Who's Afraid of a Medicare Audit?

June 1, 2003

If you are notified that your practice has been selected for an audit, don't panic.

It's a workday like most others. Your waiting room is full, the staff is harried, and you are 30 minutes behind schedule. Then your office manager alerts you that she has received notice that Medicare is auditing your practice.

Think this can never happen to you? Don't be too sure. Medicare investigations and audits of physician practices are commonplace. In fiscal year 2002, the Office of Inspector General (OIG) excluded 3,448 people and companies from Medicare/Medicaid reimbursement, and secured 517 criminal convictions and 236 civil actions. Further, private insurance companies are now pursuing physician practices through what they, too, term "audits" and "fraud investigations."

While these payers have the right to collect on incorrectly paid funds, they lack the authority of a government investigation. Check your payer contracts to see what authority private insurers have in this arena before you respond to a letter from their "fraud unit."

If you are notified that your practice has been selected for an audit, don't panic. Medicare and other third-party payers frequently conduct reviews and audits for a variety of purposes, such as when a practice enrolls for electronic billing. Read the notice carefully to see if it lists the type of review or audit being performed or the reason your practice was selected for the investigation. If a private payer has initiated the review or audit, look in the company's billing or provider manual to see if any information is listed regarding their right to audit your practice and the types of audits that may be performed.

Check Medicare's or your local carrier's Web site for additional information. You should also check the Office of Inspector General's annual Work Plan for the current fiscal year. This information can be accessed free of charge from the OIG's Web site, www.oig.hhs.gov.

The Work Plan describes the current priorities of the OIG and may help explain why you were selected for review.

Hire the right help

Contact your attorney as soon as you become aware that you are being audited. Your attorney should guide you through the audit process; don't make the mistake of going this alone.

To start preparing, have all of the affected charts pulled. Make sure all information has been appropriately filed and that no information is left in the chart "filing bin" in your office. Whatever you do, do not under any circumstances start making changes to the medical record, even if you think the additional information would be helpful to the reviewer.

Your attorney may likely recommend retaining the service of a qualified coding consultant to review the affected charts. This is money well spent. It is a good idea to have an unbiased opinion regarding the accuracy of the coding of the charts that were selected for audit. A coding consultant may also be able to identify trends in your coding that may have subjected you to review in the first place.

For instance, your practice may bill an exceptional number of professional services as level 3s, for fear that coding at level 4 will make you subject to scrutiny by auditors. Knowing potential coding problems in advance may help you mount a successful defense of the audit. There may be supporting information in your practice that justifies your coding that you can then, with your legal counsel's approval, provide to the reviewer.

A coding consultant may also help you identify other problem areas -- such as lapses in documentation, incomplete histories, and illegible charts -- and offer you guidance regarding how to prevent such issues in the future.

It makes a substantial difference who hires the coding consultant. If your practice does the hiring, then all reports and other materials generated by the consultant are subject to discovery, whereby the government may demand to review materials such as documentation and consultant reports. If you have hired the consultant you have no legal right to protect that information. However, if your attorney hires the consultant as part of his or her legal advice provided to your practice, the consultant's findings may (but are not guaranteed to) not be subject to discovery.

Submitting your documents

Your attorney should assist you in putting together the records to be sent to Medicare or the applicable third-party payer. Most attorneys recommend that you only provide the information requested in the audit letter. However, you need to look at each chart in its entirety. Your attorney may decide to forward additional information from the chart that supports your coding.


Once you have pulled together all of the relevant materials, make sure to keep a copy of all materials and correspondence to and from the reviewer. Send the materials via certified mail, return receipt requested, or through some other delivery mechanism that allows you to retain proof of the reviewer's receipt of your information. Pay close attention to the requested deadlines in the reviewer's letter. If you are unable to accommodate the timeframe specified, determine with your lawyer which of you will contact the reviewer and request an extension.

After you submit the information, the waiting period begins. Even if the letter you received from the reviewer requested your quick response, there is no guarantee that you will receive a quick response in return. It's not uncommon to hear nothing for weeks, and possibly months. A follow-up letter to the reviewer to verify that they have received the information you forwarded may be appropriate.

Preventing future audits

While you are waiting for a response, it's a good time to review your practice's overall compliance activities. Determine what steps you can take to minimize your chances of another audit. Have your billing office inform you of the reasons claims are most frequently rejected or denied. Pull a random sampling of charts for each billing provider and determine if documentation improvements can be made.

If your practice has a written compliance plan, consider amending it as necessary or retraining your employees to be sure it's being followed. If you do not have a written compliance plan, think about developing one. At a minimum, your practice should have a written policy that addresses how to handle future audits and requests for information from government and third-party payer agents. This policy should also include responding to subpoenas and search warrants.

Double check that your billing staff is appropriately performing their jobs - for example, properly crediting payments and promptly responding to credit balances. Also, make sure none of your employees (current or prospective) has been sanctioned by Medicare. You can check this online at www.exclusions.oig.hhs.gov.

Print out a copy of each search and place it with your compliance materials and the practice's employment application.

Supplemental compliance training may also appropriate for your employees. Medicare offers free training CD-ROMs and videos that can be ordered through their Web site, www.cms.hhs.gov/medlearn/products.asp.

You may wish to send your billing staff to an outside seminar or bring in a qualified coding trainer to provide an occasional educational program. Keep written records of all training efforts by your practice.

To supplement performance and training, be sure your billing staff has the most current coding and compliance materials to work with, and that your billing software is up-to-date with all changes to coding practices. Finally, don't overlook your overall practice policy manual. You may need to update it to reflect new policies triggered by your practice audit.

Being audited by Medicare is not the end of the world, although it may seem like it at the time. If the review identifies potential coding abnormalities, check them against your attorney's review and the guidance from the coding consultant. If there are differences or it appears that the reviewer did not have information that would explain your coding, request a reconsideration of the outcome and supply the new information. Also, research professional journals for any articles that support your coding of a particular claim; good sources include specialty societies and the American Academy of Professional Coders (www.aapc.com). Your attorney may decide that this information should be provided to the reviewer.

At the end of the day, the audit will be complete and your practice will survive. Use it as an impetus to reinforce or institute good compliance practices in your practice, and perform ongoing periodic internal prospective audits to identify and correct any future compliance issues.

Joan M. Roediger can be reached at editor@physicianspractice.com.

This article originally appeared in the June 2003 issue of Physicians Practice.