While most practices are making a good faith effort to perform accurate coding, and few are engaged in outright fraud, Medicare statistics show that the coding error rate is consistently around 30%. Without regular audits, your coding error rate is probably even higher, and you could be losing money or seriously out of compliance.
“I would say that the error coding rate that we typically see from an audit is around 50% and it is not unusual to see error rates as high as 80%,” says Jeffrey Restuccio, C.P.C., C.P.C.-H., Principal, Ritecode Inc. “I have even performed audits that showed that a particular doctor was over-coding 100% of the time —not intentionally, but try to convince Medicare or another payer that it was unintentional.”
Often, it does not take long for Mr. Restuccio to realize that his client is in deep trouble.
“When they call us in on a Monday and Medicare is coming in on Thursday, we can usually do nothing more than give them strategies on how to correct their coding problems and present that information to Medicare.”
Facing the real possibility of paying restitution and significant fines, most clients quickly agree to a strategy of total disclosure.
“Usually, Medicare doesn’t get a practice for fraud, but if you have 20% of your procedures over-coded or under- documented, and therefore not valid, Medicare could annualize that percentage over several years. That can cost a practice hundreds of thousands of dollars.”
While your coding may not be so out of line that it attracts the Office of the Inspector General (OIG) or raises red flags with other payers, you may still have enough problems that you may be having too many claims rejected or down- coded.
“You need to be in compliance with the rules and regulations regarding coding,” warns Mr. Restuccio. “You also need to be paid for your services. An audit is the only way to ensure that you are in compliance and that you are not leaving money on the table.”
The Case for Auditing
Medical practices generally audit for two primary reasons:
1. for revenue reasons to make sure that the practice is properly billing for its services
2. for compliance reasons to make that the practice is only billing for the services it’s providing.
“From a strictly compliance point of view, it is playing with fire not to do audits because you have no idea what the accuracy of your coding and billing is,” says Betsy Nicoletti, a practice management consultant who specializes in coding and billing issues and is the author of the 2005 Physician Auditing Workbook.
“In addition, your practice could be losing money. I audited a practice where the average revenue per E/M visit went up nearly $5.00 per visit. When you multiply that out over the number of visits, it can be a substantial amount of money.”
Some see regular auditing as an essential business activity in an era of reduced reimbursements and revenues and increased regulatory requirements.
“All doctors need to understand that their practice is a business, and they need to take the simple and prudent steps necessary to ensure that the business is running properly,” says Kenneth T. Hertz, C.M.P.E., a Consultant for the Medical Group Management Association. “An audit cycle is one of the best ways to ensure the ongoing health of a practice. An audit will help confirm that your practice is in fact doing well, will help strengthen those areas that need to be strengthened and will help shine a light on those areas that need attention.”
Doctors often resist doing audits because they feel that the practice is doing fine financially or they do not want to spend the money that an audit might cost.
“The reality is that there is opportunity for growth and improvement in virtually every practice,” says Mr. Hertz. “From a very practical point of view, insurance companies are looking for every reason not to pay and an audit can reveal if you are being paid for every- thing that you are entitled to.”
While many physicians no longer see the interest that outside agencies take in the way they run their practices as meddling, many still resist having an outside consultant scrutinizing their operations and still bristle at the idea of a coding consultant telling them how to run their practice. However, physicians who make the decision not to audit their practices may find themselves in a situation where they have no control over the audit and no control over the consequences.
“I cannot stress how important proper coding and billing needs to be, regardless of the size of the practice,” says Tamra McLain, C.P.C., C.P.C.-H., C.M.C., a Coding Manager for HRA Medical Management, Inc. “The level of scrutiny is only going to increase and a practice would be wise to stay of top of this.”
What an Audit Can Reveal
Coding audits can reveal a wide range of problems, including incorrect levels of service, under- and over-coding, and the improper use of modifiers. An audit can also uncover problems in compliance areas, with improperly documented services and in billing areas where physicians might be billing services at a lower level because they don’t understand the coding guidelines.
“When we audit a practice, we look at what services are documented and make sure that every documented service is billed,” says Ms. Nicoletti. “We typically find that many ancillary services and procedures are performed but are not billed.”
Audits can also reveal trends within a practice that might otherwise go undetected. “Often established patients are under coded and new patients and consults are over coded,” says Ms. Nicoletti. “A practice with a lot of established patients may be missing revenue. Those that see a lot of new patients or do a lot of consults may have significant compliance issues.”
An audit can also allow a physician to compare his or her practice’s coding patterns with the coding patterns of his or her peers.
Medicare and many insurance carriers track these trends. A practice that deviates significantly and consistently from national averages can find itself under scrutiny.
“You need to get your statistics and compare your patters to the national patterns,” says Mr. Restuccio. “If you are off, you need to do an audit to get your coding in line.”
If you have reasons to be off the averages, an audit will provide you with the additional documentation that you need to defend your coding if an outside agency comes in to do an audit. There are a number of sources for national coding figures, including Medicare, professional associations, and organizations such as the Medical Group Management Association.
“Keep in mind that what you think of as honest mistake, somebody else may well consider to be fraud,” warns Mr. Restuccio.
Audits can also reveal problems with the medical records that a practice maintains. “Too many doctors are not very careful with their records and don’t seem to understand the real importance of maintaining clear, comprehensive and readable notes and records,” says Inga Ellzey, President of Inga Ellzey Practice Group, Inc. and Dermatology Billing Services, Inc., and an expert in dermatology coding.
“When I audit a doctor, I want to make sure that that physician is putting into his notes all the necessary documentation to support his billing.”
Audits can also reveal problems with electronic medical records such as cloned notes. A cloned note is one that a physician has simply lifted from a previous visit and incorporated into the current record, often without updating it to reflect the patient’s current condition.
How Often Should a Practice Audit?
The OIG recommends that at a minimum a physician should audit at least five notes every year. Many consultants recommend auditing more frequently and with more records to ensure that a practice is staying within the parameters for correct coding.
“A practice really needs to audit more than once a year,” says Mr. Restuccio. “I would recommend doing audits quarterly and looking at a minimum of 30 records. A practice needs to have an ongoing audit plan.”
“Because we are a billing service, we need to audit more frequently,” says Ms. McLain. “However, the same reasons apply to a medical practice. You need to maintain your internal safeguards and you need to be prepared in the event the OIG or a carrier calls for an audit of your practice.”
Audit frequency can be affected by the coding accuracy that previous audits revealed. “If you did an audit that showed a very high level of accuracy, you might not have to do them as frequently,” explains Ms. McLain. “However, if your audit reveals an unusual amount of variance, you may want to audit more charts more frequently to identify and fix what was taking place.”
While doing a simple coding audit to ensure the accuracy of your coding and the related billing is common, experts agree that the larger the scope of the audit, the better. Most recommend auditing as many points of contact with patient information as is feasible, and would include denial audits and billing pattern audits.
“Each audit will reveal trends and patterns that must be changed,” says Ms. Ellzey. “A wide ranging audit may show that a physician is coding all patients the same, is coding too many level IV visits, or that his documentation does not support his codes.”
Should You Do It Yourself or Bring in an Expert?
Often the decision to use internal resources to perform an audit or to bring in an outside consultant is based on the size of the practice and the scope of the planned audit. For smaller practices, there is usually no one on staff who has the expertise to perform a meaningful audit and performing a coding audit is not the best use of a physician’s time. These practices should almost always go to an outside consultant for auditing services.
“For a small practice, you have an issue of skills retention, because they will simply not be doing that many audits,” says Ms. Nicoletti. “A larger practice should have staff members trained to do audits and should be able to handle routine audits internally. However, even a large practice should plan on binging in an expert occasionally to do a comprehensive audit.”
For those practices that may decide that they can perform an audit on their own, there are a number of resources available to help with that effort. The Inga Ellzey Practice Group produces a Compliance Self-Audit Toolkit specifically for dermatology practices that is a comprehensive guide to performing a self audit, with a variety of worksheets and forms that streamline the process.
While it is still wise to consider an outside consultant to perform an audit, practices may find that following an outside audit, they can execute routine internal audits using a toolkit to maintain the necessary level of accuracy in their coding.
What to Look for When Selecting an Auditor
Look for a number of qualifications when selecting an auditor. The single most important one is experience auditing other dermatology practices.
“Any competent auditor can audit the E/M codes, because they are essentially the same for all specialties. But, for dermatology, I would want someone who knew how to audit minor surgical procedures,” explains Ms. Ellzey. “The more the auditor understands about the proper use of code modifiers for those procedures and which codes can and cannot be unbundled, then the better that audit will be. A good dermatology auditor may alert you to a wide range of coding and billing problems caused by misapplication of modifiers.”
You should look for an auditor who focuses on both compliance and revenue and be very skeptical of someone who guarantees that an audit will increase your revenue. With many audits, revenues can go down because an audit reveals a significant amount of over-coding.
“You want an auditor who has a balanced perspective between revenue and compliance. You don’t want to hire someone whose sole purpose is to increase your revenue,” says Ms. Nicoletti. “On the other hand, you don’t want a very conservative auditor who is going to be a fear monger with warnings about going to jail at any moment.”
Any auditor you select should be a certified coder and must have the proper insurance. Make sure that the auditor uses an appropriate software package. You should have a good idea of how he or she conducts an audit to ensure that it will be a good fit with your practice.
When brining in an outside consultant, some practices choose to hire auditors through an attorney because it puts the audit data under attorney/client privileges. Some go so far as to have clauses in contracts with auditors that the auditor cannot speak to anyone or relinquish any data or notes to anyone without first contacting the physician’s attorney. “If you think that you may have a problem with your audit, you may want to consider hiring an auditor through your attorney,” says Ms. Nicoletti. “By doing so, the audit report is that much more difficult to retrieve and may even be protected from a subpoena.”
What Does an Audit Cost and How Long Does it Take?
The cost of having your practice audited varies based on a number of factors, including your location, the type and number of charts to be audited and the quality of the charts. Some consultants charge an hourly rate, usually in the $50 to $125 range, while others charge a per chart rate that is generally $15 to $25 per chart. Rates vary from region to region and will also vary based on the type of practice that you have. An experienced surgical auditor may charge more for auditing complex surgical charts than an auditor who is reviewing charts for more ordinary dermatological treatments. In general, the more complex your charts and the more charts you expect to audit, the more the audit will cost.
Another factor that may impact the cost of an audit is the quality of your charts. Poor-quality notes with bad handwriting or numerous errors or omissions will simply take longer to audit than well organized and carefully written charts. In general, a competent auditor should take 10 to 30 minutes to audit a chart, depending upon its complexity. Avoid auditors who claim to be able to audit charts at an extraordinarily high rate. A comprehensive audit involving a significant number of charts that results in a detailed written report may take several weeks to complete.
What to Do After an Audit
For an audit to be successful, a practice has to commit the necessary resources to make the changes needed to come into and remain in compliance. A key component to that is staff training to ensure that the new processes work and that your medical records, your coding, your billing and all the other aspects of your medical business continue to run smoothly.
“The worst thing a physician can do after an audit is nothing,” says Ms. Ellzey. “If you are audited by Medicare and they uncover the same problems that your own audit caught before, you could be in bigger trouble than if you had never done the audit.”
If an audit reveals significant overcharges to Medicare, many experts recommend contacting Medicare to self-disclose and return the overcharges. Medicare is often willing to work with a physician in these cases and accept the self-disclosure with no consequences. Medicare is not likely to really go after a physician unless it’s convinced that there is a level of fraud going on.
One of the biggest benefits of an audit is that it can help a practice develop an effective compliance plan. A compliance plan would outline future audits and would specify how often audits are to take place, how many records are to be audited, and the type of audit to be performed, either a random audit or a targeted audit, for example, all level IV visits. The compliance plan must also specify what corrective actions are to take place following an audit.
If you are ever audited by a payer, having a compliance plan goes a long way toward helping you satisfactorily resolve any issues.
Most physicians today are open to taking the steps to correct coding problems that an audit can uncover.
Unfortunately, physicians, especially those who are under-coding, tend to slide back into their old coding profile if not given constant feedback. This argues for either a compliance officer or auditor in the practice or for an ongoing regular audit plan that reviews the coding and reinforces the proper coding.
If You Think That You Do Not Need an Audit, Think Again
Even if you think that your practice is in good compliance with coding rules and regulations and that your coding and billing accurately reflect the level of service that you provide to your customers, performing coding audits is still essential for any medical practice.
“Every business in the world audits itself and medical practices should be no different,” says Mr. Hertz. “It is simply sound and prudent business practice to perform regular and comprehensive audits. Savvy doctors realize this and simply incorporate audits into their regular business operations.”
While most practices are making a good faith effort to perform accurate coding, and few are engaged in outright fraud, Medicare statistics show that the coding error rate is consistently around 30%. Without regular audits, your coding error rate is probably even higher, and you could be losing money or seriously out of compliance.
“I would say that the error coding rate that we typically see from an audit is around 50% and it is not unusual to see error rates as high as 80%,” says Jeffrey Restuccio, C.P.C., C.P.C.-H., Principal, Ritecode Inc. “I have even performed audits that showed that a particular doctor was over-coding 100% of the time —not intentionally, but try to convince Medicare or another payer that it was unintentional.”
Often, it does not take long for Mr. Restuccio to realize that his client is in deep trouble.
“When they call us in on a Monday and Medicare is coming in on Thursday, we can usually do nothing more than give them strategies on how to correct their coding problems and present that information to Medicare.”
Facing the real possibility of paying restitution and significant fines, most clients quickly agree to a strategy of total disclosure.
“Usually, Medicare doesn’t get a practice for fraud, but if you have 20% of your procedures over-coded or under- documented, and therefore not valid, Medicare could annualize that percentage over several years. That can cost a practice hundreds of thousands of dollars.”
While your coding may not be so out of line that it attracts the Office of the Inspector General (OIG) or raises red flags with other payers, you may still have enough problems that you may be having too many claims rejected or down- coded.
“You need to be in compliance with the rules and regulations regarding coding,” warns Mr. Restuccio. “You also need to be paid for your services. An audit is the only way to ensure that you are in compliance and that you are not leaving money on the table.”
The Case for Auditing
Medical practices generally audit for two primary reasons:
1. for revenue reasons to make sure that the practice is properly billing for its services
2. for compliance reasons to make that the practice is only billing for the services it’s providing.
“From a strictly compliance point of view, it is playing with fire not to do audits because you have no idea what the accuracy of your coding and billing is,” says Betsy Nicoletti, a practice management consultant who specializes in coding and billing issues and is the author of the 2005 Physician Auditing Workbook.
“In addition, your practice could be losing money. I audited a practice where the average revenue per E/M visit went up nearly $5.00 per visit. When you multiply that out over the number of visits, it can be a substantial amount of money.”
Some see regular auditing as an essential business activity in an era of reduced reimbursements and revenues and increased regulatory requirements.
“All doctors need to understand that their practice is a business, and they need to take the simple and prudent steps necessary to ensure that the business is running properly,” says Kenneth T. Hertz, C.M.P.E., a Consultant for the Medical Group Management Association. “An audit cycle is one of the best ways to ensure the ongoing health of a practice. An audit will help confirm that your practice is in fact doing well, will help strengthen those areas that need to be strengthened and will help shine a light on those areas that need attention.”
Doctors often resist doing audits because they feel that the practice is doing fine financially or they do not want to spend the money that an audit might cost.
“The reality is that there is opportunity for growth and improvement in virtually every practice,” says Mr. Hertz. “From a very practical point of view, insurance companies are looking for every reason not to pay and an audit can reveal if you are being paid for every- thing that you are entitled to.”
While many physicians no longer see the interest that outside agencies take in the way they run their practices as meddling, many still resist having an outside consultant scrutinizing their operations and still bristle at the idea of a coding consultant telling them how to run their practice. However, physicians who make the decision not to audit their practices may find themselves in a situation where they have no control over the audit and no control over the consequences.
“I cannot stress how important proper coding and billing needs to be, regardless of the size of the practice,” says Tamra McLain, C.P.C., C.P.C.-H., C.M.C., a Coding Manager for HRA Medical Management, Inc. “The level of scrutiny is only going to increase and a practice would be wise to stay of top of this.”
What an Audit Can Reveal
Coding audits can reveal a wide range of problems, including incorrect levels of service, under- and over-coding, and the improper use of modifiers. An audit can also uncover problems in compliance areas, with improperly documented services and in billing areas where physicians might be billing services at a lower level because they don’t understand the coding guidelines.
“When we audit a practice, we look at what services are documented and make sure that every documented service is billed,” says Ms. Nicoletti. “We typically find that many ancillary services and procedures are performed but are not billed.”
Audits can also reveal trends within a practice that might otherwise go undetected. “Often established patients are under coded and new patients and consults are over coded,” says Ms. Nicoletti. “A practice with a lot of established patients may be missing revenue. Those that see a lot of new patients or do a lot of consults may have significant compliance issues.”
An audit can also allow a physician to compare his or her practice’s coding patterns with the coding patterns of his or her peers.
Medicare and many insurance carriers track these trends. A practice that deviates significantly and consistently from national averages can find itself under scrutiny.
“You need to get your statistics and compare your patters to the national patterns,” says Mr. Restuccio. “If you are off, you need to do an audit to get your coding in line.”
If you have reasons to be off the averages, an audit will provide you with the additional documentation that you need to defend your coding if an outside agency comes in to do an audit. There are a number of sources for national coding figures, including Medicare, professional associations, and organizations such as the Medical Group Management Association.
“Keep in mind that what you think of as honest mistake, somebody else may well consider to be fraud,” warns Mr. Restuccio.
Audits can also reveal problems with the medical records that a practice maintains. “Too many doctors are not very careful with their records and don’t seem to understand the real importance of maintaining clear, comprehensive and readable notes and records,” says Inga Ellzey, President of Inga Ellzey Practice Group, Inc. and Dermatology Billing Services, Inc., and an expert in dermatology coding.
“When I audit a doctor, I want to make sure that that physician is putting into his notes all the necessary documentation to support his billing.”
Audits can also reveal problems with electronic medical records such as cloned notes. A cloned note is one that a physician has simply lifted from a previous visit and incorporated into the current record, often without updating it to reflect the patient’s current condition.
How Often Should a Practice Audit?
The OIG recommends that at a minimum a physician should audit at least five notes every year. Many consultants recommend auditing more frequently and with more records to ensure that a practice is staying within the parameters for correct coding.
“A practice really needs to audit more than once a year,” says Mr. Restuccio. “I would recommend doing audits quarterly and looking at a minimum of 30 records. A practice needs to have an ongoing audit plan.”
“Because we are a billing service, we need to audit more frequently,” says Ms. McLain. “However, the same reasons apply to a medical practice. You need to maintain your internal safeguards and you need to be prepared in the event the OIG or a carrier calls for an audit of your practice.”
Audit frequency can be affected by the coding accuracy that previous audits revealed. “If you did an audit that showed a very high level of accuracy, you might not have to do them as frequently,” explains Ms. McLain. “However, if your audit reveals an unusual amount of variance, you may want to audit more charts more frequently to identify and fix what was taking place.”
While doing a simple coding audit to ensure the accuracy of your coding and the related billing is common, experts agree that the larger the scope of the audit, the better. Most recommend auditing as many points of contact with patient information as is feasible, and would include denial audits and billing pattern audits.
“Each audit will reveal trends and patterns that must be changed,” says Ms. Ellzey. “A wide ranging audit may show that a physician is coding all patients the same, is coding too many level IV visits, or that his documentation does not support his codes.”
Should You Do It Yourself or Bring in an Expert?
Often the decision to use internal resources to perform an audit or to bring in an outside consultant is based on the size of the practice and the scope of the planned audit. For smaller practices, there is usually no one on staff who has the expertise to perform a meaningful audit and performing a coding audit is not the best use of a physician’s time. These practices should almost always go to an outside consultant for auditing services.
“For a small practice, you have an issue of skills retention, because they will simply not be doing that many audits,” says Ms. Nicoletti. “A larger practice should have staff members trained to do audits and should be able to handle routine audits internally. However, even a large practice should plan on binging in an expert occasionally to do a comprehensive audit.”
For those practices that may decide that they can perform an audit on their own, there are a number of resources available to help with that effort. The Inga Ellzey Practice Group produces a Compliance Self-Audit Toolkit specifically for dermatology practices that is a comprehensive guide to performing a self audit, with a variety of worksheets and forms that streamline the process.
While it is still wise to consider an outside consultant to perform an audit, practices may find that following an outside audit, they can execute routine internal audits using a toolkit to maintain the necessary level of accuracy in their coding.
What to Look for When Selecting an Auditor
Look for a number of qualifications when selecting an auditor. The single most important one is experience auditing other dermatology practices.
“Any competent auditor can audit the E/M codes, because they are essentially the same for all specialties. But, for dermatology, I would want someone who knew how to audit minor surgical procedures,” explains Ms. Ellzey. “The more the auditor understands about the proper use of code modifiers for those procedures and which codes can and cannot be unbundled, then the better that audit will be. A good dermatology auditor may alert you to a wide range of coding and billing problems caused by misapplication of modifiers.”
You should look for an auditor who focuses on both compliance and revenue and be very skeptical of someone who guarantees that an audit will increase your revenue. With many audits, revenues can go down because an audit reveals a significant amount of over-coding.
“You want an auditor who has a balanced perspective between revenue and compliance. You don’t want to hire someone whose sole purpose is to increase your revenue,” says Ms. Nicoletti. “On the other hand, you don’t want a very conservative auditor who is going to be a fear monger with warnings about going to jail at any moment.”
Any auditor you select should be a certified coder and must have the proper insurance. Make sure that the auditor uses an appropriate software package. You should have a good idea of how he or she conducts an audit to ensure that it will be a good fit with your practice.
When brining in an outside consultant, some practices choose to hire auditors through an attorney because it puts the audit data under attorney/client privileges. Some go so far as to have clauses in contracts with auditors that the auditor cannot speak to anyone or relinquish any data or notes to anyone without first contacting the physician’s attorney. “If you think that you may have a problem with your audit, you may want to consider hiring an auditor through your attorney,” says Ms. Nicoletti. “By doing so, the audit report is that much more difficult to retrieve and may even be protected from a subpoena.”
What Does an Audit Cost and How Long Does it Take?
The cost of having your practice audited varies based on a number of factors, including your location, the type and number of charts to be audited and the quality of the charts. Some consultants charge an hourly rate, usually in the $50 to $125 range, while others charge a per chart rate that is generally $15 to $25 per chart. Rates vary from region to region and will also vary based on the type of practice that you have. An experienced surgical auditor may charge more for auditing complex surgical charts than an auditor who is reviewing charts for more ordinary dermatological treatments. In general, the more complex your charts and the more charts you expect to audit, the more the audit will cost.
Another factor that may impact the cost of an audit is the quality of your charts. Poor-quality notes with bad handwriting or numerous errors or omissions will simply take longer to audit than well organized and carefully written charts. In general, a competent auditor should take 10 to 30 minutes to audit a chart, depending upon its complexity. Avoid auditors who claim to be able to audit charts at an extraordinarily high rate. A comprehensive audit involving a significant number of charts that results in a detailed written report may take several weeks to complete.
What to Do After an Audit
For an audit to be successful, a practice has to commit the necessary resources to make the changes needed to come into and remain in compliance. A key component to that is staff training to ensure that the new processes work and that your medical records, your coding, your billing and all the other aspects of your medical business continue to run smoothly.
“The worst thing a physician can do after an audit is nothing,” says Ms. Ellzey. “If you are audited by Medicare and they uncover the same problems that your own audit caught before, you could be in bigger trouble than if you had never done the audit.”
If an audit reveals significant overcharges to Medicare, many experts recommend contacting Medicare to self-disclose and return the overcharges. Medicare is often willing to work with a physician in these cases and accept the self-disclosure with no consequences. Medicare is not likely to really go after a physician unless it’s convinced that there is a level of fraud going on.
One of the biggest benefits of an audit is that it can help a practice develop an effective compliance plan. A compliance plan would outline future audits and would specify how often audits are to take place, how many records are to be audited, and the type of audit to be performed, either a random audit or a targeted audit, for example, all level IV visits. The compliance plan must also specify what corrective actions are to take place following an audit.
If you are ever audited by a payer, having a compliance plan goes a long way toward helping you satisfactorily resolve any issues.
Most physicians today are open to taking the steps to correct coding problems that an audit can uncover.
Unfortunately, physicians, especially those who are under-coding, tend to slide back into their old coding profile if not given constant feedback. This argues for either a compliance officer or auditor in the practice or for an ongoing regular audit plan that reviews the coding and reinforces the proper coding.
If You Think That You Do Not Need an Audit, Think Again
Even if you think that your practice is in good compliance with coding rules and regulations and that your coding and billing accurately reflect the level of service that you provide to your customers, performing coding audits is still essential for any medical practice.
“Every business in the world audits itself and medical practices should be no different,” says Mr. Hertz. “It is simply sound and prudent business practice to perform regular and comprehensive audits. Savvy doctors realize this and simply incorporate audits into their regular business operations.”
While most practices are making a good faith effort to perform accurate coding, and few are engaged in outright fraud, Medicare statistics show that the coding error rate is consistently around 30%. Without regular audits, your coding error rate is probably even higher, and you could be losing money or seriously out of compliance.
“I would say that the error coding rate that we typically see from an audit is around 50% and it is not unusual to see error rates as high as 80%,” says Jeffrey Restuccio, C.P.C., C.P.C.-H., Principal, Ritecode Inc. “I have even performed audits that showed that a particular doctor was over-coding 100% of the time —not intentionally, but try to convince Medicare or another payer that it was unintentional.”
Often, it does not take long for Mr. Restuccio to realize that his client is in deep trouble.
“When they call us in on a Monday and Medicare is coming in on Thursday, we can usually do nothing more than give them strategies on how to correct their coding problems and present that information to Medicare.”
Facing the real possibility of paying restitution and significant fines, most clients quickly agree to a strategy of total disclosure.
“Usually, Medicare doesn’t get a practice for fraud, but if you have 20% of your procedures over-coded or under- documented, and therefore not valid, Medicare could annualize that percentage over several years. That can cost a practice hundreds of thousands of dollars.”
While your coding may not be so out of line that it attracts the Office of the Inspector General (OIG) or raises red flags with other payers, you may still have enough problems that you may be having too many claims rejected or down- coded.
“You need to be in compliance with the rules and regulations regarding coding,” warns Mr. Restuccio. “You also need to be paid for your services. An audit is the only way to ensure that you are in compliance and that you are not leaving money on the table.”
The Case for Auditing
Medical practices generally audit for two primary reasons:
1. for revenue reasons to make sure that the practice is properly billing for its services
2. for compliance reasons to make that the practice is only billing for the services it’s providing.
“From a strictly compliance point of view, it is playing with fire not to do audits because you have no idea what the accuracy of your coding and billing is,” says Betsy Nicoletti, a practice management consultant who specializes in coding and billing issues and is the author of the 2005 Physician Auditing Workbook.
“In addition, your practice could be losing money. I audited a practice where the average revenue per E/M visit went up nearly $5.00 per visit. When you multiply that out over the number of visits, it can be a substantial amount of money.”
Some see regular auditing as an essential business activity in an era of reduced reimbursements and revenues and increased regulatory requirements.
“All doctors need to understand that their practice is a business, and they need to take the simple and prudent steps necessary to ensure that the business is running properly,” says Kenneth T. Hertz, C.M.P.E., a Consultant for the Medical Group Management Association. “An audit cycle is one of the best ways to ensure the ongoing health of a practice. An audit will help confirm that your practice is in fact doing well, will help strengthen those areas that need to be strengthened and will help shine a light on those areas that need attention.”
Doctors often resist doing audits because they feel that the practice is doing fine financially or they do not want to spend the money that an audit might cost.
“The reality is that there is opportunity for growth and improvement in virtually every practice,” says Mr. Hertz. “From a very practical point of view, insurance companies are looking for every reason not to pay and an audit can reveal if you are being paid for every- thing that you are entitled to.”
While many physicians no longer see the interest that outside agencies take in the way they run their practices as meddling, many still resist having an outside consultant scrutinizing their operations and still bristle at the idea of a coding consultant telling them how to run their practice. However, physicians who make the decision not to audit their practices may find themselves in a situation where they have no control over the audit and no control over the consequences.
“I cannot stress how important proper coding and billing needs to be, regardless of the size of the practice,” says Tamra McLain, C.P.C., C.P.C.-H., C.M.C., a Coding Manager for HRA Medical Management, Inc. “The level of scrutiny is only going to increase and a practice would be wise to stay of top of this.”
What an Audit Can Reveal
Coding audits can reveal a wide range of problems, including incorrect levels of service, under- and over-coding, and the improper use of modifiers. An audit can also uncover problems in compliance areas, with improperly documented services and in billing areas where physicians might be billing services at a lower level because they don’t understand the coding guidelines.
“When we audit a practice, we look at what services are documented and make sure that every documented service is billed,” says Ms. Nicoletti. “We typically find that many ancillary services and procedures are performed but are not billed.”
Audits can also reveal trends within a practice that might otherwise go undetected. “Often established patients are under coded and new patients and consults are over coded,” says Ms. Nicoletti. “A practice with a lot of established patients may be missing revenue. Those that see a lot of new patients or do a lot of consults may have significant compliance issues.”
An audit can also allow a physician to compare his or her practice’s coding patterns with the coding patterns of his or her peers.
Medicare and many insurance carriers track these trends. A practice that deviates significantly and consistently from national averages can find itself under scrutiny.
“You need to get your statistics and compare your patters to the national patterns,” says Mr. Restuccio. “If you are off, you need to do an audit to get your coding in line.”
If you have reasons to be off the averages, an audit will provide you with the additional documentation that you need to defend your coding if an outside agency comes in to do an audit. There are a number of sources for national coding figures, including Medicare, professional associations, and organizations such as the Medical Group Management Association.
“Keep in mind that what you think of as honest mistake, somebody else may well consider to be fraud,” warns Mr. Restuccio.
Audits can also reveal problems with the medical records that a practice maintains. “Too many doctors are not very careful with their records and don’t seem to understand the real importance of maintaining clear, comprehensive and readable notes and records,” says Inga Ellzey, President of Inga Ellzey Practice Group, Inc. and Dermatology Billing Services, Inc., and an expert in dermatology coding.
“When I audit a doctor, I want to make sure that that physician is putting into his notes all the necessary documentation to support his billing.”
Audits can also reveal problems with electronic medical records such as cloned notes. A cloned note is one that a physician has simply lifted from a previous visit and incorporated into the current record, often without updating it to reflect the patient’s current condition.
How Often Should a Practice Audit?
The OIG recommends that at a minimum a physician should audit at least five notes every year. Many consultants recommend auditing more frequently and with more records to ensure that a practice is staying within the parameters for correct coding.
“A practice really needs to audit more than once a year,” says Mr. Restuccio. “I would recommend doing audits quarterly and looking at a minimum of 30 records. A practice needs to have an ongoing audit plan.”
“Because we are a billing service, we need to audit more frequently,” says Ms. McLain. “However, the same reasons apply to a medical practice. You need to maintain your internal safeguards and you need to be prepared in the event the OIG or a carrier calls for an audit of your practice.”
Audit frequency can be affected by the coding accuracy that previous audits revealed. “If you did an audit that showed a very high level of accuracy, you might not have to do them as frequently,” explains Ms. McLain. “However, if your audit reveals an unusual amount of variance, you may want to audit more charts more frequently to identify and fix what was taking place.”
While doing a simple coding audit to ensure the accuracy of your coding and the related billing is common, experts agree that the larger the scope of the audit, the better. Most recommend auditing as many points of contact with patient information as is feasible, and would include denial audits and billing pattern audits.
“Each audit will reveal trends and patterns that must be changed,” says Ms. Ellzey. “A wide ranging audit may show that a physician is coding all patients the same, is coding too many level IV visits, or that his documentation does not support his codes.”
Should You Do It Yourself or Bring in an Expert?
Often the decision to use internal resources to perform an audit or to bring in an outside consultant is based on the size of the practice and the scope of the planned audit. For smaller practices, there is usually no one on staff who has the expertise to perform a meaningful audit and performing a coding audit is not the best use of a physician’s time. These practices should almost always go to an outside consultant for auditing services.
“For a small practice, you have an issue of skills retention, because they will simply not be doing that many audits,” says Ms. Nicoletti. “A larger practice should have staff members trained to do audits and should be able to handle routine audits internally. However, even a large practice should plan on binging in an expert occasionally to do a comprehensive audit.”
For those practices that may decide that they can perform an audit on their own, there are a number of resources available to help with that effort. The Inga Ellzey Practice Group produces a Compliance Self-Audit Toolkit specifically for dermatology practices that is a comprehensive guide to performing a self audit, with a variety of worksheets and forms that streamline the process.
While it is still wise to consider an outside consultant to perform an audit, practices may find that following an outside audit, they can execute routine internal audits using a toolkit to maintain the necessary level of accuracy in their coding.
What to Look for When Selecting an Auditor
Look for a number of qualifications when selecting an auditor. The single most important one is experience auditing other dermatology practices.
“Any competent auditor can audit the E/M codes, because they are essentially the same for all specialties. But, for dermatology, I would want someone who knew how to audit minor surgical procedures,” explains Ms. Ellzey. “The more the auditor understands about the proper use of code modifiers for those procedures and which codes can and cannot be unbundled, then the better that audit will be. A good dermatology auditor may alert you to a wide range of coding and billing problems caused by misapplication of modifiers.”
You should look for an auditor who focuses on both compliance and revenue and be very skeptical of someone who guarantees that an audit will increase your revenue. With many audits, revenues can go down because an audit reveals a significant amount of over-coding.
“You want an auditor who has a balanced perspective between revenue and compliance. You don’t want to hire someone whose sole purpose is to increase your revenue,” says Ms. Nicoletti. “On the other hand, you don’t want a very conservative auditor who is going to be a fear monger with warnings about going to jail at any moment.”
Any auditor you select should be a certified coder and must have the proper insurance. Make sure that the auditor uses an appropriate software package. You should have a good idea of how he or she conducts an audit to ensure that it will be a good fit with your practice.
When brining in an outside consultant, some practices choose to hire auditors through an attorney because it puts the audit data under attorney/client privileges. Some go so far as to have clauses in contracts with auditors that the auditor cannot speak to anyone or relinquish any data or notes to anyone without first contacting the physician’s attorney. “If you think that you may have a problem with your audit, you may want to consider hiring an auditor through your attorney,” says Ms. Nicoletti. “By doing so, the audit report is that much more difficult to retrieve and may even be protected from a subpoena.”
What Does an Audit Cost and How Long Does it Take?
The cost of having your practice audited varies based on a number of factors, including your location, the type and number of charts to be audited and the quality of the charts. Some consultants charge an hourly rate, usually in the $50 to $125 range, while others charge a per chart rate that is generally $15 to $25 per chart. Rates vary from region to region and will also vary based on the type of practice that you have. An experienced surgical auditor may charge more for auditing complex surgical charts than an auditor who is reviewing charts for more ordinary dermatological treatments. In general, the more complex your charts and the more charts you expect to audit, the more the audit will cost.
Another factor that may impact the cost of an audit is the quality of your charts. Poor-quality notes with bad handwriting or numerous errors or omissions will simply take longer to audit than well organized and carefully written charts. In general, a competent auditor should take 10 to 30 minutes to audit a chart, depending upon its complexity. Avoid auditors who claim to be able to audit charts at an extraordinarily high rate. A comprehensive audit involving a significant number of charts that results in a detailed written report may take several weeks to complete.
What to Do After an Audit
For an audit to be successful, a practice has to commit the necessary resources to make the changes needed to come into and remain in compliance. A key component to that is staff training to ensure that the new processes work and that your medical records, your coding, your billing and all the other aspects of your medical business continue to run smoothly.
“The worst thing a physician can do after an audit is nothing,” says Ms. Ellzey. “If you are audited by Medicare and they uncover the same problems that your own audit caught before, you could be in bigger trouble than if you had never done the audit.”
If an audit reveals significant overcharges to Medicare, many experts recommend contacting Medicare to self-disclose and return the overcharges. Medicare is often willing to work with a physician in these cases and accept the self-disclosure with no consequences. Medicare is not likely to really go after a physician unless it’s convinced that there is a level of fraud going on.
One of the biggest benefits of an audit is that it can help a practice develop an effective compliance plan. A compliance plan would outline future audits and would specify how often audits are to take place, how many records are to be audited, and the type of audit to be performed, either a random audit or a targeted audit, for example, all level IV visits. The compliance plan must also specify what corrective actions are to take place following an audit.
If you are ever audited by a payer, having a compliance plan goes a long way toward helping you satisfactorily resolve any issues.
Most physicians today are open to taking the steps to correct coding problems that an audit can uncover.
Unfortunately, physicians, especially those who are under-coding, tend to slide back into their old coding profile if not given constant feedback. This argues for either a compliance officer or auditor in the practice or for an ongoing regular audit plan that reviews the coding and reinforces the proper coding.
If You Think That You Do Not Need an Audit, Think Again
Even if you think that your practice is in good compliance with coding rules and regulations and that your coding and billing accurately reflect the level of service that you provide to your customers, performing coding audits is still essential for any medical practice.
“Every business in the world audits itself and medical practices should be no different,” says Mr. Hertz. “It is simply sound and prudent business practice to perform regular and comprehensive audits. Savvy doctors realize this and simply incorporate audits into their regular business operations.”
