How to Survive a Medicare Audit

Being audited by Medicare is not the end of the world — although it may seem that way at the time. The simple fact is, Medicare has an aggressive campaign to audit physician practices, and every provider who treats Medicare patients is subject to review by the Centers for Medicare & Medicaid Services.

How does the government determine which medical practices to audit? Audits sometimes arise from complaints by individuals — for example, by patients, disgruntled employees and competitors — about a provider’s billing practices. More commonly, however, audits result when the government itself identifies potentially questionable billing practices.

Because claim information is stored electronically, analysts and auditors can quickly identify physicians whose billing patterns for specific procedures exceed the norm set by their peers. (Of course, simply because a physician submits a large number of claims does not necessarily mean anything is wrong.)

A typical audit is based on a review of a small number of claims covering a brief period. An auditor might elect to look at, say, 20 claims over six months — with a resulting determination that an overpayment of $1,500 was made by Medicare. But the matter doesn’t stop there. Rather, the auditor extrapolates the figure to cover a much broader period, frequently the six years preceding the audit.

For example, depending on the size of the practice being audited and the total amount paid for the audited services, 20 claims could mushroom into hundreds or thousands of claims, and a $1,500 overpayment could balloon into a projected overpayment of $500,000, $1,000,000 or more.

Preparing for an Audit

The best way to prepare for any eventual Medicare audit is to conduct your practice as much as possible in accordance with all applicable rules governing reimbursement. Here are a few suggestions:

• Avoid coding errors. Make sure that your current procedural terminology (CPT) codes accurately describe the services you provide, and that your diagnosis codes (ICD-9) justify those services. Diagnosis codes must be consistent with service codes.
• Take the time to write things down. Write or dictate notes indicating what you do when treating patients and why you do it. If you don’t document the information in the charts, your best arguments will be of little help during an audit. When documenting, be precise and explicit. For example, don’t leave it to auditors to infer why you ordered certain tests. Not surprisingly, legibility of chart notes becomes even more important in the event of an audit. The easier a record is to read, the less likely it will be audited in great detail.
• Develop and implement a voluntary compliance program. Following an effective compliance program is the best way to reduce the risk that can result from being audited. Having a program in place demonstrates your good-faith efforts to comply with the rules, a factor that will be taken into account in the event of an audit.

The policies and procedures you set down in writing should be in accordance with the Office of the Inspector General’s “Compliance Program Guidance for Individual and Small Group Physician Practices,” which can be accessed at their website.

Responding to an Audit

If you have been selected for an audit, it really doesn’t matter how or why you’ve been picked. Complaining about the unfairness of being subjected to an audit is unproductive. As with a tax audit, all that matters is being able to document and defend what you have done.

There are no shortcuts or secrets when responding to a Medicare audit. The best way to defend yourself is to be honest and forthright. You want to demonstrate that everything you did was medically necessary, documented in the patients’ records and appropriately coded on the claims that were submitted.

The following approach is worth adopting:

• Accept that Medicare has a right to audit your practice. Also accept that you have an obligation to make sure your claims are accurate.
• Take control of the situation as best you can. Keep records of all contacts with the auditor, and make sure your staff notifies you about all requests for information. Designate someone in your practice to be the main contact with the auditor.
• Gather and copy the records requested by the auditor. Review the entire patient chart for all records that relate to the procedure or service being audited. Where relevant, be sure to include referrals from other physicians, diagnostic tests and reports, operative reports and any other entries in the chart that relate to the service or procedure being audited. Check for errors in photocopying.
• Do not alter medical records under any circumstances. Don’t allow members of your staff to do so either. Even when an alteration would be perfectly innocent, it would likely attract the attention of investigators and might be interpreted as an attempt to document services that were not provided.
• Do not discuss claim decisions with the auditor. Statements made by providers at any time during the audit (including during exit interviews) may later be utilized against the provider. Unfortunately, an audit sometimes can serve as a springboard for more serious sanctions, including a criminal investigation.
• Consult with legal counsel experienced in these matters. Do it as soon as you are notified of an audit and before forwarding your response.

A Final Note

Private health insurers are also conducting audits and fraud investigations of physician practices. 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 they actually have in this arena before you respond to an audit notification from them.