The term "audit" often evokes anxiety, not just among taxpayers, but also within the healthcare industry, particularly for revenue cycle managers and healthcare CFOs. Revenue cycle audits serve to identify areas for improvement, potentially revealing shortcomings like billing inaccuracies, compliance risks, or even underlying staff skill deficiencies or planning gaps. Understandably, with the current healthcare staffing crisis, many healthcare organizations acknowledge the imperfections inherent in their revenue cycle processes. However, a revenue cycle audit serves as a valuable tool to optimize these processes and achieve greater efficiency. In anticipation of an upcoming audit, preparation is key to demonstrating strong performance to management and senior leadership, even in the presence of imperfections within the current system. According to the Healthcare Financial Management Association (HFMA), organizations Clinical audits and denials impact 3% or more of NPR being held in reserve[1].
Understanding Revenue Cycle Audits
A revenue cycle audit plays a crucial role in a comprehensive revenue cycle management strategy. This process serves a three-fold purpose: ensuring adherence to regulations, optimizing revenue streams, and enhancing operational efficiency. By identifying and rectifying workflow shortcomings and instances of revenue leakage, revenue cycle audits empower healthcare organizations to improve their financial health and mitigate the risk of penalties associated with compliance issues.
These audits can be conducted internally by a healthcare organization's dedicated audit team or outsourced to specialized external firms. Regardless of who performs the audit, a comprehensive approach is essential. This typically involves reviewing established policies and procedures, conducting staff interviews, analyzing data metrics, and monitoring key performance indicators (KPIs).
Two primary audit types exist to help organizations maintain optimal performance. Proactive Audits, conducted before issues arise, often focus on high-value procedures and frequently utilized services. They aim to identify areas where workflow improvements can prevent revenue loss. Conversely, Reactive Audits address errors after they have been flagged. Common triggers for reactive audits include instances of overpayments or denials stemming from eligibility verification failures.
Who Performs the Revenue Cycle Audit?
The entities responsible for conducting revenue cycle audits can vary depending on the size, complexity, and specific requirements of the healthcare organization. Here are the people involved in conducting revenue cycle audits:
- Internal Audit Team: Many larger healthcare organizations have dedicated internal audit teams equipped to conduct revenue cycle audits. This approach offers a couple of advantages. Firstly, it allows healthcare organizations to maintain greater control over the audit process, ensuring alignment with the organization's specific priorities and objectives. Secondly, leveraging internal audit teams can potentially reduce associated costs compared to outsourcing the audit to an external firm. However, it's important to acknowledge that internal audit teams may lack the specialized expertise or objectivity that external audit firms can provide.
- External Audit Firms: Specialized external audit firms bring a unique value proposition to the revenue cycle audit process. Their deep understanding of the healthcare revenue cycle, combined with extensive experience in conducting audits across a wide range of healthcare organizations, allows them to identify areas of inefficiency or non-compliance that internal teams might miss. Furthermore, the independence of external audit firms fosters trust and confidence in the auditor's objectivity and thoroughness. This can be particularly important for audits with significant financial implications or those that may involve potential legal ramifications.
- Regulatory Agencies: Governmental regulatory agencies, such as the Centers for Medicare & Medicaid Services (CMS), the Office of Inspector General (OIG), and state Medicaid agencies, may conduct revenue cycle audits to ensure compliance with mandated healthcare billing and coding practices. These audits play a critical role in safeguarding taxpayer dollars and protecting the integrity of federal healthcare programs. Regulatory agencies have the authority to impose significant financial penalties on healthcare organizations found to be in non-compliance with billing and coding rules. Additionally, they may take further actions such as revoking a provider's ability to participate in government-funded healthcare programs.
- Payers: Insurance companies (payers) also have a vested interest in ensuring the accuracy of submitted healthcare claims. To this end, they may conduct revenue cycle audits to identify potential instances of overpayment or improper billing. These audits typically involve a review of medical records, coding practices, and supporting documentation to ensure that services billed for were medically necessary, delivered as described, and coded correctly according to insurance guidelines. By identifying and rectifying billing errors, payer audits help to control healthcare costs and prevent waste within the healthcare system. However, healthcare providers may sometimes find themselves disagreeing with the results of a payer audit, particularly in cases where medical necessity or coding accuracy is disputed. In such instances, healthcare providers have the right to appeal the audit findings and work towards a resolution with the payer.
- Accreditation Organizations: Healthcare accreditation organizations, such as The Joint Commission (TJC), Healthcare Facilities Accreditation Program (HFAP), and Det Norske Veritas (DNV), may incorporate revenue cycle audits as part of their comprehensive evaluation process. These audits go beyond simply verifying adherence to established billing and coding practices. Accreditation organizations are also interested in assessing a healthcare organization's commitment to quality care delivery and patient safety. In this context, a well-functioning revenue cycle is viewed as an essential component of a high-performing healthcare organization. A robust revenue cycle ensures that financial resources are available to invest in necessary equipment, technology, and qualified staff, all of which contribute to the quality of care provided to patients. Furthermore, a strong revenue cycle management system helps to minimize errors and prevent fraud, which can ultimately have a negative impact on patient safety. By incorporating revenue cycle audits into their evaluation process, accreditation organizations can gain valuable insights into a healthcare organization's overall commitment to quality and patient safety.
What RCM auditors look for in every area
Revenue cycle auditors meticulously examine various aspects of a healthcare organization's revenue cycle to identify areas for improvement and ensure compliance with regulations. Here's a breakdown of what RCM auditors typically look for in each key area:
Patient Registration and Scheduling:
- Accuracy of patient demographic information: Auditors verify that patient names, addresses, insurance details, and other demographic data are accurate and complete to prevent billing errors and ensure proper claim submission.
- Eligibility verification: Auditors assess whether the organization has a system in place to confirm patient eligibility for insurance coverage before services are rendered. This helps to avoid denied claims due to coverage issues.
- Prior authorization: They ensure the organization obtains prior authorization from payers when necessary for specific procedures to prevent claim denials.
Coding, Compliance and Charge Capture:
- Accurate coding practices: Auditors scrutinize coding practices to ensure they adhere to the latest ICD-10 and CPT coding guidelines. Inaccurate coding may lead to claim denials or underpayments.
- Complete documentation: They review medical records to confirm that they contain complete and accurate documentation that justifies the assigned codes and supports the medical necessity of services provided.
- Proper charge capture: They verify that all billable services rendered to patients are captured accurately and completely to ensure the organization receives appropriate reimbursement.
- Compliance: They may specifically examine the organization's coding practices to identify any patterns of non-compliance that could lead to significant penalties or recoupment demands from payers.
Claims Submission and Denial Management:
- Clean claim submission: Auditors assess the accuracy and completeness of submitted claims to minimize the likelihood of denials due to missing information or errors.
- Denial follow-up: Auditors evaluate the organization's process for identifying and following up on denied claims. A timely and effective denial management system is crucial for recovering lost revenue.
- Coding compliance: They may specifically examine the organization's coding practices to identify any patterns of non-compliance that could lead to significant penalties or recoupment demands from payers.
Payment Posting and Reconciliation:
- Accurate coding application: Auditors verify that payments received from payers are accurately matched to the corresponding claims and coded services.
- Denial and adjustment resolution: They assess how the organization addresses denied or adjusted claims to ensure proper resolution and potential recovery of lost revenue.
- Timely posting: Auditors ensure that payments received are posted to patient accounts promptly and accurately to maintain clear financial records.
Patient Pay Estimates:
- Transparency in cost estimates: They evaluate whether patients are provided with clear and accurate estimates of their out-of-pocket costs for services before they are rendered.
- Point-of-service collections: Auditors assess the organization's process for collecting patient co-pays and deductibles at the time of service to improve cash flow.
- Patient billing practices: They may review patient billing statements to ensure they are clear, accurate, and itemized to avoid confusion or disputes with patients.
By thoroughly examining these areas, RCM auditors can identify weaknesses in a healthcare organization's revenue cycle and recommend corrective actions to optimize revenue capture, streamline processes, and ensure compliance with regulations.
Conclusion
Revenue cycle audits are essential for optimizing the financial health and operational efficiency of healthcare organizations. By identifying and addressing billing inaccuracies, compliance risks, and workflow inefficiencies, these audits provide crucial insights for improvement. Conducted by internal teams, external firms, regulatory agencies, payers, and accreditation organizations, revenue cycle audits ensure adherence to best practices and regulatory requirements.
Audits cover key areas such as patient registration, coding, charge capture, claims submission, denial management, payment posting, and patient billing practices. By thoroughly examining these facets, auditors help enhance processes, reduce errors, and improve patient satisfaction. Ultimately, the findings from these audits enable healthcare providers to achieve greater efficiency, secure appropriate reimbursement, and maintain compliance with industry standards.
If you are a healthcare provider and wish to discuss how you can prepare for a successful Revenue Cycle Audit, feel free to write to us at partnerships@homrcm.com.
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