A frequent misconception held by out-of-network providers is that cash-based and out-of-network healthcare practices are above the fray of insurance company scrutiny. But even when a practice does not accept insurance, insurance companies can still find a way into the picture. Patients often expect their health plans to reimburse at least part of the cost of care. To meet those expectations, some practices provide superbills, while others go a step further and submit out-of-network claims directly to insurers as a courtesy. These arrangements can help patients, but they also expose practices to unexpected scrutiny and potential insurance audits.
For out-of-network providers who believe they are isolated from payor audits, it can be a shock to receive a demand for records. Many out-of-network providers assume audits only happen to in-network practices. In reality, insurers frequently review out-of-network claims, and sometimes those reviews expand into broader audits of a provider’s records and billing practices.
What Are Insurance Companies Looking For in an Out-of-Network Audit?
Insurance companies typically request audits to verify what services were provided, whether those services match what was billed, and whether the care was medically necessary under the patient’s policy. In some cases, an insurer may also revisit previously paid claims to determine whether it believes it overpaid and is entitled to recover funds.
Audits can also be part of compliance check-ins by payors. Insurers are often required to monitor for fraud, waste, and abuse, and out-of-network claims naturally receive closer attention because they fall outside standard contractual controls. This is particularly the case when payors conduct financial audits to determine whether patient financial responsibilities (e.g., co-pays, deductibles, co-insurance, etc.) are being collected by out-of-network providers.
Do Out-of-Network Providers Have to Respond to a Payor Audit?
Whenever an insurance company makes payment on a claim, whether in-network or out-of-network, insurance regulations usually provide that they may audit paid claims to root out fraud, waste, and abuse. Practices that submit claims on behalf of patients directly to payors make “implied certifications” that the services they provided, and medical records kept in connection with them, meet the relevant American Medical Association’s CPT code requirements. Assuming you can safely ignore an audit request can be a costly mistake, potentially leading to repayment demands, fines, or legal action.
Even fully cash-based practices are not immune. Patients may still seek to be reimbursed by their medical insurance by submitting a superbill, which may trigger an audit if the payor suspects the billing or services provided raise red flags.
How to Reduce Risk and Prepare for an Insurance Audit
The best defense against audit risk is preparation. Practices that consistently follow their internal policies, comply with HIPAA and state privacy laws, and maintain clean, accurate records are far better positioned to respond if questions arise. Documentation should always be complete and compliant, including consent forms, privacy acknowledgments, and required disclosures, not just clinical notes.
Clear communication with patients is equally important. Patients should understand upfront how out-of-network reimbursement works and that insurance coverage is never guaranteed. Collecting payment at the time of service, collecting patient financial responsibilities, and setting realistic expectations can prevent disputes and reduce pressure on the practice if reimbursement is denied.
What to Do If You Receive an Audit Notice
If an audit notice arrives, prompt and careful action is critical. Providers should avoid making changes to records once an audit is underway, as even well-meaning edits can raise red flags and be considered fraudulent alterations. Instead, providers should promptly consult experienced healthcare counsel who can reach out on your behalf to the special investigations auditors to clarify the scope of the audit and seek additional time to prepare an appropriate and strategic response.
Insurance audits do not have to derail your practice, but if you ignore them or do not handle them properly, they can bring about much more exposure than just a monetary demand. For cash-based and out-of-network practices, having the right legal team can make all the difference when insurance companies come knocking.
Protect Your Practice with Frier Levitt
The stakes are high, and timely intervention to an audit is crucial to protect your financial interests and professional reputation. Frier Levitt’s Audit Defense Team has extensive experience navigating complex payor audits and safeguarding practices from further scrutiny. We tailor our defense strategy to each case to achieve the best possible outcome for our clients.
Unjust audit findings could jeopardize your practice’s future. Contact Frier Levitt to learn how we can help you challenge payor audits and protect your practice
