The Medical Chart Audit Process
The only way to verify coding accuracy is to compare the coding against the medical record documentation. The medical charts review, a frequently conducted healthcare audit, looks at documentation and claims information to determine if claims have been appropriately coded.
Chart auditing programs have become necessary in response to the increase in federal payer audits. Even commercial payers have geared up teams to conduct frequent and random hospital and medical practice onsite and offsite compliance audits.
When a provider organization performs an internal audit — or hires an independent auditor to perform an external audit — the organization learns if its claims will withstand government scrutiny. The audit also provides an opportunity to self-report and correct issues that pose a threat to the organization’s financial viability.
All medical coders should learn how to conduct an audit in view of its potential value to their employer (and their coding careers). Fortunately, the audit process is easy to understand when broken down to its component parts.
Step 1: Plan the Medical Record Audit
Perhaps you need a medical record audit to establish a baseline of coding accuracy for the organization or to assess the effectiveness of previous staff training related to areas targeted by audits. Auditing objectives range from investigating areas of insufficient documentation to identifying improper coding, billing activity, and postpayment risks. In any case, conducting an audit to produce useable data requires planning. Questions to consider include:
- Does benchmark data from previous audits exist?
- Do benchmarks suggest the focus of the audit (e.g., new patient visits, consultations, office visits, hospital visits, etc.)?
- Do other events suggest the focus of the audit (e.g., claims denials, federal audit targets or error reports, a new regulation or guideline, a new internal policy or software platform, a new medical coder or provider)?
- Will the audit evaluate for revenue and compliance?
- Is the audit prospective (before filing the claims) or retrospective (after filing the claims)?
- How many charts will you review?
- Is there a measure for the focus (e.g., utilization patterns)?
- Which audit tools will you use (e.g., code sets and guidelines, payer guidelines, fee schedules, and specialized software)?
Chart auditing is an iterative process, meaning that you repeat the process, and what you learn from one audit affects your starting point for the next, including the frequency with which you audit. Therefore, answers to these questions will likely change.
Step 2: Choose Between 2 Basic Auditing Methods
A prospective audit helps identify and correct problems before sending claims to the payer. A prospective audit reviews the documentation and codes billed to the payer. This identifies inconsistencies or errors, although it may delay the billing process.
A retrospective audit is a postpayment audit to evaluate whether services that were previously reported to a payer were appropriate and consistent with the payer’s binding rules. The auditor reviews the documentation, claim forms, and sometimes the explanation of benefits (EOBs) to ensure proper medical billing.
Each medical practice must determine which type of audit method will work for its environment. Note that errors identified in the retrospective audit must be resolved through corrected claims, refunds to the payer, and possible fines.
Step 3: Decide the Audit Approach
Choosing between a focused audit and a random audit will depend on which approach serves the audit’s objectives.
- Focused audits center on a particular service item, provider, diagnosis, etc. For instance, you may need to audit a single provider who is trending in above-average reimbursement. Or maybe your organization is struggling with modifier errors.
- Random audits refer to comprehensive reviews involving a sample of charts arbitrarily selected to indicate compliance problems reflected in all charts. The sample will come from a designated period, preferably within the last three months. This type of audit pinpoints areas to focus improvement efforts and training. Baseline audits, designed to inform the medical practice how it fares in relation to correct coding and billing, are typically random audits and should include all coding practices, services, and practitioners in the organization.
Step 4: Determine Audit Scope
Determining the scope of the audit involves honing or defining factors that entered the decision to perform a focused or random audit.
You might choose a random sampling if this is the practice’s first audit. If the organization has conducted previous audits, past audit reports should suggest a focus area such as initial office visits, consultations, inpatient visits, or certain diagnosis codes. Reasons might necessitate a payer-focused audit and require you to review charts billed exclusively to Medicare, Medicaid, or another payer. Similarly, you might perform a provider-focused audit or a coder-focused audit. Maybe you need to review high-volume services or those with high denial rates.
Priority should define the audit scope. Focus on coding and billing complexities with a heightened potential to affect reimbursement or liability. Schedule less urgent target areas with a recurring yearly audit work plan .
In defining the audit scope, the auditor should include the sample date range.
Step 5: Determine Sample Size
The audit sample should use a percentage of patient encounters that represent the encounter types. Auditing too few records may distort results, while auditing too many becomes impractical in terms of time and labor.
The standard audit sample size ranges from 10 to 15 charts. When conducting an audit involving multiple physicians, the OIG recommends five to 10 charts per medical provider.
The OIG also recommends using RAT-STATS to help with statistical sampling. This tool is provided for free through the OIG and will tell an auditor how many charts to pull for an accurate sample size.
Tools such as RAT-STATS allow the practice to understand the sampling methodologies used by payers. This allows the practice to remain proactive in compliance efforts by mining information that reflects high-risk areas. If the practice can identify these areas, audit the documentation and coding, and provide education based on variances, then the practice will lower the probability of having a payer audit reveal hidden liabilities.
Step 6: Select Audit Tools
Prioritizing efficiency when selecting an audit tool is important when auditing the medical record. If the auditor is conducting a review of surgical notes, for example, a surgical audit tool should be used. If the auditor is conducting an evaluation and management (E/M) audit, the tool needs to reflect the practitioner guidelines.
Some auditors choose audit software to audit records, print an audit report, and help analyze the data. Keep in mind that software does not have the capability to evaluate medical necessity. This is a “thinking” process that requires the auditor to possess a strong background in medical coding.
When selecting an audit tool, remember that tools vary among payers. MAC tools may vary, as well. The auditor should choose according to the audit scope, using a payer- or MAC-specific tool when applicable.
It’s also imperative to have references on hand. For accuracy and to support audit findings with verifiable guidelines, the auditor should refer to:
- ICD-10-CM, CPT®, and HCPCS Level II code sets and guidelines when auditing outpatient organizations
- CPT® Assistant references and AHA Coding Clinic® references
- Frequency reports by physician (utilization of levels of service obtained by the medical billing software) and utilization based on specialty (can be obtained by insurance carrier)
- Physician’s fee schedule by insurance carrier
- Payer guidelines and payment policies
- Medical terminology reference, such as a medical dictionary
- The OIG Work Plan
Step 7: Locate Documentation
Once the sample size and charts have been identified, you’ll need to collect documentation pertaining to the date of service (DOS) for charts under review. In addition to a note, the medical record for the patient encounter might include labs, forms, images, and other miscellaneous items. All documentation is required to successfully conduct the review.
In a retrospective audit, you’ll need the superbill/charge ticket, patient chart, claim form, or billing record (to validate what was submitted), and the EOB or remittance advice for each patient encounter.
You might also want to familiarize yourself with the chart organization, special forms including the history form, problem list, and medication sheet.
Step 8: Conduct the Audit
Using your tools and resources, perform the audit. Be sure to review both coding and documentation. Pay attention to the guidelines in the CPT®, ICD-10-CM, and HCPCS Level II coding books, as well as ensuring proper documentation. Double-check coding criteria for services, such as:
- New versus established patient
- Consult versus transfer of care (referral)
- Time-based code requirements
- Critical care services
- Hospital services
- Nonphysician practitioner services
Step 9: Analyze Audit Findings
Once the audit is complete, analyze your findings and identify problem areas, such as:
- Improper assignment of CPT® or HCPCS Level II codes for procedures or services
- E/M levels not supported by documentation
- Incorrect diagnosis codes, including ICD-10-CM codes that don’t capture optimum specificity or support medical necessity
- Missing modifiers and/or incorrect modifier usage
- Incorrect diagnosis linkage
- Services performed but not billed
Step 10: Create the Audit Analysis and Summary Report
Compile the audit findings in a concise report. Your writing style should be detailed and persuasive. The reader should be able to understand what was audited and how the audit was performed.
Identify the number of encounters documented correctly and incorrectly. Note trends and errors in coding. Each error or risk area should be outlined categorically and labeled so as to define the category (for example, particular CPT® code, particular payer, particular provider, or specialty). All errors should be explained and include a citation to the appropriate standard.
Finally, suggest remedial actions. Recommendations might include additional training or modification of documentation systems. Include recommendations for follow-up analysis to evaluate the effectiveness of the corrective action.
The auditor’s approach to communicating the audit results is as important as the audit approach. Choose a constructive tone to avoid defensive reactions that could sabotage improvement efforts. Also give the staff time to review results and prepare questions before meeting. The audit report should be the first postaudit communication. Know your audience and personalize findings for the medical coder, the physician, and the nonphysician practitioner.
Step 11: Meet with Coders, Practitioners, and Ancillary Staff
Discussing audit findings allows the auditor to address risks and the corrective actions to mitigate them. Allow enough time to talk about each case, offer suggestions, and answer questions.
When conferencing with the provider, you may get pushback. Providers concerned with patient care may not prioritize learning the details of coding and compliance. Auditors can help providers understand the importance of these areas by speaking to their concerns. For instance, if the provider is concerned about unwanted attention from CMS, the auditor can outline the potential risk of an audit. Some auditors also show providers examples of how inaccurate coding can lead to revenue loss.
Let staff members know what they did well and how they can improve. If a physician isn’t documenting a thorough assessment and plan, for example, explain why capturing these elements is important for the patient and the practice. If audit findings are under dispute, substantiate them with hard copies of payer and coding guidelines.
Remember, the tone of communication is crucial. Your goal is to establish open dialogue.
Step 12: Make Recommendations for Improvement
The audit won’t benefit the organization if efforts aren’t made to address utilization pattern abnormalities, coding errors, and documentation deficiencies.
Use audit findings to educate providers on how to improve clinical documentation. Your recommendations might include shadowing sessions or creating “cheat sheets” to help practitioners capture the full clinical story and all services provided during the patient encounter.
Audits can also direct ancillary staff training. Tailor education to correct detected problems. Educate medical coders and billers on the proper coding and billing of CPT® codes, ICD-10-CM codes, HCPCS Level II codes, and modifiers.
If internal policy causes error, revise the policy. Commit to following through on all recommendations, particularly audit-tailored training, monitoring, and suggested target areas of future audits.
Step 13: Provide Ongoing Monitoring and Assessment
Consult with providers and the compliance officer or practice manager to establish (or modify) an audit work plan. A general rule to determine how often to conduct a chart review is “more errors, more audits.” Create a timeline based on the audit results.
For instance, if reviewed charts achieve 90 percent accuracy, a standard annual audit should keep the organization compliant. Up the audit cycle to every quarter if accuracy drops between 75 and 90 percent. Audit monthly for accuracy below 75 percent. Finally, perform a prospective audit with accuracy below 60 percent . The workload might seem daunting, but the alternative is worse.
Step 14: Execute Audit Follow-up
If an identified error has resulted in payer overpayment, it’s necessary to report it to the payer. The organization may voluntarily return the overpayment or request that the payer initiate a demand letter. How refunds are handled will depend on the payer who made the overpayment.
If, however, you suspect the overpayment is linked to a pattern of claim errors that has accumulated overpayments, you have an obligation to investigate. You will need to initiate a focused audit. If your findings confirm a significant error rate involving overpayments, the organization should seek legal counsel regarding the next steps.
Auditors don't handle self-disclosures. When one is needed, legal counsel should take over the disclosure process and participate in the creation of a corrective action plan.