which are active in five regions of the United States.

• Investigations Medicare Drug Integrity Contractor (I-MEDIC)

The inquiries about Medicare Advantage (Part C) and prescription drug coverage (Part D) fraud, waste, and abuse initiatives are monitored by the Medicare Drug Integrity Contractor. Providers, prescribers, and pharmacies are only eligible for some Part D benefits.

• Plan Program Integrity Medicare Drug Integrity Contractor (PPI MEDIC)

The integrity of The Plan Program The Part C and Part D proactive data analysis, audits, risk assessment reports, plan provider education, and outreach are handled by the Medicare Drug Integrity Contractor.

How Billing Audit Helps Your Practice

An effective medical billing audit can help practices to optimize billing operations. Let’s discuss how medical practices gain benefits from the audits they conduct.

Prevent Billing Errors

Medical practice is put at risk if there are billing errors. Additionally, their services are subject to federal and state legal investigations, rendering them unreliable. Error-prone claims are connected to some irrefutable losses. Due to financial penalties and fraudulent claim filings, these incorrect claims necessitate paybacks. Regular billing audits examine false charges and prevent future occurrences.

Assist Coding Staff

Medical billing audits can help find coding errors, get advice on fixing issues, and ensure that the most recent procedure codes are applied. To streamline and standardize the medical billing process, audits are necessary. HIPAA compliance is required for medical billing procedures. A medical facility and its billing partner risk serious problems, including legal repercussions that would damage their reputation and cost them money if they are not. Audits are, therefore, essential to prevent losses caused by non-compliance.

Establish Administrative Standards

Medical billing audits help the administrative team ensure that claims are submitted truthfully, accurately, and timely. By establishing a positive, stable work environment and a culture of compliance that draws and keeps exceptional employees, audits set the standard for office workers and save them unwanted stress. Improper billing for services and procedures involves under and over-coding, code overuse, and inappropriate unbundling practices.

Enhance Patient Care

Audits of medical billing claims considerably aid the quality of patient care. The practice reorients its attention to the standard of care it offers. Auditing helps a practice track and monitor the services and treatments it provides, and it also trains its doctors to give their patients the best care possible. The revenue cycle and results improve when patients have a better experience.

Increase in Profitability

Auditing medical billing helps prevent billing and claim fraud. Proper internal checks and balances help practices assess if they are ready to comply with ICD-10-CM. It also ensures the efficient use of electronic health data to gain required outputs for patient records. As a result, the likelihood of denials that profit the practice is reduced.

Concluding Remarks

Medical offices can benefit from conducting audits of their medical billing. They can assist in protecting processes against financial losses, legal issues, and reputational damage. Additionally, they can aid in raising profitability and patient care quality. Practices must think about performing a medical billing audit. It is a financial commitment that may protect your business and increase profits.

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