Hayes' Healthcare Blog

Seeing the Light on Risk-Based Auditing: A Real-World Example

Posted by Robert Freedman on November 1, 2017 at 9:00 AM

The Aha Moment. Seeing the Light. The Eureka Effect.  These are all terms for the same human experience:risk-based auditing suddenly understanding a previously difficult to understand concept.

We’ve been speaking a great deal lately about the benefits of risk-based auditing versus traditional, periodic auditing. We’ve outlined the benefits and encouraged you to consider making this switch to better meet your compliance and revenue integrity goals. This is all beneficial information that can help you make difficult decisions.

But even more powerful than theory is actual practice. In a recent discussion with a senior audit leader, I witnessed an “Aha Moment” first hand. After laying out the advantages of risk-based auditing, I watched as he suddenly understood what I was talking about. The clouds parted and he saw the light. He is now a passionate advocate for risk-based auditing.

Belts and Suspenders

Perhaps the most significant part of the story is that this director works in a well-established, large health system with nearly 20,000 employees and multiple hospitals. They are one of the largest health systems in their state. And they have a comprehensive program in place to ensure compliance, proper coding/documentation and thorough revenue identification and collection.

This director relies heavily on data to evaluate and mitigate risk in his organization. They have invested significantly to ensure accuracy and timeliness of coding and documentation. And they employ nearly 70 coders to review every single claim for their 1,000 providers!

Their process involves the doctor coding his/her own form and then it gets input into the system. A coder then checks each one and makes any changes necessary and sends it on its way to billing.

In addition to this 100 percent checking process, the organization deploys a traditional periodic audit program where they review 10 claims for every provider every year on a pre-scheduled basis.

Tightening the process even further, they have chosen to conduct prospective audits – reviewing the claims before the coders have checked them. This provides valuable insight into the documentation performance of their doctors. They use these results that show documentation and coding errors to help train providers  to help eliminate the problem at the source.

In my experience, organizations who use prospective auditing don’t want any claims going out the door that they might have to refund later. These “brute force” auditing programs aimed at ensuring 100 percent accuracy can certainly be effective, but the expense is enormous – running into millions of dollars in labor costs.

We are currently in discussions with multiple organizations, both large and small, across the country about moving to risk-based auditing. They know the future is coming but are not prepared to make the move right now. Like the organization I spoke to, they are secure in what they are doing and are apprehensive about change.

So why would this particular well-run organization with a comprehensive “belts and suspenders” approach to ensuring quality documentation and compliance be interested in shifting to risk-based auditing?

What resonated for him was the need to be proactive rather than reactive and to find more efficient ways to spend their budget dollars.

Leading the charge

After our discussion, the director was so convinced the organization should consider this change that he sent a memo to senior leadership on both the revenue cycle and compliance sides of the organization extoling the virtues of risk-based auditing and encouraging them to join him in leading the change initiative.

He outlined these key reasons to justify the shift.

  • It will allow them to reduce the number of auditor ratio from one per 150 providers to one per 400 providers.
  • It will enable them to set automated custom alerts to compliance, revenue, and/or denial risks helping the organization to be more proactive in recognizing unwanted trends.
  • It will provide them with trend analysis based on internal metrics benchmarked against similar organizations.
  • It will assist with both provider and hospital related risks like PEPPER, medication reconciliation and denials claims.
  • It will convert auditors into “Sherlocks,” ferreting out potential risks in coding and provider documentation instead of treating everyone the same, as is the case with periodic auditing. This would enable them to provide resources to the most needed areas to improve compliance and missed revenue opportunities.
  • It would allow them to directly use their 837 billing files and 835 remit files instead of the data pull from their EHR.

Helping with the analysis

Realizing how difficult it is to get a large organization to make such a significant change, we offered to help analyze his data to make the risk-based auditing case. We will help develop a comprehensive committee level report based on their own audit experience that provides the reasons to convert to a risk-based system.

We also discussed how risk-based auditing can be a key factor in enhancing their denial management. Analyzing global pools of data rather than individual transaction incidents leads to more effective root-cause analysis by revealing patterns and uncovering flaws in the process that cause denial issues. Finding the problem at the source and initiating appropriate corrective action eliminates the need to chase individual problems as they occur, providing a much more effective, long-term solution to denial issues.

And this organization is not alone. I’ve spoken to dozens of organizations who are in a similar position and feel their periodic auditing program and labor-intensive coding process is sufficient. Even if that is the case, at some point they will be forced to address the incredibly high costs of that type of program. They know they must work smarter because they can’t work much harder. Even if they could get budget for additional audit FTE, the market is sparse. 

The need for risk-based auditing is even more acute for organizations who don’t have the available budget for such an intense, double-checking auditing plan. Without the resources to adequately carry out an all-encompassing periodic auditing program and a 100 percent claim check process, their compliance and revenue integrity risks increase exponentially.

It may just be a matter of time before they, too, see the light.

If you want to have a conversation about how your organization can make the shift to risk-based auditing, contact us today.

Topics: Risk-based audits

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