June 15, 2002
10 min read

Insights from chart audits

Thorough documentation is your best defense when dealing with a Medicare audit.

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Carefully evaluating your coding and reimbursement filing practices may not only help you avoid being the target of an audit, it may also help you uncover unclaimed reimbursement in your practice. This article explores why chart audits occur, identifies risk areas and describes how to prepare for the potential scrutiny.

What are the odds?

The chances of being audited by Medicare or another third-party payer depend on a number of variables. All other things being equal, the odds of a formal investigation are small because the Centers for Medicare & Medicaid Services (CMS) has funded carriers to perform postpayment reviews only on a few providers (approximately 3%). However, the odds increase for a variety of reasons, including:

  • the provider receives a disproportionate share of money from the payer relative to other similar providers;
  • the group practice may be one of the largest in the community or state;
  • the provider’s utilization pattern is unlike that of similar providers;
  • the provider’s subspecialty entails extensive specialized testing or procedures;
  • the services performed may be carrier “hot buttons” because they are commonly abused;
  • the provider files claims with an unusually large number of errors and denials;
  • an employee of the provider registers complaints or concerns with the payer;
  • a beneficiary complains about the provider’s claims for reimbursement;
  • the provider has been previously investigated, resulting in adverse findings.

Obviously, there are numerous ways to attract attention from payers. For most, there is considerable anxiety associated with any form of payer inquiry. Most physicians want to stay off the radar screen and avoid unwanted attention. Unfortunately, this is not always possible.

Increased audit activity

The Office of Inspector General provides yearly reports to Congress of their annual audit of Medicare fee-for-service payments. The latest audit results reveal improper payments totaling $12.1 billion, or 6% of the $191.8 billion processed by CMS in 2001. The types of errors found are shown in the table on page 14.

Although errors have been reduced over the past 6 years, the same problems persist. Therefore, OIG recommends sustaining efforts to reduce improper payments. Those efforts have been very successful. For every dollar invested in audit activity in 2000, $75 was recovered. This is a 25% increase over their previous target. Many of these recoveries result from chart audits performed by various Medicare carriers.

Source: Office of the Inspector General.

Chart audits

During a postpayment audit, chart documentation is scrutinized and compared with reimbursement claims. Some problems, however easily excused, are always identified. There are no perfect practices and no one files perfect claims all the time. The only question is, “How serious are the errors?”

Many ophthalmologists, optometrists and opticians would like to know the extent of their exposure to criticism for poor charting or inaccurate claims before a Medicare audit. Some of them are our clients. Over the past 17 years, Corcoran Consulting Group has performed hundreds of chart audits for clients to help identify problems, mitigate errors and optimize reimbursement. From that experience, we have identified a number of risk areas and common problems.

Risk areas

Before cataloguing common problems, it is useful to know where they are usually found. The highest numbers of errors are generally associated with the most complex claims.

Claims filed with durable medical equipment regional carriers (DMERC) for postcataract glasses are the most complicated, lengthy and tedious in all of eye care. More than 90% of these claims are erroneous. Likewise, the most complicated surgical claims often contain errors, particularly for the subspecialties of retina and oculoplastics.

Further, it is undoubtedly true that the most ambiguous and difficult rules cause the most trouble for physicians; those are the rules for E/M coding. Finally, the providers with the least amount of experience dealing with Medicare often make the most mistakes; optometrists fill that niche because they devote most of their time to a younger clientele.

Some common services continue to attract attention because postpayment reviews frequently find errors. Based on our experience with Medicare carriers, we consider certain common services problematic because they are highly audited.

Comprehensive exams

CMS has identified codes 99214, 99204 and 99205 for special scrutiny. The OIG report cites a 37% error rate for 99214 in 2000 and a 31% error rate in their review conducted for 2001. In our work with clients, the reason that physicians fail to meet the documentation requirements for these codes is most often found in the inadequate documentation of the patient’s history.

In a smaller number of cases, the omission of crucial elements of the eye exam is at fault. For most eye care professionals, the ophthalmic codes (ie, 920xx) would be preferable to E/M codes for about 75% of their patient visits. Documentation requirements for the ophthalmic codes are more easily met, and reimbursement levels are slightly higher for comparable codes.

Extended ophthalmoscopy

Of all ophthalmic diagnostic tests, extended ophthalmoscopy (92225, 92226) is the most audited because of frequent abuse and more rigorous local medical review policies. These services are indicated only for serious retinal disorders (eg, retinal detachments), and the required drawing must be detailed. Additionally, an interpretation must accompany the drawing.

The gold standard for documentation is a large (3-inch), color scale drawing without preprinted anatomical landmarks of any kind on a separate piece of paper distinct from the concurrent eye exam. A review of your carrier’s bulletins may yield some surprises.


In 1999, Medicare liberalized its definition of consultative services and simultaneously enhanced the documentation requirements. In our experience, the chief complaint is often poorly worded, which may nullify the consultation. This critical notation should identify who asked for the consultation, what the issue was and why a consultation with an ophthalmologist or optometrist was necessary.

Additionally, the remainder of the history is too often abbreviated, so the level of service is reduced. Careful review of the criteria and how to select the level of service provided is key to your success in filing these claims accurately.

Medical necessity for cataract surgery

Does your medical record contain the following criteria to support the need to perform cataract surgery?

  • Dysfunction such as can’t work, can’t drive, can’t read, etc.
  • Patient desires surgery and likelihood that vision will improve after the operation.
  • The patient is medically fit for surgical intervention.
  • Glasses do not provide satisfactory vision for the patient’s needs.

The medical necessity for an operation on the fellow eye must also be documented in the patient’s medical record. The carrier expects that the patient’s desire for a second surgery and continued dysfunction is determined after the first surgery and after the patient has had time to adequately assess the results of the first surgery.

Medical necessity for capsulotomy

The medical necessity for YAG capsulotomy also depends on dysfunction. Despite imperfect Snellen acuity, if the patient is satisfied with his or her vision, then the necessity for the procedure is dubious. To support medical necessity for cataract surgery and YAG capsulotomy, we recommend a one-page patient questionnaire asking the patient if he or she has difficulty reading, driving, working or other activities of daily living. While a note in the chart is sufficient, extra documentation is extremely helpful during postpayment review.

New technologies

Anything new invites attention. There are a host of new technologies in ophthalmology, including feeder vessel laser therapy (G0186); transpupillary thermotherapy (0016T); ocular photodynamic therapy (67221 and 67225); selective laser trabeculoplasty (65855); optical coherence biometry (92136); scanning laser ophthalmoscopy (92135); and blood flow analysis (92499). As you introduce these services to your practice, you begin to file claims for services that you previously did not provide.

The existence of a CPT code does not ensure reimbursement or coverage. The “new” technology might be deemed unproven, experimental or investigational by third-party payers. Payers generally are suspicious of procedures for which there are few peer-reviewed, published articles in reputable scientific journals.

Payment for avant-garde procedures is customarily the patient’s responsibility. Under Medicare’s standards, investigational procedures are not covered. Before filing claims, some research is advisable.

New practice physician

When you employ a new physician, your group attracts attention if only through the credentialing process. Not infrequently, new graduates are unfamiliar with the scope and details of regulations covering reimbursement. Carriers know this and watch for mistakes early on. An over-enthusiastic young doctor can rapidly get into trouble. We suggest watching your practice patterns for early warning signs of potential problems. Peer review of chart documentation by an experienced partner is helpful as well.

Inadequate chart documentation for tests

Doing a test and filing the printout or photographs in the medical record is not nearly good enough to merit reimbursement. Does the chart note contain an order for the test or obvious rationale to the reviewer? Are the results reliable? Is there an interpretation and report describing the findings, assessment and plan? Was the test properly supervised? Good chart documentation is the key to withstanding criticism during a postpayment review.

Some tests are performed to rule out disease, and when the results are normal the payer will not reimburse the claim because the diagnosis does not match any of the listed indications in the local medical review policy. In such cases, it is wise to ask the patient to accept financial responsibility by signing an advance beneficiary notice (ABN) prior to testing.

Avoiding wrong diagnosis codes


Overutilization: punctal occlusion with plugs

Increasing use of punctal occlusion with plugs over the past few years has drawn attention from regulators that sometimes results in overpayment determinations by payers. Among other reasons, ophthalmologists and optometrists are attracted to perform punctal occlusion with plugs by high reimbursement relative to other minor procedures. Here is a case study in which submitting large numbers of claims for punctal occlusion provided an unfavorable result.

Dr. A identified the benefits of punctal occlusion with plugs for her dry eye patients. She began to perform the procedure as a first line of therapy on most patients with symptoms of dry eye. First she inserted four collagen plugs, then later she inserted silicone plugs in the two lower puncta. Her patients were pleased and the procedure was financially rewarding to the practice.

She did not expect an investigation of her claims and was satisfied with her chart documentation, despite the fact that her chart notes were incomplete and difficult to read. Upon review, most did not support medical necessity. In particular, the chart notes did not document failure of treatment with artificial tears. Most of the notations were abbreviated, with minimal examination and no operative report describing the procedure.

The increased use of CPT code 68761 in her Medicare profile (when compared to her peers) eventually caused authorities to question the legitimacy of the claims. The results of the carrier’s investigation were unfavorable because of the shortcomings in her chart notes.

Overutilization of any CPT code carries an element of risk. Deviation from accepted standards of care raises concerns about medical necessity. Documentation must be thorough.

Recovering from this type of attention is difficult.

Several considerations should be made when selecting the appropriate ICD-9 code.

Be as specific as possible and consistent with the patient’s medical record. The most specific ICD-9 codes have four or five digits. Using nonspecific codes may not reveal adequate medical necessity for the service.

A history of the disease may be appropriate for a condition that no longer exists (ie, V-codes).

Code symptoms if no definitive diagnosis can be determined. Do not describe the patient with a disease or condition he or she does not have. “Rule out” does not exist in the ICD-9 manual.

Document whether the condition is chronic or acute and what the planned treatment is. If it is acute in an emergency situation, be sure to identify the nature of the condition. A chronic disease can be listed multiple times as long as it continues to be treated.

Identify how injuries occurred.

List chronic conditions or secondary diagnoses only if they pertain to that particular visit.

Be consistent with CPT rules. For example, if you use a separate procedure code, then identify an additional diagnosis to justify that service.

Understand the third-party payer guidelines. Some payers truncate the diagnosis list and ignore the second or third ICD-9 code.

Understanding ICD-9 coding and applying the appropriate rules improves the efficiency and accuracy of your claims and determines who is responsible for payment.

Patient responsibility

The Medicare Carriers Manual, Part 3 §2320 reads:

“The coverage of services rendered by an ophthalmologist is dependent on the purpose of the examination rather than on the ultimate diagnosis of the patient’s condition. When a beneficiary goes to an ophthalmologist with a complaint or symptoms of an eye disease or injury, the ophthalmologist’s services (except for eye refractions) are covered regardless of the fact that only eyeglasses were prescribed. However, when a beneficiary goes to his/her ophthalmologist for an eye examination with no specific complaint, the expenses for the examination are not covered even though as a result of such examination the doctor discovered a pathologic condition.”

This regulation causes more debate than many others because it attaches much more importance to the patient’s complaint or symptoms rather than the assessment or plan. From the physician’s perspective, that implies a loss of control over the process of garnering reimbursement for his or her services. From the patient’s perspective, it can create unwelcome surprises. The solution is to carefully interview the patient about the reason for the visit.

Incorrect claims for postcataract glasses

Numerous errors occur on claims for postcataract glasses. A DMERC processes these claims, not the local Medicare carrier. A “supplier” number issued by the DMERC carrier must be placed on the claim forms.

These claims are paid under Medicare’s prosthetic device benefit, for use by the patient at home, and “home” is the correct place of service (POS 12), not the physician’s office.

Medicare does not cover all features of eyeglasses. The prescription in the lenses and a standard frame to hold them are considered medically necessary and covered. Cosmetic or convenience items are generally considered noncovered. Explicit documentation of medical necessity in the physician’s chart is necessary to claim reimbursement for added features such as UV filters, tints and antireflective coatings.

The beneficiary signs an ABN at the time these items are ordered to indicate that he or she understands that Medicare will not pay for cosmetic or convenience items and that the patient has accepted financial responsibility for the service.

Additional nuances to consider include:

The need to have proof of delivery on file; that is, the patient’s signature attesting that he or she actually received the eyeglasses as billed.

Glasses cannot be billed before they are delivered; the dispensing date is the correct date of service, not the date of order.

These claims require great attention to detail.

What to do

Some of the attention you attract is avoidable and some is not. Be prepared to deal with all types of attention through a quality assurance (QA) program or a compliance plan. Your QA program should contain steps to take and resources that assist in maintaining compliance. The resources and activities include:

  • Policy and procedure manual to deal with efficiency issues, complaints and claim filing instructions.
  • Educating and training physicians and staff on the importance of accurate coding and documentation.
  • Performing a utilization analysis of the practice and of individual physicians in your group.
  • Performing periodic chart reviews that focus on risky areas, common problems, proper coding, the quality of chart documentation and adherence to policies and procedures.

An effective QA program will improve documentation, reduce the number of denied claims, inhibit complaints and improve morale.


The OIG’s report provides ample evidence that most claims are submitted correctly and paid properly. However, they also point out that undocumented services and medically unnecessary services continue to be pervasive problems. They recommend that CMS increase its efforts to reduce improper payments.

Physicians are understandably concerned about the potential risk associated with postpayment review. Many react by underbilling. The Medicare utilization statistics from 1999 to 2000 reflect a downward shift on claims filed for high-level services and some diagnostic tests. Physicians err on the side of caution and believe the risk of having those services reviewed is not worth the return.

Many of the reviews we have conducted for clients reveal underbilling. On average, we find net underpayments of 2% of collections; some have been larger. For a million-dollar practice, that represents $20,000 per year. Many practices oversimplify the process and choose not to learn the various rules and regulations. This attitude is risky and costly.

There is always room for improvement. No one has perfect medical records and codes correctly 100% of time. However, with education, updated resources and the right attitude, practices can succeed and not fear the scrutiny.

For Your Information:
  • Kevin J. Corcoran, COE, CPC, FNAO, is president of Corcoran Consulting Group. He can be reached at 1845 Business Center Drive, Suite 108, San Bernardino, CA 92408; (800) 399-6565; fax: (909) 890-1333; e-mail: kcorcoran@corcoranccg.com; Web site: www.corcoranccg.com.