Sales: +1 (248) 957-1731


The Critical Role of Medical Billing Audits in Healthcare

Errors can occur in the complicated process of medical billing. But for healthcare providers to get paid on time and stay out of trouble, they need to bill correctly and keep good records. It is where medical billing audits come in.

Medical billing audits thoroughly examine billing procedures, documentation, coding, and claims submissions to identify any discrepancies, mistakes, or issues. Essentially, they ensure that healthcare providers follow regulations and get fully and correctly compensated for the services rendered.

The article on this website provides a thorough explanation of the prerequisites for medical billing audits. It will outline their significance, different types of audits, steps to conduct audits, and how healthcare providers can leverage them to enhance revenue cycle management.

What are Medical Billing Audits, and Why Are They Important?

A medical billing audit carefully reviews patient medical records, billing codes, claims submissions, and reimbursement data to uncover:

  • Coding errors like using outdated codes, upcoding, unbundling, etc.
  • Charge entry mistakes in the billing system.
  • Documentation issues like incomplete records.
  • Non-compliance with regulations and payer policies.
  • Fraudulent claims
  • Trends of lost revenue through rejections, underpayments, etc.

Thorough audits are crucial because inaccurate billing can have serious repercussions:

  • Claim rejections lead to revenue losses.
  • Incorrect coding results in underpayments or even allegations of fraud.
  • Penalties for non-compliance negatively impact the financial health of the practice.

Additionally, audits help prevent billing errors and ensure every earned dollar is collected. They also provide insights into process gaps that cause errors.

Essentially, routine audits ensure you submit clean claims, prevent downstream issues, and derive maximum reimbursements legitimately. They indicate where your medical billing process needs refinement and what steps must prevent future claim denials or rejections.

Internal Audits vs. External Audits

There are two broad categories of medical billing audits:

Internal Audits

These are conducted by the healthcare organization's medical billing staff or third-party internal auditors. Internal audits examine several aspects of claims, procedures, and systems, such as denial analysis, revenue trends, charge capture, documentation examination, and coding correctness.

They help prepare for external audits and identify vulnerabilities proactively. Setting up internal audits as regular practice is prudent to diagnose problems early.

External Audits

Various organizations, including Medicare Recovery Audit Contractors (RAC), Medicaid Integrity Contractors, and Commercial Insurance Companies, are in charge of this. Generally, they audit a sample of high-risk claims.

Since external audits have the potential to result in fines, penalties, or even punitive action should fraudulent activity be proven, accuracy is crucial. Having robust internal audits strengthens compliance and helps fare better in external audits.

Steps to Conduct Effective Medical Billing Audits

While methods may vary based on factors like organization size, type, specialization, etc., these steps cover the audit essentials:

1. Define Audit Scope

Clearly, determining the scope and coverage of a medical billing audit is crucial to setting proper expectations. Start by defining the type (internal vs external), services areas to include (hospital inpatient, hospital outpatient, physician office services, etc.), exact date range of claims to be analyzed (Q1 2022, May 2023), and segments like payers, specialties or locations on which to focus.

A clearly defined strategy guarantees proper resource allocation, mapping of analytical complexity, and setting of audit boundaries. It enables auditors to precisely comb through data and records needed to arrive at actionable and relevant findings rather than getting lost across years of claims. An example is conducting an internal inpatient-focused audit spanning Q3'2023 claims for the cardiology specialty to gauge how potential CMS changes for 2024 may impact cardiology department collections.

2. Determine Audit Methodology

An audit is only as effective as its methodology allows. Hence, laying down the approach to carrying out analysis across pivotal facets aids efficient auditing structured to provide meaningful revelations rather than just data. Start by listing all data components and parameters that would be collected, like patient records, different claim forms submitted, coding sheets, reimbursements received, denial reasons, etc.

Template worksheets will compile information in standardized formats that are amenable to evaluation. Develop checklists indicating compliance markers to be confirmed in each area – e.g., documentation supported, coding accuracy and currency, and contractual considerateness. Comparison-ready reporting elucidates charging differences between amounts billed Vs. Amounts reimbursed, providing adjusting rationale. All-encompassing methodology with templates sharply focused on areas of supreme relevance makes medical billing audits fruitful.

3. Review Patient Documentation

Perhaps the most imperative evidence an audit examines is patient medical documentation encompassing clinical charts, physician orders, surgical notes, discharge papers, and the like, which encapsulate rendered services for a patient.

Auditors scrutinize if all established diagnoses are mirrored simultaneously in paperwork and if coded procedures find adequate mention correlating to the severity indicated, says LinkedIn. They validate the usage of proper interpretative paths between treatments referenced in records to justify codes billed.

Documentation corroboration gives confidence that medical necessity has yet to be upcoded or overstated. It highlights where physicians may need counseling on documentation practices for coding teams to assign accurate codes.

Auditors will point out charge omissions that, if corrected, might jeopardize prospective reimbursement if the documentation contains evidence of the testing. Thus, documentation review is at the crux of audits.

4. Verify Coding Accuracy and Compliance

While coder interpretation of medical records into billing codes forms the foundation for claiming payments, it is also probable for human errors, oversight, or misjudgments to occur during translation.

Auditors assume accountability to catch deviations or non-adherence in coding from accepted norms through code validation, ensuring every diagnosis, procedure, service, and supply billed has a sound basis medically and award contracts with accurate specificity without altering facts or misleading payers.

They look for common slipups like upcoding more complex conditions not borne out fully, splitting two related services into separately coded components when regulations use older codes that are no longer applicable and thus rejected.

It requires analyzing if the existing diagnosis truly warrants the choice of specialized codes or whether generalized ones apply to guide necessary coder education. Critical verification of whether coding principles have been aptly followed or require amendments is central to audits.

5. Compare Charges to Actual Reimbursements

Normative audit procedures demand reconciling claimed amounts against actual reimbursements received to deduce reasons for differences and identify potential revenue leaks.

By quantifying gaps between expected payments and actual payouts, one can pinpoint oft occurring denial triggers like incorrect reimbursement calculation, coverage inappropriateness, reduced amounts for failure to obtain preauthorization, post-discharge billing timelines lapsing, etc.

Distilling common factors for consistent devaluation of earnings allows for the development of mitigation strategies and appeal opportunities. It permits case review where clinical complexities limit payment unintended by contracts, so contract evaluation becomes necessary for amendment during renewal if legitimate dues remain unpaid.

Comparing monies billed against monies collected streams is one of the most profit-bearing activities yielding action plans.

6. Analyze Reasons for Claim Denials

Since denied claims directly reduce potential reimbursements, auditors prioritize the analysis of reasons precipitating denials and the accuracy of the denial basis.

By mapping the percentage of claims rejected against causes cited in denial letters, problematic areas readily surface. Say coding errors, improper documentation, or outdated codes contribute heavily to rejections; documentation processes should be revamped, and billing system code upgrades, respectively.

Denial causes could signal insurer biases requiring litigation or highlight frequent patient non-disclosures generating eligibility issues. Exploring denial genesis is pivotal to fashion systemic changes, improving future claim acceptance rates and hence enhancing revenues without needing to alter legitimate business operations.

It also builds appeal cases where the denial rationale seems unfounded or contradictory to contract clauses. Thus, denial review forms a key audit step.

7. Identify Areas Needing Enhancement

By amalgamating medical bill audit findings across facets like documentation adequacy analysis showing gaps, coding evaluation indicating overutilization of unspecified codes, reimbursement reconciliation revealing persistent underpayments despite claims meeting requirements, denial cause examination displaying expired code rejections - one can highlight components requiring fix actions to boost accuracy ensuring cleaner claim acceptance and prevention of revenue leakage goals.

Audits establish exactly which staff need targeted training owing to recurring knowledge/performance gaps through error patterns, thereby preventing issues from being perpetuated. They help assess if existing processes need to be updated, thus requiring newer technology solutions to upgrade performance, even with seemingly little discoveries, such as an incorrectly supplied uninsured discount. Consolidated analysis is vital to formulate enhancement areas from audits.

8. Educate Your Staff

An audit is wasteful if its findings dust away in records instead of catalyzing actual improvements through the implementation of recommended actions. Hence, it is imperative to discuss auditors' observations with respective department heads and staff executing activities diagnosed to need upgrades.

For example, repeat coding errors signal the need for coder training on newer rules, and consistent patient demographic gaps highlight the necessity to reinforce registration staff on properly capturing all mandatory data fields. Review sessions enlightening all stakeholders on documentation/coding guidelines and recent regulatory updates go a long way in remedying deficiencies.

Celebrating positive findings like stellar coding accuracy also boosts employee morale and enthusiasm. After all, audits target optimizing accuracy levels across the revenue cycle, which comes from people competence, so staff education is pivotal.


Capitalize on Medical Billing Audits

While medical billing audits demand time and resources, their benefits outweigh their efforts:

  • Enhanced revenue collection: Accurate documentation and error-free coding help claims pass easily for better realization of earnings.
  • Reduced claim denial rate: Consistent auditing ensures cleaner claims that face fewer rejections/denials through early correction of deficiencies
  • Improved staff and process efficiency: Identifying problem areas allows for strengthening incompetencies via training. It also emphasizes the need to address process inefficiencies.
  • Informed data-backed decision-making: Audits generate valuable practice analytics to guide fact-based process decisions for better future outcomes.
  • Improved regulatory compliance: Audit tests help recognize vulnerabilities and remedy issues, enhancing compliance levels.
  • Lesser penalties/financial risks: Timely audits and quicker resolution of errors minimize penalties from payers or federal agencies.

The Final Words

In a nutshell, medical billing auditing plays an indispensable role in helping healthcare providers verify compliance, maximize legitimate revenues, and streamline processes without oversights slipping through the cracks, which result in claim denials or worse – legal penalties. Investing in regular audits is imperative for continued financial health and stability of healthcare practices.

Don't leave revenue on the table unnecessarily. AltuMED provides expert medical billing audits, identifying vulnerabilities before payers notice issues. Request a free assessment.

Subscribe to Our Newsletter!

Subscribe to Our Newsletter!

Enter Your Email Address. We Promise We Won't Spam You

Relevant Articles
Follow Us

Subscribe to newsletter

Enter your email to receive our newsletter, so you can stay in the loop with our latest promos.

Subscribe to Our Newsletter!

Enter your email address to

receive "Go Practice" as an email newsletter.