Physicians running their own practices can often find overlooked sources of revenue and prevent a costly Medicare audit by self-auditing their claims submissions – an activity that’s becoming more and more important.
“Self-audits can avert the threats from Medicare and private insurers who, if they spot overpayments, irregularities, or lack of documentation in your billing and coding, can audit your claims going back years, and then levy fines and penalties as well as extracting paybacks,” said Pam D’Apuzzo, CPC, CPMA, managing director at VMG Health, a healthcare consulting company that helps medical practices with coding, auditing, compliance, and profitability.
Besides uncovering errors, self-audits can help your practice become more profitable by pointing out where you’re leaving money on the table, said Steven P. Furr, MD, FAAFP, board chair of the American Academy of Family Physicians (AAFP) and family physician in Jackson, AL.
“A big problem is that family physicians tend to undercode and are under-reimbursed,” Dr. Furr said. “They don’t bill to the level of service they’re providing. We’re not seeing as many simple problems; we see more patients with chronic and complex conditions. Yet family physicians think ‘I don’t want to overcode and get in trouble,’ so they undercode.”
Added Betsy Nicoletti, MS, CPC, founder of CodingIntel, a coding membership resource for medical practices, “It’s a smart practice to internally look at this data. You’ll be able to identify any anomaly. For example, one practice had a new NP who was only coding level 2s. Money was flying out the door because she wasn’t billing appropriately high enough. In another practice, one physician was found to be billing all level 5 E/Ms. That’s a problem.”
Erroneous Claims Can Lead to Lost Funds
In one fiscal year, CMS’ auditors identified and reviewed more than 1.1 million erroneous claims with overcharges adding up to over $2.5 billion in overpayments. Medical practices and organizations ultimately returned $1.6 billion to the Medicare Trust Fund (after program and administrative costs were deducted).
CMS reported that for fiscal year 2023, the estimated improper payment rate for Medicare fee-for-service was 7.4%, or $31.2 billion. Improper payments include fraud but also cover inaccurate coding, including upcoding or under-coding, duplicate billing, and unbundling of services (which can lead to denied claims, underpayments, or overpayments).
One example of the importance of self-audits: In 2024, Penn State Health, a large hospital system in central Pennsylvania, performed a self-audit, looking at billing and coding for annual wellness visits. Staff examined code requirements against the required documentation for those codes, and found key elements missing. Penn State Health voluntarily self-disclosed and sent more than $11 million back to Medicare.
Most Common Claim Submission Errors
D’Apuzzo pointed to several factors that may contribute to claim submission errors:
“Medicare and private insurer rules and requirements often change annually, and physicians and their practices are unable to keep up with them or don’t realize what they are,” said D’Apuzzo. Besides that, the regulations and rules of Medicare and private insurers can differ from each other, but providers sometimes just apply Medicare rules to all insurer claims.
It's important to keep up with these coding changes. Codes that were added within about the last 10 years get less attention, said D’Apuzzo. Two codes for transitional care management were added in 2013 and five codes for chronic care management were introduced since 2015. “They’re both high revenue codes, and because they’re newer than other codes, the practice may not be aware of how often they’re billing these codes and are not confirming that they’re meeting all the documentation requirements,” said D’Apuzzo.
Keep in mind that flawed coding or documentation may not originate with you but could come down to staff training. “Often, it’s not the provider who is coding incorrectly; sometimes it’s the process that contributes. Somewhere down the line, a coder or biller applies a modifier, and the claim that goes in doesn’t look like what the physician expected,” noted D’Apuzzo.
“Enrollment can also trip people up in terms of compliance, so make sure you’re getting everyone enrolled before billing for them,” Nicoletti added. Also, ancillary staff may be providing some services, and may make errors in the documentation.
Besides inadvertent errors, sometimes intentional fraud is taking place. The US Department of Justice estimates that fraudulent billing to Medicare, Medicaid, and private insurers is estimated at about $27 billion. An organization self-audit may turn up some of these situations.
How to Do an Effective Self-Audit
The Office of the Inspector General (OIG), which works to track down fraud and waste in government programs including Medicare, recommends that physician practices conduct quarterly self-audits.
Most or all of the data you’ll need to capture for a self-audit is contained within your practice’s EHR. If you have a data department or knowledgeable staff, you can ask them for appropriate reports. You can also work with healthcare consultants or health business companies who can advise which data to capture and what to focus on. Software is available that can show how you compare to the CMS bell curve of billing and coding for your specialty.
Dr. Furr said his practice, Family Medical Clinic, looks regularly at the claims and practice data captured in their EHR. “We put out a monthly report, which is mainly financial. We know what each partner is doing and can compare among us. There’s a record of how many visits each partner had; what the level of their visits are; where they are within the curve of coding CPT codes 99213, 99214, and 99215. It’s all done automatically by the EHR.
“Sometimes the information is surprising when you look at your numbers over time,” said Dr. Furr. “You might say, ‘I didn’t realize I was doing that much’ or ‘I didn’t realize that it didn’t really pay very well for the amount of time it took me to do that.’ When you see something like that, you might want to change how you do things.”
“Performing a self-audit is time-consuming, so it’s wise to focus your efforts,” said Nicoletti. “The Office of the Inspector General puts out a work plan for the year that tells what’s coming in 2025. Once you know what the government is focusing on, it helps you to refocus for the year ahead. Is it modifiers? Transitional care? Some practices decide to monitor a different topic every month,” she said.
Besides comparing your claim submissions to others in the practice, you’ll want to measure your billing and coding stats against national standards. The American Academy of Professional Coders offers a useful benchmarking tool.
“You can also get national benchmarks by specialty, straight from CMS; it will show the bell curve data,” said D’Apuzzo. “Decide what are your issues of concern,” she said. “If you don’t know what’s potentially of concern, run a report of all services billed so you see the frequency of that service. It’s very telltale.”
Are You Really in Danger of Being Audited?
Small practices may feel that they’re safe from audits, reasoning that Medicare and private insurers would rather go after the big fish. “There’s some truth to that, but not entirely,” said D’Apuzzo. “Sometimes what tips an insurer off to a small practice is if a patient complains or reports the practice. The patient looks at a bill that comes through, says ‘that didn’t happen,’ and calls the insurer. If the insurer has had other complaints about that practice, that can alert them to decide to audit.”
While it’s important to self-audit claims submissions, there are other areas that are also worth checking, including standards and procedures, quality measures, and malpractice, said Dr. Furr.
“We are really big on quality measures and keeping up with that helps us track how many patients are within their goals for A1C or other important measures, said Dr. Furr.
“For self-audits, the data’s there. Doctors have the tools. So, it’s smart to use them to the maximum,” he said.