Knowledge Expansion

Executive Session: Proactive and reactive auditing for strong compliance and maximizing revenue

Podcast

Compliance Regulations

Coding & Documentation

Beverly Gibson MBA, M.Ed., CMPE, CPC, CPC-I, CPMA, CEMA, CIFHA
Cristy Good MPH, MBA, CPC, CMPE
Annual healthcare spending has reached $3.5 trillion.1 Centers for Medicard & Medicaid Services (CMS) spending alone was $1.28 trillion, or 37% of all national health expenditure (NHE) in 2017.2 In recent years, some reports have suggested up to 10% of NHE may involve fraud.3  In 2017, the Government Accountability Office estimated that more than $90 billion in Medicare and Medicaid payments were improperly paid.4  With healthcare spending expected to double over the next decade,5 fraud is on the hit list of all payers.

The Office of Inspector General (OIG) for the U.S. Department of Health and Human Services (HHS) recommends that every medical practice have a compliance program. Providers are responsible for ensuring claims are accurate and are encouraged to have effective compliance programs to avoid receiving or retaining overpayments. A key aspect of a compliance program is an audit to ensure that medical documentation substantiates the codes reported.

Audits are generally performed for two reasons:
  1. To determine compliance risks
  2. To ensure maximum revenue.
Most audits, however, are performed for compliance reasons with the overall objective of avoiding penalties due to noncompliance.

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Penalties are steep. Penalties for violating the False Claims Act (FCA) can include recovery of up to three times the amount of damages sustained by the government because of the false claims, plus penalties up to $21,916 per false claim filed. Any person who knowingly submits, or causes the submission of, a false or fraudulent claim to the federal government can be held liable. No proof of specific intent to defraud is required to violate the civil FCA. Failure to report and return an overpayment is a violation of the FCA. Commercial payors have similar legal options at their disposal.

Audits should be both proactive and reactive, meaning that organizations have an obligation to seek out errors in addition to reacting appropriately when errors are found. Seeking out errors means targeting high-dollar procedures, difficult-to-code services and frequently utilized services. Reacting appropriately includes reporting and repaying overpayments, education and re-auditing. It also means using statistically valid random samples to probe errors and extrapolate errors over a six-year look-back period with the express purpose of repaying overpayments.

Patient care is and should be the top priority of a physician practice. However, a practice’s focus on patient care can be enhanced by the adoption of a voluntary compliance program. For example, the increased accuracy of documentation that may result from a compliance program will assist in enhancing patient care.

A well-designed compliance program can:
  • Speed and optimize proper payment of claims
  • Minimize billing mistakes
  • Reduce the chances that an audit will be conducted by HCFA or the OIG
  • Avoid conflicts with the self-referral and anti-kickback statutes.
The incorporation of compliance measures into a physician practice should not be at the expense of patient care; rather, they should augment the ability of the physician practice to provide quality patient care. Voluntary compliance programs also provide benefits by not only helping to prevent erroneous or fraudulent claims, but also by showing that the physician practice is making additional good faith efforts to submit claims appropriately.

Physicians should view compliance programs as analogous to practicing preventive medicine for their practice. Practices that embrace the active application of compliance principles in their practice culture and put efforts towards compliance on a continued basis can help to prevent problems from occurring in the future. A compliance program also sends an important message to a physician practice’s employees that while the practice recognizes that mistakes will occur, employees have an affirmative, ethical duty to come forward and report erroneous or fraudulent conduct, so that it may be corrected.

Potential risk areas affecting physician practices:
  1. Coding and billing
  • Billing for items or services not provided as claimed
  • Submitting claims for equipment, medical supplies and services that are not reasonable and necessary
  • Double billing resulting in duplicate payment
  • Misuse of provider identification numbers
  • Unbundling
  • Lack of modifiers
  • Clustering
  • Upcoding the level of service provided
  1. Reasonable and necessary services
  • Medicare (and many insurance plans) may deny payment for a service that is not reasonable and necessary according to the Medicare reimbursement rules
  1. Documentation
  • Timely, accurate and complete
  1. Improper inducements
  • The OIG set forth various risk factors applicable to physician practices, including improper inducements, kickbacks and self-referrals. They include financial arrangements with outside entities to whom the practice may refer federal healthcare program business.6
It is recommended that an annual internal audit by an external auditor be completed. This is a proactive collaborative “friendly audit” to ensure compliance.

Only 7% of all practices are decreasing funds spent on compliance.7 The remainder are either increasing annual budgets or holding steady. Given the hefty consequences of incorrect coding, either in terms of non-compliance or lost revenue, an increase in funds allocated for auditing and training may well be warranted.

Additional resources:

Notes:

  1. Centers for Medicare & Medicaid Services. “National Health Expenditure Data.” Available from: https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html.
  2. Ibid.
  3. McKinney M. “Berwick targets waste in healthcare expenditures.” Modern Healthcare. April 10, 2012. Available from: https://www.modernhealthcare.com/article/20120410/NEWS/304109969/berwick-targets-waste-in-healthcare-expenditures.
  4. “Improper payments: Actions and guidance could help address issues and inconsistencies in estimation processes.” U.S. Government Accountability Office. May 31, 2017. Available from: https://www.gao.gov/products/GAO-18-377.
  5. Japsen B. "Baby boomers to push U.S. health spending to $6 trillion by 2027." Forbes. Feb. 20, 2019. Available from: https://www.forbes.com/sites/brucejapsen/2019/02/20/baby-boomers-to-push-u-s-health-spending-to-6-trillion-by-2027/#7b31865bb2d5.
  6. “A roadmap for new physicians.” HHS OIG. Available from: https://oig.hhs.gov/compliance/physician-education/01laws.asp.
  7. Healthicity. The state of medical coding & auditing industry survey report, 2018. Available from: https://www.healthicity.com/resources/annual-auditing-report-2018.

About the Authors

Beverly Gibson
Beverly Gibson MBA, M.Ed., CMPE, CPC, CPC-I, CPMA, CEMA, CIFHA

Cristy Good
Cristy Good MPH, MBA, CPC, CMPE
Sr. Industry Advisor MGMA
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