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Expecting Inspection

01.01.08 written by

The physician’s day in the office was going fairly smoothly until the practice manager announced an unexpected visitor; a Medicare auditor was seated in the conference room. When asked if there was a problem, the auditor gave no specific reason prompting this surprise visit. Rather, she explained that she would be auditing patient charts for adequacy of documentation on claims billed to Medicare. The on-site inspection of records would begin today.

This is a fictional story, but it illustrates the discomfort that physicians face when surprised with an audit from an insurance carrier. The questions are many. Is this a routine inspection? Have there been patient complaints? Has the medical practice been flagged by irregular billing patterns? Worse yet, could this be a whistle-blower investigation?

Although an external audit can certainly be random and routine, physicians are acutely aware that Medicare and other insurance carriers often conduct audits to investigate suspected fraud or abusive billing practices. Physicians cannot avoid all audits like this one, but there are actions that you can take to decrease that probability.

Audit Prevention

The Department of Health and Human Service and the Office of Inspector General (OIG) have asked physicians to voluntarily develop and implement compliance programs. A compliance program integrates the various complex laws and regulations into your claims-processing procedures. Ideally, the goal is to prevent fraud and other wrongful behavior.

A comprehensive compliance program will include a coding compliance policy. This policy is a “meeting of the minds” between the physicians, billing staff, and insurance carriers that claims will be processed with agreed values (codes). Importantly, the coding compliance policy should establish a plan for both the internal monitoring and independent reviews of your coding and billing functions.

Internal monitoring is your day-to-day assessment of operations to ensure that processes are working as they are intended. For example, internal staff with coding expertise might routinely monitor a sample of records for “evaluation & management” (E&M) coding accuracy. The frequency and type of internal monitoring will vary based on the dynamics and specialty of the practice. Staff should not forget to document their monitoring activities according to policy.

Independent reviews are chart audits conducted by a certified coder at the request of the physician. Too often overlooked, independent reviews are vital to your compliance program in that they are non-biased, external controls for assessing any weaknesses in your coding and billing processes. Should an investigative audit by an insurance carrier later reveal inaccurate coding, the independent review by a certified coder can demonstrate your reasonable efforts to comply with ethical and legal business practices and thus avoid a fraud claim basis.

Physicians are advised to schedule an independent review with a certified coder at least annually. Independent reviews should be scheduled more frequently if there have been significant additions to the medical staff, changes in documentation methods, or increase in rejected claims.


Insurance carriers have become stricter in enforcing accurate coding and billing as substantiated by documentation in the patient record. Random audits are not uncommon. However, physicians can take steps to minimize the likelihood of a payer audit, and mitigate possible sanctions, by establishing a compliance program.

An effective compliance program will lessen the risk of fraud and abuse by identifying and addressing high-risk areas. Self-monitoring and scheduling an independent review by a certified coder are compliance efforts deserving of your special attention. Your healthcare attorney can locate a coding specialist familiar with your practice needs.

NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.