Benefits of Medical Coding Audits & Why You Need One

benefits of medical coding audits

Accurate medical coding plays an essential role in healthcare information management and overall quality of care. Medical coding audits, both internal and external, ensure that healthcare organizations have the proper policies and procedures in place to achieve quality medical coding.

Regular audits can reveal inaccuracy issues, such as outdated codes or even fraudulent billing. These audits provide a quality assurance process that helps organizations obtain proper reimbursement and maintain regulatory compliance. We compiled this guide to the importance of medical coding audits, showing how they can improve medical coding accuracy, to aid organizations seeking greater accuracy and accountability.

Why Conduct a Medical Coding Audit?

With the majority of healthcare organizations formalizing compliance programs, the need for medical coding audits is clear. The consequences of not auditing medical code include exposure to compliance risk and lost revenue. Conducting regular audits uncovers current problems and equips healthcare organizations with the knowledge to improve coding policies and procedures.

conduct medical coding audit

Discover Problematic Trends

A few of the common issues medical coding audit services can uncover include:

  • Under- and up-coding: Under- and over-coding are inaccurate representations of services rendered. In the case of under-coding, the code used is for less-expensive services than actually performed, while up-coding describes more expensive procedures than actually performed.
  • Unbundling: When medical code uses multiple CPT (current procedural terminology) codes for a procedure when a single code would suffice, this is known as unbundling. This could occur as a simple mistake. Coders may not be up-to-date on the latest ICD-10 codes, or this could be an intentional form of up-coding.
  • Outdated coding: Medical coders are responsible for knowing multiple sets of code, including ICD (international classification of diseases) from the World Health Organization, CPT codes from the American Medical Association and HCPCS (Healthcare Common Procedure Coding System) from the Centers for Medicare and Medicaid Services. Those code sets are typically updated on an annual basis. Using outdated code can lead to lost revenue.
  • Lack of documentation: Medical coding accuracy is not only dependent on medical coders, who can only use the documentation they are given. If the provider generates documentation with missing or undecipherable details, the medical coding is going to be inaccurate.

Prevent Compliance Headaches

Compliance is one of the most important reasons to audit medical coding. Medical coding and billing are subject to compliance with the payer’s policy, including Medicare, Medicaid and private payers, and with regulations from the Office of the Inspector General (OIG). Systematic failure to comply with these regulations can trigger compliance audits. The discovery of billing fraud will result in hefty fines and damage to the organization’s reputation.

Medical coding audits not only uncover problems and opportunities to improve, but they also highlight what coding processes are being done right. There are multiple reasons to audit medical coding, but it ultimately boils down to protecting your organization.

Benefits of Medical Coding Audits

So, you understand what is at stake, including compliance risk and lost money, when healthcare organizations do not commit to regular audits of medical coding. It is also important to understand how exactly accurate medical coding and audits benefit healthcare organizations.

increase medical coding compliance

1. Increasing Compliance and Reducing Fraud

Compliance and billing fraud is a major issue in the healthcare industry. According to Medical Economics, in 2016, Medicare’s fee-for-service improper payment rate, which measures payments that did not adhere to Medicare coding and billing regulations, was 11 percent, equivalent to $40.4 billion. These improper payments are either the result of billing errors or fraud. In 2016, the Medicare Fraud Strike Force charged 301 healthcare professionals with $900 million in Medicare billing fraud.

The most common causes of improper billing, says Medical Economics, include:

  • Lack of documentation, accounting for 64 percent of improper Medicare payments
  • No documentation at all
  • Lack of medical necessity
  • Incorrect coding

When it comes to fraud, up-coding and billing for unnecessary services, services not provided or appointments patients did not keep are the most common acts.

Medical coding audits can uncover improper billing practices, whether caused by error or fraud. Healthcare organizations can make the proper updates to billing protocol and staff training to ensure further billing mistakes and intentional fraud are not committed, ultimately reducing risk and potentially saving organizations from being slapped with hefty fines.

2. Improving Accuracy

The Central Learning 2nd National ICD-10 Coding Contest found that medical coding accuracy largely falls beneath the standard of 95 percent accuracy. For example, the average coding accuracy for overall inpatient cases was 55 percent in 2016. That number increased to 61 percent accuracy in 2017. Coding accuracy was even lower for ambulatory surgery and the emergency department.

Accuracy in medical coding is essential to avoid compliance consequences and for your patient records and overall quality of care. For example, the accuracy of medical coding affects healthcare organizations’ quality reporting and risk adjustment.

Medical coding audits can identify issues, such as poor documentation, that affect coding quality. Poor documentation affects patient records and makes it difficult for medical coders to do their jobs. In addition, accurate coding for quality reporting is becoming increasingly important as the requirements for value-based reimbursement evolve.

3. Protecting the Bottom Line

Inaccurate coding leads to healthcare organizations losing money. Inaccurate coding can result in denied and rejected claims. When a payer reviews and processes a claim only to deem it unpayable, the claim is considered denied. This can occur due to coding errors caught after processing or because the claim goes against the provider-payer contract. Rejected claims do not even make it through the payer review process due to multiple errors. Whether a claim is rejected or denied, it will take time to correct the errors and resubmit the claim in order to receive reimbursement.

In other cases, claims with inaccurate coding will make it through the payer process. Under-coded claims leave money on the table, while up-coding leaves healthcare organizations vulnerable to regulatory fines.

Medical coding audits will find areas in the coding process that lead to lost revenue. Afterward, healthcare organizations can adjust their coding processes to avoid future damage to the bottom line.

providing medical coder education

4. Providing Coder Education

Coder education is one of the most valuable benefits of medical coding audits. Investing in coder education helps healthcare organizations prevent future errors that lead to compliance while decreasing fraud risk and lost revenue. Here are some tips for using audit results to educate medical coders:

  • Prepare medical coding staff for audits: Use audits as an opportunity to open the conversation around medical coder education. Make it clear that an audit, whether internal or external, is not meant to discredit anyone’s work, but rather it is meant to serve as a chance to improve as a team.
  • Develop quality benchmarks for coders: After an audit is completed, the results can be used to develop new benchmarks going forward. Coders can be involved in the creation of those benchmarks and help keep one another accountable to them.
  • Offer consistent resources: Inaccurate coding can be attributed to inconsistent education. Is everyone using the same resources to get the job done? Create a collection of reliable resources, such as the CMS and American Medical Association websites, that all medical coders can trust and use.
  • Prioritize communication: Talk about the results of an audit. What do they mean? How can they be used to improve? And don’t stop there. Encourage coders to ask questions and communicate with one another. Keep track of the answers to commonly asked questions to help onboard new coders.
  • Commit to regular education: Medical coding requirements and regulations change on a regular basis, so education should be designed to keep up. Schedule educational sessions for the team on a regular basis to help keep the organization’s coding process current, efficient and accurate.

Internal vs. External Coding Audits

Coding audits in healthcare can be conducted internally and externally. Here is the difference between the two options.

Internal Coding Audit

An internal coding audit is conducted by staff members employed by the healthcare organization. In larger healthcare organizations, this can mean members from the audit department conduct the review of coding procedures and processes. In smaller organizations, a medical coder trained to conduct audits may be in charge of this task.

When conducting an internal coding audit, healthcare organizations have a number of steps to consider. You need to understand what the audit will cover:

  • What are the most common procedures in your facility’s case mix?
  • Will the audit cover all payers or a specific payer?
  • How large of a sample will the audit include?

Next, internal auditors can take regulatory compliance into consideration by checking the areas subject to high compliance risk. Finally, it can be helpful to audit areas that had inaccuracies uncovered by previous audits. Selecting random areas to audit can also help uncover unexpected inaccuracies. After obtaining the results, the healthcare organization needs a plan of action to understand the results and apply them to make changes in the coding process.

external coding audits

External Coding Audit

Third-party medical coding audits are performed by professional medical coding audit companies. Internal coding audits certainly have value, but external audits have the benefit of being objective. Additionally, companies that specialize in this process can often offer advanced medical coding and auditing services beyond what a healthcare organization can accomplish internally.

When undergoing an external coding audit, healthcare organizations do not need to perform the auditing process, but they can prepare for the process and its results. Before the audit, organizations can set expectations and goals. External auditors can then tailor their work to the organization.

Healthcare organizations also need to prepare their medical coders. An external audit can be a stressful event. Coders need to understand the audit is not designed to tear down their work, rather it is a way to help the team develop and improve. The coding team will also need to prepare to give external auditors access to all of the records they need and be ready to communicate with them. When it is time to audit medical coding, healthcare organizations should view external auditors as an important resource.

Once external auditors complete their review, they will present their findings and offer recommendations for improvement. Getting the most ROI out of an external audit means taking those recommendations seriously and effectively implementing change.

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How Often Should You Have a Medical Coding Audit Conducted?

How often to audit medical coding can depend on any number of factors, including the size of the organization, the rate of staff turnover and regulatory updates. The experts recommend an external coding audit at least once a year, but many healthcare facilities commit to monthly external coding audits to reap as much benefit as possible. Monthly external coding audits support:

  • Greater consistency
  • Coder development
  • Compliance
  • Clinical documentation improvement.

Monthly coding audits help healthcare organizations catch errors more frequently, which means they can recapture more revenue and rectify the errors resulting in lost revenue. The insights gained from monthly audits can be used to keep medical coders up to date on the latest regulatory requirements and help them avoid common errors. The results of monthly audits can also be used as an important tool in onboarding new coders.

Annual reviews offer a retrospective for 12 months, but organizations may need to make updates to their processes more often than that. For example, the American Hospital Association Central Office releases coding updates on a quarterly basis. Coding audits conducted on a monthly basis can determine if those updates have been properly applied, and organizations can make necessary adjustments sooner rather than later.

Armed with monthly audit insight, healthcare organizations can more rapidly identify areas for clinical documentation improvement, which enhances the overall coding process. Committing to audits more than once a year, whether monthly or on a quarterly basis, is an investment, but the sooner inaccuracies and lost revenue are discovered, the greater the return on investment.

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What HealthCare Resolution Services Can Do for You

An external coding audit gives healthcare organizations an objective, third-party assessment of their medical coding procedures and policies. If your organization is looking to improve compliance and prevent lost reimbursement, independent medical coding audits are a great place to start. HealthCare Resolution Services has fully qualified coding compliance auditors who can look into your organization’s entire medical coding process to reveal inefficiencies and compliance risk.

HCRS has the experience your organization needs to improve medical coding accuracy. We work across military, government and civilian organizations. Over our two decades of performing healthcare medical coding audits, we have helped the Medical Integrity Program (MIP) recover approximately $40 million in improper payments, and we have maintained 95 percent or greater accuracy in our work. For every $1 spent on our expert services, we have found $8 in incorrect payments for our customers.

Whatever kind of healthcare facility you run and no matter what kind of services you provide, we are equipped with the expertise to audit your medical coding processes and set you on the path to capturing more revenue and protecting your organization from fraud and compliance risk. Contact us to learn more about our services and how we can help your organization.

9 Reasons Why Outsourcing Your Medical Coding is the Right Choice

why you should outsource medical coding

Your healthcare organization’s compensation relies on accurate and efficient medical coding and the submission of medical claims. Medical coding, however, can be complex, time-consuming and expensive when you complete it in-house. These challenges lead many practices to consider medical billing and coding outsourcing.

Deciding whether to build an in-house medical coding team or outsource your coding to a third-party coding specialist is an important decision for any healthcare organization. In most cases, working with outside coding professionals is the optimal option because of the advantages this approach provides. Here’s why you should consider medical coding outsourcing.

  1. Up-to-Date Certifications
  2. Consistent Staffing Levels
  3. Cost-Effectiveness
  4. Hiring Challenges
  5. More Time for Core Activities
  6. Flexibility and Scalability
  7. Consistent Quality and Accuracy
  8. Transparency
  9. Security and Compliance

What Is Remote or Outsourced Medical Coding?

remote medical coding

Outsourced medical coding means you contract your coding work out to a third-party coding company instead of completing it in-house. Depending on your agreement, the coding company will be responsible for all or most of the work related to your medical coding needs. The third-party company is also responsible for keeping their staff up-to-date on the latest coding skills and requirements. While many medical coders work remotely, you can also contract with coders who will come into your practice and work there.

If outsourcing their coding, after completing a procedure, a physician will send the medical charts over to the company they work with. The coders will read the charts, complete the coding and send the charts back to the practice.

Outsourced medical coding agencies may also perform medical coding audits and provide other services such as medical record review, research support and clinical documentation improvement.

The alternative to outsourcing your medical coding is to complete it in-house. At some organizations, the physicians and other medical professionals may do coding themselves. Other organizations may build an in-house team of medical coders to complete all or most of their coding.

Benefits of Outsourcing Medical Coding

benefits of medical coding outsourcing

There are many advantages to outsourcing your medical coding to a specialist. Here are some of the leading reasons outsource medical coding is the right choice.

1. Up-to-Date Certifications

Medical coders need to keep up with updates to coding systems, regulations and best practices. They also need to stay current with certifications and complete continuing education requirements. It’s also beneficial for them to keep up with updates from government agencies, healthcare organizations and other groups through their websites, blogs, email lists, webinars, seminars and other resources.

Keeping up with certifications and updates requires a significant time investment. Occasionally, a major update will occur that creates a substantial change in medical coding. The introduction of ICD 10, for example, brought with it a significant increase in the number of codes. ICD-10-PCS has about 19 times more procedure codes than ICD-9-CM, volume 3, and ICD-10-CM has about five times more diagnosis codes than ICD-9-CM.

If you work with third-party medical coding specialists, you don’t have to worry about these requirements, however. Medical coding outsourcing companies will take care of these issues for you, and you can rest assured that the coders working on your charts are up-to-date with their certifications, skills and knowledge.

At HealthCare Resolution Services (HCRS), our coders are all fully certified by the American Academy of Professional Coders (AAPC) or the American Health Information Management Association (AHIMA).

2. Consistent Staffing Levels

If you have an in-house coding team, you rely on them for all of your coding needs. When you have only your team to work with, you have limited adaptability to adjust to changing conditions. Sometimes the volume of coding that needs to get done may exceed the capacity of your in-house team. Other times, your team may be short-staffed because one of your coders is on vacation, gets sick or even quits. This can lead to backlogs in coding work and delays in payment.

Medical coding agencies, on the other hand, have a large staff of coders, so they can adjust to changes in the volume of work your practice gives them. They also don’t have to worry about one of their workers being out of the office, because they have other coders they can rotate in. When you work with contract medical coding companies, you can be comfortable knowing there are always enough coders to get the job done promptly.

3. Cost-Effectiveness

In many cases, outsourcing your medical coding works out to be more cost-effective than hiring and maintaining an in-house team of coders. Employing medical coders, especially ones with specializations and superior skills, is expensive. With outsourcing, you get access to top-notch coders at a lower rate.

According to the AAPC, the average salary for a medical coder is $52,411 annually. Certified coders and those with more experience will command a higher salary. Coders who specialize and have certifications as a Certified Professional Medical Auditor, Certified Documentation Expert Outpatient or Certified Physician Practice Manager earn an average of around $64,000 annually.

Salary isn’t the cost associated with employing a medical coder, of course. You will have other expenses such as employer-paid taxes and benefits like health insurance, retirement benefits and paid time off. These costs will be about 35 percent of a coder’s salary. You will also have expenses such as office space and supplies as well as intangible costs like those associated with hiring, training, supervising, licensing and insurance. You also need to consider the opportunity costs for the time you’ll spend hiring, training, managing and otherwise investing in your internal coding team.

When you outsource your medical coding, the company you contract with is responsible for all of these expenses. Because they operate on a larger scale, have experience with medical coding and have coding as their primary focus, they can typically provide these services to practices for less than it would cost the practices to conduct all medical coding themselves.

Because conditions differ between practices, you can conduct your own analysis to determine what the most cost-effective option is for you. Often, the most economical approach is to outsource your coding to a specialist.

4. Hiring Challenges

Hiring medical coders can present challenges beyond costs. There is currently a shortage of qualified medical coders. This is due in part to the IDC 10, which reduced coders’ productivity due to the need to learn a new system. The introduction of ICD 10 also led to large-scale retirements, and more retirements are expected shortly, as the average age of a medical coder is 54.

It’s even more difficult to find a qualified coder if you need one with experience in a particular specialty. There may not be enough medical coders in your area who meet your requirements. The medical coder shortage is also driving up the salaries of coders. Retaining the coders you hire can also be a challenge, especially since there are so many job opportunities for coders today.

If you outsource your coding, however, you will constantly have a pool of coders available. Even if some coders leave the company you contract with, they will have others to take their place immediately. Remote medical billing and coding companies can hire coders from anywhere, so they have a larger pool from which to hire employees. The coding company you work with will have coders available who have the qualifications you need, even if you need someone with a specific specialization.

5. More Time for Core Activities

Doing medical coding in-house takes time and resources away from other activities. This is especially apparent if physicians do their own coding, but training and managing an in-house team takes significant time and resources as well. There’s a considerable opportunity cost associated with doing your own medical coding.

Outsourcing your coding gives you more time to focus on core activities. This means that your staff has more time to focus on patients, helping to improve quality of care. When you work with a reliable coding company, you’ll still get accurate coding and get compensated in a timely manner, but you won’t have to take time away from the core of your practice to get those results.

6. Flexibility and Scalability

Working with a contract medical coding company affords you more flexibility and scalability than hiring an in-house team does. With an internal team, you have a set number of coders. Hiring additional employees is a long process. Those coders also have limited expertise and experience, so if something unexpected happens, they may not know how to deal with it without additional training.

With outsourcing, however, you have access to a large pool of coding professionals. This access enables you to scale your team up or down almost immediately. If you have an unusually high volume of work one day, the coding company can assign more employees to complete that work so you don’t have a delay in submitting claims and receiving payments. As your practice grows in the long run, you can also scale up your coding capacity more permanently with minimal effort.

You also have access to coders with different expertise and certifications if you use outsourced medical coding companies. If you need coding for a specialized medical service you don’t normally deal with, the company will have a coder on staff with the knowledge necessary to meet that need.

7. Consistent Quality and Accuracy

medical coding accuracy

When you work with a coding specialist such as HCRS, you know you’re getting services that provide a consistent level of quality and accuracy. We have years of experience with medical coding and a large team of skilled coders. We code and audit more than 3 million medical records every year for the Army, Navy and Air Force, and we consistently have accuracy rates of 95 percent or more.

Because of the flexibility that a medical coding outsourcing company can offer, you can be confident that you’ll get the same level of quality even if the volume of records increases. You also don’t have to worry about decreasing levels of accuracy and quality due to lower levels of staff on certain days or changes in coding rules.

8. Transparency

The coding company you work with will be able to provide you with detailed records and performance reports related to your medical billing. They may provide you with these reports automatically or upon request. This gives you excellent visibility into your coding and billing, helping you to get a more complete picture of how your practice operates. You can obtain these insights without having to invest time in keeping and maintaining detailed records or even supervising staff. This advantage is another point you should consider when deciding whether to hire or outsource medical coding professionals.

9. Security and Compliance

Security and compliance with regulation is a significant concern for all healthcare organizations. In regards to medical coding and billing, you need to have robust data security and disaster recovery measures in place to protect against data loss and other cyber incidents. You also need to ensure compliance with HIPAA and other regulations.

A professional coding firm will understand the security and compliance concerns related to your coding needs. While you should always take proper precautions on your end, you can be confident that your coding company is taking the proper steps as well.

hcrs medical coding solutions

Partnering With HealthCare Resolution Services

If you’re looking to improve the accuracy, timeliness and consistency of your medical coding and billing, consider outsourcing your coding. This approach provides numerous benefits that make it a smart choice for many healthcare organizations.

HealthCare Resolution Services is a leading medical coding company with more than 20 years of experience working with some of the country’s largest healthcare providers including governmental, military, veteran and civilian organizations. We have a large staff of certified, skilled coders, and we’re ready to provide the quality medical coding services you need.

All of our coders are certified by the American Academy of Professional Coders (AAPC) or the American Health Information Management Association (AHIMA) and have at least three years of experience. Our coders use our proprietary coding software to achieve improvements in accuracy and efficiency. We offer affordable rates for remote U.S., offshore and on-site services.

We deliver concrete improvements in coding productivity, efficiency and accuracy. We increased monthly coding productivity by 48 percent, increased monthly audited record by 122 percent and reduced overall administration time from 31 to four percent for the U.S. Navy Headquarters Bureau of Medicine and Surgery (BUMED). When working with the Medicaid Integrity Program (MIC), we helped to recover more than $40 million in improper payments. We work with more than 300 military treatment facilities.

We’ve also delivered more than 6,000 training hours in evaluation and management coding, audit preparation and more. We offer abstraction and quality management, auditing, medical record review and research support services.

We have a full suite of services to help our clients handle the workload threatening to overwhelm healthcare providers and government health agencies. To learn more about our medical coding services, contact us by filling out this quick online form or give us a call at (866) 599-4277.

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