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Healthcare Audits and Possible Provider Considerations!

Updated: Aug 24, 2021

Is Your Healthcare Business Being Audited?

What Does It Mean and What Can We Do?

By Michael S. Koslow, MPM

As most businesses working within healthcare provider networks or as non-network providers know, complex and comprehensive audits can be both time consuming and labor intensive. Whenever choosing to do business with a government healthcare agency, its contracted delegated authorities (e.g. Medicare Administrative Contractor or “MACs”), State-supported Medicaid programs, or the litany of private insurance carriers, a business may be audited for a variety of reasons at any time. It’s a collaborative process.

A common thread involving each of these audits normally includes a mandated requirement for the auditing agency to notify that entity being audited that a suspected billing/claim anomaly has been identified through an internal claim review conducted by the government agencies or private insurer pre-pay and/or post pay reviews of submitted claims. Normally, specific identified submitted claims have been referenced in “edit pair” software (i.e. ClaimsXten™, FACETS®, etc.) programs as inconsistent with industry standard billing practices. Also, insurers may use proprietary business software that enables insurers to identify “high outliers” using Current Procedure Terminology or “CPT,” International Classification of Definitions “ICD,” or Healthcare Common Procedure Coding System “HCPCS” Codes to support submitted claims for payment and reimbursements.

Remember, being a statistical high outlier may be supported by your specialized profession, geographic location (e.g. rural treatments or unique treatments within a geographic area of 30 miles or so), or non-elective medically necessary justifications. In addition, the statistical analysis of the identified "unclean" claims usually corresponds to a designated number of claims as a part of the entire claim universe under review by an insurer within a particular period for specific billing codes. In addition, the universe of claims under review correspond to a designated “confidence level” which may be 90 or 95%.

The “look-back” periods for claims review normally is restricted to a one to two-year period from the date the claim was submitted for payment to the insurer. There are some exceptions which may extend the look-back period to five or more years in the event the audit is believed to have indications of acts of fraud. Typically, insurers have a limited period to conduct administrative reviews to 30 days under the provisions of the federal Prompt Pay Act (31 U.S.C. 39). Most States have enacted supplemental rules and laws that affirm the timely payment of “clean” claims (or those with no identifiable aberrancies) ( In California the supplement can be found in California Ins. Code § 10123.13 and Health & Safety Code § 1371.35.

Regardless of whether the submitter of the claim is a large business or a relatively small business, the adverse impact to the daily operations of a business can be equally as disruptive. The time and effort expended by the business to research, review, compare submitted claim data with existing National (NCD) and Local Coverage Determinations (LCD), now referenced as “Articles,” unique insurer medical guidelines, policies, and directives, is a considerable undertaking by any business. Businesses that submit millions of monthly claims (i.e. behavioral health or Durable Medical Equipment “DME” commodities, etc.) or those that may submit hundreds of monthly claims both have limited resources and staff that they can dedicate to the necessary reviews of audit-identified claims, copying of both hard-copy and/or electronic claims, and then ensuring that the requested claim(s) data is forwarded to the correct location and in the proper format to avoid unnecessary delays to the audit process.

Particular attention needs to be made with regards to ensuring that the unclean claims under audit are definitively those identified by corresponding insurer-provided or designated reference numbers. Something to keep in mind are two-fold: (1) the response date with requested documents/data is negotiable in most cases, but you must respond to the auditing agency notification correspondence within the designated time frame (usually 30 days from the date of the notification letter); and (2) review or have an expert review your alleged unclean claims for correct medical coding according to established/documented medical policy/coding guidelines. The guidelines and policies change from time to time and; therefore, must coincide with the policies in effect at the time of claim submission for payment.

On occasion, billing errors or insufficiencies may be resolved through the submission of a corrected claim (you may have a specific period that limits how long you have to submit a corrected claim) or, if applicable, a negotiated settlement of the outstanding identified and supported overpayment. Federal rules associated with several federal healthcare agencies may require 100% repayment of any insurer data supported identified overpayment sums. If there is an unreconcilable impasse between an insurer and a provider, the provider may be relegated to seeking relief of addressing alleged identified overpayments through either the agency’s/ insurers’ grievance and/or appeals processes (grievance and appeal actions are distinctly different). It is extremely imperative that the time allotted for the submission of any appeal be known as a provider may inadvertently and unintentionally waive their respective appeal rights if not submitted to the insurer within the designated period. Repayment programs are also a consideration for paying back overpayments over an agreed upon period.

Although there are appeal rights, there is no guarantee that you will prevail at any level of the appeal process (Redetermination, Reconsideration, or Administrative Law Judge review). In some cases, you may believe you have supported your case from a policy, coding, and/or medical configuration management perspective for medically necessary treatments, yet the backlog for Administrative Hearings with an Administrative Law Judge can extend to well over three years! Still, formulating a well-prepared response and comprehensive data analysis as a part of any healthcare business audit is both prudent and logical when presenting your case before an auditor, compliance officer, or claims review specialist.

Medical practitioners and business owners within the healthcare industry have been passionate about their professions and the overall benefits to patients and beneficiaries alike. This article was written to provide a practical perspective that considers the possible emotional impact when a audit is requested on any business, but focuses on the pragmatic factors involved in the audit processes and how to address them with sound guidance.

In conclusion, coordinating with auditors, investigators, and claims review specialists within the government and insurer groups is a time sensitive collaborative process.

If you have any questions about an audit, overpayment review or demand, compliance review, or Healthcare Efficiency Data Information Set (HEDIS®)-type review, it is highly recommended that you confer with an attorney specializing in healthcare matters and an experienced healthcare investigator to provide you with options, next steps, and process compliance.

*This article is provided for educational purposes only and is not offered as, and should not be relied on as, legal advice. Any individual reading this information should consult an attorney for their particular situation.*

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