Audit Preparedness for Provider Organizations
By Richard S. Cooper, Esq.Member
McDonald Hopkins LLC
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Original Publish Date: March 8, 2016
Current Payor Audit Activities/Trends
Audits are increasing in frequency and payors are using more aggressive tactics. Amounts sought in recoupment actions are increasing significantly. Medicare is more likely to seek criminal sanctions. This article will summarize the principal types of Medicare and private payor audits and explain the importance of being prepared for these audits. At this end of this article, the components of an effective audit response are outlined.
Principal Types of Medicare Audits
- CERT Audits (Comprehensive Error Rate Testing). Usually focuses on providers that provide high cost items or services and/or have high volume and/or have atypical billing/coding practices.
- RAC Audits (Recovery Audit Contractor’s Program). Uses private contractors. Paid on a percentage basis. RAC audits can focus on a variety of issues and practices. Providers should refer to the applicable RAC website for a list of audit targets.
- ZPIC Audits (Zone Program Integrity Contacts). Contractors to CMS. Data mining for compliance with Medicare coverage and coding policies. Can investigate fraud as well. Most serious of the audits. Can prepare cases for civil or criminal referral to CMS or law enforcement agencies.
- MAC Audit (Medicare Administrative Contractor). Can be a routine payment audit.
Private Payor Audits
- Informal (review) vs. formal (audit).
- Random vs. focused.
- Pre- or post-payment.
- Procedure usually determined by contract or Provider Handbook and applicable state law.
- Take all audits seriously.
- Extrapolation can lead to very large recoupment actions. Need to try to reverse audit findings, in whole or in part, before pre-payment review, extrapolation and recoupment occurs.
- Payors have a contractual right of offset for amounts they are seeking to recoup. This gives payors substantial leverage in negotiations with hospitals.
- Payors follow what other payors are doing. A problem audit with one payor can cause other payors to initiate their own audits.
- Often difficult to reverse using payor/contractor internal process (police, prosecutor, judge). May need to resort to ALJ, Department of Insurance complaint, litigation or lobbying efforts. Consider ERISA rights and cause of actions.
- HAVE A COMPLIANCE PLAN!
- Be prepared:
- Know focus of audits—will vary over time and vary by payor.
- Conduct self-audits or independent audits—best to find the problem yourself and mitigate its impact.
- Audit response structure in place:
- Situation specific deadline and responsible party chart.
- Known guidelines for each participant.
- Centralized location and custodian for audit-related materials.
- Permits input from all appropriate sources—multidisciplinary.
- Create ability to data mine for audit response data.
- Develop solid recordkeeping system to support data mining efforts.
- Conduct training and education regarding audit response obligations and responsibilities.
- Have audit response process in place—don’t miss key deadlines or not give yourself enough time for a comprehensive, thoughtful response.
Effective Audit Response
- An effective audit response:
- Recognizes the timelines and understands a missed deadline can mean fines, the inability to challenge or the inability to introduce evidence or arguments. A payor’s appeal process may have multiple levels, each with different time periods and procedural requirements.
- Includes a validation audit (before records submitted).
- Immediately flags and stops problems in systematic way to prevent ongoing exposure.
- Is thorough, clear and concise; includes all necessary/required information. Don’t make the payor/contractor have to work too hard to decipher your information and arguments.
- Looks for procedural, legal and factual flaws in the auditor’s position.
- Auditor applied wrong rules or standards, misinterpreted CPT manual.
- Auditor failed to consider or missed certain information.
- Challenges to extrapolations.
- Introduces all new facts and evidence when required.
- Is professional and non-confrontational.
- Employs an effective risk vs. cost/benefit analysis not driven by emotion.
Richard S. Cooper, Esq., is a Member of the McDonald Hopkins LLC law firm. He is also the Manager of its National Healthcare Practice Group and Co-chair of its Healthcare Restructuring Practice Group
Mr. Cooper provides legal representation to a broad range of hospitals, other healthcare facilities and physician groups across the United States. He has been listed in The Best Lawyers in America for health law for twenty-two consecutive years and selected for inclusion in Ohio Super Lawyers (2005-2015).
Visit the McDonald Hopkins LLC web site at www.mcdonaldhopkins.com.