Coding and Billing

How to Avoid an Insurance Audit–And What To Do If It Happens

By Joe DeLoach, OD, FAAO

Dec. 5, 2018

An audit by an insurance company can be a costly and stressful event for your practice.

Common problems in optometry, resulting in bad audit outcomes, stem from the “head in the sand” approach taken by too many doctors, and the reliance on unsubstantiated advice about billing and coding from CE programs, industry, word-of-mouth and blogs.

Optometrists often have the misguided opinion that the small nature of their practices will protect them from audits. A recent blog post stated that recommendations for strict compliance with reimbursement rules is simply an attempt to restrict optometrists from billing medical care. Nothing could be further from the truth.

Optometry as a profession has steadily moved up CMS’s Comprehensive Error Rate Testing ranking of the most fraudulent and abusive medical specialties. Violations of optometry billing resulting in multiple six-figure fines, and even fines in the millions, have become too common. Several optometrists were sent to federal prison in 2018 for fraudulent insurance issues.

Here are the essential points to remember to avoid insurance audits, and what to do if you do get audited.

What Are Insurance Audits?
There are two main sources of audits: Random audits and target audits.

Random audits are just that–random, and every provider is likely to experience one. Most doctors are already receiving requests for medical records they may not recognize as what we often refer to as “mini-audits.” Through software-driven cognitive analysis of billing patterns, payers can look at far more providers than the previous manual audit system allowed.

Target audits occur when provider billing patterns fall outside the norm for that provider’s profession. This can include volume of services, repetitive services, extensive billing for diagnostic services and billing for services that are not common within the profession.

Are there Red Flags to Avoid Getting Unwanted Attention?
Staying out of trouble starts with providers having a thorough understanding of the coding-and-billing-related federal fraud and abuse laws, the medical policies of each payer in their particular region, the preferred practice patterns for the most common ocular presentations, and what is required for defensible medical-record documentation.

The most common issues resulting in audit of optometrists are over-use of Level 4 and 5 Evaluation and Management codes, over-use of the Comprehensive Ophthalmology codes and billing for non-medically necessary diagnostic testing. One of the most significant problems in optometry is what some refer to as “panel testing.”

Panel testing involves having protocols where a set number of diagnostic tests are always performed based on the reason for the visit/chief complaint or based on a particular disease or diagnosis. The medical necessity for most every diagnostic test must be based on knowledge gathered prior to the point the decision is made for each additional test. Repetitive, or “confirmatory,” testing is not considered medically necessary.

Some red flags can be avoided and some cannot. Providers who have a patient base with a higher percentage of ocular disease patients will obviously provide higher volumes of medical care and more diagnostic testing. They are more likely to be audited, and therefore, their medical records must adequately justify the need for the increased level of medical care provided.

Equip Yourself with Valuable Information
There are good, and not always accurate, sources of information on proper medical reimbursement. The best information comes directly from the source. Providers should have updated copies of the CPT and ICD manuals, which often serve as the basis for many reimbursement issues. Additionally, providers must have a working knowledge of the fraud and abuse laws, especially the False Claims Act and the Anti-Kickback Statute, and what the regional medical policies of each payer are. Doctors can research these issues themselves or take advantage of compliance and reimbursement company materials that can provide a more direct roadmap to the rules providers must abide by.

Doctors should be wary of any educational material that focuses on making money instead of patient care. Demand that “experts” provide documentation of any information given, typically reference to law sources or written policies of ICD, CPT or individual-payer medical policy.

Train Your Staff
Training of staff involved in the medical-record documentation process, or any stage of the billing process, is important. What is more important is that providers not delegate the process of coding to those who cannot make independent medical decisions. Only the doctor can decide the type and level of office visit billed, the diagnostic testing billed and the diagnoses that support those decisions.

Keep Thorough & Consistent Medical Records & Do Training Audits
With changes in audit protocols, everyone is subject to audit. All doctors must understand the tenets of reimbursement, individual-payer policy and how to properly document the medical record. The medical record is the only defense to the inevitable audit. CMS Fraud and Abuse Prevention Program recommends an annual medical record audit of 10 encounters for every provider in the practice. To be honest, this is rarely sufficient. Reviewing our own prior decisions rarely uncovers coding and documentation errors, and a professional “training” audit is a much better choice. Training audits should be conducted by companies with contract auditors, and are the best way to find out how a doctor will fare come audit time. It is a small investment to prevent potential unfortunate audit results.

News of an Impending Audit Will Probably Come Via a Letter
Unless criminal activity is suspected, auditors rarely just “show up” at a practice. Audit request letters are the norm and will provide all the details necessary to comply with the request. What auditors will typically request is the medical record for a specific service date. As few as ten, or over a hundred, medical records may be requested. Target audits may focus on type and volume of office visits, use of particular diagnostic tests or how select diagnoses are commonly billed.

It is imperative that a doctor never improperly alter a medical record in an audit request, and that they comply with the dates referenced for return of any requested information.

An Audit Can Be a Long Process
Once the payer receives the requested medical records, it can take weeks to months for the doctor to get a reply. Requests for larger amounts of encounters can take six months, or more, before the doctor hears back from the payer. It is vitally important to identify a contact person in your office, so the payer has someone they can have direct contact with at any time. While this may be an experienced office manager, it is a bad decision for the doctor to not stay in close contact with every phase of the audit process.

What Happens if You Fail an Audit?
Unfortunate outcomes from an audit are based on the severity of the problem. At a minimum, payers will request the doctor return reimbursement received for services the audit process deemed not medically necessary or not documented. As the severity of the offense increases, so will the penalty. In addition to the return of monies received, audit decisions can include fines per service item billed, probationary sanctions, removal from participation in the plan and even criminal penalties. The more severe penalties are almost always avoidable by simply knowing and following ethical patient care decisions and individual payer rules.

If audited, it is always a good idea to seek help from a reputable compliance or reimbursement service. Proper response to audit requests can make a big difference in outcomes. There are multiple levels of audit appeal based on individual payer rules. If involved in any significant audit problem, including the decision to appeal, providers should always compile a defense “team” consisting of reimbursement and coding specialists and a qualified health-care attorney.



Joe DeLoach, OD, FAAO, is a Clinical Professor at the University of Houston College of Optometry and CEO of Practice Compliance Solutions. To contact: :

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