Designing an internal audit process for physician billing compliance

Healthcare Financial Management, July, 1998 by Linda J. Mast

The expansion of the Federal government's initiatives to uncover fraud and abuse has created a demand for corporate compliance plans. The U.S. Sentencing Commission guidelines create incentives for healthcare providers to adopt preventive measures, the most powerful of which is the determination of culpability based on the steps a provider has taken to prevent and detect criminal conduct. In other words, having an effective compliance program in place can minimize risk of violations and reduce potential penalties if violations are identified.(a)

A compliance program is most effective if it has an internal audit process as a component. Internal audits can help a provider identify a variety of compliance-related potential problems, particularly those related to physician billing.

Planning the Internal Audit Process

Designing an effective internal audit process begins with a systematic identification of areas of compliance-related risk and an analysis of the risk involved. This analysis should focus on factors that are pertinent to the institution. For example, teaching institutions should analyze risks related to billing practices of faculty physicians. Financial reports that track individual physician billing can be used to identify billing patterns that fall outside of expected profiles. Physicians who consistently bill services at levels higher or lower than their colleagues should receive priority attention.

The published Federal regulations and targeted investigations that are being conducted nationally or locally also will have a bearing on risk assessment. For example, the Office of the Inspector General has targeted laboratory services in ambulatory settings as one focus of 1998 investigations. Organizations providing such services should plan accordingly as they set the priorities of their internal audit work plans.

To be successful, internal audits require the involvement of key administrative staff during audit planning. By involving department managers early on, the audit team may be alerted to additional areas of risk or concern by the managers who work most closely with providers in the areas targeted for audit. Involvement of these key individuals also will facilitate acceptance of the auditors' findings in a constructive manner.

It is essential to stress that all auditors should follow established procedures and use the same criteria to audit all physicians. Auditors with experience in clinical services, coding, or claims review are ideally suited for the medical audit process.

Specific aspects of the internal audit should include:

* A comparison of billing practices of physicians at each clinic location;

* An assessment of physician compliance with managed care and Medicare contract requirements;

* A review of representative samples of each physician's patients' records;

* An operational audit of billing department activity; and

* A report on the overall audit, including an executive summary highlighting specific areas where payment could be enhanced and potential problems may exist.

The reporting structure for audit results should be established in advance of initiating an audit and applied uniformly.

Retrospective Medical Record Review

All third-party payers expect medical record documentation to support all billed services. An internal audit of physician billing should compare clinical documentation with the CPT and ICD-9-CM codes listed on the claim for that service. At teaching institutions, a check of appropriate involvemeNt of teaching physicians in medical services also is necessary. Levels of billing and documentation supporting teaching physician involvement can be audited by reviewing medical records for documentation supporting the service billed.

Standard documentation criteria for physician services are published by the American Medical Association in the Current Procedural Terminology, which is updated annually. A critical component in the internal audit process is incorporating HCFA regulations and maintaining up-to-date information on Federal guidelines related to physician billing.

Records selected for review should be based on the billing practices of the individual physician whose billing is being reviewed, For example, since a specialist generally bills a high volume of consults and few office visits, an audit of that individual's records should focus on consuLt billing. In contrast, primary care physicians would be expected to bill a higher volume of office visits, so the audit should emphasize such visits.

Once the retrospective medical record review has been completed, the results should be reported clearly and consistently. This reporting process should incorporate information on any billing errors identified (and suggest process improvements), provide feedback about what is being done well, and identify instances of revenue lost due to missed charges or underbilled services. This information should be made available to the individual who was audited as well as to appropriate financial administrators.