How Does Medical Auditing Work?

what is medical auditing

Medical Auditing is done at the final part of the revenue cycle management wherein a systematic assessment performance is made. It is done to identify errors and create or revise ways to prevent fraud in healthcare and can protect the organization.


  • Reviewing the quality of healthcare provided to the patient
  • Educate providers on documentation guidelines
  • Determine if organizational policies are current and effective
  • Maximizing the revenue cycle management
  • Making sure that appropriate revenue is achieved
  • Protect against federal and payer audits, malpractice litigation, and health plan denials

Importance of Medical Auditing

Medical billing audits can expose flaws in the management such as mistakes in provider documentation, misuse of codes in the cases of undercoding, overcoding, unbundling; and fraudulent billing practices whether intended or unintended. Not only will it identify wrong coding but the practice of repeating it again can be avoided. Aside from the mentioned reasons, there are two basic reasons why medical auditing with corrective actions is important. First, prevalent and repeated errors resulting in high reimbursements may appear somehow “sketchy” and may be perceived as fraud, and second, if higher reimbursements are done over and over again to the same physician it can be perceived as a fraud on the payer. The False Claims Act governs these types of activities and monitors the upcoding and overbilling of claims. The Office of the Inspector General reminds everyone that if they know that a claim is false, then the attempt to collect payment constitutes a violation.

The Medical Auditor

The medical auditor conducts reviews of the coding process, the policies, and the system workflow to free and eliminate the organization from liability. The skills of an auditor cover vastly the scope of the entire revenue cycle which include coding, charting, billing, knowledge of medical science, and compliance with the current and updated regulatory guidelines. Advanced training is necessary to become a medical auditor. For a medical auditor to be working with a healthcare provider, he functions to gain financial success by reducing claim denials from wrong coding or poor documentation. He will also identify some reimbursement deficiencies and seek overpayments while protecting the provider from false claim liability.

Auditing a Medical Chart

Reviewing medical charts is crucial and already an established standard process in medical auditing. It will go deep into investigating the medical charts and documentation and compare them with the claims that were filed to check appropriateness. This can be done internally (internal audit) or by hiring an outside auditor (external audit) to know if it can withstand the government’s audit. Once an error is found, the organization can now, and should, self-report this to rectify the issues and to prevent further mistakes that can damage their integrity.

AAPC elaborately describes the steps on how to conduct an audit.

Step 1. Planning the Medical Record Audit

– The objectives of auditing vary from the investigation of areas of poor documentation to identifying faulty coding, billing, and payment risks. The goal of auditing is simply producing usable information for planning. Chart auditing bends the learning curve of the auditor after learning different mistakes from the past and comparing them with the present mistakes from there, considering other factors, the auditor can make the best decision and course of action that he will propose.

Step 2. Choose between two basic auditing models

– Prospective audit. This will foresee the problems that may arise prior to sending the claims to the payer. However, reviewing the charts, codes and documentation can delay the billing process.

– Retrospective audit. A claim has been submitted and payment was made before an audit begins and will identify compliance with the carrier’s binding rules. The auditor will review the documentation, claim forms, and explanation of benefits to ensure proper medical billing.

Choosing between these two depends on the type of work environment and the medical auditor will choose what is best for them.

Step 3. The approach to audit

– Focused audit. This approach, from the word implies, focuses only on specific service items, providers, diagnoses, or any trending events.

– Random audit. Charts are selected randomly and then will identify compliance problems. A comprehensive review will be made after selecting the charts. Time of selection is also considered here, for example, during the last quarter of the year.

Step. 4 Determine audit scope.

– Determining the scope of the audit involves honing or defining factors that entered the decision to go with the focused or random audit.

Step 5. Determination of the sample size

– 10 to 15 charts are the standard sample size. The Office of the Inspector General recommends 5-10 charts per medical provider. RAT-STATS is also recommended by the OIG and is free and will tell the auditor the number of charts needed for an accurate sample size

Step 6. Auditing Tools

– An efficient tool is also important according to AAPC in auditing medical records and they can vary among payers.

Step 7. Documentation

– After obtaining the sample size and the collected charts, certain documents regarding them shall be collected such as the date of services, lab forms, images relevant to the encounter, etc. Gather as many documents as needed to conduct the review process. Familiarization with the chart itself is important its contents such as the chief complaints, medical history form, medications, surgical procedures if any, etc.

Step 8. Audit and analysis of findings

– Once the documents are prepared and with the right tools, an audit can be started and identify proper coding guidelines and documentation in the process. Incorrect diagnoses, unbilled services, incorrect codes, and lack of documentation support are some of the important key findings an auditor should capture.

Step 9. Summary of findings and reporting

– The summary report is important and should highlight the findings and should be presented in a way that is understandable to the reader. Encounters with correct and incorrect details should be counted. The common errors are identified to create a trend and supported with explanation with citation to the appropriate standard. Suggestions for improvements and remedial actions are part of the report while observing a constructive tone to avoid defensive reactions from the auditee.

Step 10. Post auditing meeting, recommendations, monitoring, and assessment

– A discussion is set to address possible risks and corrective actions to mitigate them. Again, the tone is crucial and a constructive approach will help the auditor get his thoughts across without the necessary offense. If a problem is with the charting of a physician, then address the concern to the physician. The entire team should be present so that any corrective efforts can be addressed directly if the problem is within their area of expertise. Recommendations are laid out also in the meeting aside from the written report made. An audit work plan may be made or modified as part of the ongoing monitoring and assessment.

Step 11. Audit follow-up

– Once an error is identified concerning a payer, it is morally obligated to report it to the payer for example in cases of overpayment. Either the organization voluntarily returns this overpayment or asks the payer to make a demand letter. Repeated errors are investigated if overpayments are linked to a certain pattern seen in the system.

In conclusion, medical auditing is laborious and might even be frightening for an organization. However, it must be kept in mind that the purpose of this process is not to prosecute but to identify and take autonomous action to correct the system and avoid further errors in the future. If an organization’s conscience is clear then medical auditing is viewed as something part of a normal, accepted procedure that every business should do and comply with.

References: What Is Medical Auditing? – AAPC

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