What to Do Immediately if Notified of an Insurance Audit

One of the most concerning letters for a doctor is to be notified that you're the subject of an audit by the government or a third-party health insurer. With the recent increase in audits of health care billings across the spectrum – including chiropractic care – now is the time to prepare for an eventual practice audit.

Posted in Examiner eNewsletter on Wednesday, October 21, 2020

It is also vitally important to address audits in a timely fashion. Failure to do so risks losing payments and being subject to repayment of amounts already billed and paid. Further, it can also affect your continued participation in a third-party payor’s plan. In a worst-case scenario, it may even result in fraud and abuse charges.

This is serious stuff and you need to dedicate the time and resources to prepare, and if notified of an audit, respond!

The Best Time to Prepare for an Audit Is Before it Occurs

We have all heard the adage that an ounce of prevention is worth a pound of cure … this could not be more true than with health care billing. It is not unusual to complete years of formal education and training and still know little or nothing about billing for services.

The best way to prepare is to establish a process for proper documentation, proper utilization of the correct billing codes, and review and troubleshoot billing practices:

• Hire a consultant from time to time to do a self-audit.
• Have your billing professionals cross check each other periodically – particularly if there is turnover among staff.
• Ensure that each bill submitted is proper and supported by existing documentation. The insurer does not excuse billing errors because an inexperienced or incompetent biller submitted the charge.

By setting up a compliance program in your office to ensure proper coding and compliance with laws and regulations from the beginning, you will reduce your chance of audit, and improve your ability to show that your billings are correct, accurate and properly payable, if audited. You can also dispel any suggestion of billing with the intent to commit fraud or to misrepresent care provided, which of course, could result in severe penalties, fines and even prison time.

A post-payment audit occurs when a third-party payor (e.g., Blue Cross/Blue Shield) reviews claims to assess if money was improperly paid. Strict time frames attach to responding to an audit, appeals are limited, and as noted above, consequences result when the doctor cannot support the billing with clinical documentation.

It is common lore that if you practice long enough your billing practices will eventually be audited. It does not matter who submitted the bill, so hiring a third-party billing vendor will not alleviate your responsibility. If you provided the service, submitted it to the insurer and were paid for the service, you can be targeted for recoupment. This is pursuant to the terms of your provider contract and in response to a post-payment audit investigation.

In general, audits can go back years, but a participating provider agreement or a state law may change the duration. For example, in Missouri an insurer or the plan administrator (the payor) may not request reimbursement more than 12 months after the claim was paid. New Jersey law permits the payor to review only the past 18 months of reimbursement unless there is proof of fraud or an “improper pattern of billing.”

Some states, like Kansas, provide no statutory guidance, but there is an implied covenant of good faith and fair dealing in all contracts. Since an improper pattern of billing can be alleged by the payor in virtually all audits, this allegation may render any look-back limitation period illusory.¹

Make Sure Billing Codes Are Supported by the Patient Records

Once your office is open and billing properly, don’t rest on your laurels. It takes continued vigilance to assure that billing is done correctly. Providers often feel a false sense of security after submitting numerous billings that are routinely paid over time.

Payment of incorrect billings can stop abruptly and unexpectedly. The same submissions that had been paid may be rejected in an audit. Don’t get complacent or sloppy. Properly document and double check your billing submissions as if they will be subject to an audit.

As the practice grows with more services and practitioners, continue to monitor for a potential audit. This includes:

• Monitor procedure codes and modifiers being used by each provider in the office.
• Compare notes with others in the office.
• Address any problem areas identified in your ongoing monitoring effort.
• Review third-party payors and government reports to see areas of increased scrutiny or coding practices that have been determined to be incorrect.

Some insurers have modified their contract language to significantly limit or essentially eliminate the provider’s ability to appeal audit findings except in rare circumstances. These contracts leave the provider in a position of doing a good job of documenting and billing from the first patient visit, with little or no options aside from attempting to negotiate down the amount of the overpayment or extending the recovery time to stagger out payments.

Accordingly, pay attention to detail and be thorough with every claim. This not only may help reduce the potential or frequency of audits, but it helps you get paid for your services.

What is the Purpose of a Post-Payment Audit?

Health insurers are cost conscious and concerned about rising healthcare costs. Effective audit programs often provide them with significant returns compared with their costs.

In addition, insurance companies are looking for ways to prevent fraudulent billing, and a well-designed audit program provides them with a method to accomplish that objective while generating savings.

What Causes Audits?

Some post-payment reviews are random, but most are not. Insurers will compare your billing profile to your peers in your geographic area and look for specific red flags. If your profile varies significantly in any key area, you may be flagged for an audit.² These areas include, but are not limited to:

• Higher use of a particular CPT code than your peers.
• Higher average number of per-patient visits than your peers.
• Billing of higher reimbursing CPT codes than your peers, e.g., CPT 98942 (5 region CMT); CPT 99205 or 99215 (Level 5 Evaluation & Management); CPT 97530 (Therapeutic Exercises); or CPT 97112 (Neuromuscular Re-Education).
• Performing a greater number of extra-spinal adjustments than your peers (CPT 98943).

In addition to an abnormal billing profile, a complaint by a disgruntled employee or patient could also flag a doctor for an audit. Thus, beware of what you share with third parties.

Do not say anything to an employee, contractor or patient that you wouldn’t say to your licensing board or to the authorities. A basic rule of thumb is: If you would not say it in a crowded elevator, you should not say it at all.

What are the Consequences of a Post-Payment Audit?

Primarily, the payor will be looking to recoup money paid to you that was not supported by your patient records (or were fraudulently billed in serious cases). However, the consequences do not stop here. Unfortunately, in addition to owing money back, audits can be a precursor to civil fraud investigations, criminal fraud investigations, suspension or loss of license to practice and possible jail time.

Do not let the audit snowball out of control and lead to any of the more severe consequences listed above. You cannot ignore an audit and hope it goes away. Involve your health care attorney and other trusted advisors in the process the minute you get the first request for records to be reviewed by the payor.

Who Conducts the Audits?

The Special Investigation Unit (SIU) of the insurance company will conduct the audit. Usually, this is an ex-law enforcement officer or insurance adjuster, but it could also include a chiropractor or other licensed health care provider. Many investigators are paid on commission based upon how much they recover for their employer and are, thus, incentivized to maximize the amount recovered from the doctor.

If an audit attacks the medical necessity of your treatment, make sure the payor has an actual chiropractor making that determination as opposed to a nurse or other healthcare provider. Some states have enacted laws that mandate a healthcare provider of the “same specialty” perform the review or the review is invalidated.

Will the SIU Contact My Patients?

In some cases, SIU investigators will call patients, others will submit questionnaires to patients, while others will not contact patients at all. Because the patient is also an insured of the payor and has a contract of health insurance with them, the payor is within its rights to contact them. However, if they cross the line and defame, libel or slander you to the patient without basis, you may have legal redress. Whatever the case, do not coach your patients on how to respond.

Explain what is happening and that a payor’s right to audit is a standard component of its contract. You may also wish to allow your patients to review their files before they respond to an investigator, and this is perfectly acceptable.

What Should I Do if Audited?

In the event of an audit:

• Contact your malpractice insurance company immediately. If you have ALDE coverage with NCMIC, it will likely start when notification is provided to your carrier. If the insured physician hires an attorney before contacting the carrier, the ALDE coverage will not apply until the day the carrier is notified. The fees/expenses incurred before notification to the carrier will not be covered and will have to be paid by you. The carrier may also have the right to appoint counsel and if your initial lawyer is not approved, you may end up paying the lawyer yourself.
• Your health care attorney will likely double check and ensure that the complete universe of patient records are submitted – which also alerts the auditor that legal counsel is involved, which may render them more amenable to alternative resolution and/or less harsh penalties. While sending the records on your own may seem tempting or money saving, having people who are experienced in dealing with the third-party payors can be invaluable. Remember, any documentation not provided originally is generally not going to be able to be submitted later and the responsive information may be deemed waived and cannot be considered by the auditor.
• Cooperate—stonewalling will get you a more intense audit and may lead to the snowball effect discussed above.
• Don’t volunteer information or talk substance with the auditors. You have a duty to provide them with copies of your files—that’s it! You do not have a duty to make their case for them by answering substantive questions unprepared.
• Never “touch up” or otherwise change your notes or chart. This could lead to dire consequences and start the snowball effect. Remember, many times it is not the actual crime, but the cover up that leads to severe penalties!
• Ensure auditors get all of your supporting documentation. For example, don’t let them miss the backside of a two-sided note.
• Only send notes for the timeframe audited. If there is an 18-month look back limitation (as in some states), only send 18 months of notes.
• Do not send originals, only copies. If the originals get lost, you will never be able to support your billing and may have violated your state’s recordkeeping regulations.

In the wake of COVID-19, audits will likely continue to increase. Additionally, health care billings associated with treatment of the virus will likely be more closely scrutinized for some time to come.

Many times, providers don’t respond promptly when presented with an audit request. It is an unpleasant situation to address, and there can be a tendency to let it sit. Or, providers sometimes respond improperly or incompletely to the request. As a consequence of delay or ineffective response, we see many providers who may have already received a negative review to the first audit response, and only then do they reach out for help. By the time a doctor receives a determination to the audit, it may be difficult or even impossible to supplement the audit response materials to support the billing and improve the situation and chance of payment. Help yourself – contact your carrier as soon as you receive an audit request and get the team working for you immediately. 

The above article was developed with the assistance of the following attorneys:

Brian Niceswanger is the leader of Evans & Dixon’s Health Care Law Group. He is an experienced trial lawyer having tried dozens of jury trials in state and federal courts across Missouri and Kansas, as well as across the country. His practice includes many areas of health care law including: telemedicine, risk management, contracting disputes, professional credentialing, state licensure, professional negligence, and managed care. In over two decades of health care practice he has represented institutions, physicians and physician groups, dentists, podiatrists, chiropractors, nursing homes, assisted living facilities, physician assistants, nurse practitioners, and many other health care providers in virtually all areas of practice.

Stephanie Preut focuses her practice in the area of health care litigation, representing a broad spectrum of health care providers and patients in cases involving wrongful death, medical negligence, chiropractic negligence, dental negligence, and many other practitioners. Preut helps practitioners and offices in many facets of practice, from operational and facility issues, to security, employment, reimbursement and winding down a practice. Preut, like other lawyers in the Health Care Law Group at Evans & Dixon, also represents doctors and other healthcare professionals in administrative actions, and Board of Healing Arts situations, including investigations and/or licensing disciplinary action matters.

Ryan Cox started his legal career in the Pacific Northwest and relocated to Kansas City approximately 15 years ago and has spent a significant part of his practice assisting health care providers in malpractice claims and litigation, medical staff credentialing and disciplinary actions, administrative actions before the Board of Healing Arts, as well as third-party payer audit, disputes, reimbursements and appeals. Cox has also successfully argued appeals before the Oregon Court of Appeals and the Missouri Court of Appeals in his many years of practice.

¹ It is recommended that practitioners check your individual state law, or confer with counsel in your state, for the limitation period applicable in your state.

² It is recommended that practitioners consult with the reference manual promulgated by many of the health plans covering chiropractic care for guidance on acceptable billing practices. See generally: 2020 Chiropractor, Acupuncture and Massage Therapy Reference Manual, BlueShield of Northeastern New York.