How to prepare and manage payer audits

Physicians Practice contributor Martin Merritt, JD, the executive director of the Texas Health Lawyers Association and a health lawyer at Friedman & Feiger, LLP, sat down with Angela Miller, CHC, CMC, a payer claim auditing specialist and founder and president of Medical Auditing Solutions, LLC, to discuss how to prepare and manage payer audits.

MM: Angela, what guidance can you provide to physician practice personnel in dealing with payer audits?

AM: First, providers need to understand the difference between an audit and prepayment additional documentation request (ADR).

An audit is post-payment review of the claim to determine compliance with any of a number of payer requirements. An ADR is a prepayment request and usually relates to high-dollar, frequently abused, or high-volume procedures. The ADR seeks chart notes and other documentation reflecting medical necessity, before the claim can be paid. An audit will have defined deadlines for response while an ADR will suspend altogether the deadlines for payment under many prompt-payment statutes. 

MM: What triggers an audit or ADR?

AM: Payers use algorithms to identify high-utilization practices, or those practices which stand out as either ordering more procedures than their peers, or those ordering more high-cost procedures than their peers. Although payers are careful to state that they do not interfere with medical judgment, if actual utilization trips an algorithm, payers have at their disposal a number of remedies, increasing in severity from least to most severe. First, payers may send a warning letter that utilization is higher than a provider’s peers. No action is taken, other than a warning to modify prescribing behavior. Second, payers may place a practice on pre-payment review where payment is withheld until documentation is provided supporting the claim. Third, a recoupment demand may be made for claims already paid. Fourth, network participation may be terminated. Fifth, a complaint to a licensing board may be made especially for out of network/balance billing. Finally, in only the most egregious cases, a criminal complaint may be filed with the FBI or state prosecutor.

MM: What is the first thing providers need to do when receiving an ADR or post pay audit request?

AM: First, make sure the person in charge of mail knows the importance of these documents. Time is critical. A failure to respond timely will result in denial or 100% failed audit. This can result in a provider being put on “prepayment audit” or “document hold,” under which no practice can survive for very long.

Second, make it easy for the auditor to review the materials provided. Documentation that is hard to read won’t be read. Transcribe any handwritten notes on a copy of the chart note. Gather all documents requested and organize them in the exact same way for each patient and claim. Review the packet for any missing documents. Some systems store test results and the physician electronic interpretation and notes in two different spots in the EHR. All documents and all clinical assessment of said documents must be provided.

What you want to avoid is antagonizing the auditor. This is the second most common mistake, second only to missing deadlines, that I see.  If the documents are disorganized, or illegible, you invite denials. 

MM: I know some audits are small and providers are tempted to cut a check and be done, do you have an opinion on this?

AM: Number one, never cut a check without thoroughly reviewing the claims data, verifying the reason for the overpayment. Payers can make mistakes just like providers–an example being not applying the correct policy based on date of service. Some audit results can be extrapolated. A recoupment involving 30 claims can sometimes be extrapolated over the entire universe of claims. 

Second, it may be a good investment to employ a healthcare attorney to draw up a settlement agreement which releases all recoupment claims, known or unknown, through the date of the payment. Of course, this would not apply if the recoupment is sought because the claim was paid twice, for example. But in larger recoupment payments, it is good to attempt to obtain a release to prevent future recoupment claims.

MM: Is it necessary to pull any of the payer policies and manuals when reviewing payer audits?

AM: That is the most important work that an auditing specialist can perform. It is important to look at the time period and the procedure codes being audited and pull all policies from the payer to cover all dates of service and all procedure codes in the audit sample. Practices are typically not equipped to do this kind of work. There are times when a payer audit will apply current policies to dates of service outside the current policy period. This can save thousands of dollars in recoupment claims.