Home | Medical Clinics: Responding To Insurance Company Claim Audits
Medical Clinics: Responding To Insurance Company Claim Audits
MEDICAL CLINICS: RESPONDING TO INSURANCE COMPANY CLAIM AUDITS
Insurance companies and government payors often audit the claims submitted by medical clinics after they are paid. When not handled properly, these audits can snowball, leading in some cases to repayment of large amounts of money, termination of provider contracts, or even referrals to the Minnesota Board of Medical Practice or criminal investigators.
This article discusses some of the ways in which medical clinics can best respond to insurance company claims audits to avoid these types of consequences.
Billing Complexities
By one estimate, 15 percent of health care dollars are spent on billing and insurance-related activities by medical providers. Providers must navigate a maze of coding and payor requirements to submit a claim for payment. They must understand—and correctly apply—ICD-10-CM diagnostic codes, CPT codes, and HCPCS codes. All of these codes are revised at least yearly. For example, the Evaluation and Management Services (E/M) codes underwent a major revamp in January. Providers also must be familiar with and correctly apply the billing guidelines of both private and governmental payors.
Billing Errors
Managed care companies in Minnesota have become more aggressive in their post-payment claims audits. Payors and their audit companies may try to recoup funds from medical clinics by claiming:
Insufficient documentation to support the charges.
Incorrect use of Evaluation and Management codes.
The use of billing codes that reflect a higher level of service than was actually performed, or “upcoding”.
Incorrect use of code modifiers.
“Unbundling” services that are part of an all-inclusive code.
Billing for services provided by unqualified employees.
Billing under the wrong national provider identifier (NPI).
Billing for the same services more than one time.
Billing for services not provided as billed.
The Consequences
Medical claim audits should not be taken lightly. What first seems like an innocuous audit can sometimes lead to negative ramifications.
First, the third-party payor may seek to recoup payments it contends were improperly submitted. Some provider agreements allow the insurance company to audit a small sample of claims and then extrapolate from the sample to claim a much larger recovery based on the total revenue paid to the provider. In other words, an insurer may find an 8 percent error rate on a sample of 43 claims. Some insurers will then apply this 8 percent error rate to all 1,543 claims submitted by the provider in the last two years to seek a recoupment in the hundreds of thousands or even millions of dollars.
Insurers usually do not need to go to court to recover funds from providers. Provider agreements typically contain language allowing the insurer to simply deduct, or “offset,” the amount identified in the audit from future claims payments.
Second, insurers sometimes will drop a physician or clinic from network provider status based on audit findings. Provider agreements usually give the insurer wide latitude over network management. As a result, it is important for providers to strike the right tone in responding to an insurance company audit.
Third, managed care companies are required to have anti-fraud departments under Minnesota law. Insurance companies will sometimes claim that a provider has engaged in “fraud” based on audit findings and report the audit results, even those based on unintentional error, to the Minnesota Board of Medical Practice. This makes it important for providers to provide a proper response at the outset of an insurance company audit.
Fourth, insurance companies sometimes report audit findings (accurate or not) to the Minnesota Attorney General’s Office or other government investigative agencies, especially if the claims involve government programs like Medical Assistance or Medicare. The government agencies have their own investigative and audit authority and may pursue civil recoveries or even criminal investigations in some cases. A thoughtful and thorough response to an audit can head off an overzealous or misguided government intervention.
Record Requests
A good start matters. Most audits begin when a clinic receives a request from a third-party payor for the charts of specified patients for specified dates of service. The clinic’s provider agreement will require it to cooperate with an audit. It is important for the audit to get off to a good professional start. Some audits take the wrong turn early on because the payor perceives the clinic, incorrectly or not, to be uncooperative (and therefore assumes the clinic has something to hide) or sloppy (and therefore assumes the clinic makes billing errors too).
Carefully review the audit notice. The clinic should immediately and carefully review the audit notification letter to determine: (1) the scope of the information requested; (2) the deadlines to respond; and (3) how and to whom the response should be submitted. Payors often ask for records to be faxed to them or uploaded to a secure portal. If the clinic has too many documents to fax, contact the auditor for alternative arrangements. Be sure to meet deadlines. If the clinic cannot respond by the requested deadline, ask the payor for a reasonable extension, and document the grant of any extension in writing.
Supply the right records. In the past, insurance companies often conducted on-site audits, which allowed them to have a give-and-take with clinic staff. If information was inadvertently missing from a patient record or the payor had a question about a note or process, it could simply ask questions of the clinic staff in real-time. This allowed clinics to correct misinterpretations by insurance companies before they became formal adverse findings.
Now, most audits are conducted remotely. There may be no back-and-forth with clinic staff while the audit is underway. If records are not provided, the insurer assumes they do not exist. It is important that payors receive the complete and correct records to support a claim. Clinics should carefully read the payor’s request for information when supplying records and make sure they supply the precise records that have been requested. If the payor asks for records with a certain date range, be sure to supply those records, and be sure they are complete. It is not uncommon for adverse audit findings to be made because a payor did not receive complete records.
In occasional cases, a provider may need to submit a record prior to the requested date to give a payor a complete picture of services it will evaluate in the requested date range. For clinics that use paper records, be sure to submit copies, not originals, of any records.
Understand audit triggers. It is important for the clinic to understand as much as possible about the motivations for the audit. Some audits are routine. But more and more, audits are triggered by algorithms that detect higher utilization patterns or higher use of certain codes than peers, the use of a new billing code, or an employee or patient complaint. Understanding the motivation for an audit can help the clinic get out front of any potential problems and determine whether to consult with legal counsel in responding to the audit.
Know the type of insurance involved. The clinic should identify whether the claims involve government programs or private or commercial insurance. There can be serious legal ramifications for clinics and physicians who are alleged to have overbilled government programs, such as Medical Assistance or Medicaid.
Identify the auditor. Some insurance companies conduct audits in-house. Others use contractors. Many outside contractors “eat what they kill”—meaning their compensation is based on a percentage of the amount recovered. It is no surprise that these auditors have an incentive to find billing errors.
Some payors have one set of staff who conduct routine audits and another set of staff who conduct audits involving suspected fraud. The fraud units are often called Special Investigation Units (SIUs). The Minnesota Department of Human Services also operates a similar Surveillance and Integrity Review Section (SIRS) to investigate potential Medical Assistance billing fraud. Knowing who is doing the audit provides important insight about the scope and motivation for the audit. For instance, fraud investigators are more likely to interpret an inadvertent billing mistake as “fraud” and refer their findings to government investigators as part of their anti-fraud programs.
Know the patterns. The clinic should identify any patterns surrounding the patients whose files are being reviewed and the claims submitted on their behalf. Again, this can help the clinic get in front of problems, rather than react to them after the payor makes adverse findings.
Be prepared. Understanding the motivation of the audit can help clinics respond to it. In cases of alleged overbilling—especially of government programs—it may be prudent to have legal representation so the clinic does not answer questions unprepared or provide equivocal responses that are interpreted against the interests of the clinic. It is not unheard of for a routine audit to snowball.
The clinic should review its responses to the audit. For example, if the audit was sparked by an algorithm that identified the clinic to be an outlier, the clinic may be able to explain why the nature of its practice makes it different from geographic peers (e.g., the clinic has more medically complex or sicker patients, more patients with mental illnesses, a higher percentage of patients who are senior citizens, etc.)
Responding to Audit Findings
Evaluate the audit findings. At the conclusion of an audit with adverse findings, the payor will provide the clinic with a formal audit report. The report should identify the amount sought to be recovered and the reasons the payor believes the claims were improper.
If the recovery amount is small, the clinic may decide to pay the requested amount. It may not be worth the clinic’s time or resources to quibble with small dollars, even if the clinic believes the payor’s findings are erroneous. For sizable recoveries, it may be in the clinic’s interest to mount a defense or to negotiate the amount of the recovery. In some cases, the payor may have gotten its findings wrong. In other cases, the clinic may not want to send a message of “rolling over” when audited.
Request details. Some payors provide detailed audit findings, while others provide high-level summaries. If a clinic wants to contest the findings, it should ask for the claim-by-claim workpapers from the payor so it can understand what the payor finds objectionable about each claim where a recovery is sought.
Read the contract. If the clinic decides to contest a recovery, it should carefully review its contract with the third-party payor to determine:
How long the clinic has to contest the recovery.
The process for contesting the recovery.
The procedures that allow the payor to offset the recovery amount from future claims payments.
Pushing back. If the recovery amount is large or the consequence of adverse findings significant (e.g., an audit that alleges intentional upcoding or financial loss to government programs), the clinic should give serious consideration to aggressively responding to the findings. There may be opportunities to negotiate the amount of any recovery or correct the record.
Past is prologue. Human beings make mistakes. Even the most conscientious billing practices can result in inadvertent errors. It is important for clinics to correct any errors going forward that lead to the audit findings. Payors often audit for a one-year period at a time. If a problem occurred one year, the payor may well conduct an audit again in a future year to see if the problem has been corrected. If not, it may seek recover money for the same problem in future years. If the clinic is notified of a billing system error and does not correct it going forward, the clinic may face future allegations that the billing conduct is intentional, not just an inadvertent error.
The law firm of Swanson Hatch, P.A. represents health care providers in complex legal, regulatory, compliance, and professional licensing matters, including responding to claim audits by third-party payors. Former Minnesota Attorneys General Lori Swanson and Mike Hatch were active participants in health care matters during their respective tenures as attorneys general. They supervised the office’s Medicaid Fraud Control Unit, which enforces state Medical Assistance laws and undertakes actions against medical providers that overbill Medical Assistance. They also provided legal representation to the Minnesota Board of Medical Practice and the Minnesota Departments of Human Services, Health and Commerce. Prior to her twelve years as Minnesota Attorney General, Lori Swanson previously served as Solicitor General and Deputy Attorney General of the State of Minnesota. Swanson is a member of the American Health Law Association was named by Health Leaders magazine as one of 20 American making a difference in health care. Before he became Attorney General, Mike Hatch previously served as Commissioner of the Minnesota Department of Commerce for eight years, where he regulated the insurance industry. Lori Swanson can be reached at lswanson@swansonhatch.com, or at 612-315-3037. Mike Hatch can be reached at mhatch@swansonhatch.com, or at 612-315-3037. The firm’s website is www.swansonhatch.com.
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www.swansonhatch.com
431 S Seventh Street, Suite 2545
Minneapolis, MN 55415 612-315-3037
The materials in this article are for informational purposes and do not constitute legal advice, nor does your unsolicited transmission of information to us create a lawyer-client relationship. Sending us an email will not make you a client of our firm. Until we have agreed to represent you, nothing you send us will be confidential or privileged. Readers should not act on information contained in this article without seeking professional counsel. The best way for you to inquire about possible representation is to contact an attorney of the firm. Actual results depend on the specific factual and legal circumstances of each client’s case. Past results do not guarantee future results in any matter.
Insurance companies and government payors often audit the claims submitted by medical clinics after they are paid. When not handled properly, these audits can snowball, leading in some cases to repayment of large amounts of money, termination of provider contracts, or even referrals to the Minnesota Board of Medical Practice or criminal investigators.
This article discusses some of the ways in which medical clinics can best respond to insurance company claims audits to avoid these types of consequences.
By one estimate, 15 percent of health care dollars are spent on billing and insurance-related activities by medical providers. Providers must navigate a maze of coding and payor requirements to submit a claim for payment. They must understand—and correctly apply—ICD-10-CM diagnostic codes, CPT codes, and HCPCS codes. All of these codes are revised at least yearly. For example, the Evaluation and Management Services (E/M) codes underwent a major revamp in January. Providers also must be familiar with and correctly apply the billing guidelines of both private and governmental payors.
Managed care companies in Minnesota have become more aggressive in their post-payment claims audits. Payors and their audit companies may try to recoup funds from medical clinics by claiming:
Medical claim audits should not be taken lightly. What first seems like an innocuous audit can sometimes lead to negative ramifications.
First, the third-party payor may seek to recoup payments it contends were improperly submitted. Some provider agreements allow the insurance company to audit a small sample of claims and then extrapolate from the sample to claim a much larger recovery based on the total revenue paid to the provider. In other words, an insurer may find an 8 percent error rate on a sample of 43 claims. Some insurers will then apply this 8 percent error rate to all 1,543 claims submitted by the provider in the last two years to seek a recoupment in the hundreds of thousands or even millions of dollars.
Insurers usually do not need to go to court to recover funds from providers. Provider agreements typically contain language allowing the insurer to simply deduct, or “offset,” the amount identified in the audit from future claims payments.
Second, insurers sometimes will drop a physician or clinic from network provider status based on audit findings. Provider agreements usually give the insurer wide latitude over network management. As a result, it is important for providers to strike the right tone in responding to an insurance company audit.
Third, managed care companies are required to have anti-fraud departments under Minnesota law. Insurance companies will sometimes claim that a provider has engaged in “fraud” based on audit findings and report the audit results, even those based on unintentional error, to the Minnesota Board of Medical Practice. This makes it important for providers to provide a proper response at the outset of an insurance company audit.
Fourth, insurance companies sometimes report audit findings (accurate or not) to the Minnesota Attorney General’s Office or other government investigative agencies, especially if the claims involve government programs like Medical Assistance or Medicare. The government agencies have their own investigative and audit authority and may pursue civil recoveries or even criminal investigations in some cases. A thoughtful and thorough response to an audit can head off an overzealous or misguided government intervention.
A good start matters. Most audits begin when a clinic receives a request from a third-party payor for the charts of specified patients for specified dates of service. The clinic’s provider agreement will require it to cooperate with an audit. It is important for the audit to get off to a good professional start. Some audits take the wrong turn early on because the payor perceives the clinic, incorrectly or not, to be uncooperative (and therefore assumes the clinic has something to hide) or sloppy (and therefore assumes the clinic makes billing errors too).
Carefully review the audit notice. The clinic should immediately and carefully review the audit notification letter to determine: (1) the scope of the information requested; (2) the deadlines to respond; and (3) how and to whom the response should be submitted. Payors often ask for records to be faxed to them or uploaded to a secure portal. If the clinic has too many documents to fax, contact the auditor for alternative arrangements. Be sure to meet deadlines. If the clinic cannot respond by the requested deadline, ask the payor for a reasonable extension, and document the grant of any extension in writing.
Supply the right records. In the past, insurance companies often conducted on-site audits, which allowed them to have a give-and-take with clinic staff. If information was inadvertently missing from a patient record or the payor had a question about a note or process, it could simply ask questions of the clinic staff in real-time. This allowed clinics to correct misinterpretations by insurance companies before they became formal adverse findings.
Now, most audits are conducted remotely. There may be no back-and-forth with clinic staff while the audit is underway. If records are not provided, the insurer assumes they do not exist. It is important that payors receive the complete and correct records to support a claim. Clinics should carefully read the payor’s request for information when supplying records and make sure they supply the precise records that have been requested. If the payor asks for records with a certain date range, be sure to supply those records, and be sure they are complete. It is not uncommon for adverse audit findings to be made because a payor did not receive complete records.
In occasional cases, a provider may need to submit a record prior to the requested date to give a payor a complete picture of services it will evaluate in the requested date range. For clinics that use paper records, be sure to submit copies, not originals, of any records.
Understand audit triggers. It is important for the clinic to understand as much as possible about the motivations for the audit. Some audits are routine. But more and more, audits are triggered by algorithms that detect higher utilization patterns or higher use of certain codes than peers, the use of a new billing code, or an employee or patient complaint. Understanding the motivation for an audit can help the clinic get out front of any potential problems and determine whether to consult with legal counsel in responding to the audit.
Know the type of insurance involved. The clinic should identify whether the claims involve government programs or private or commercial insurance. There can be serious legal ramifications for clinics and physicians who are alleged to have overbilled government programs, such as Medical Assistance or Medicaid.
Identify the auditor. Some insurance companies conduct audits in-house. Others use contractors. Many outside contractors “eat what they kill”—meaning their compensation is based on a percentage of the amount recovered. It is no surprise that these auditors have an incentive to find billing errors.
Some payors have one set of staff who conduct routine audits and another set of staff who conduct audits involving suspected fraud. The fraud units are often called Special Investigation Units (SIUs). The Minnesota Department of Human Services also operates a similar Surveillance and Integrity Review Section (SIRS) to investigate potential Medical Assistance billing fraud. Knowing who is doing the audit provides important insight about the scope and motivation for the audit. For instance, fraud investigators are more likely to interpret an inadvertent billing mistake as “fraud” and refer their findings to government investigators as part of their anti-fraud programs.
Know the patterns. The clinic should identify any patterns surrounding the patients whose files are being reviewed and the claims submitted on their behalf. Again, this can help the clinic get in front of problems, rather than react to them after the payor makes adverse findings.
Be prepared. Understanding the motivation of the audit can help clinics respond to it. In cases of alleged overbilling—especially of government programs—it may be prudent to have legal representation so the clinic does not answer questions unprepared or provide equivocal responses that are interpreted against the interests of the clinic. It is not unheard of for a routine audit to snowball.
The clinic should review its responses to the audit. For example, if the audit was sparked by an algorithm that identified the clinic to be an outlier, the clinic may be able to explain why the nature of its practice makes it different from geographic peers (e.g., the clinic has more medically complex or sicker patients, more patients with mental illnesses, a higher percentage of patients who are senior citizens, etc.)
Evaluate the audit findings. At the conclusion of an audit with adverse findings, the payor will provide the clinic with a formal audit report. The report should identify the amount sought to be recovered and the reasons the payor believes the claims were improper.
If the recovery amount is small, the clinic may decide to pay the requested amount. It may not be worth the clinic’s time or resources to quibble with small dollars, even if the clinic believes the payor’s findings are erroneous. For sizable recoveries, it may be in the clinic’s interest to mount a defense or to negotiate the amount of the recovery. In some cases, the payor may have gotten its findings wrong. In other cases, the clinic may not want to send a message of “rolling over” when audited.
Request details. Some payors provide detailed audit findings, while others provide high-level summaries. If a clinic wants to contest the findings, it should ask for the claim-by-claim workpapers from the payor so it can understand what the payor finds objectionable about each claim where a recovery is sought.
Read the contract. If the clinic decides to contest a recovery, it should carefully review its contract with the third-party payor to determine:
Pushing back. If the recovery amount is large or the consequence of adverse findings significant (e.g., an audit that alleges intentional upcoding or financial loss to government programs), the clinic should give serious consideration to aggressively responding to the findings. There may be opportunities to negotiate the amount of any recovery or correct the record.
Past is prologue. Human beings make mistakes. Even the most conscientious billing practices can result in inadvertent errors. It is important for clinics to correct any errors going forward that lead to the audit findings. Payors often audit for a one-year period at a time. If a problem occurred one year, the payor may well conduct an audit again in a future year to see if the problem has been corrected. If not, it may seek recover money for the same problem in future years. If the clinic is notified of a billing system error and does not correct it going forward, the clinic may face future allegations that the billing conduct is intentional, not just an inadvertent error.
www.swansonhatch.com
431 S Seventh Street, Suite 2545
Minneapolis, MN 55415
612-315-3037
The materials in this article are for informational purposes and do not constitute legal advice, nor does your unsolicited transmission of information to us create a lawyer-client relationship. Sending us an email will not make you a client of our firm. Until we have agreed to represent you, nothing you send us will be confidential or privileged. Readers should not act on information contained in this article without seeking professional counsel. The best way for you to inquire about possible representation is to contact an attorney of the firm. Actual results depend on the specific factual and legal circumstances of each client’s case. Past results do not guarantee future results in any matter.
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Swanson | Hatch, P.A.
431 S. 7th Street, Suite #2545
Minneapolis, MN 55415
612-315-3037
www.swansonhatch.com