Understanding the Risks of the Various CMS Audits to Avoid Large Overpayment Demands and Loss of Credentials

Healthcare providers across the nation have been battered by audits from the CMS and private payors alike. The CMS, however, has many different types of audits, each with their own wrinkles and potential risks to providers. To understand the risks involved, a provider needs to understand what type of audit is being conducted and the potential ramifications from same.

As the CMS employs a myriad of audits, this article will focus on some of the most impactful ones, as well as some of the newer audits of which providers may not be fully aware.

Post-Payment Audits

The most well-known audit is the post-payment audit. A post-payment audit is where the CMS requests a sample of records, reviews medical records to determine medical necessity and accuracy of coding and issues a determination. Based on many factors, including sample size and error rate, the CMS may also extrapolate its findings, which typically results in overpayment demands in the six-figures.

Post-payment audits are predominantly handled by CMS contractors who have contracts for a region. The contractors are advised what codes to focus on based on high error rates both within the region and medical specialties. Once an overpayment demand is received secondary to a post-payment audit, providers are given an opportunity to appeal the findings.

Post-payment audits handled by Recovery Audit Contractors (“RAC”) are of particular concern since RAC auditors are third parties who are paid a percentage of the amount they recover on behalf of the CMS. RAC audits are subject to the same appeals process as other CMS audits, however, due to their financial incentives, success at the first levels of the CMS appeals process is lower in RAC audits.

Pre-Payment Audits

A pre-payment audit usually follows a post-payment audit that found a high error rate concerning a specific code or modifier. During a pre-payment audit, providers are required to submit medical records for the dates of services being billed concurrent with the billing of said services. As such this is an onerous, time-consuming process for a medical practice. A certified professional coder will review the billed codes against the documentation and pay or reject the claim. If the claim is rejected, it becomes part of the overall monthly error rate. Providers need three (3) consecutive months of low error rates to be off pre-payment audit.

Although pre-payment audits are largely educational in nature, they significantly impact cash flow and prolonged participation could lead to other audits, and in some cases, referrals to civil and criminal investigations.

Targeted Probe and Educate (TPE) Audits

TPE audits are utilized by CMS contractors to review the documentation and compliance of providers who have either a history of high claim error rates or billing practices / utilization rates that make them outliers compared to their peers.

The first rounds of a TPE audit are almost exclusively educational. A random sample of claims is taken, and the CMS contractor has them reviewed by a certified professional coder to determine accuracy. If the CMS contractor finds any claims were not supported by the documentation, those unsupported claims are requested to be repaid to the CMS and an error rate is determined by the number of unsupported claims. If the total error rate is high, the provider is afforded an educational call with the CMS’ reviewer and investigator. The provider then moves to the next round of the TPE where the same process is followed.

Although initially educational, if a provider continues to have a high error rate through three (3) rounds of a TPE audit, the CMS can refer the provider for additional action, including, termination of CMS billing privileges.

Supplemental Medical Review Contractor (SMRC) Audits

An SMRC audit is like a RAC audit, with one key difference being that SMRC audits are handled by one national contractor rather than regionally. An SMRC audit evaluates medical records to determine whether Medicare claims were billed in compliance with acceptable standards of documentation, billing and coding.

The focus of the SMRC include vulnerabilities identified by CMS internal data analysis, the Comprehensive Error Rate Testing (CERT) program, professional organizations, and Federal oversight agencies.

Like the TPE audit, the SMRC process also allows for a “Discussion/Education Period” where providers can discuss results and have an opportunity to submit additional records for the SMRC’s review prior to finalizing the findings. This audit, unlike other audits, has strict deadlines for the submission of records and request for a discussion and education call, and to submit supplemental records for review.

After the education and review of additional documentation process is completed, the SMRC may initiate claim adjustments and/or overpayment demands through the standard CMS post-payment recovery process. Practices have appeals rights through the standard CMS appeals process as well.

How Frier Levitt Can Help

Audits are an unfortunate cost of doing business in healthcare. Therefore, understanding the multitude of CMS audits and their respective risks is crucial to avoiding cash flow issues, large overpayment demands, or worse. Frier Levitt has spent decades helping providers going through every conceivable audit and has a team of attorneys and billing and coding experts who can help your practice navigate through this stressful process. Contact us today if you receive a document request, overpayment demand or audit.

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