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  • How to Respond to the Audit Results

    By Laura Loeb, Esq.
    Hogan & Hartson LLP
    Outside Counsel to IDSA

    It may be months or even a year before you receive the results of the payer's audit. The letter will state the amount, if any, that the payer believes you owe. Invariably, the payer has extrapolated the error rate in the sample of requested records over a year or year and a half. It is not unusual for the payer to find a high error rate and, therefore, for the amount requested to be a large amount. You also will be given in the letter a short deadline for when this amount is due.

    The letter can be very intimidating. It is meant to be. At this point, if there is a large amount of money at stake, it probably is a good idea to engage a lawyer. The lawyer should have some understanding of coding and reimbursement issues as well as experience in dealing with the payer and defending physicians in fair hearings.

    The letter should go over in detail the payer's audit findings, service by service, with an explanation as to why the service was denied altogether or downcoded. For infectious diseases physicians, the focus of the audit usually is E&M codes. The auditor will judge your documentation against guidelines developed by the American Medical Association (AMA) and the Health Care Financing Administration (HCFA). Even non-Medicare payers use these guidelines in conducting these audits.

    In addition, the letter usually provides you with three options:

    • Option One: Admit your wrongdoing, give up your right to appeal and pay the full amount by the deadline.
    • Option Two: Give up your right to appeal, provide the payer with an explanation as to why you don't owe this amount and take your chances as to whether the payer will reduce the amount owed.
    • Option Three: Appeal the audit results, pay just the amount allegedly in error for the sample of records (i.e., before the extrapolation), and the payer will audit a wider sample of records, albeit over the same time period in question.

    Most physicians agonize over whether to choose option two or three. If you choose option two, be prepared to pay the whole amount in question. You may believe you have a good argument that the audit error rate is too high and that your documentation is sufficient. However, my experience has been that once you waive your right to appeal by choosing option two, the payer has all the negotiating leverage. At this point, there is no incentive for the payer to be at all fair or understanding. Sometimes you can reduce the amount in the demand letter slightly, but usually there is little movement on the part of the payer.

    Option three is typically the best choice because it preserves your right to appeal the results of the payer's audit. The payer's threat under option three to request more records to review is a real one. However, if the payer already has found a high error rate in the first sample, you have little to lose by selecting option three, other than the inconvenience of gathering more records. This is because the wider sample is over the same time period as the initial request. The payer already has extrapolated the alleged error rate from this initial sample over the year or year and a half. Having the payer audit more records over this same time period will only result in a higher repayment amount if the payer finds a higher error rate in the wider sample. Thus, if the error rate in the initial sample is high, you have very little to lose by choosing option three.


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