What Otolaryngologists Need to Know About Payer Audits

Everett Historical/SHUTTERSTOCK.com

Both government and private payers continue to aggressively monitor providers to prevent and recover overpayments. This is evidenced by the fact that the number of audits conducted in recent years has increased dramatically. A negative audit finding can result in the need to repay five- and seven-figure amounts.

Types of Audits

Private Payer Audits
Private payer audits take two forms: 1) informal reviews and 2) formal audits. These audits can be the result of actual allegations or evidence of non-compliance, or they can be random, in which general compliance is assessed. The procedure for such audits is typically determined by contract or the payer’s provider handbook and in accordance with applicable state law. Prepayment reviews may be conducted, in which the sufficiency of a claim—and its supporting documentation—is determined before payment is made to the provider. Post-payment reviews can also be performed, during which claims are analyzed after the provider has been paid to determine if an overpayment was made.

Medicare Audits
The Centers for Medicare and Medicaid Services (CMS) is the agency responsible for Medicare audits. These audits can take one of three forms:

1. Comprehensive Error Rate Testing (CERT) audits—These typically focus on providers who provide high-cost items or services, have high volume and/or have atypical billing or coding practices.
2. Recovery Audit Contractor’s Program (RAC) audits—These are performed by private contractors who are paid on a percentage of the amount of the improper payment discovered.
3. Zone Program Integrity Contractor (ZPIC) audits—These are performed by CMS contractors and are the most serious of the three audit types. Contractors mine the provider’s data for compliance with Medicare coverage and coding policies and investigate fraud, and may prepare cases for civil or criminal referral to CMS or law enforcement agencies.

Medicaid Audits
Medicaid audits focus on compliance with both CMS and state regulations, and investigate fraud. Any instances of fraud that are found will be reported to the state attorney general.

Audit Focus

The primary focus of audits in recent years has been medical necessity. Much of this audit activity is associated with payer concerns about specific fraud and abuse issues. Payers may be tipped off to such issues due to consistent billing by a provider for high volumes of certain high-level services, high volumes of evaluation and management services or by consistent referrals of patients for certain testing.