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By Joan Logue
10/09/07
Probe Billing Audits:
Your Best Defense Against Increased Federal and State Scrutiny
Joan Logue
Are you ready for Medicaid auditors?
You should be because they’re coming. Over the next few years, federal
and state efforts to prevent and punish Medicaid fraud, waste, and abuse will
blossom. Investigators will use the latest data mining techniques to uncover
billing errors and questionable billing practices in health-care organizations
of all sizes.
In addition, the penalties for Medicaid billing errors, especially systemic
errors, will be significant. Under new regulations, even one or two consistent
billing errors could lead to huge fines of up to $10,000 per transaction.
Medical laboratories, whether within a hospital or independent, will face
new pressure to demonstrate compliance with federal and state regulations.
And while labs generally do not tend to have large numbers of billing errors,
errors in the labs themselves are fairly easy to detect. So you have to be
prepared.
To understand this issue you need to become familiar with the Deficit Reduction
Act of 2005. The act, which took effect in January of 2007, includes a provision
that takes federal oversight of the states’ Medicaid program to a new
level.
The problem addressed by the Deficit Reduction Act was that Medicaid expenditures
were growing very fast—much faster than Medicare. In some states, Medicaid
expenditures account for one-third of the state budget, and in five years,
Medicaid is expected to be the top expenditure in state budgets across the
country.
Meanwhile, federal oversight of state Medicaid programs had been lax, mainly
due to insufficient funding and staffing. Now, as a result of the Deficit Reduction
Act, there is a new chain of accountability standards for Medicaid cost control,
and the net effect is that medical labs are facing more scrutiny than ever.
Here
are the key elements of the law that will lead to increased audits of medical
laboratories:
• The federal government is providing financial incentives to states
that enact false claims statutes mirroring the federal False Claims Act. As
states adopt these statutes, Medicaid billing audits will become more common
and more uniform.
• All health-care organizations receiving annual Medicaid payments
of at least $5 million must establish written policies, applicable to all employees
and contractors, which provide detailed information about Medicaid fraud. Ignorance
of state and federal regulations will not be an acceptable excuse for violations
uncovered in audits.
• Even organizations that do not achieve $5 million in Medicaid business
will be affected by the new provisions of the Deficit Reduction Act, which
requires the federal Centers for Medicare and Medicaid Services (CMS) to actively
curtail fraud, waste, and abuse at all levels through investigations and audits.
Be
assured that the CMS is no paper tiger. It has added 100 employees whose duties
consist solely of protecting the integrity of the Medicaid program. CMS must
make an annual report to Congress that includes data showing the return on
investment (ROI) of its fraud and abuse prevention and recovery efforts.
This demand for an ROI means that enforcement at both the federal and state
levels will have to be increased, which means closer scrutiny of claims. The
best way to prepare for that closer scrutiny is to conduct proactive probe
billing audits on your own.
Probe billing audits, conducted two to four times a year, are an important
component in any lab’s compliance program. First, they demonstrate a
good-faith effort at preventing waste, fraud, and abuse. Second, they often
uncover errors that can help lab managers recover lost revenue.
It is surprising how often a probe audit of just 30 randomly selected claims—the
sample size recommended by the Office of the Inspector General—will turn
up billing problems. My company, Health Systems Concepts, recently conducted
a probe audit of a lab at a 450-bed hospital. Of the 30 claims examined, 13
(43 percent) had at least one billing error. In six claims, tests were ordered
and performed but not billed. Eight claims did not have the venipuncture billed.
And in three claims, the wrong test was billed. At this lab, which was not
atypical, our probe audit immediately uncovered a significant opportunity for
lost revenue recovery.
Conducting probe billing audits like this does not need to be onerous. In
addition to independent consultants who can conduct audits, the process can
now be automated with new software.
Regardless of how you choose to conduct routine probe billing audits, the
important thing is that you use them to provide evidence of a robust compliance
program, to reduce culpability, and to recover revenue. Then when the federal
and state auditors arrive at your door, you’ll be able to breathe easy.
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