How to survive a medicare audit

OB/GYN News, July 1, 2004 by Joseph S. Eastern

Mention of a government audit usually raises the specter of the Internal Revenue Service. But physicians who treat Medicare beneficiaries need to know about a far more likely audit source: the Centers for Medicare and Medicaid Services and its nationwide network of Medicare carriers.

The 34 private insurance companies that administer Medicare are required by the terms of their contracts with the government to audit a certain number of physicians each year, whether they suspect improprieties or not.

While 5% of Medicare providers are audited each year, your risk is not necessarily 1 in 20. It could be higher if you are an "outlier"--a physician who is more than two standard deviations away from the "norms" for your specialty and practice area, who consistently bills the higher-level E & M [evaluation and management] codes, or who bills lots of obscure and seldom-used codes.

Your chances also increase if Medicare receives complaints about you from patients, other physicians, or even your employees. Beneficiaries and office employees are encouraged, with significant potential monetary rewards, to report anything they think might be considered fraud or abuse.

Which means, of course, that your best defense against audits is good charting, precise coding, and scrupulous avoidance of all things abusive or fraudulent.

So what should you do if you receive the dreaded letter requesting copies of 15-40 of your charts?

First, keep in mind that a Medicare audit is similar to one by the IRS: You are guilty until proven innocent. The burden of proof is on your shoulders.

So, review the charts carefully before copying and sending them. Make sure all reports, consultation letters, operative notes, and other essential information are present. You have 45 days to respond, so take your time.

The audit process is mindless and standardized, with little or no attention paid to logic or fairness. The auditor is usually an insurance clerk who knows little or nothing about medicine or medical procedures. Diagnosis and treatment codes are compared against standardized criteria, and the precision and accuracy of your coding is determined.

They always find something, of course. Typically, the auditor will find a billing error and calculate an overpayment.

For example, if he or she believes you have billed $40 more than you should have for a particular procedure because that level of care cannot be justified in the handful of charts examined, that $40 "overpayment" will be multiplied by the number of times that particular code was billed over the last 18 months, and you will receive a bill for the total amount.

Needless to say, the total "refund request" can be an astronomical sum.

At this point, you have two choices: Pay up, or appeal.

Your appeal takes the form of something called a "fair hearing," which is anything but, since it will be chaired by a nurse who is employed by the insurance carrier! In some states, you can request that your case be reviewed by a physician in your specialty. If that is permitted, by all means do so.

As with any legal proceeding, don't volunteer any information--answer only the questions asked. Bring a lawyer if a large sum of money is involved, and tape record the session.

The outcome is a foregone conclusion, since the "judge" is employed by the other side: You will lose. You can now request a genuinely fair hearing by an administrative law judge, but it will be 6-12 months before that takes place.

Meanwhile, you have to pay up. If the amount you owe is large, you can request a hardship exemption, but they are seldom granted. If the judge rules in your favor, you'll get your money back with interest.

Real problems arise if fraud is suspected. A fraud team can swoop into your office, unannounced, for a thorough post-payment review.

They may have already called your patients, or even visited them. Remember to cooperate, volunteer nothing, and call your attorney.

Fortunately, fraud is not even a consideration in the vast majority of cases. The auditors are simply trying to hit refund targets set by the government, which will make the carriers eligible for bonus payments. While audits are frustrating and grossly inconvenient, and you could be deprived of the use of a significant amount of money for a year or more, most audits are resolved fairly in the end.

Keep good records, maintain a complete paper trail, cooperate, and don't be intimidated.

You will prevail.

BY JOSEPH S. EASTERN, M.D.

DR. JOSEPH S. EASTERN practices dermatology and dermatologic surgery in Belleville, N.J.