See For Yourself


More practices are doing internal audits to catch small mistakes before they turn into big problems

The federal crackdown on Medicare fraud and abuse has meant many a sleepless night for physicians worrying whether their coding practices will raise a red flag - and result in an audit. Now the Health Care Financing Administration (HCFA) is trying to help. The sample compliance program for small physician practices released last year by the Office of Inspector General (OIG) lists seven key components. Number one on the list? “Conducting internal monitoring and auditing through the performance of periodic audits.”

The OIG isn’t alone in encouraging internal audits - especially chart audits to ensure that documentation supports coding levels. Private payers, too, are taking a closer look at charts, according to Mary LeGrand, a consultant with St. Louis-based Karen Zupko and Associates. “We are finding that private payers are looking at notes - maybe not as often as Medicare, but they are looking at documentation.”

What these payer auditors are looking for is proof of medical necessity - and that the physician actually did everything that was billed for. In the world of medical billing, if it isn’t documented, it didn’t happen. If it didn’t happen - and you billed for it - you’ve committed fraud.

With motivation from all sides, more practices are doing internal chart audits, reviewing charts themselves. The idea is to catch small mistakes before they turn into big problems.

The more, the better

Sounds like a good idea, but practices already swamped with patients to see, bills to send, and contracts to sign find it hard to squeeze in regular chart audits. Luckily, even the OIG says auditing annually is probably enough; its compliance plan specifically suggests a baseline audit with subsequent audits “at least once a year.”

That said, more frequent audits cast a wider safety net. LeGrand believes practices should ideally audit themselves each month, though she admits that quarterly or biannual audits are more realistic.

R. Todd Welter, president of R.T. Welter & Associates, a consulting group in Denver, points out that some specialties are at higher risk than others and should probably do more than the minimum. Specifically, practices that see a lot of Medicare patients, such as cardiology and internal medicine, should make sure they are doing all they can in terms of compliance. “Pediatricians? I wouldn’t worry about it. Once a year should be fine,” Welter notes.

Practices that audit frequently may realize an economic benefit. Remember that audits catch underbilling as frequently as overbilling. For example, if a physician has consistently undercoded, it may be possible to go through a review process and collect more. “Sometimes you’ll even find things that didn’t get billed,” says Marilyn Rissmiller, program manager for the healthcare financing department of the Colorado Medical Society. The benefit of frequent audits is finding underpayments in time to collect additional monies owed. But if you have exceeded your carrier’s time limit for appeals, you may be out of luck.

Finding a balance

However often you audit, be precise about how many charts you actually pull out to review. “Some people go overboard in trying to do a statistically representative sample,” says Welter. It’s not necessary to pull every chart, but “you do need to be true to yourself. Don’t load the sample,” he advises. Avoid the temptation to audit only the files of the most conscientious physician in the practice - or the one you suspect may be coding inaccurately.

Welter suggests random, double-blind samples. He’ll ask someone in the practice to pull 20 files without saying why he wants them. Of those 20, he randomly audits 15. If those 15 are accurate - or close to it - he’ll stop with that. But if he sees lots of problems, he’ll expand the audit and review more charts. In one sample, for example, Welter discovered that one physician had coded a 99213 with an EKG for every single patient. He pulled more charts from that physician; they all were the same. He knew he had found a problem.

LeGrand takes a slightly more systematic approach. “Typically, I look at a minimum of five and up to 10 charts notes per provider.” She pulls from charts supporting coding for new patients, established patients, and consultations, as well as from all payer groups.

The OIG similarly recommends five or more medical records per payer or five to 10 records per physician.

The approaches can vary; but one simple rule of thumb applies: “The larger the sample size the more confidence you’re going to have in what the final results are,” points out Rissmiller.


When you have the records in hand, your primary task is to make sure the notes support the code billed. “Sit down with CPT codes and guidelines and look at the notes and see what is missing compared to the actual exam,” LeGrand suggests. Most physicians, she notes, “focus on documenting positive findings” - that is, they document signs of illness, but don’t remark on what they do as a matter of course, or what looks normal. Simple education and awareness can help that.

It’s important to include indications of medical necessity, Le Grand urges. The OIG will find fault if a physician performs, documents, and bills for a neurological exam - but the patient only presented with a sore throat. This review also provides an opportunity to discover if a physician rambles in his dictation - raising transcription costs - or isn’t reviewing transcribed notes. Look for obvious errors as well as signs that a physician made minor corrections after having reviewed the dictation. Finally, the record should be legible and include the physician’s signature.

Obviously, it will be difficult for physicians to catch their own mistakes when it comes to documentation - and incomplete documentation is probably just the result of not being informed. Still, physicians need to be involved in chart audits to avoid making the same mistakes time after time. “For [chart audits] to be effective, the doctors have to be involved at least in the discussion of the results,” says Rissmiller.

Welter suggests doing chart audits as a kind of grand rounds. “Put the chart note up on a screen in front of God and everyone,” he says. Physicians can then critique the handiwork of their colleagues.

In most cases, however, the initial audit is done by staff or by an external consultant. What’s important is that the person is competent. The auditor should also be audited from time to time, to make sure he or she is staying on top of new rules, Welter adds. If you do select an internal auditor from among your staff, don’t pick the same person who does all the coding for physicians in the group. That person won’t be able to find his own mistakes - and if he does, he may be reluctant to point them out.

Take the fifth?

Physicians who do find errors - especially poor documentation and overpayment - face a quandary. From the government’s perspective, failure to report overpayments once they have been detected constitutes fraud and abuse. But some healthcare attorneys argue that this could violate the Fifth Amendment privilege against self-incrimination. Talk with a lawyer if you uncover systemic signs of fraud. Be wary of just ignoring the problem, however; staff may report the problem, launching a qui tam or “whistle blower” suit.

Be assured, most audits don’t uncover criminals; they just uncover mistakes. “If it’s a billing error, [physicians] need to make corrections if the initial bill resulted in an overpayment,” Rissmiller says. Call your carrier to find out what process they’d like you to follow to pay them back, she suggests.

Of course, auditing prospectively, or before the bill is sent, can help avoid problems related to self-reporting. But prospective audits slow down billing - and payment. They are generally recommended only if the practice knows it has a problem with its process, or with a particular physician.

“If there is a physician who is of concern to the practice and who consistently is coding more than the documentation supports, I’d do prospective audits,” Le Grand explains. Welter concurs, “If you have a doctor that you know is undereducated, or you just suspect fraud or abuse, you should do prospective audits.”

Finally, “make sure that you document findings and keep those records,” Rissmiller advises. Chart any self-reporting, repayment, physician education, or other corrective actions taken. That way, if you ever do face an external audit, you’ll able to prove that you tried your best to get it right.

Pamela Moore, senior editor, practice management at Physicians Practice, can be reached at

This article originally appeared in the July/August 2001 issue of Physicians Practice.

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