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Preparing for private carrier fraud audits

By Michael J. McCarrie, Esq.

Medical coding is a language all its own. The use of descriptive terms to identify medical procedures in an effort to reimburse the provider is an inexact science. The purpose of these codes is to communicate services provided by practitioners to the government or the insurance carrier. The Current Procedural Terminology billing guide, published by the AMA, continues to provide assistance in capturing, recording and reimbursing medical procedures. By definition the CPT guide changes each year. In addition, the CPT assistant is issued to help with additional gray areas not clearly described.

These codes are the subject of intense review, use and analysis by the government and the Insurance Industry for a variety of reasons. The most important and significant use of the statistical analysis with the codes in the health care industry is to identify and recover dollars spent for fraud, waste and abuse. Rightfully so! However, it is the efforts which are employed by the carrier during their gathering of evidence, which either supports or negates the use of the code, that we are concerned about. We need to scrutinize, understand and be prepared to deal with the carrier’s evidence-gathering methods so that there is no miscommunication or misunderstanding about your practice area, specialty or billing methodology.

Initially, you should understand that most of the health care insurance companies and the industry as a whole have the most sophisticated claims software systems which enable them to identify coding outliers and irregularities for audits. This data-mining activity is performed by highly qualified, trained individuals whose job is to conduct “data-runs,” which help the company optimize their efforts at identifying the most frequently billed code and compare that information across practitioners in your specialty.

Insurance companies typically employ former local state and federal investigator who may or may not have significant health care experience or experience in the specialty within which they are auditing. Typically, the health care company will contact the medical practice either by phone, mail or in person, based on an historical review of your coding, billing and reimbursement systems and mechanisms. Make no mistake, when the letter, phone call or the knock at the door occurs, it is as a result of significant research, investigation and planning on behalf of the insurance company. Accordingly, the medical practice should anticipate and plan for this notification in the same way.

Any information that you provide to the insurance company’s investigator or auditor during this initial contact will be memorialized in their investigator/auditor’s file, log or note pad and used to compare against the information they already have received. Such information can come in the form of patient interviews which typically confirm types of treatment, duration and times of appointments.

You should not take this initial contact lightly. In response to this initial contact you have two options. Option one is to meet and discuss the areas the investigator/auditor are reviewing. This option is fraught with danger since you are now providing information to an individual(s) who is more prepared for the interview, has a prearranged agenda of questions and can focus on their assigned task – to identify and recover money for the company. Do not be misled into thinking that this first contact by the company is somehow a fortuitous event. It is not. Their questions are planned and sometime scripted, and the area they cover is relevant to their reading and understanding of the various codes and policies, which may or may not even apply to your practice.

The second option is to postpone this initial meeting until you have had an opportunity to understand the complete nature of the audit/investigation. This option can leave you in “no man’s land,” since it will be viewed by some as an indicator that you are hiding information, which in their view should be readily retrievable and accessible during this initial visit. Your hours of operation, scheduled appointments and office protocol should be considered by all, and reasonable accommodations for your schedule should be made. The only way this can be done is to affirmatively postpone the initial meeting, memorialize it in a letter to the individual investigator/auditor following their contact, and get with your office manager or billing representative immediately.

There have been significant referrals from insurance carriers to the local, state and federal governmental agencies and prosecuting attorneys resulting from their audits. As such, you should have a heightened awareness at this initial contact, understanding that what you provide could potentially be used against you at a later date. Therefore, your initial response and/or contact with the insurance company should be as well thought out, planned and implemented as the carrier’s strategic plan to audit your practice.

Once you have been contacted by the insurance company and advised that they intend to audit your practice you should plan for, and formalize, the process for responding to the audit.

It is critical to understand the significance of a “formal” approach in responding to any audit or investigation, as the companies draw heavily upon data-mining software, coordination with law enforcement and potential civil litigation. An audit/investigation format can typically include retrieving the most reliable information first, such as the original documentary evidence, medical files and sign-in registers/logs to review and compare with the data-mining material already in the company’s possession. Additional documentary evidence includes any letters, e-mails, reports, log books, photographs of the premises, videotape recording of patients, time cards, attendance sign-in sheets, etc. This information provides first-hand factual evidence that, at a minimum, the patient was at the practice on the date listed. While this may seem to be trivial information, any misstep in this “proof ” process, could lead to devastating results.

For example, a change in your practice’s sign-in protocol may seem minimal, and may possibly be forgotten when you speak with the auditor or investigator. However, if it does not accurately outline times, dates and signatures, you could be in a position of having to explain the absence of a time notation or patient’s signature even though there is evidence the patient was at the facility on the day in question.

Accordingly, each contact made with the insurance company, either by phone, mail or in person, should be well-planned and memorialized so that any statements made by either party during this first contact are reproduced in some documentary fashion. While this letter-writing campaign may at first blush seem too time-consuming, it will help keep communication between your practice and the carrier clear. Any misunderstanding in this communication flow can work against you unless you formalize this initial process. Your practice manager should review the carrier’s demand, understand the scope of their requests and the timeframe of the review to determine whether retrieval of files and/or information is disruptive to the practice, given the insurance company’s time constraints. If it is, tell them and reschedule the timeframes. If it is not but would take you more time to produce the information, tell them. Every communication with the insurance carrier in this initial response regarding the timing and scope of the review, must be in writing.

Your practice’s response to the audit/review depends upon the type, scope and duration of the audit, and requires an evaluation of the carrier’s demand, and in most cases the assistance of a coding expert. The expert will typically review and evaluate the practice which the carrier has identified as problematic in order to determine its accuracy.

Next, your expert most likely will provide some initial categorization of the types of claims and codes, their relevant description and any insurance company policy that sheds light on evaluating the issues. This area of review is littered with the insurance company’s outlining billing and/or coding “standards” of which, in the evolving health care industry, you were to expected to have had a complete understanding. This coding and billing policy arena must be completely reviewed by you and your expert prior to any submission of a response to the company. Any misunderstood code/policy could work against you in the final analysis.

There are a significant number of audits and investigations that contain false accusations that result in a rush to demand repayment and refer to law enforcement or civil litigation due to a lack of formalizing this process. Don’t get caught up in this mix. All parties benefit from a formalized process, since it is your practice that is on the front line, providing the service to the patient.

Michael J. McCarrie, Esq., is a member of Artz Health Law, which has a National Healthcare audit response team that provides immediate response to clients who have been targeted by any insurance carrier for audit or investigation.

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