Auditors are getting increasingly brazen. We're seeing more medical record requests, retroactive denials and significant payment demands from them. Could it be because some insurers are using audits ostensibly designed to locate and address "fraudulent or abusive" billing and coding practices for financial gain?

Take extrapolation, for example. Auditors recently visited a surgery center and examined 80 medical records. Out of 80, they found 2 records that were overcoded, 2 that were undercoded and 1 in which the op note wasn't signed.

Rather than asking the center to refund the overcoded claims and the unsigned op note, the auditors asked the center to pay a percentage of all claims. We're talking $64,000 instead of $3,000. That's extrapolation, although some might call it extortion. Oh, those 2 undercoded claims? Auditors told the ASC not to rebill those until they were instructed to.

Safeguarding what's rightfully yours
Yes, protecting earned revenue has never been more challenging. Proper coding alone is not enough these days.

Not all auditors may act in good faith. Auditors with a focus on financial incentives can sometimes become rather aggressive, using misleading recovery forays in an attempt to gain access to your medical records and provider revenue. When you give auditors access to your claim data and medical records, you do so with the assumption they'll assess proper use of service codes, modifiers, comparative billing patterns, medical necessity supported treatment, as well as documentation that properly supports all codes billed. However, reports show a large percentage of appeal submittals are overturned as the result of unsupported audit findings.

Gone are the days of written notifications and corrective requests regarding innocent billing mistakes and coding errors. Notifications involving reported billing errors are becoming more unreasonable and perplexing. Don't be surprised if you receive irrational audit findings such as payment demands being made based on discrepancies with documentation, even though the documentation meets appropriate guidelines and supports all codes billed.

Even with proper documentation and coding, an auditor may elect to use another ambiguous reason to justify a determination that documentation is insufficient and to warrant your refunding an insurance payment. It's not uncommon for auditors to make determinations without adequate review of all documents pertinent to proper claim adjudication. I've even witnessed auditors reporting coding errors that support a claim that was actually underpaid due to missed codes, then the provider was informed by the payor to not bill a corrected claim unless the payor instructs them to do so. These are just a few examples of practices witnessed by some auditors and payors that choose not to acknowledge governing laws and certain rights involving healthcare benefits.

Extrapolation, another word for extortion?
A more disconcerting practice involves those payors who take advantage of a minimum amount of innocent coding mistakes that their auditors find. Even though findings are minimal, some payors will use misleading tactics to justify submittal of much larger refund requests than expected through "extrapolation." Many providers have been surprised to receive huge refund requests by payors after an audit that does not correlate with the much smaller dollar amounts of the minimal coding discrepancies reported by the auditor. Extrapolation is an arbitrary and capricious refund methodology that relies on an error rate percentage calculation of claim sampling, rather than actual claim errors.

Basically, the payor calculates a percentage of claim or coding errors as reported by auditors against all claims audited. They then take that percentage (though minimal) and apply it to a much larger claim volume and time frame "as determined by the payor." Extrapolation signifies a presumed pattern of systemic overbilling rather than basing findings on actual claim errors. The problem with extrapolation is it also fails to comply with certain rights and payor compliance requirements as understood under governing laws.

How to defend yourself
Here are some ways to make sure you're not victimized by deceptive audit practices.

1. Don't let language deceive you. It's not uncommon for auditors with a primary focus on recouping revenue to use "fraud and abuse" or "risk adjustment" or another artistically defined excuse to conduct an audit and gain access to your medical records and claim data.
2. Leave a paper trail. Third-party entities acting on behalf of payors do not adjudicate or acknowledge appeal submittals. If you receive a payment demand from a third party, submit the appeal directly to the payor's appeals or grievance department, and send a copy of the appeal to the third party or to the payor's recovery unit as proof you have properly responded to the payment demand.
3. Know your rights. How do you know if an audit request or audit findings are valid? Knowledge is power. You and your earned revenue are protected by certain rights and governing laws. You're in a much better position to level the playing field and address deceptive practices if you know about protective rights and governing laws. You can legitimately respond to assertive auditor demands trying to force on-site reviews. A large percentage of claim denials and refund requests fail to meet payor compliance requirements and governing laws. Government Accountability Office reports for 2011 show that 39% to 59% of payor denials were reversed on appeal. The more your facility exercises protected rights under governing law, the less likely it is to be victimized by disingenuous claim practices.