If your medical practice accepts payments from Medicare or Medicaid, you could find yourself dealing with the time and expense of an audit, even if you are doing everything right.
With the current debt crisis, the government is working to ferret out fraud, and the Center for Medicare Services (CMS) is blanketing practices with audits of what they are billing for services, says Joe Pannitto, a client adviser at SeibertKeck Insurance Agency.
“You need to be prepared,” says Pannitto. “Even a practice that is squeaky clean, if audited, has to deal with the expenses of defending themselves.”
Smart Business spoke with Pannitto about how the right insurance can protect you in the event of an audit.
How are practices identified for audit?
The government, through Recovery Audit Contracts (RAC), separated the U.S. into four regions. Independent companies are assigned to these regions to find fraud and abuse in Medicare and Medicaid.
Computer programs look for billing patterns, and things outside the norm get kicked out of the system. Those practices are then identified as potentially having questionable billing. But sometimes the audit may be random. After a practice is identified, the company will then serve notice on the practice that it wants to audit its billing.
Since it began two years ago, CMS has identified $684 million in payment corrections, whether those are overpayments, or, sometimes underpayments.
What can a medical practice do to ensure it isn’t crippled by an audit?
It’s really a matter of awareness. There are coverages available to protect you, both as part of your medical malpractice insurance, or, more recently, as a standalone policy. With the economics of medicine, any time you have to discuss additional coverages and added expenses, it hurts the bottom line.
But you have to weigh that cost with the risk you face with these audits. There’s the expense of defending yourself with legal counsel, the expense of providing and defending an independent audit of yourself to justify your billing, as well as any fines or penalties that may be levied.
How can insurance protect a practice that is being audited?
It’s huge. No insurance product will insure true overpayment; if you were overpaid by $X, no insurance is going to pick that up. What will be covered, however, is when an audit says that you have overbilled. There is an appeals process. You have to get legal counsel and pay for your own audit to run a comparison to what they’re saying you were overpaid, both of which are covered by the insurance. There are fines and penalties that could be levied through the Department of Justice if it is found you were overpaid, and certain fines and penalties would be covered, as well.
Without coverage, you’re exposed to all of that out of your own pocket, and you are without the expert knowledge of an attorney versed in this type of case to defend you.
When you look at what the premium is for the coverage versus the actual cost out-of-pocket expenses if you don’t have coverage in an audit, there really is no comparison.
The insurance industry has started to address this issue, and malpractice carriers are providing at least a small level of coverage on their policies. It is typically about $25,000 worth of coverage, but that is strictly for defense costs, and it doesn’t go very far.
Standalone policies, created to address regulatory and auditing issues, will provide up to $1 million of coverage, or, depending on the practice, even higher limits. That covers auditing expenses, attorneys, and certain fines and penalties.
Looking at the potential of what you could be exposed to, the cost of this coverage is pretty minimal.
Once a practice has been notified of an audit, how should it proceed with its insurance carrier?
Once you get that letter, you need to respond ASAP. Contact your carrier. With a standalone policy, you will be able to select from a pool of attorneys.
After you’ve been notified of the audit, you have 45 days to respond to the contractors and CMS. If you don’t respond within 45 days, that is basically an admission of guilt by default.
That’s not a lot of response time when you have a very busy practice. Things can fall through the cracks, and if they do and you go beyond 45 days, you may be found guilty.
What would you say to practice leaders who say they are doing everything right and that they don’t need the added expense of this type of insurance?
Some practices are really stretched thin, and adding another layer of insurance is not something they want to do or think they can afford. But as difficult as medicine is right now, there is tremendous pressure to squeeze the system to remove fraud and abuse.
There will be many practices exposed to these audits that haven’t done anything wrong, but still have to defend themselves. And the RAC audits are just one that they may be exposed to, as there are several concerning Medicare and Medicaid billing.
Contracting auditing companies are paid based on what they find, so if you are audited, you have to ask yourself whether they are going to give you a clean bill of health or whether they are going to find something.
If Medicare and Medicaid payments are part of your practice, this is not something you can afford to overlook.
Joe Pannitto is a client adviser at SeibertKeck Insurance Agency. Reach him at (330) 867-3140 or [email protected].
