Why are Internal Audits Important in Medical Billing and Coding?

by | Last updated Dec 15, 2023 | Published on Aug 12, 2022 | Medical Billing

Internal Audits Important in Medical Billing and Coding
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Internal audits are essential to assess clinical documentation and coding and billing practices in a medical organization. With increased payer scrutiny and regulatory requirements, conducting internal audits can ensure revenue cycle processes are functioning smoothly and meet compliance to avoid inefficiencies or malpractice. An audit of documentation and financial performance can be performed by an internal auditor or a medical billing and coding company that specializes in the field.

With the increasing documentation in patient records for each care process, medical practices have to deal with an overwhelming volume of data, charts, and claims information. Medical coding and billing involve various processes that end with claim submission, denials management, and collection.

Errors in in these processes can lead to:

  • Denials and late payments
  • Improper payment and recoupments
  • Insufficient medical documentation
  • Patient eligibility issues
  • Errors in ICD-10, CPT and HCPCS coding and modifier use

Let’s look at some major coding and billing risk areas for physicians that internal audits can help with.

One is upcoding, the practice of submitting a claim with a higher or more extensive medical code that is not supported by the documentation and/or circumstances. For example, if the E/M documentation warrants level three codes but it is coded with level five codes, it would lead to inappropriate claims by falsely inflating the level of E/M services performed.

The use of coding modifiers is another high-risk area. For example, take modifier 25, which is added to an E/M code to denote a significant and separate E/M service was provided on the same day as a procedure. If modifier 25 is appended on the claim to obtain higher reimbursement, but the circumstances and/or the documentation do not support the separate nature of the E/M, it poses a major compliance risk.

The list goes on. Target areas that are frequently audited internally by provider organizations to ensure compliance throughout the revenue cycle are: evaluation and management levels, high-cost procedures, new patients vs existing patients, telehealth, and overall emergency department utilization, Recovery Audit Contractor–approved list, cardiac procedures, and total knee replacement and spinal surgeries (www.fortherecord.com). Other recommended target areas include most common payer denials and new medical services. Data that should be closely analyzed and tracked include misapplied codes, improper code sequencing, and missed codes that might lead to undercoding, according to the For the Record report.

Internal Medical Billing Audit – Goals and Method

Conducting internal audits has become crucial to assess if all these processes are working well, reduce risk of errors, and ensure compliance in revenue cycle management (RCM). According to the Medical Group Management Association (MGMA), internal audits can:

  • Identify errors in provider documentation
  • Identify inefficiencies in payer reimbursement
  • Determine usage of incorrect medical codes, such as use of deleted or modified codes
  • Uncover areas of payer rules if medical practice billed inappropriately
  • Identify fraudulent billing practices, whether intentional or unintentional
  • Identify errors in claim scrubbers or claims software deficiencies utilized by the medical practice
  • Determine undercoding, overcoding, unbundling and lack of modifier usage
  • Address areas of risk that may prevent a visit from a Recovery Audit Contractor (RAC)

Competent medical billing companies have medical coders with advanced training who are capable of conducting audits. Knowledgeable about medical coding, medical terminology, clinical documentation, compliance, and regulatory rules, medical auditors will first determine the scope of the audit and compile data using approved tools.

Coding accuracy, appropriateness of documentation and completeness of a claim will be verified by evaluating the following:

  • Whether the service reported was performed and if it is documented correctly
  • Whether the CPT code accurately reflects the service performed or whether another code would be more appropriate
  • If the patient’s chart documentation supports the billed service
  • Identify claims not accurately processed by the payer

Experienced auditors will work with physicians and practice staff to conduct the audit of the selected claims. They will report the findings and provide recommendations to correct errors identified.

Benefits of Internal Medical Billing and Coding Audits

Internal audits promote revenue cycle management success by helping to:

  • Identify erroneous billing practices that lead to financial losses
  • Identify and correct coding errors before they come under government or insurance payer scrutiny
  • Reduce claim denials caused by insufficient documentation or coding errors such as use of deleted or modified codes
  • Ensure proper documentation of procedures and services reported
  • Correct variations from national averages due to inappropriate coding
  • Promote adherence to coding protocols
  • Defend against RAC audit or requests for medical record documentation from federal contractors and malpractice litigation
  • Protect against fraudulent claims and penalties by detecting upcoding and overpayments
  • Identify gaps in revenue
  • Drive timely claims payment and co-ordination of benefits
  • Optimize RCM

Get Expert Support

With thousands of ICD-10 and CPT codes, only trained auditors who have expertise in coding can catch their inappropriate use. Companies that provide medical billing and coding services will also conduct medical billing audits to confirm that claims are appropriate and accurate and correctly submitted.

Information obtained from internal audits can be used as a tool to improve the practice’s overall performance. As the MGMA report notes: “Audit findings are intended to enrich quality of patient care by ensuring clinical documentation accuracy and can help improve safety measures and identify financial gaps. In the end, a successful audit will help the healthcare organization standardize outstanding business practices”.

Loralee Kapp

Since joining our RCM Division in October 2021, Loralee, who is HIT Certified (Health Information Technology/Health Information Management), brings her extensive expertise in medical coding and Health Information Management practices to OSI.

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