How an 'Innocent' Audit Can Spell Big Danger

Keith W. Carlson, Esq; Kathy W. Nichols, Esq


March 19, 2019

In This Article

Be Prepared and Know Your Rights

It's important for physicians to be prepared and understand their rights when dealing with insurance audits and overpayment demands. Here are 12 tips that could help you if you receive any of the following from an insurer: a request for medical records, a request to perform an audit, or an overpayment demand.

1. Don't ignore the audit request. Ignoring an audit can have disastrous results. If you don't respond to an insurer's request for medical records, the insurer may assume you didn't perform the services and may take steps to recover what it paid you—plus possible interest and penalties.

2. Be aware of attempts to recoup stale claims. Many times, insurers seek to recoup money beyond the statute of limitations. Generally, in California, insurers can only seek repayment 1 year after it paid the claim. If an insurer requests repayment for claims beyond the 1-year statute of limitations, you do not necessarily have to pay back those claims. But insurers won't always explain this and will seek more than they're entitled to.

3. Be aware of your appeal rights. If you are in-network, you most likely have contractual rights that will protect you in an audit and provide you with appeal rights to fight an overpayment demand. If you are out-of-network, the insurer is still required to provide you with an appeal.

4. Don't respond by phone. All communications with the insurer regarding an audit or overpayment should be done in writing. If you decide to communicate by phone, confirm everything in writing. And it's generally best if handled by your attorney.

5. Don't assume that this is a "routine" audit. In fact, there is no such thing as a "routine" audit. When an insurance company audits you, it's because they want to recoup on paid claims. Upon receiving notice of audit, you should quickly review the records sought and determine why you are being audited.

6. Don't delegate the audit response to staff. Although staff can assist in locating records, they typically are not qualified to evaluate the sufficiency of an audit request and determine what information should be included in any response.

7. Don't just send a check. Many providers simply issue a check after receiving a request for repayment. First, often the overpayment demand is flawed and the entire amount is not owed. Second, even if the overpayment demand is warranted, you should sign a settlement agreement so that the insurer cannot come after even more claims.

8. Don't ever speak to investigators without counsel. They may be nice on the phone, but investigators are tasked with recouping money paid on claims and auditing providers. Many investigators have past law enforcement experience and will use what you say against you, if possible.

9. Don't forget medical privacy. You can release a patient's medical records to their own insurer, but beware of insurers attempting to "peek" at the records of noninsured patients. If you are out-of-network, you may not even be required to provide medical records to the insurer without the patient's consent.

10. Send a timely response and keep a copy for your records. Once you respond to the audit, keep a copy for your records in case it results in an overpayment demand.

11. Provide a medical records summary for every record you produce. It may sound tedious, but making the investigator's or insurance auditor's job easier will increase your chances of a favorable result.

12. Do not "edit" medical records. After you receive notice of an audit, you cannot change or enhance medical records. A poor record-keeping violation is better than a fraud accusation. There are certain instances in which you can supplement a medical record, but even then, you should consult counsel.

In addition to overpayment demands, insurers also place providers on "prepayment review." This means the provider must send medical records with every claim before they're paid.

Insurance companies are not set up to review medical records for every claim, so inevitably the process results in a slow-down or, in some cases, a complete shut-down of payment. Insurers will typically perform an audit before placing a provider in "prepayment review." This is yet another reason it is important to take all audits seriously.

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