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Creating an Internal Inpatient Auditing Program

Changes in reimbursement policies, laws, and regulatory oversight are forcing healthcare organizations to respond to increased regulatory scrutiny and audits. Medicare audits have increased 936 percent in the last five years alone, according to Becker’s Hospital CFO, and ad hoc inpatient audits are no longer enough of a defensive strategy.

Healthcare organizations must adapt if they expect to master the increased complexity of the requirements to achieve timely and accurate cash flow – and one of the best ways to accomplish this is to implement a robust inpatient auditing program.

Developing a corporate compliance plan is a good starting point when establishing revenue-protecting practices. Although not legally required, corporate compliance plans are good risk management tools, and internal audits are an integral part of such plans.

Internal inpatient audits mitigate regulatory exposure and inappropriate reimbursements through identification of high-risk coding and billing practices such as:

  • Unbundling
  • Duplicate billing
  • Coding/billing for a higher level of service than was rendered
  • Coding/billing for services not rendered
  • Coding/billing for medically unnecessary services

In addition to understanding and managing your compliance risk, auditing provides data that can be used to help you proactively reduce denials and diagnosis-related group (DRG) downgrading. Audit results help you recognize opportunities to optimize reimbursement and identify when self-disclosure of overpayments is necessary.

To implement a quality inpatient auditing program, an organization must have both a plan and a team in place to execute the audits. In this article, we will look at points to consider in both strategizing and staffing.

Planning an Audit Strategy

Planning your audit strategy requires knowledge of your organization and its potential risk areas. A first step is to complete an initial audit as a baseline, long before you ever receive notification of external audit. These baseline audit results will lay the foundation for the focus of additional audits as well as education opportunities for your team.

An auditing program that returns consistent and reliable results is based on standards of practice that an organization develops with its audit goals clearly in mind. Standards of audit practice include written documents that list policies and procedures for the design and frequency of inpatient audits and for responding to audit requests.

What to Audit

There is no formal standard solution for a perfect audit plan; each organization’s needs differ. However, a solid internal inpatient auditing program should include both pre-bill and retrospective audits.

A pre-bill audit aims to keep your discharge not final billed (DNFB) dollars low. These audits are done as you complete concurrent coding during a patient’s stay, and they must be completed quickly after coding and prior to final billing. To reduce the effort involved with pre-bill audits, some organizations only audit specific DRGs or clinical service lines known to be challenging.

A retrospective audit is usually more holistic, and it identifies opportunities for improvement and recommendations. Retrospective audits can be random or focused. A random audit focuses on a statistically significant number of records across all services lines. Focused audits target issues you want to investigate. Possible focal points for these types of audits include:

  • Any patterns in denial rates
  • Common themes from DRG downgrades
  • Issues identified in pre-bill audits
  • Reviews of top DRGs
  • Substantial issues identified by Recovery Audit Contractors (RAC)

After you determine what your organization wants to audit, the next step is to establish audit frequency.

When to Audit

Frequency of audits depends on the audit’s purpose; if a problem exists, the auditing process should be repeated until the audit demonstrates that the issue has been resolved. An organization that has experienced fraud and abuse violations will want to consider conducting audits more frequently in order to identify and resolve any concerns and then to maintain acceptable standards. Frequent audits are also utilized by organizations that have had an unusually high number of denied claims. Investigating a denial can cost your organization $100 per case. An inpatient auditor should routinely review denials, identify the reasons for them, and develop a plan for mitigating the damage.

Ideally, a random audit should be performed quarterly. Taking budget constraints into account, audits should be completed annually, at a minimum. The frequency of focused retrospective audits should be influenced by the need to monitor the types of issues uncovered in previous audits.

As you implement your audit plan, one of the keys to success will be creating a strong inpatient audit team.

Characteristics for an Inpatient Auditor

The best place to begin recruiting your internal inpatient auditing team is your inpatient coding team. Why? Your existing team possesses institutional knowledge that may take months for new team members to learn. It is easier to teach your coders new auditing skills through in-house education than to bring an external hire up to speed on the nuances of your organization.

At a minimum, an internal inpatient auditor should possess strong inpatient coding skills and have three years of acute coding experience. As you develop an education plan to transition these coders to an auditing role, consider assessing their coding skills with an automated tool. This will identify your candidates’ skills objectively and consistently while focusing on the next steps in your education plan.

The inpatient auditing role requires a robust skill set beyond the foundational building block of coding skills, however. The specialized auditing role requires additional “soft” skills that can be challenging to teach, such as:

  • Communicating well with all levels of the organization
  • Using critical thinking in complex situations
  • Working independently
  • Remaining objective
  • Understanding that not all situations have one right or wrong answer

As you begin to develop your own plan or consider an education partner, it is important to start with foundational components of both technical and soft skills, plus clinical documentation improvement. An effective program includes both auditing modules and experience in auditing a variety of medical records. Providing feedback is critical to learner knowledge retention.

The benefits of proactive auditing are critical to an organization’s success. If you cannot afford to staff an internal auditing program, recruiting a solid partner is always an option.

About the Authors

Laurie A. McBrierty, MLT, ASCPLaurie is vice president of product management at Career Step. Laurie brings nearly 30 years of experience in healthcare, healthcare information systems, and product management to Career Step, where she drives the product management of the company’s offerings. Prior to joining Career Step, Laurie served in various executive positions with companies such as xG Health Solutions, WellPoint, Resolution Health, QuadraMed, Kaiser Permanente, SoftMed, 3M HIS, and Stanford Health Services. She has also served on various boards and committees within the American Health Information Management Association (AHIMA) and is a respected leader in health information management. Laurie holds a bachelor’s degree in information systems management from the University of San Francisco.

Cari Greenwood, RHIA, CCS, CPC
Cari is a revenue cycle product specialist. Cari has more than 13 years of medical coding experience. She currently serves as a subject-matter expert supporting corporate clients and development of Career Step’s revenue cycle management offerings. Cari holds RHIA, CCS, and CPC credentials and a post-baccalaureate certificate in health information management (HIM) from Weber State University.