Most audit denials and financial recoupments are based on three deficiencies: insufficient clinical documentation, incorrect coding, and medically unnecessary procedures.

Just like storms, recovery, governmental, commercial, and health plan audits come and go. These audits produce a similar, dual effect for hospitals and health systems—financial blows and potential lessons to learn. For example, in 2015, the Centers for Medicare & Medicaid Services (CMS) Medicare fee-for-service recovery audit contractor (RAC) program found $171.38 million in reimbursement corrections from hospitals, health systems, and other providers, according to the American Hospital Association’s (AHA’s) RACTrac survey 4th Quarter 2015 results.

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But RAC audits also can help many organizations improve clinical documentation, coding, and billing processes. Reimbursement tempests provide valuable insight for quality improvement initiatives. For example, a large, Level 1 trauma center in Atlanta, Ga., recently used Medicare administrative contractor (MAC) audit findings (formerly probe and educate audits) to guide clinical documentation improvement (CDI) and electronic health record (EHR) upgrades. Another organization used RAC audits as lampposts to guide new process improvements in rehabilitation services.

See related sidebar: Requests for Health Information on the Rise

As more prepayment and health plan audits emerge in the healthcare landscape, hospitals can use them as new opportunities for cost savings in audit management, record request responsiveness, and health plan collaboration. Providers have found three principle ways to use audit storms to strengthen operational processes and mitigate reimbursement losses.

Reviewing 2016 Audits

The first step in capitalizing on audit efforts is awareness. Audits are growing more common and increasing their scrutiny of health information from medical records, clinical documentation, and EHR data. The most common audits in 2016 will include recovery, commercial plan, and government audits, such as MAC, RAC, comprehensive error rate testing (CERT), Office of Inspector General (OIG), and quality improvement organization (QIO).

Second, these audits focus on finding improper payments and carry direct financial impact to healthcare facilities.

The most prevalent of these, RAC audits, are expanding in 2016 with three specific changes: the introduction of new contractors, QIOs auditing short-stay and two-midnight cases, and the creation of managed care RACs. Recent regional RAC trends include focusing on claims involving the following factors.

  • Surgical procedures assigned an unrelated principal diagnosis
  • Drug dose not matching units billed
  • DMEPOS use during an inpatient stay
  • Therapy claims that exceed the $3,700 Medicare cap

Health plan audits also will remain prevalent in 2016. While health plan audits impart no direct financial impact on insurers, the number of medical records requested is typically higher than with recovery, government, or commercial audits—creating a heavy staffing burden for audit and health information management departments.

The third principle is that with so many audits ahead, the only way to reduce costs is through strong audit managers working closely with quality, compliance, coding, and reimbursement teams. This approach will allow lessons learned from each audit to be collected to improve compliance and mitigate future audit risk. The following are examples of providers learning such lessons.

Probe and Educate Audits Help CDI

The majority of audit denials and financial recoupments are based on three deficiencies: insufficient clinical documentation, incorrect coding, and medically unnecessary procedures. By taking a deeper look at audit findings, facilities can identify root issues and implement corrective actions. Such was the case at a Level 1 trauma center where the audit management team reports directly to the organization’s director of compliance.

The organization underwent three phases of probe and educate audits. Originally conducted by the MACs, these audits are now performed by KEPRO—the Beneficiary and Family Centered Care QIO. In the early stages of probe and educate audits, very few problems were identified. However, over time this facility experienced a 67 percent increase in denials.

Based on these findings, the audit team took three immediate corrective actions:

  • Analyzed specific cases from audit findings using clinical documentation and coding reviews
  • Summarized and reported clinical documentation issues by physician
  • Evaluated EHR documentation workflows in conjunction with health information technology (HIT) and medical staff liaison

To achieve buy-in, the audit team identified exact revenue retention milestones for both the facility and the physicians if clinical documentation was improved. Based on their findings, the audit team worked with compliance, IT, and medical staff leadership on several steps:

  • Implementing hard stops in the EHR to prevent patient discharge before record/documentation completion by the physician
  • Incorporating the use of peer-to-peer physician advisors to educate medical staff
  • Building new online learning modules within the EHR and targeting specific documentation gaps

Although the MAC probe and educate audits caused great frustration for staff at this facility, they also identified why certain claims were denied and spurred significant improvements in physician documentation. Drilling down to root issues and taking corrective actions is the most important silver lining for providers to recognize and leverage—the sooner, the better.

Real-Time Reviews Shed Light on Risks

Other audit teams use recovery, government, commercial, and health plan audit targets to steer their internal reviews. Some organizations have replaced three-year-old case findings with efforts to identify root causes in real time, reaping faster rewards in coding, quality, and compliance. In this way, internal reviews shed light on organizations’ top reimbursement risks for the year ahead and allow for successful rebilling of accounts.

One West Coast health system employs this forward-looking approach. In conjunction with their local department of community health, compliance department, and quality improvement team, audit managers create a quarterly and annual agenda based on the OIG’s annual work plan. Each service line also provides input into the internal audit plan. Specific 2016 targets for documentation and process improvement at this health system include the following areas.

  • Newborns
  • Transfers
  • 72-hour readmissions
  • Cancelled surgeries
  • Inpatient behavioral health

Internal audits are conducted every six months looking at five, 10, or 25 cases. Most often findings reveal a documentation issue. Findings are immediately shared with the organization’s CDI team and medical staff for education and corrective action. In this way, an ounce of prevention is certainly more cost effective than appealing auditor denials down the road.

Prevention Costs Less

Awareness and anticipatory steps related to recovery, government, commercial, and health plan audits has helped healthcare provider organizations reduce costs and improve outcomes. Better documentation and coding upfront—as directed by audit findings—results in fewer audits and more revenue retained in the years ahead. This strategy remains true regardless of how hard the audit storm hits.

Dawn Crump, SSBB, CHC, is vice president for Audit Management Solutions, CIOX Health, and a member of HFMA’s Greater St. Louis Chapter.

Discussion Starters

Forum members: What do you think? Please share your thoughts in the comments section below.  

  • Has your organization seen increased audit activity over the last year from any particular type of oversight entity?
  • Has your organization used audit findings to identify any forward-looking opportunities that are helpful in reducing the overall number or adverse consequences from audits?

Publication Date: Thursday, May 12, 2016