Are You in Compliance?

September 1, 2004

Whether or not your practice has a full-time billing staff or outsources this function, billing remains the backbone of the revenue cycle in the practice.


Today's billing and coding compliance rules for physician groups and other healthcare organizations are more complex than U.S. tax laws and change more often. Yet many physician groups, large and small, fail to keep adequate tabs on them - or to get help when they need it. Today's competitive healthcare market requires continual review of billing and coding procedures that, left unchecked, may mean revenue loss, coding violations, or both.

Practices should implement a billing and coding compliance program to demonstrate a commitment to prevent erroneous claims while monitoring adherence to applicable statutes, regulations, and requirements involving government healthcare programs.  Whether or not your practice has a full-time billing staff or outsources this function, billing remains the backbone of the revenue cycle in the practice. For the appropriate amount of funds to get to the practice's bank account, the billing staff must:

  • properly code the charge,

  • submit it to the appropriate third-party payer,

  • collect copays,

  • manage accounts receivable,

  • follow up on denials and adjustments,

  • mail patient bills and statements, and

  • keep up with changes in the billing rules.

It's this last part that proves especially difficult.

Costly mistakes

Billing mistakes and inconsistencies are costly and create problems for the practice. Overbilling invites the scrutiny of third-party payers and the government, and underbilling leaves hard-earned dollars on the table. Missing changes in coding rules and regulations may result in payment denials, slower cash flow, or outright revenue loss.

Most physician groups provide some level of training to their billing staff, but rules are complex and staff knowledge can quickly become outdated because of frequent changes in billing rules and lack of guidance when questions arise. For instance, the 90-day grace period for phasing in the use of the new ICD-9 and CPT codes will be eliminated as of October 1, 2004 and January 1, 2005, respectively. This means that practices will have to become familiar with the applicable new changes far enough in advance to alter their charge slips, enter new codes in the computer, and educate physicians and staff. 

Also, consider your internal processes and look for opportunities to improve. For example, does your practice maintain the infamous "bottom drawer" - the place where the billing staff keeps the denials and adjustments that are too difficult to deal with today? Far too many physician groups leave money on the table because the billing staff either doesn't have the time or the necessary resources to appeal denials.

Other questions to ask: Has everything been billed that can be billed? Does the billing staff use modifiers properly? Does the practice ever undercode for fear of being accused of overbilling? Each of these situations represents a loss of revenue that will never be made up.

And revenue loss is only part of the problem. By way of lax billing processes, the practice may be creating an unfavorable or aberrant profile with third-party payers and the government, leading to investigations that can result in significant fines or even threats of criminal prosecution. Sanctions for improper billing range from civil (monetary) penalties to criminal prosecution (small physician groups are closely monitored), as well as exclusion from Medicare.
A pattern of incorrect billing in the right circumstances can be interpreted as fraudulent billing. The cost of defending a physician group against these charges can be significant. A retainer of $250,000 for a top criminal lawyer is well within the realm of possibility.

Put controls in place

A comprehensive compliance program requires a commitment to provide ongoing training, monitoring, and follow-up, and can minimize billing mistakes, reduce denials, maximize revenues, and satisfy the government's expectation that billing practices are both proper and legal. If the government does initiate an investigation of the practice, a well-documented compliance program minimizes the chance of proving any intentional wrongdoing on their behalf.
Larger practices are usually more apt to have a compliance plan in place; the final OIG Compliance Program for Individual and Small Group Practices was published in the Federal Register on October 5, 2000 and can be found at: www.oig.hhs.gov/authorities/docs/physician.pdf
. Some key steps include:

  • Training. The first step in implementing a program and ensuring proper billing is regularly scheduled, appropriate training for all staff involved in the billing process - from the front desk to billing clerks to physicians. Training also includes keeping up with changes in billing rules and regulations and disseminating those changes to everyone involved in the process. Depending on the size of the physician group, training may be one-on-one coding education or a formal education program for an entire billing department. When compared with the potential for improved revenue and cash flow, the cost of training is small. Subscribing to a coding newsletter and other publications to enhance the practice's scope of knowledge is beneficial. The American Medical Association (www.ama-assn.org) and DecisionHealth (www.decisionhealth.com) are excellent sources for obtaining newsletters and books on coding, billing, and compliance. Communicate with representatives of third-party payers and never hesitate to request written confirmation of billing guidance given to you over the phone or where documented policies can be obtained to include with your training and procedure manuals. Many payers have Web sites where their policies regarding billing and coverage issues may be obtained.

  • Documentation. Effective and well-written compliance plans demonstrate a willingness to comply with the law. It's important to document your efforts. As record reviews are completed, create a file or notebook with the results and any corrective action taken. Also, document any employee or physician training and education sessions that relate to compliance. Keep a library of any bulletins, newsletters, or other billing and coding reference material used by the practice.

  • Chart Reviews. Conduct chart reviews at least quarterly. Results can be used to educate physicians and staff about correct documentation and coding procedures, and later to measure the effect of coding education. The OIG's recommended compliance guidelines require only five charts yearly per provider per year. However, 10 to 25 charts can provide a more accurate assessment of physician compliance, and gauge whether there is a pattern of coding that would put the practice at risk. If a potential problem emerges, a larger sample of charts dealing with the problem area should be pulled and reviewed in a focused audit to identify documentation of the service provided or billed. Problems can crop up when introducing new procedures or codes, services are too complex to code, are regularly denied, or have a high impact on reimbursement and/or volume. 

As physicians become more adept at coding and documentation, chart reviews may be done less often and include fewer charts.

Practices should also consider reviewing services targeted by the OIG in its Annual Work Plan. In fiscal year 2004, some of the areas that OIG relates specifically to physicians include E&M services, consultations, use of modifiers -25 and -59, medical necessity of diagnostic tests, radiation therapy services, incident-to billing, payments for non-ESRD epoetin alfa, and allergy treatments.

Getting help

If your group has an employee who is well versed in billing and coding, some of the audits can be performed internally. However, many practices do not have enough staff to conduct comprehensive and regularly scheduled audits. 

A third-party review can be performed for about $500 to $1,250 per physician, depending on the number of charts involved. Consultants will typically charge $40 to $70 per chart. This fee usually covers the audit and a report detailing the results and recommendations. Some fees may also include physician education.

If your group is the target of an audit and can produce documentation to support your efforts to comply with the law, honest billing mistakes are kept in perspective. By outsourcing the responsibility for preparing a compliance plan, your practice can benefit from the experience and knowledge that consultants acquire when they see the same issues over and over again. And rather than employing a full-time compliance officer at $40,000 to $60,000 for a small- to medium-sized physician group, you can pay for compliance services and oversight on an "ˆ la carte" or monthly basis depending on what's needed.

A compliance plan for a small group (one to three physicians) can be put into place for approximately $5,000 to $7,000, and provides a level of assurance that the billing system is functioning properly and revenues are appropriate for the services provided. Costs increase for larger medical practices, but the benefits increase as well. Consider these advantages to using an outside party for your compliance plan:

  • Credibility - Many physicians and practice managers are more likely to listen to an outsider with clinical and financial experience.

  • Knowledge - It is the consultant's job to stay on top of the ever-changing coding and billing rules.

  • Objectivity - An internal auditor may not identify problem areas for correction if he, or one of his peers, is the source of the error.
    Note that the consultant's job is not to place blame, but rather to improve coding and billing compliance.

Regardless of who handles your billing and coding compliance plan, the physicians as well as the staff should buy into the process to produce successful results.

James P. Sacher, CPA, a partner with Skoda, Minotti & Co., has over 25 years of experience in the field of business advisory services and is the partner in charge of Skoda, Minotti & Co.'s Healthcare Consulting Group. He is also vice president of the Cleveland Sight Center and president of the Cleveland Eye Bank.

Mary Lou Martin, a healthcare consultant, Skoda, Minotti & Co., has over 20 years of experience in healthcare administration and education, with an emphasis on physician compliance programs, procedure/diagnosis coding, and medical record documentation. She is a Certified Medical Manager and Certified Professional Coder. Both can be reached at (440) 449-6800.

This article originally appeared in the September 2004 issue of Physicians Practice.