Compliance Means Audits, Monitoring

February 15, 2001
Practice Management
John W. McDaniel

When preparing its final compliance guidelines for physician practices recently, the Office of Inspector General (OIG) organized them in a step-by-step format, outlining the seven elements of a compliance program. In effect, the OIG recommended a roadmap for physicians seeking to implement a compliance program.
Unlike guidance issued by other organizations, the OIG of the federal Department of Health and Human Services said in its Final Physician Practice Guidance that it recognizes that most physician practices may not have the resources to implement all elements of a compliance program. Therefore, the OIG set priorities for the steps physician practices should follow when creating an effective compliance program. (Readers can find the guidance, Compliance Program Guidance for Individual and Small Group Physician Practices, at www.hhs.gov/oig/new.html).

Quality Control

Developing and implementing an effective compliance program begins with auditing and ongoing monitoring under a coding compliance program. The process of auditing and monitoring includes regular evaluations to determine whether the practice’s standards and procedures are current and accurate and that the individuals responsible for discharging coding and compliance duties are doing so accurately, thereby ensuring proper claims submissions. Each practice should adopt policies and procedures to ensure that it is complying with current reimbursement and billing processes and with all changes in CPT-4 codes and government regulations.

The OIG recognizes that it may be difficult for a physician practice with a single person supervising billing and coding to perform effective ongoing review. While some physicians have an understanding of basic coding principles, many do not have the detailed knowledge needed to evaluate the accuracy of the specialized codes assigned to each procedure. Similarly, it may be difficult for a physician in a small practice to evaluate properly whether documentation of the professional care meets all payers’ standards. For this reason, the OIG suggests that physicians use outside reviewers to do baseline audits and an annual review, saying outside consultants bring a fresh perspective to auditing and monitoring.

In addition to developing and implementing policies and procedures for coding and billing, physicians also should ensure that patients’ bills and medical records are reviewed for compliance with applicable coding, billing, and documentation requirements. The OIG recommends that physicians perform a baseline audit for benchmarking to help the practice evaluate the progress it makes in reducing or eliminating potential areas of vulnerability.

The practice can use a self-audit to determine if bills are coded accurately and reflect the services provided, whether services or items provided are reasonable and necessary, and whether medical records contain sufficient documentation to support the charges. A self-audit also can determine whether any incentives for unnecessary services exist.

During the audit, physicians should establish a consistent methodology for selecting and examining records and develop the audit methodology to be used in the future. The audits should be conducted on claims submitted in the first three months after the practice has completed an education and training program on compliance issues. Using the first three months’ of data will allow the group to establish a benchmark against which to measure future compliance effectiveness.

Following the baseline audit, the OIG recommends that physicians conduct audits at least once each year to ensure that the compliance program is being followed. Although there is no set formula as to how many medical records should be reviewed, the OIG recommends a basic guide of two to five medical records per payer or five to 10 medical records per physician. Of course, physicians will have greater confidence in results from larger sample sizes.

If an audit uncovers problems, the group should conduct a focused review more frequently. When audit results reveal areas needing additional attention or reflecting the need for education of employees and physicians, these areas should be incorporated into the practice’s training and education program.

Periodic audits should include the following:
• A valid sample of the practice’s top-10 denials or the practice’s top-10 services provided
• Confirmation that the practice has been using specific codes and not codes that are too general for payers’ purposes
• A check for data-entry errors
• Confirmation that all orders are written and signed by a physician
• A check for reasonable and necessary services performed
• Confirmation that all tests ordered by physicians were actually performed and documented and bills were submitted only for those tests
• Review of assignment codes and modifiers to claims.

Taking Action

One of the most important elements of a successful compliance program is taking appropriate action when the practice identifies a problem in its internal audit. The action should be taken as soon as possible, but it is recommended that the action be taken within 60 days of the date the problem is identified. In some cases, the action can be as simple as generating a repayment to Medicare or the appropriate payer. In other cases, the practice may want to seek legal advice or consult with a coding and billing expert to determine the best course of action.

After a practice has conducted a baseline audit and corrected any deficiencies, it should establish an ongoing coding compliance program. Such a program would include the following components:
• An analysis of evaluation and management (E&M) coding for each physician and a comparison with the federal Health Care Financing Administration’s (HCFA) audit standards. This comparison will help physicians determine areas of potential undercoding and overcoding. Areas of undercoding indicate a reimbursement opportunity and any areas of overcoding indicate a potential liability for a practice.
• Quarterly reporting of E&M coding for each physician
• Chart audits for each physician
• Individual educational sessions with each physician to review the outcome of the coding assessment and to establish a framework to ensure that compliance requirements will be satisfied.

In addition to chart audits and physician education, each practice should profile each physician’s utilization patterns of major E&M codes against HCFA’s actual usage distribution. HCFA, which manages Medicare and Medicaid, has this information available by medical specialty and it may be obtained under the Freedom of Information Act. Or physicians may ask physician practice improvement advisers for this information. (See Table 1: Family Practice E&M Coding Distribution.)

Each practice should profile its utilization against the appropriate standards to determine the potential for overcoding or undercoding. Upon review of this baseline information, physicians can use chart audits to determine whether they are overcoding or undercoding and to ensure the appropriate use of documentation and medical necessity to substantiate procedural coding. Table 2 shows utilization patterns for established office visits for two physicians in the same practice and the benchmark or target frequency for each physician.

While both physicians in Table 2 have approximately the same patient volume, Physician A is overcoding by approximately $17,154 per year, and Physician B is undercoding by approximately $8,669 per year on established office visits alone. A chart audit showed Physician A consistently failed to substantiate the need for higher levels of service, and Physician B had better documentation and proof of medical necessity but used lower-level codes.

Most physicians are like Physician B in that they have a tendency to undercode. Therefore, a coding compliance program can lead to increased reimbursement for most physicians. A program also can help those physicians who tend to overcode by setting a framework within which their coding proficiency can improve.

______________________________

Table 1: Family Practice

E&M Coding Distribution

(CPT-4 Codes and Distribution Percentage)

____________________________

         Table 2: Utilization Patterns for Two Physicians

Source: Health Care Financing Administration,
Bethesda, Md., 2000, and Physician Management Group Inc., New
Orleans.

Note: Benchmark frequency is the goal frequency for each physician.