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Minimizing the risk of a Medicare audit in era of heightened scrutiny

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Photo by Daniel McCann

Physicians’ Medicare coding and billing practices are coming under increased scrutiny as Medicare tightens efforts to cut waste and fraud.

Working to halve its improper payments by next year, the Centers for Medicare and Medicaid Services is more closely comparing physicians’ billing patterns to their peers’ and flagging outliers. CMS has also expanded its Recovery Audit Contractor program, bringing fresh regard to Medicare claims that have already been filed.

For physicians, CMS’ stepped up efforts translate to increased chances of being audited. Yet there are steps they can take to minimize the risk of being caught in an auditor’s crosshairs.

“The most important step physicians can take is to make sure that their staff members who handle the billing keep up-to-date with the ever-changing payment policies,” says AOA Trustee Boyd R. Buser, DO, who serves on the AOA Coding and Reimbursement Advisory Panel. “A lot of audits arise from innocent coding errors that cause a physician to be identified as an outlier. So it’s important that medical practices stay abreast of new developments.”

Audit triggers

One practice likely to draw an auditor’s attention is coding and billing for evaluation and measurement (E&M) procedures at levels far outside the norm of one’s peers, says William Mangold, MD, a contractor medical director for Noridian Administrative Services LLC, which processes Medicare claims in several states.

“There seem to be a lot of physicians focused on being sure they check off enough bullets to justify a higher level of service,” he says. “But the medical necessity of those high-level treatments is coming under more scrutiny.”

He provides an example of a patient with a cold. A physician conducts a history and exam and diagnoses a viral upper respiratory infection. No treatment is needed. Still, Dr. Mangold says, some physicians will cite enough services—comprehensive exam, complex medical decision-making, for example—to justify a high-cost, high-level E&M visit.

“That’s not appropriate,” says Dr. Mangold. “The physician’s services, the mental effort and the time needed to arrive at the right decision did not warrant the number of bullets checked.”

Nevertheless, Dr. Mangold acknowledges that sometimes seemingly inappropriate billing is justified. He cites the case of an internist whose practice consists solely of providing sleep-study consultations. That physician’s billing patterns will differ widely from other internists in his community. “But his billing is perfectly reasonable because he’s the only physician doing those consultations,” Dr. Mangold says.

The key to justifying any treatment, particularly higher-level E&M services, lies in thoroughly documenting the medical necessity of the procedures. “The physician’s thread of reasoning demonstrates the medical necessity of the encounter,” says James E. Gaydos, DO, a family physician in Montpelier, Vt., who has been audited several times.

“The thread of reasoning needs to run from the chief complaint through the history of present illness—and if needed, the family, medical and social history—and through the physical exam,” he says. “Then you must make sure that your reasoning is represented in the diagnosis and treatment plan. If you do not document your findings in each section of the encounter, your documentation is null and void.”

New and established patients

Dr. Mangold also reports heightened scrutiny of how physicians distinguish between new and established patients. The definition of an established patient, he says, is clear: a patient seen within three years by a physician or a colleague of the same specialty in the physician’s practice. Visits for established patients are billed at a lower level than new-patient visits. “Now a physician might ask, ‘I’m in a new group practice and brought this patient from my last practice, so is the patient an established patient with my new group?’ And the answer is yes,” Dr. Mangold says. “This is a growing issue as group practices add new physicians.”

AOA can help

The AOA Division of Socioeconomic Affairs can provide assistance to AOA members who are undergoing a Medicare audit. For more information, call Kavin Williams, the AOA’s health reimbursement policy specialist, at (312) 202-8194 or send him an email at

Another problem involves the misuse of electronic health records (EHRs). Dr. Mangold says physicians have telephoned him recently to report EHR sales reps touting their systems’ ability to maximize the billing code for every patient encounter. There’s nothing wrong with maximizing a procedure code as long as it’s reasonable and medically necessary, he says.

But he cautions physicians to be wary of EHRs that seem more geared to making money rather than thoroughly recording and justifying treatments and diagnoses. For example, software that allows physicians to simply check off procedures without providing space for further elaboration is a problem. “That’s not the way the systems should work,” Dr. Mangold says, stressing once again the primacy of establishing and documenting medical necessity.

2 Responses

  1. Chris Burritt D.O. on Sept. 6, 2011, 4:26 p.m.

    I disagree with “the most important step physicians can make”. Even as a fledgling PGY-1 it is obvious to me that the best way to practice medicine for the health of my patients (most importantly) but also to prevent wrongful claims of fraud is to simply opt out of medicare and perhaps insurance altogether. It’s the best way I know how to properly practice medicine according to the Oath of Hippocrates and prevent my practice from being jeopardized for being “an outlier”.

  2. Kash Tandon on Nov. 17, 2011, 10:15 p.m.

    We conduct audits for our clients to help them realize their coding and billing issues so they can be immediately corrected and remediated. With ICD 10, the issue will only increase.

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