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Implement random billing audits

By Rebecca Anwar, Ph.D. & Judy Capko

As medical practices across the country contract with managed care plans, they begin to see their adjustments climb. It is important for physicians and the managers to implement processes to ensure that physicians are getting paid for what they do. This begins with ensuring that charges are being posted and ends with a review of the claims processing and Explanation of Benefits the managed care plan produces.

Developing an audit process, as well as conducting a periodic random audit, will keep your systems and controls in place. The random audit should be conducted quarterly and include at least 20-25 patients for each provider. For each patient you will want to track one date of service through your entire system.

Appointment System. First of all, are you sure all patients seen are entered on the appointment system, including walk-ins, add-ons and nurse visits? This can be verified by matching your charge documents or superbills used the previous day with the appointment schedule for that day. Do you have a charge document for each patient on the appointment system? Are there charge documents for patients not in the appointment system? Once you are sure all appointments are documented, you can begin the audit process.

Start by taking a week’s period of time and producing a hard copy of the schedule. Select every fourth appointment on the schedule and highlight the patient’s name. Use this to pull the patient charts.

Chart notes to charge slip. The next step is to examine the chart notes and see if the documentation matches the description of the service charged on the charge document. For example, does the charge document show the patient had a problem-focused exam, but the chart documentation reveals a detailed examination with lab and x-ray done or vice versa? If the chart shows lab and x-rays ordered, are there results in the chart to substantiate that the ordered diagnostics having been done? Are the diagnoses listed on the charge document listed in the patient’s record?

Charge slip to patient ledger. Next, review the charge slip with a copy of the patient’s ledger from either your computer or your one-write system. Make sure all the charges were transferred from the charge slip into the accounts receivable system. Verify that all CPT and ICD-9 codes were entered correctly. Also verify that the ICD-9 codes were appropriately matched up with the corresponding CPT codes. Make sure any payments made at the time of service were entered into the system on the correct date. At this point verify that the services were submitted, either electronically or by paper claim, to the appropriate third party payer.

Explanation of benefits (or remittance advice). The final step in the audit process is to review the explanation of benefits (EOB) for third party payment on the date of service being audited. Confirm that all services submitted were considered by the insurer. Don’t assume that the insurance company did not make an error in processing the claim! Scrutinize the EOB to confirm that any adjustments made were appropriate. Finally, verify that an attempt was or is being made to collect any remaining financial responsibility due from either a secondary carrier or the patient.

Analyzing your results. This is a matter of numbers, dates and dollars. Tally up the number of discrepancies you discover and the total dollar value this represents. You can then multiply the numbers to project the potential financial signifance of these errors. This will enable you to report to your staff the financial impact this can have on the practice. For example, if your total patient visits for the week audited were 200 and you audited 20 visits, this would account for ten percent of the total visits. If the audit revealed $90 in lost revenue, you would multiple this by ten for a potential loss of $900 a week, or more than $3600 a month. This example shows how costly errors can be. It is not uncommon to discover errors that would generate revenue to cover the expense of one employee’s monthly salary and benefit package.

Next assess the type of errors that are made. Look for recurring errors and common threads. For example, is one physician the major culprit or are the mistakes distributed among the providers? Is it more often occurring in one particular category, such as diagnosis, service code or date of service? Are you discovering missing data or incorrect data? Determine the source of error so that you can approach resolution effectively.

To maximize your audit as a quality assurance tool, scrutinize dates for acceptable time spans. What was the lapse between data entry and claims submission? Did any claims get returned for correction and require a resubmission, eating away valuable staff time and delaying payment? Are your insurance plans paying you in a reasonable length of time and in agreement with your contract? Are the payments posted promptly and correctly? After the insurance payment is posted, is the patient (or secondary insurance company, when appropriate) balance billed promptly? It may be time to determine and clarify what time span is acceptable for all these functions and communicate this to your staff.

Taking action. What are acceptable results and what do you do when the error ratio is unacceptable? Obviously, you want 100 percent, but this may be unrealistic. If you have any error in lost revenue, you will want to ensure that the staff understands the seriousness of this and how this adds up. In the other areas, 95 percent may be acceptable, depending on the type of error and potential consequence. At any rate, you will want to take corrective action.

If you discover errors on more than ten percent of your patient visits, you have a serious problem that needs a well-organized strategy to resolve. Be careful to identify the source without creating defensiveness. This is an excellent time to bring in a consultant or outside billing specialist to examine and streamline your entire procedure and develop tools to reduce the probability of costly errors. When the entire team supports the billing process, you will get results. In today’s reduced fee for service environment, this is the best way to increase productivity and profitability.

Rebecca Anwar, Ph.D. is based in Philadelphia, PA and Judy Capko is based in Newbury Park, CA. They are senior consultants with The Sage Group Inc.

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