10 Best Practices for Establishing Internal Coding Audits

An existent compliance plan not only detects incorrect coding practices, it may also be considered by some federal agencies when determining whether reasonable efforts were taken to avoid and detect fraud and abuse. Let's look at the following 10 best practices for establishing internal coding audits at your ASC.


1. Establish your coding compliance goal

Facilities should adopt a standardized method to measure coding quality performance. A coding audit will serve as a baseline indicator of coding accuracy, first by identifying root causes for coding errors, which should decrease variance and increase reliability. Second, an audit will identify strengths and weaknesses of coders, thereby facilitate the establishment of education goals.


2. Appoint a qualified internal auditor

Depending upon your ASC's organizational structure, reviews can be conducted by your coding manager/supervisor, lead coder or compliance department provided they are qualified and credentialed. The staff member who performs the internal audit should be credentialed with a coding certification and specifically experienced in ASC coding policies and guidelines. It would be wise to err on the side of caution since medical credentials (RN, LPN, MD) do not automatically mean the person is a qualified coding auditor. If your facility does not have a staff member qualified to perform internal audits, consider engaging a consultant and/or company with expertise in ASC auditing. The external audits should be performed on a more frequent basis than annually until coding accuracy percentages have been deemed acceptable and consistent.


3. Determine the frequency of reviews

How often should your facility perform internal audits? Monthly? Quarterly? Annually? Bi-annually? Frequency is determined by different variables. Volume of cases may warrant more frequent audits. Problematic specialties (areas of weakness) determined by a random internal audit may warrant a more focused and frequent auditing protocol. The best practice is to perform internal audits on a quarterly basis, with an external audit performed annually to validate internal audit consistency. Your ASC will want to nip any issues in the bud sooner than later.


4. Decide on the type of review

Your facility will need to determine whether it will perform a random or a focused audit. A random audit selection is a representative sample of your facility's case mix. A focused audit selection is a sample of accounts from a pre-identified problem area/specialty. Most facilities that perform internal audits will perform a random audit of its multi-specialty procedures. If the audit reveals a pattern of repeated coding errors, it may elect to perform a focused audit targeting the specific issue to verify the extent of the problem and initiate corrective measures.


5. Determine the financial classes

While RAC audits and accurate Medicare reimbursements are a primary focus for many ASCs, coding errors do occur amongst the varying commercial payers. Keep in mind all financial classes, whether Medicare or commercial, when determining your initial baseline audit. If a trend in variances is determined, a more focused audit may be indicated for a particular payer and/or specialty.


6. Define the scope of your audit

Will your audit be prospective or retrospective to claim submission? In a prospective audit, accounts are reviewed prior to claims submission to ensure the appropriateness of the coding, documentation, and adherence to the insurance carrier reporting guidelines. An internal prospective audit, when performed correctly, will identify incorrect billing patterns before claims are denied or outside auditors assess penalties. In a retrospective audit, accounts are reviewed after claims submission and reimbursement from the insurance carrier. All incorrectly reported claims identified during a retrospective audit should be carefully scrutinized. Refunds and/or rebilling should be performed according to the payer's repayment or corrected claims rebilling guidelines.


7. Sample size and margin of error

Sample size. For results to be statistically valid, choosing a sample size is critical. If the sample is too small (i.e., 10 accounts per quarter), the random variability will be not only inflated, but the likelihood of overlooking a potential issue may be increased. The recommended standard for sample sizes is to select 10 percet of the case volume. Currently, most ASC facilities use internal audit sample sizes from 1-10 percent.

Margin of error. A 91 percent overall accuracy rate may seem like a good score, but, consider that 9 percent of your claims are billed erroneously. According to the OIG, a minimum 95 percent accuracy rating is the best practice for a coding quality standard. This affords an acceptable 5 percent margin of error.


8. Standardize a method for classifying and reporting variances

Your facility should standardize definitions for "how" to count coding variances and ensure consistency. The basic coding audit should include a review of ICD-9-CM, CPT, HCPCS and modifiers. It should include any indications of documentation deficiencies and whether the operative documentation supports medical necessity pending carrier coverage policies. Compile a list of the key issues identified by the audit so that an action plan can be developed and implemented in a timely manner.


9. Utilize credible references

What audit tools should be used to determine the appropriateness of claims? Assemble reference materials such as current editions of coding manuals, AMA guidelines, specialty guidelines, NCCI edits and CMS or other carrier policies (i.e., LCD, specific carrier billing policies/contracts). Remember, AMA guidelines don't always correlate with Medicare/LCD policies, so it is important that your internal auditor and your coder know which commercial contracts follow AMA guidelines and which commercial contracts follow Medicare reimbursement policies.


10. Prepare a summary of findings

A spreadsheet reflecting a comparison of the coder's code selections and the auditor's code selections is preferable for documenting code over code reporting. Include over-reporting, under-reporting, financial impact, and a comment section. Keep in mind that the coder should be given the opportunity to review the preliminary audit and explain the rationale behind his or her coding.


After the audit is complete and the coder's rebuttal (additional information/rationale) has been considered, a final summary report and audit spreadsheet is submitted. Schedule a meeting with significant key staff to include the coder, supervisor and compliance officer (include physicians when applicable) to discuss any issues that can be resolved through staff and physician education or through the adjustment of the facility's coding/billing process.


Determine problem areas and who or what is accountable. Is it poor documentation, or is it the coding, the billing or payor reimbursement practices? Document your facility's efforts to improve its coding/billing process and continue monitoring any weak links.

Cristina Bentin can be reached at cristina@ccmpro.com. Learn more about Coding Compliance Management.

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