How to Perform a Billing, Coding, & Reimbursement Process Compliance Audit

When it comes to the administration of laboratory medicine, including billing, coding, and reimbursement, auditing provides a mechanism for reviewing processes to identify erroneous outcomes and areas of improvement. Auditing should typically include both internal and external assessments. Here’s a look at the steps that make for an effective auditing process and strategy.

Audit Purpose

Before starting the process, there should be a clear understanding of what is to be audited. Will the audit cover all lab disciplines or just one testing specialty such as molecular diagnostics? Will the audit address the professional component? Based on such considerations, there should be a statement expressing the audit’s purpose and scope. The following is an example purpose statement:

The purpose of this engagement is to assess the accuracy, validity, and effectiveness of coding, billing, reimbursement, and related compliance of the technical and professional components of clinical and anatomic laboratory services.

Audit Objectives

After defining the purpose of the audit/assessment, the next concern should be how to accomplish those objectives. Here’s an example of a statement related to objectives:

The recovery of payment for services begins with the actual provision of the service. Reimbursement is dependent upon coding accuracy and completeness, proper billing protocol and employment of information systems, monitoring of reimbursement, and change in protocols where and when needed. To provide such an evaluation, it is important to do the following:

1. Identify all outpatient services with appropriate Current Procedural Terminology/Healthcare Common Procedure Coding System (CPT/HCPCS) coding
2. Determine where revenue may be lost due to inappropriate billing/coding and effect change to capture all fair and appropriate revenue       
3. Maintain compliance with all applicable government regulations     
4. Examine private fee data to evaluate charges

Steps of the Audit Assessment

The steps of the audit can be performed separately or simultaneously, and include the following:

1. On-site Visit

Depending on the scope of the audit, an on-site visit may be merited. A primary focus of the on-site consult is interaction with the pathologists, technologists, and department staff to discuss concerns and questions for follow-up by the consultant/auditor. On-site consultation also allows auditors to meet with representatives from the lab departments, as well as from the finance, medical records, billing, and information systems departments within the lab facility. Such meetings enable clarification and confirmation of the scope of the engagement, while also providing a format for initiating communication.

2. Chargemaster/Fee Schedule Review

In the hospital setting, the fee schedule is referred to as a charge data master or chargemaster. Other non-hospital sites refer to their listing of services and charges as the fee schedule. By perusing the chargemaster/fee schedule before or during an on-site visit, individual services and associated descriptions, procedural codes, units of service, and charges can be reviewed for potential discrepancies. While on site, the consultant can readily review areas of concern raised by the chargemaster perusal, including services which appear void from the chargemaster, low charges, inappropriate or incomplete coding, software interfaces, etc. Other issues of special interest may also be discussed and associated charges may be preliminarily scrutinized.

The lab or facility will typically house a separate billing department. The consultant may visit the billing office to discuss previously detected denials for payment, billing problems, and notifications provided by the Medicare Administrative Contractor and Medicaid, TRICARE, or commercial payers.

3. Spreadsheet Analysis

An Excel file may be used to reflect the chargemaster review by incorporating original chargemaster content along with recommendations for change. The spreadsheet file may reflect charge number, coding recommendations, CPT descriptions, current charges, and fee schedule allowables for Medicare, Medicaid, and private payers. Annual billing frequencies/volume may be applied for each service to reflect projected pro forma impact if recommendations are adopted.

Private fee data, depending upon the source, may be based upon a relative value scale. The various relative values are based upon scrutiny of several relative value systems, UCR (usual, customary, and reasonable) data, RBRVS (resource-based relative values scale), and internal data reviewed during consultation. The data provided can relate to the technical component and pathology physician component of services and is only recommended as a guideline for internal charge comparisons. The data supplied can relate to client locale.

4. Documentation Review

It’s advisable to review CMS 1450 and 1500 claims to evaluate the chargemaster application and appropriateness of billing. This review of claims should be combined with a review of matched requisition(s) for services, lab and pathology reports, itemized bills, remittance advices, and Advance Beneficiary Notices of Noncoverage (ABNs), where appropriate. This process examines the entire billing cycle—from ordering through reimbursement—to detect compliance concerns and impedances to the billing and reimbursement process. Medical records may be added to the review documents.

These reviews may highlight compliance issues that a chargemaster review alone will not detect. These reviews provide a complete check on the reimbursement process as well as the appropriate linkage of information from one information system to another. Diagnosis coding is scrutinized during the review.

5. Review of Other Documents

Review of other documents, such as “scripts” can be used to add levels of compliance risk, including:

Requisition Forms: Review of requisition forms may be performed to evaluate whether all pertinent information is present and captured, as well as to assess the manner in which test choices are presented to physicians and determine if that presentation facilitates physician compliance with policies and procedures for processing both specimens and claims.

LCDs, NCDs, ABNs: As coverage issues continue to dominate Medicare reimbursement at the local and national levels, reviewing ABN forms, for both format and use, enables confirmation of appropriate patient presentation or recommendation of appropriate use. The review of claims and EOMBs (Explanation of Medicare Part B Benefits) can identify those claims attached to local coverage determinations (LCDs) and national coverage determinations (NCDs) and potential problems for payment of these services.

Communication with Physicians: A crucial part of the assessment is review of communication with physicians regarding medical necessity issues, local medical review policies, use of ABNs, and levels of Medicare reimbursement. General policies and procedures may be reviewed for appropriate application and completeness.

6. Research and Report Preparation

Certain coding and billing issues may require further investigation or interrogation of the applicable payer. All dominant issues receive a written discussion and/or recommendation. At this point, the chargemaster is thoroughly reviewed for correct coding assignment. Specifically, it’s important to flag the following issues:

• Incorrect procedural coding
• Inadequate or incomplete coding
• Excessive assignment of unlisted or miscellaneous codes
• Non-coded procedures
• Inactive charge items
• Low client fees
• Charge form/requisition inadequacies or outdated information
• Non-billed procedures
• Relationship of revenue codes to other coded services
• Indicators of incomplete cost documentation

If undetected, these issues may result in noncompliance with regulatory requirements and/or revenue loss. Written discussions and commentaries are also included to help address controversy, compliance, and non-billed services.

7. Report Presentation

If possible, the final audit report should be presented on site to give the consultant the opportunity to extend the discussion of issues addressed in the report. Due to ease of access, conferences on site contribute to greater interaction and more effective staff education. This presentation usually encompasses a half to full day and typically begins with an executive summary of detected financial and compliance issues with key administrative staff. It proceeds with individual departmental discussions with appropriate managers and supervisors to assure complete communication on departmental findings. An exit conference may be appropriate to provide administrative staff with guidance on prioritizing the implementation of recommendations.

Example Audit Findings

Here are a few assessment outcomes, from the author’s own experience, that support the notion that audits should be proactive and approached annually.

Example 1  

While performing an assessment for a hospital laboratory many years ago, a review of the chargemaster showed that the coding for a hepatic function panel actually identified an acute hepatitis panel. The hepatic function panel was coded with CPT 80074 rather than CPT 80076. Currently, Medicare allows $47.63 for an acute hepatitis panel (80074) and $8.17 for a hepatic function panel (80076).¹ Keep in mind that the fee schedule was much higher 20 years ago—more like $109. As a result, every hepatic function panel reimbursed $39.46 more than allowed. Let’s conservatively assume that the hospital billed 2,000 panels a year. That equates to overpayment of $78,920 for one year. That amount in 2023 may be accepted if the payer is reimbursed. But if a government audit detected the error, fines and penalties under the False Claims Act would be applied as part of recoupment.

The government may recover up to three times the damages caused, plus a sizeable civil penalty of $5,000 to $11,000 for each violation. The penalties are additionally indexed to inflation.² Thus, the government may at a minimum claim $78,920 + $78,920 x 3 + $5,000 x 2,000—that equates to $10,315,680 for one year. The hospital was asked how many years this had been happening and how many internal and external audits had occurred. The voluntary recoupment process was indicated.

Example 2

During a documentation review, it was found that two units of service (UOS) were consistently billed and reimbursed for a cytogenetics procedure, but only one UOS was appropriate. In examining the chargemaster file, it was found that the procedure was hardcoded with two UOS. Again, this finding raises the possibility of recoupment with fines and penalties, while repeating the issues discussed in Example 1.

Example 3

Observation of billing office personnel accessioning patient samples noted that the requisition was accessed and appropriate information was entered into the software system. If information was missing, a special team accessed data. If International Classification of Diseases (ICD) coding was missing, the data still went to billing personnel. Further reports indicated that the ICD was rarely input at accessioning, resulting in partial registrations. Labs use this approach to rush samples to testing, with the full registration being completed at a later time. However, based on experience, a full registration upon receiving the specimen saves time overall, identifies missing information earlier, eases prior authorization, and shortens the billing process, all without affecting testing.

The documentation review revealed that ICD-10 codes weren’t received or retrieved and resulted in billings with the GZ modifier. The Centers for Medicare & Medicaid Services (CMS) states that the GZ modifier must be used when physicians, practitioners, or suppliers want to indicate that they expect Medicare to deny an item or service as not reasonable and necessary, and that they didn’t have the beneficiary sign the ABN. Reporting a GZ modifier results in an automatic denial.³

Example 4

In the written report, coding deficiencies for two charge numbers—Numbers 6XXXX1 and 6XXXX2—were addressed. The transfusion services identified pretreatment of red blood cells (RBCs) with chemicals or drugs. “Typos” appear to have led to incorrect coding.

The first charge number was coded with CPT 85970; this isn’t a code and would precipitate no reimbursement. We assigned CPT 86970 to match the description. It could be useful to view the billing volume that allowed no payment.

The second service identified additional treatments and was coded with CPT 86790-59, virus antibody NOS. Reassigning CPT 86970 on the spreadsheet and being able to view the total billing volume led to estimating the increase in reimbursement with appropriate coding.

Takeaway

The goal of this analysis is to identify pertinent functions to include in an audit of a laboratory’s coding, billing, and reimbursement processes. Such auditing is important and should be done annually.

References:

1. https://www.cms.gov/medicare/medicare-fee-service-payment/clinicallabfeesched/clinical-laboratory-fee-schedule-files/23clabq1
2. https://oig.hhs.gov/compliance/physician-education/fraud-abuse-laws/
3. https://www.g2intelligence.com/the-abn-modifiers-and-how-to-properly-use-them/

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Diana W. Voorhees, MA, CLS, MT, SH, CLCP, CPCO, is the principal of DV & Associates, Inc., Salt Lake City, UT. DV & Associates makes no representation, guarantee, or warranty, expressed or implied, that the information provided is free of error, and bears no responsibility or liability for results or consequences of its use.