Preparing for audit inevitability: Is your practice ready?

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Audits are inevitable. Every provider will be audited — multiple times, across different insurers, sometimes for single claims, sometimes for comprehensive reviews. The question isn’t whether a practice will face an audit, but whether it will be ready when it happens.

After two decades in the medical billing industry, we’ve seen too many trustworthy physicians get blindsided by audit requests, scrambling to gather documentation while trying to understand what went wrong. The reality is that most providers don’t realize how easily they can trigger an audit, even when they’re doing everything right clinically.

Audit triggers

Olga Khabinskay
_{© WCH}

Insurance companies aren’t randomly selecting providers to audit. They’re using sophisticated data analysis to identify patterns that suggest potential issues. The same red flags appear again and again.

The ‘impossible day’ problem

Claims data analysis starts with a simple question: Can this provider physically deliver all the services they’ve billed for? If you’re billing for more than 24 hours of work in a single day or seeing 70 patients when that seems impossible, you’re going to get flagged.

For example, take an orthopedist who actually sees up to 70 patients a day. He has a system, uses scribes and moves efficiently through his schedule. But that high volume still triggered an audit. The key difference? His documentation clearly showed which services were provided by physician assistants under his supervision, and everything was properly coded.

The problem isn’t necessarily the volume — it’s when the documentation doesn’t support what you’re billing for. If you’re using mid-level providers, that’s fine, but your records need to show the supervision and the actual care provided.

Pattern recognition gone wrong

Providers are surprised that billing the same Current Procedural Terminology codes for every patient is a huge red flag, even when it’s clinically appropriate. For example, a pulmonologist running pulmonary function tests on every patient makes sense — that’s what patients come to see him for. But a primary care physician ordering the same test for every patient? That’s going to trigger questions.

Insurance companies compare billing patterns with those of other providers in similar specialties and geographic areas. If you’re always billing at the highest-level codes, or always at the lowest, you stand out. If a practice is the highest billing provider in an area, they’ll likely get audited.

The geography problem

Billing from multiple locations on the same day — Fort Worth in the morning and Dallas in the afternoon — could be flagged as potentially impossible. The system assumes you can’t be in two places at once.

Providers get audited because they were covering multiple locations or doing hospital rounds at different facilities. The solution isn’t to stop providing care across locations — it’s to ensure that documentation clearly shows the schedule and the services provided at each location.

Specialty practices: Greater audit risk

Some specialties are getting hit harder than others. Specialty services attract more scrutiny because of cost, complexity or historical abuse patterns.

Wound care: The documentation nightmare

Wound care providers are facing intense scrutiny. The materials are expensive, and there’s significant room for interpretation in wound severity assessment. Providers get in trouble for misrepresenting wound depth or complexity, sometimes unintentionally.

The bigger issue: Many wound care providers are using products or techniques based on manufacturer recommendations without verifying Food and Drug Administration approval or insurance coverage. When the audit comes, saying “The manufacturer told me this was covered” doesn’t matter.

Diagnostic testing: The necessity question

Genetic testing has become a major audit target, especially for elderly patients. Insurance companies are questioning whether comprehensive genetic panels are medically necessary for every patient receiving them. The recent focus on genetic testing for cancer predisposition in asymptomatic elderly patients shows how quickly audit priorities can shift.

Diagnostic service providers need rock-solid documentation of medical necessity. It is imperative to show why this specific patient needed this specific test at this specific time.

Physical therapy: The ‘gym membership’ problem

Physical and occupational therapy providers are dealing with a particular challenge: proving that patients are receiving therapeutic benefit rather than just using the service recreationally. Medicare’s position is clear: Patients can’t use PT as a personal gym.

The key requirement is documented improvement in patient function. This means objective measurements, functional assessments and clear documentation of progress toward specific goals.

The manufacturer trap

This is where many providers get caught, when they’re often trying to do the right thing by offering new services or technologies to their patients.

Here’s how it typically works: A manufacturer or supplier presents an exciting new device or service. They show impressive revenue projections, explain how much you can bill per procedure, and provide marketing materials that make everything sound straightforward. What they don’t adequately explain are the compliance requirements, documentation standards and coverage limitations.

Don’t rely on manufacturer representations rather than doing due diligence, or face significant recoupments.

What’s coming: The regulatory pressure cooker

Budget pressures at federal and state levels are driving more aggressive cost containment measures, and provider audits are seen as a primary tool for identifying inappropriate payments.

Medicaid’s money problems

Medicaid programs are facing greater budget constraints that will likely result in more frequent and intensive audits. States are looking for ways to preserve limited health care funding, and recovering overpayments from physicians and other clinicians is an obvious target.

The recent changes to Medicaid funding mechanisms will create additional pressure for states to demonstrate tight control over provider payments. This translates directly to more audits with higher stakes.

The OIG work plan reality

The Department of Health and Human Services Office of Inspector General (OIG) publishes an annual work plan that outlines audit priorities, and smart providers pay attention to it. But here’s what many don’t realize: The work plan represents only a fraction of total audit activity. Individual insurance companies and state Medicaid programs are conducting their own audits based on their specific concerns.

Providers should review the OIG work plan and proactively address any issues related to their specialty, but don’t assume that’s the only audit risk.

How to think and act like an auditor

Think like an auditor and ensure documentation and processes can withstand scrutiny.

• Documentation: Beyond “If it wasn’t documented, it wasn’t done”

Most providers don’t understand how detailed and specific that documentation needs to be. It’s not enough to document that you provided a service — you need to document why it was medically necessary, how it was performed and what the outcome was.

Templates need to be current with coverage requirements and coding guidelines. This isn’t a one-time setup — coverage requirements change, and your documentation needs to evolve with them.

• Staff training: The weak link

Practices with excellent clinical documentation fail audits because their staff didn’t understand Health Insurance Portability and Accountability Act requirements or proper telephone protocols. When auditors visit your office, they’re not just looking at medical records — they’re observing how the staff handle patient information and whether office procedures comply with regulations.

Every staff member who touches patient information needs to understand their role in maintaining compliance. This includes knowing when to refer questions to appropriate personnel and understanding the proper response when auditors arrive.

• Internal audits: Practice what you preach

Regular internal audits are essential, but they need to mirror the methodology external auditors use. Don’t just check whether your coding is correct — verify that your documentation supports the codes you’re using and that your processes comply with all relevant regulations.

The results of internal audits can be valuable evidence of good faith compliance efforts if you do face an external audit. They show that you’re actively monitoring your compliance and addressing issues proactively.

• Expert consultation

If you receive an audit request, don’t try to handle it alone. The initial response can significantly impact the outcome, and there are specific procedures and timelines that must be followed.

If you’re being offered a new service or technology, especially if it involves significant revenue potential, get professional advice before implementing it. The cost of consultation is minimal compared with the potential cost of audit failures.

Professional coding and auditing services aren’t just an expense; they’re an investment in your practice’s stability. The cost of professional help is typically far less than the cost of audit failures, which can include not only financial recoupments but also provider sanctions and the administrative burden of appeals.

Comprehensive compliance is critical

Practices that view compliance as a competitive advantage rather than a burden understand that meticulous attention to documentation and regulatory requirements demonstrates their commitment to quality care. It positions them for success in an increasingly regulated environment.

The key is recognizing that compliance is an ongoing process. Regulations change, coverage requirements evolve, and audit priorities shift. Staying current requires constant attention and often professional support.

The audit notice will come. The time to prepare is now, while you still have the opportunity to implement the systems and processes necessary for successful outcomes.

The new reality is challenging, but it’s not insurmountable. With the right approach and adequate preparation, providers can navigate the audit environment successfully while maintaining their focus on patient care.

Olga Khabinskay is director of operations at WCH, a national health care practice management services company that provides billing, coding and credentialing as well as provider technology services.