Responding to Payer Audits

​Imagine receiving a letter from a private payer stating, "According to our audit, your practice has been overpaid $300,000 from 2010-12." ​Please remit in full within 30 days. 

An increasing number of physician practices have reported receiving similar notices. 

In an effort to control costs, carrier claims processing and Special Investigative Units are conducting audits of claims to prevent improper payments and overpayments 

While no specific types of pediatric practices are targeted, carriers generally base audits and repayment requests on patterns that they believe indicate potential overpayment. For example, some carriers may flag providers considered as outliers in frequently reporting high level evaluation and management codes. 

Oftentimes, carriers will extrapolate alleged overpayments and demand across-the-board repayments even for valid claims. Worse, carriers will reduce payments on future claims to correct alleged overpayments on past claims. 

Pediatricians should ensure proper billing. This includes being able to respond to and, if need be, contest inappropriate carrier repayment attempts. Otherwise, the practice will be faced with uncertain and unstable revenue. The steps below will help a practice respond to payer audits and repayment demands. 

What to do when audited 

When notified of an audit and repayment request: 

• Do not ignore the request or be intimidated. 
• Identify the reason for the audit to determine an appropriate response. 
• Reply in writing to inform carriers you are willing to work with them and that they must identify each claim in question as well as the specific criteria or standards they are applying to the audit. 
• Make sure both the practice and the carrier consistently apply current CPT guidelines. Reference CPT coding guidelines and have appropriate documentation for support. The AAP Coding Hotline can be a resource. 
• Review your carrier contract on audits and dispute resolution as well as applicable state laws regarding audits and repayments. 
• Focus any overpayment recovery efforts on a case-by-case basis. Avoid unilateral take-backs by not allowing the carrier to extrapolate repayments on future claims. 
• Have the carrier provide documentation as proof of overpayment for each contested claim. 
• Document in writing all contacts with the carrier on this issue. Should a carrier payment policy require reporting that varies from CPT guidelines, obtain written, dated documentation from the carrier to verify that is the case. Keep this documentation permanently. 
• Utilize counsel by an attorney skilled in carrier contracting when negotiating contracts and when confronted with repayment demands. 
• For coding disputes, consider hiring an independent external review. "If my documentation was correct, I review each chart with the medical director," said Richard Lander, M.D., FAAP, member of the AAP Section on Administration and Practice Management executive committee. If unresolved, Dr. Lander will call for an independent reviewer. 

Taking the case to an arbitrator may be the only solution. Andrea J. Leeds, MD, FAAP, a member of the AAP Committee on Practice and Ambulatory Medicine, pointed out that carriers are both accuser and judge. "We can plead our case but are at their mercy. We need to have unbiased arbitration to determine a fair resolution." She also noted that legislation may be necessary for this to occur throughout the industry. 

If the practice has made a billing error, correct the problem and demonstrate to the carrier how it has been corrected and measures implemented to avoid this problem in the future. Carriers usually will respond favorably to this type of response and may not pursue further punitive action. 

Based on his experience as an independent reviewer, Dr. Lander observed, "Unfortunately, the vast majority of charts reviewed do not have sufficient documentation to support the doctor's coding." He suggested that physicians learn better coding and documentation. Electronic medical records also may help to improve chart documentation. 

 Contract provisions to minimize audits 

 When negotiating carrier contracts, make sure to include provisions that address the time period for retroactive audits and repayment requests. This time period should be the same duration as the limit for timely filing. 

There also should be prohibitions on unilateral adjustments to other non-related claims, recouping revenue automatically from your bank account as well as adjusting or withholding payment on future claims. 

The recommendations in this publication do not indicate an exclusive course of treatment or serve as a standard of medical care. Variations, taking into account individual circumstances, may be appropriate. This content is for informational purposes only. It is not intended to constitute financial or legal advice. A financial advisor or attorney should be consulted if financial or legal advice is desired.