A Medicare Billing Audit? Not If, but When

April 4, 2011
Ed Rabinowitz

Among the factors influencing the increase in Medicare billing audits is the Recovery Audit Contractors (RAC) audits -- entities that review paid claims for Medicare and Medicaid providers to ensure they meet government regulatory and policy requirements. In fact, experts say the likelihood of a random RAC audit is probably not a matter of if will happen, but when. Are you ready?

The frequency of Medicare billing audits is on the rise nationwide. A number of factors are influencing the trend, including Medicare budget shortfalls, the aging baby boomer population, organized crime’s involvement in Medicare fraud, and the transition of Recovery Audit Contractors (RAC) audits from a pilot program to a permanent one.

“RAC audit contractors are paid between nine and thirteen percent of the recovery that they generate,” says Nancy Moore, president of NBP LLC, a practice-management support company based in Austin, Texas. “So, there’s even an independent market that is heavily incentivized to find the shortcomings at the physician level.”

RAC audits have also expanded beyond Medicare to include Medicaid, as well as some Medicare Advantage plans. “If a doctor has Medicare patients, as well as Medicaid patients, and some of the those Medicare patients are part of an Advantage plan, every one of those encounters could possibly come under one of these RAC audits,” says Shari McCartney, a director with the Ft. Lauderdale, Fla.-based law firm Tripp Scott. She adds that when it comes to the likelihood of a random RAC audit, “it’s probably not a matter of if, but when.”

Take the case of a physician who is seeing a high acuity population, where he is treating very sick patients. He regularly bills the upper levels, because he’s a specialist. By his numbers alone, the physician is going to be targeted for an audit because his billing is above-average.

Develop a Compliance Plan

NBP’s Moore says that the easiest way to lessen the likelihood of an audit, or at least minimize its impact should one occur, is by creating a compliance plan. “Physicians need to have an objective assessment of what they’re doing, and not trust their own internal knowledge,” she says. That assessment should take place at least once a year. Then, should deficits be discovered, whether through poor documentation or improper coding, the practice needs to demonstrate that it has implemented corrective action. “Having a compliance plan and strategy in place will assure that if the practice is audited, that it is reasonably bullet-proof, and any detrimental effect is minimized,” Moore says.

McCartney of Tripp Scott says it’s critical that competent people conduct any internal audit, whether an outside consultant is brought in or the practice hires an individual who is a certified coder to do a random sampling of files, check the billing, and check to see whether claims were properly coded. Doing this regularly will provide the practice with a basis for comparison, and help you to evaluate whether you have problems with overbilling or underbilling. If find you have overbilled, you can take steps to correct the error before an auditor can catch it.

McCartney adds that it’s often difficult to get her physician practice clients to agree to create a compliance plan. “They don’t see the value in spending money to create a plan,” she says. “But goodness knows, if there’s an audit, and if there’s a recoupment, then they’re going to wish they had those plans in place.” She suggests that the increasing frequency of RAC audits may help physicians realize they need to be more proactive about protecting themselves.

Educating Your Staff

NBP’s Moore says that the second part of the proactive mindset that the practice needs to develop should be about education.

“It’s important to educate the staff,” Moore says. “What are the risks? And that’s part of the compliance plan. What should you watch out for?” She notes that there are a plethora of webinars and other opportunities available for education. Unfortunately, most practice staff already feel like they’re overwhelmed, and that they don’t have the time for education, Moore says.

McCartney of Tripp Scott adds that a having a compliance plan in place can serve as a mitigating factor in determining a practice’s degree of wrongdoing. “If you have a plan and you abide by it -- that it doesn’t just sit on the shelf gathering dust -- then the government would consider that you may have made errors, but that you weren’t intentionally committing fraud,” she says.

And if you don’t have a plan in place? “Imagine that someone knocks on your door and says, ‘I’m here to do the audit,’” McCartney says. “You’ve never reviewed your charts, and you don’t know where you stand. A regular review is the best ounce of prevention.”