Fraud Audits: Is The Fear Of A Fraud Audit Keeping You Up At Night?


Physicians face many challenges in juggling all of the moving pieces of a productive and profitable practice. In addition to overseeing the entire health of the business, doctors are now faced with increased scrutiny with regards to chart note documentation, coding and billing practices. Fraud and abuse audits are on the rise and more physicians find themselves facing fines, penalties and even investigations that may impact them criminally and/or civilly.

According to the Office of Inspector General, Convictions under Health Care Fraud and Abuse Control have increased by over 27% (583 vs 743) since 2009. [1] Defendants facing criminal charges have increased by 49% compared with 2008 (821 vs 1676.) [1] There have been 923 new healthcare fraud investigations opened, 2,690 pending investigations and 743 convictions in the 2011 FY.

Daniel R. Levinson Inspector General of US Dept. of Health and Human Services stated on October 4, 2012: “Today the office of inspector general deployed over 200 special agents…to execute arrests and search warrants across the country.” [3] They are requesting an additional $9 million from the Congressional Budget for the 2013 FY. They are expecting to hire an additional 1,974 full-time employees. [3]

You may be asking why the increased oversight and action being taken by the OIG and the FBI? According to the FBI, health care fraud costs the country over $80 billion dollars a year. As reported in OIG’s Fall 2011 Semiannual Report to Congress, OIG reported savings and expected recoveries of approximately $25 billion for FY 2011. This includes $19.8 billion from legislative and other cost-saving actions that were supported by recommendations in audits and evaluations, $4.6 billion in investigative receivables and $0.6 billion in audit receivables. [4]

Another noteworthy motivation may be that for every dollar spent on investigations, $7.20 is recovered. [2] It is a worthwhile venture for them to crack down on fraud and abuse. And why should you care about this other than for obvious reasons? According to the OIG, in FY 2011, the OIG excluded 2,662 individuals and organizations from participation in Federal health care programs. Additionally, penalties and fines are assessed at 3 times what was originally paid in addition to a $5,500 to $11,000 fine per claim. [4]

Here is an example: A physician who submits 50 false claims for $50 each is liable for between $282,500 [($2,500 x 3) + (50 x $5,500)] and $557,500 [($2,500 x 3) + (50 x $11,000)] in damages under the False Claims Act.

Here are some of the egregious acts considered fraud: Incorrect Coding – Assigning incorrect codes is considered misrepresentation of services; Medical Necessity – Performing inappropriate or unnecessary procedures; Unbundling – Using two or more CPT billing codes instead of one inclusive code; Double Billing – Charging more than once for the same service; Up Coding – Inflating bills by using diagnosis; billing codes indicating patient needs more expensive treatments; Improper Cost Reports – Submitting false cost reports seeking higher reimbursement than permitted by facts; and Routinely waiving copays and deductibles.

So what does this mean for you and your practice? Education is key to knowing what problem areas are targeted by these departments and then taking action to ensure you are in full compliance. These two measures alone could ultimately help in mitigating these potential audits and worse, investigations.

The first step I suggest every physician take DON’T PANIC! Yes this is the new reality but you can start instituting policies and procedures now to better protect yourself and your practice. Education and implementation is crucial. Executing an effective compliance program is the next big step. Not only has CMS determined such a program is necessary but it will also assist physician practices in adhering to applicable laws and guidelines. “CMS has determined that all Medicare Contractors… shall have in place an effective compliance program. The compliance program may be tailored to the size and scope of the work to be performed…CMS has published its own “Compliance Guidance for Fee-for-Service Contractors” …it is not to be read as the sole pronouncement of desired substantive or procedural elements of an effective compliance program. Most importantly, an effective program is not static, but is constantly evolving towards the ultimate goal of being proactive rather than reactive.” [5]

Other actions to take in protecting your practice should be the use of an outside auditor to assess your chart notes against codes for diagnosis and billing, the training of applicable staff and ultimately surrounding yourself with professionals who know more than you. Seeking out help from these invaluable resources could prove the difference between a good night sleep and not having to refill your Xanax!
[3] reference:
[5] CMS: Centers for Medicare and Medicaid Services 4/5/2012

Korby Miller is the owner of Remedy Billing Solutions, a medical billing company focused on maximizing client revenue and ensuring practice/billing compliance.

By Korby Miller, MS I/O Psych