Guidelines to Avoid External Payer Audit

Understanding External Payer Audits

An external payer audit is an examination of a healthcare practice’s finances or processes conducted at the will of payers. These payers are either the government or a commercial insurance company looking to ensure correct payments were provided to the practices for past cases. Government audits can be broken down even further into Medicare, Recovery Audits, and Medicaid audits. Whenever the payer has concerns about medical coding and medical billing, they may initiate an external audit process. In this blog, we discussed about basic guidelines to avoid external payer audits.

Reasons for Initiating Payer Audits

There are a number of reasons why any payer might initiate an external audit, the most common reason is a medical necessity. The providers may feel that his or her treatment recommendations are medically necessary. But if they are not documented properly, it’s an issue. The provider may explain all the reasons why the treatment was medically necessary, but the payer would want documents that would support them.

Another reason that would initiate external payer audits is using certain procedure codes and modifiers more often than your peers. It might happen with small practices or with solo providers, where providers themselves do the coding and use a specific set of procedure codes and modifiers without proper understanding of them.

Many physicians use the same level of service repeatedly. From the payer’s perspective, that means the physician isn’t paying attention to individual patient circumstances. If you almost always bill a level 4, you may trigger an audit. If your coding is accurate and the documentation supports level 4, that’s good. But you should still be prepared to be audited because of this pattern, especially if you are using time as a component of selecting an E/M code, in which case a payer may ask you to share your appointment schedules to verify that the volume of longer visits is possible within clinic hours.

Guidelines to Avoid External Payer Audit

  • Every practice should have an accurate medical billing and coding plan/ compliance plan in place and require regular internal audits to help identify areas of vulnerability. If an internal audit shows there may be a problem with a physician’s coding and documentation, you know you have a problem before the payer does. If you are billing the government, they want to know that you have a plan for submitting accurate claims, training people, policing yourself, and striving to do better. Many practices have portions of it or are following unwritten policies. That won’t cut it with an auditor. Your policies and plan must be in writing.
  • The Centers for Medicare & Medicaid Services (CMS) wants to see evidence that providers are serious about compliance and take action to correct these problems. Providers should outline quality-assurance procedures, such as internal audits, which indicate they are monitoring coding and documentation compliance. The plan should also spell out consequences in a disciplinary action policy and remedial education plan.
  • To avoid external payer audits, you should include staff training policies and requirements, the name of the go-to person in charge of compliance, and a Q&A log of coding questions that arise from physicians and staff in practice. This blog serves as your single point of truth for answers from credible sources that can be cited. Each time your team learns something from a reputable coding resource or gets an answer from a payer, it should be written in this log, which becomes a reference document for all staff, physicians, and new hires.
  • To stay updated on billing and coding guidelines, billing, coding, and, documentation training for physicians, front desk staff, billing staff, and coders is essential. Arrange for it at least annually. And assign staff to attend webinars and read coding publications and Medicare transmittals.

The crucial thing is, if you get a request for records or audit, don’t ignore it. Take that request seriously and act quickly. If you don’t, you could end up in prepayment review, be excluded from a clinical network, or be subject to state and federal fraud statutes or state insurance laws. Don’t wait until it’s a prepayment audit or huge refund request before calling, because at that point, it might be too late for optimal legal advice.

Another simple way to avoid external payer audits is outsourcing your medical billing and coding operations to a professional medical billing company like Medical Billers and Coders (MBC). We are a leading revenue cycle company and will be managing complete medical billing and coding for your practice.

We ensure that every claim is submitted accurately following payer-specific billing guidelines to receive accurate insurance reimbursement. To learn more about our services, contact us at