February 01, 1999
4 min read

Costs of Medicare audits involve more than repaying fees

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Last year was a very active year for Medicare audits, and, unfortunately, eye doctors were sometimes the targets. The audits often resulted in doctors repaying tens of thousands of dollars to Medicare. The dollar cost is in addition to the costs of stress, lost time from the practice, attorneys’ fees and consultants’ fees. Let’s review the audit process and some methods for living more comfortably in the current managed care environment.

The audit process

Medicare audits begin with a letter requesting medical records that correspond to claim forms the provider has submitted to the Medicare carrier. The provider mails copies of the appropriate medical records to the auditor, who then reviews the records and determines whether the provider has been reimbursed appropriately. The auditor’s second letter tells the provider the results of the audit, often outlining procedures for repaying dollars to Medicare.

Providers are given the opportunity to appeal the audit. The first step of this process is euphemistically referred to as the “fair hearing.” Fair hearings are run by an employee of the carrier and consider the recommendations of the carrier’s employees and consultants as well as evidence offered by the provider. If the fair hearing decides in favor of the carrier and if the money in question exceeds a threshold (usually $500), the provider may move to the next step, which is a hearing before an administrative law judge.

Administrative law judges are real judges, not employees of the carrier, who are reimbursed by the Health Care Financing Administration for their hearings and deliberations. These hearings again consider evidence and arguments from both the carrier and the provider before issuing a decision. These decisions are not precedent setting in that each case is considered on its own merit, but they have often been favorable to the providers.

The carrier may choose claims for the audit randomly or may look for “red flags” or “triggers” for audit. A typical audit will request records for 12 to 20 claims first. If no errors are found, or if the errors are minor and will not result in repayments to Medicare, the auditor will inform the provider by letter that the audit is completed.

The audit can be expanded

If the auditor finds errors in claims or poor medical records resulting in significant repayments, the auditor may decide to expand the audit by requesting records corresponding to another batch of Medicare claims. This is usually offered as one option, combined with the option of the auditor using the first records and claims as a benchmark from which repayments can be computed.

For example, if the audit of the first 20 charts would yield a Medicare repayment of $400, the auditor might offer to settle the audit by expanding it to include more claims and records. There is no statute of limitations on Medicare audits, so auditors could consider every claim submitted to that payer, even going back several years.

A typical audit would consider another 80 records, making the total 100 records. At that point, the provider is given two options: 1. to send photocopies of the additional 80 records to the auditor or 2. to agree that the auditor could use the result of the audit of the first 20 records ($400=$20/record) and multiply this by the total number of records involved. In this example, the total would be $20/record multiplied by 100 records=$2,000.

Repayment within 30 days

Another troublesome characteristic of Medicare audits is that the provider is required to make the repayment to Medicare within 30 days of receipt of the demand. The repayment is required even if the amount is contested and the hearing process is begun. Imagine the hardship for your practice if Medicare required a payment of tens of thousands of dollars within the next 30 days.

Next month’s column will discuss what triggers audits of eye care providers.

How to Prepare for Medicare Audits
  • Review your own medical records periodically to be sure that you are reporting appropriate office visits and procedures to Medicare and other carriers.
  • Do not expect your office staff to deal with the challenges of proper record keeping and proper claims’ submission. Ultimately, these are the doctor’s responsibilities.
  • Educate your entire professional staff — doctors and support staff — to be sure medical records are complete and claims are properly supported by the content of the records.
  • Know the payers’ rules. Doctors and key billing staff should be very familiar with the requirements of each payer. Ignorance is no defense.
  • Rely upon the rules, not upon payments. Payers pay in error all the time and reserve the right to collect any and all payments made in error. Base your policies on each payer’s rules, not upon the explanations of benefits.
  • Know Documentation Guide lines, Current Procedural Terminology (CPT) and International Classification of Diseases (ICD). The American Optometric Association (AOA) Codes for Optometry outlines CPT codes and ICD guidelines. (This resource, up dated annually, is $95 for members and $142.50 for non-members. Call the AOA Order Dept. at (800) 262-2210.) Such knowledge often wins audits.
  • If you receive an audit letter, don’t panic. If your records and your billing policies are sound, you will be just fine. Audits are just part of the reality of managed care.
  • Ask questions of the auditor to be sure you are supplying exactly what is requested, no more and no less.
  • Ask for a delay if it is not possible to produce the requested materials in the time allotted.
  • Don’t try to deal with the audit alone. Inform your state association and seek counsel early in the process from your practice consultant, billing service and attorney.

For Your Information:
  • Charles B. Brownlow, OD, FAAO, is executive vice president of the Wisconsin Optometric Association and vice president of operations of Practice Management Inc. Dr. Brownlow is a member of the AOA Eye Care Benefits Center executive committee and the ECBC subcommittee on coding issues. He may be contacted at Practice Management Inc., 5721 Odana Rd., Ste. 102, Madison, WI 53719; (800) 827-1945; (608) 274-5044; fax: (800) 308 -7189; (608) 274-2674; e-mail: brownlowod@aol.com.