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When to Perform Medical Coding Audits

Healthcare organizations juggle many moving parts and two key processes that go hand in hand are medical coding and medical coding audits. Through medical coding audits, companies confirm that their practices are meeting regulatory and compliance expectations, and that they receive proper payment for the services rendered and resources utilized. Coding audits are reviews of healthcare organizations' coding practices, documentation quality, and billing accuracy. A comprehensive audit will validate that formal procedures are in place and being adhered to, and will assess workflow efficiency.

Medical coding audits act as a preventative measure so organizations can identify errors in billing and compliance quickly before they result in larger issues. Due to ever-changing guidelines and the ongoing need for coder education, coding audits serve an essential purpose in the healthcare practice. Organizations that do not regularly conduct coding audits risk financial loss when incorrect coding results in underpayments. Incorrect coding resulting in overpayments will result in a high rate of denials, and potential investigation and fines if the issues are repetitive and high volume.

Meeting Coding Compliance

How frequently a healthcare organization should audit its coding processes differs between companies. However, according to the HHS Office of the Inspector General (OIG), healthcare organizations are advised to perform a medical coding audit annually to confirm they are compliant.

There may be reasons why organizations choose to perform audits more than once a year. An organization’s compliance plan may require more frequent audits. Depending on the root causes of previously identified coding errors, specific types of cases (targeted DRG, APC) may be appropriate. Audits may be built into performance reviews for coders or providers, requiring monthly or quarterly reviews. Every organization may have a multitude of reasons that support audits being conducted more than annually.

The OIG recommends a consistent accuracy rate of 95% or higher. If an organization is not meeting this recommendation, its leaders may want to assess if a monthly or quarterly audit should be put in place.

Benefits of Medical Coding Audits

Medical coding audits improve a company’s operations. By performing audits, organizations will see benefits including:

Maintaining Compliance: Compliance requirements consistently change as new regulatory guidelines are implemented. Medical coders need to stay current on all compliance guidelines. Through coding audits, companies can assure their medical coders are up to date with their continuous training. A coding auditor will identify any new regulations, payer rules, and laws that may affect coding practices.

Avoiding Penalties: Healthcare organizations that are consistently cited for coding issues or irregularities may be flagged and find themselves under investigation. Not only are investigations time-consuming and costly, but they can also result in fines if the investigation identifies legitimate compliance issues.

Reducing Denials: Coding audits increase billing accuracy, which results in fewer claims denials. Claims are often rejected for minor errors and small inaccuracies that are very easily fixed. An average of 1 in 7 claims are denied due to mistakes that could easily be fixed prior to billing. Audits can very easily identify these high-frequency error trends and enable prompt corrective action that results in fewer claims denials and increased savings.

Retrospective and Concurrent Coding Audits

The timing of when audits are performed may differ based on the organization’s objectives. First, there's retrospective auditing which refers to the review of previously submitted claims. Concurrent audits refer to the review of claims before they are submitted for billing. While concurrent audits can help to increase immediate accuracy, it means that more time will be taken for claims to go to billing, impacting cash flow. Companies that are struggling with accuracy may find concurrent auditing useful because it tackles the issue right away.

Retrospective audits help organizations see the larger picture and determine any ongoing procedural issues, errors, and trends. Both retrospective and concurrent audits have their benefits and pitfalls to consider. It might be useful to secure a third-party auditing company such as Lexicode to help determine which type of audit would be better based on an organization's needs.

Examining the Auditing Process

The coding audit process is thorough and involves many different work steps. The first step will be to identify the type of audit that will take place, retrospective or concurrent. Auditors will then decide on a sample size, or how many medical records they plan to review; the sample may be random or targeted depending on the goal of the audit. This number will differ based on the audit type and the organization's size. For a smaller organization, 10 to 20 claims may be a good place to start and for larger organizations, 25 to 30 claims per coder/provider may be best.

Once the auditor reviews the sample with auditing goals and scope in mind, the detailed findings, including a root cause analysis, will be presented to the organization. Most importantly, the auditors’ recommendations will be valuable in identifying corrective action and how to best move forward. Alternatively, organizations may hire a consultant to help them determine how to best implement the recommendations for improvement.

Goals in coding audits include:

  • - Identifying gaps and inconsistencies in documentation
  • - Identifying irregularities in payer reimbursement
  • - Identifying incorrect application of medical codes and modifiers
  • - Identifying claims billed incorrectly according to payer rules
  • - Identifying any fraudulent practices

Internal vs. External Coding Audits

Organizations can choose to utilize an internal auditor or commission a company outside of the organization to conduct their medical coding audits. While it is up to the organization which type of auditor if preferred, all auditors need to be credentialed and experienced in medical coding and auditing practices.

An internal auditor is most likely going to be an employee with other responsibilities since auditing only happens periodically. If the employee is feeling overworked and is unable to provide a thorough audit, this can present a problem when trying to establish a complete picture. At the same time, an internal auditor may be biased having worked in the coding department which could also result in inaccurate data.

Outsourcing coding audits to medical coding companies such as Lexicode can help organizations receive a more objective evaluation of their coding practices. With an outsourced company, the auditor will be fully engaged and dedicated to this particular task rather than juggling multiple responsibilities.

Lexicode provides organizations with coding audits and revenue impact assessments, denials management and appeals, HIM operational reviews, and a consulting team to support providers every step of the way. Lexicode also offers education services for medical coders and physicians so they can stay on top of their continuing education.

Conclusion

Medical coding is a key process in the healthcare industry and presents its own unique complexities and challenges. Through regular medical coding audits, providers can meet compliance standards, reduce denials, increase savings, and avoid investigations and fines. With LexiCode’s consulting and auditing services, organizations receive support and a thorough review to help them increase the accuracy of their claims and optimize their coding processes. With over 40 years of medical coding experience, LexiCode is a trusted brand in the healthcare industry.