Medical Coding Audits: What You Need to Know to Stay Compliant

Posted on October 23rd, 2023 / Under Medical Billing / With No Comments

Effective management of healthcare information is incomplete without medical coding. Coding audits are a critical practice performed by a clinical coding auditor to ensure the practice has proper procedures set in place to achieve medical coding compliance. 

Centers for Medicare and Medicaid Services (CMS)and the Office of the Inspector General (OIG) recommend healthcare organizations obtain an unbiased evaluation of their coding practices. This helps providers identify and eliminate errors in medical coding, maintain regulatory compliance, and expedite the reimbursement process. 

Keep reading to learn about how medical coding audits can help you avoid major pitfalls stemming from coding errors. 

Importance of Medical Coding Audits

Coding reviews include examining the medical records of the patients to ensure the provider has selected and entered correct and comprehensive diagnosis and procedure codes. 

A medical records audit generally includes an examination of documentation to ensure it is accurate and complete, reviewing CPT codes, checking the location of patient care, ensuring the modifiers are not absent or incorrect, any absence or presence of any bundling concerns, and a medical coding utilization review. 

Research shows that around 80% of medical bills contain some type of coding and billing errors, costing patients an extravagant amount of money compared to the level of service obtained. Other consequences of not conducting regular coding audits include damage to your practice’s reputation, lost revenue, and compliance risks. 

Medical coding audits can help you uncover any current problematic trends in your practice, including upcoding, outdated coding, unbundling, and downcoding. For instance, multiple issues can affect medical coding accuracy, such as a lack of documentation. A general rule of thumb is medical coders are only able to use the documentation they are provided, so if a healthcare provider records documentation with missing details, it will lead to medical coding errors. Such errors can be identified through regular coding audits. 

Another important reason for organizations to conduct these audits is compliance. Coding and billing practices are required to be in compliance with multiple regulations, including private payer policies, CMS, and OIG regulations. This puts the organization at risk of facing legal repercussions. 

Benefits of Regular Medical Coding Audits for a Healthcare Practice

Reduction in Claim Denial

One common reason why most medical claims get denied at the initial stages is coding errors. Some common issues uncovered during these audits include any wrong diagnosis or procedure codes and insufficient documentation. With proper coding audit policy and procedure, coding errors are minimized. This reduces the risk of medical claims getting denied or rejected by the payer’s insurance provider. 

Revenue Protection

Coding mistakes are one of the major reasons why healthcare practices incur financial loss. For instance, if a claim is under-coded, there are still chances of it getting processed by the payer; this results in practice losing money by getting reimbursed for less than the actual level of services rendered. On the other hand, over-coded claims put the practice at potential risk of a regulatory fine. 

Moreover, coding mistakes discovered during claims processing can cause the payer to deem the claim unpayable. This results in healthcare providers investing extra time and effort into fixing coding mistakes and resubmitting claims. However, with effective medical coding audit software, potential issues can be identified early in the process, helping your organization avoid such revenue loss.

Fraud Reduction

Another reason why periodic medical coding audits are essential is compliance issues and billing fraud. Medical coding audit documents allow organizations to identify any improper billing practices, such as invoicing for services not acquired by the patient or unnecessary services, and help uncover whether such issues were caused through intention or coding error. This allows healthcare organizations to take action and have their staff follow proper billing protocols to eliminate billing fraud. 

Coding Accuracy Improvement

The acceptable coding accuracy rate is 95%, and research shows that medical coding accuracy actually falls way beneath this standard. Coding accuracy impacts your risk judgment and quality of reporting. One major factor that affects coding quality is missing or incorrect documentation, which can easily be identified through coding audits. 

Educating Your Staff

One of the many benefits of coding audits is medical coding training. These audits allow your staff to improve as a team and ensure that your coders have proper training. 

For example, outpatient coding audits will allow your coding team to develop a comprehensive understanding of the CPT system and get informed of the updated regulations. Inpatient coding audits allow coders to recognize changes in AHA (American Hospital Association) guidelines and ICD codes. This way, your coding staff will acquire all the necessary skills required to ensure coding accuracy. 

Preventing Payer Audits:

It is possible for your practice to get flagged for investigation by a payer if coding issues become persistent. The purpose of this investigation is to identify potential coding and billing fraud in practice, which, if found, can lead to financial consequences, including hefty fines. Regular audits can help you avoid any payer investigations for waste, abuse, or billing fraud. 

Internal and External Coding Audits

Generally, a member of the healthcare staff is employed by the organization to conduct an internal coding audit. This could be the auditing team members in large facilities and a clinical coding auditor in smaller organizations. 

Internal coding audits help organizations identify areas of improvement and assess coding accuracy. While it is recommended to conduct regular internal coding audits, the actual frequency of these audits can vary depending on the size of a practice and its available resources. 

External coding audits, on the other hand, are conducted by third-party auditing companies or government companies like OIG and are relatively more objective. These audits can take place biannually or even annually in some organizations. 

External coding audits play a vital role in identifying recurrent coding errors and fraudulent coding practices within the organization. These audits have more value than internal audits as they are performed by an independent party. 

Coding audits, whether external or internal, are essential if your organization wants to maintain medical coding integrity, prevent fraudulent activities, and avoid potential pitfalls.

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