By now, most, if not all healthcare providers have been audited by either a health insurance payer or the Centers for Medicare and Medicaid Services, or both. The healthcare audit process can vary depending on the payer; however, most audits follow a general process beginning with a request for medical records. The healthcare provider submits the records to the requesting payer who then have the records reviewed by a consultant. The consultant prepares a report with his or her findings that the payer then uses to determine whether the payer received payments for services that the payer believes was inappropriate. Then, the payer will request a refund from the provider of the total amount of “overpaid” claims.

The costs of the healthcare audit to the provider can be substantial. For starters, the provider and his or her staff will have to spend time gathering the records to comply with the initial request. Some offices still use paper notes while others use an electronic health records system. Some EHR systems only save the daily notes so the provider has to then find x-ray reports, treatment plans and other records in a separate location. Locating, gathering, organizing and then copying or printing the medical records can take many hours. The costs can add up to. Staff may get paid overtime. Printing and copying can be costly too.

After the records are submitted but before the payer issues its findings, most providers will try to determine on their own or with the help of others why the audit took place and whether they are at risk for having to refund money to the payer. During this process, the provider may contact attorneys and consultants to discuss their records and the applicable billing, coding and documentation guidelines. Smart providers will do this in order to immediately take corrective action to prevent problems from continuing in the future. Providers can expect to pay hundreds or even thousands of dollars to attorneys and/or consultants for a review of records and assistance with making any necessary changes to their habits going forward.

If the provider receives from the payer an overpayment determination, the cost to the provider can quickly escalate. There are two main costs: 1) lawyer and consultant fees to challenge the determination in whole or in part and 2) the amount of reimbursement that the provider must ultimately return to the payer if in fact an error occurred. Overpayment determinations can range from a few thousand dollars to hundreds of thousands of dollars. The provider must determine whether the defense costs justify the results. For instance, it does not make financial sense to pay an attorney and consultant $5K – $10K to defend an overpayment demand of $2K. However, if the overpayment determination is $20K or more, then the legal and consultant fees of $5K – $10 K may be warranted. It is at this stage that finding an attorney and consultant with expertise in this audit arena can be invaluable. An experienced attorney can convey to the provider an estimate of the costs associated with the audit defense and explain the likelihood of success. This can be enormous value for the provider who is trying to determine whether or not to make the investment in legal and consulting fees. CMS audits under the Medicare system can cost even more. The reason is that Medicare audits have a five step appeal process. This process takes more time than the average health insurance payer audit.

So what can a provider do to curb the costs associated with a healthcare audit? Providers should do everything they can to avoid an audit in the first place. Alternatively, the provider must ensure that when an audit does occur, that the risk of an overpayment determination is low.

To accomplish these goals of avoiding the audit or mitigating the impact of an audit, a healthcare provider should invest in a compliance program. A compliance program is a written plan for identifying risk areas in the provider’s practice. Healthcare attorneys develop compliance programs for healthcare providers that can help the providers identify areas of risk including billing, coding, documentation and violations of state and federal laws. The provider and the attorney can work together to correct any problems. Comprehensive compliance programs should urge the provider to have a consultant perform an audit of the provider’s medical records just like an insurance payer would do. A consultant hired by the provider can perform an audit similar to that of a third party payer, but the results will allow the provider to make adjustments going forward instead of causing an overpayment determination. So, if and when a third party payer audit occurs in the future, the provider’s records will be more likely to comply with the requirements for proper billing, coding and documentation thus avoiding an adverse payer determination. Compliance programs are an investment of time and money, but the investment is only a fraction of the time and costs compared to a healthcare audit. Not to mention, providers who do investment in a compliance program are also investing in their own peace of mind.