Revenue Cycle Audit: How to Get Ready and Ace It

The phrase 'audit' is one associated with apprehension not only for taxpayers but also in the medical field, especially in revenue cycle managers and healthcare chief financial officers. It is these revenue cycle audits that also seek to identify areas that may pose potential weaknesses like under or over billing, breach of regulatory statute, lack of skill in personnel or due to improper planning. Given the present crisis in staffing many healthcare facilities recognize the flaws in their systems for managing revenue generation processes. Nevertheless, conducting a revenue cycle audit provides an opportunity to improve revenue cycle processes and increase productivity. 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]. 

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Understanding Revenue Cycle Audits

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The importance of a revenue cycle audit cannot be overlooked as it is part of an integrated revenue cycle management strategy. This process has a threefold purpose: to secure compliance, to maximize revenues, and to increase efficiency. Revenue cycle audits enable healthcare institutions to better their financial standing and reduce risks associated with penalties from compliance-related issues, by correcting or improving identifiable workflow inefficiencies and missed revenue opportunities.

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.

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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:

1. Internal Audit Team:  Many larger healthcare organizations have dedicated internal audit teams equipped to conduct revenue cycle audits. This methodology bears some benefits. To begin with, it allows healthcare institutions to have more operational control over the audit process and keep it in line with the strategic goals of the organization. Secondly, the use of internal audit teams can also help save costs as opposed to hiring donning an outsider charge of the audit. On the other hand, it is necessary to point out that internal teams may miss the quest of specific skills or impartiality that comes with external audit firms.
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2. External Audit Firms: External audit firms that specialize in a particular industry, particularly the healthcare sector, have different value to add in the revenue cycle audit process. For instance, they possess a good grasp of the healthcare revenue cycles and have conducted audits in various healthcare set ups and so are able to point out systems malfunction or nonconformities to which the internal teams would overlook. In addition, the external audit firms are independent which builds trust in the objectivity and completeness of the work done by the auditor. This is even more advantageous for audits with high monetary worth or those which can lead to litigation.
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3. Regulatory Agencies:  For profit or not-for-profit health literacy entities are all bound by the regulations set forth by the Governmental regulatory bodies. Revenue cycle audits may sometimes be carried out by the Centers for Medicare & Medicaid Services (CMS), the Office of Inspector General (OIG) and state Medicaid agencies, among others, to verify that appropriate healthcare billing and medical coding is carried out in accordance with the law. These audits, however, are essential not only in the prevention of fraud and abuse of healthcare programs, but also, in the proper use of taxpayer funds allocated to these programs. Non-compliant health care institutions’ billing and coding practices with applicable regulations are subject to substantial monetary fines imposed by regulatory authorities. They may also go a step further and suspend a provider’s privilege to access government subsidized medical services.
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4. Payers:  Insurance companies (payers) have an interest in the integrity of claims made in healthcare as well. They may, therefore, want to do revenue cycle audits that will look for overpayments or over-billing. In this type of auditing medical documents, medication coding and their relationship to reimbursement issues will be analyzed to make sure that the billed for services were actually provided, were necessary and billed as per the insurance policy. Payer audits help in promoting healthcare efficiency and minimize wastage by correcting inflated charges. It is, however, possible for healthcare facilities to disagree with the results of a payer audit more so in relation to the medical necessity or coding of the services. If this happens, healthcare facilities have a right to dispute the audit and seek reconciliation with the payer.
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5. Accreditation Organizations: Healthcare accreditation organizations including The Joint Commission (TJC), Healthcare Facilities Accreditation Program (HFAP), and Det Norske Veritas (DNV) might include revenue cycle audits into their evaluation procedure. Such audits are not limited to compliance with the billing and coding practices alone. Among such efforts, the quality of care and patient safety of the healthcare organization’s operations is one concern that the accreditation bodies are interested in. The economical aspects of a healthcare organization and how important a revenue cycle is for such an organization is considered important by the accreditation bodies. This induces the need for a strong revenue cycle where funds will be available for the purchase of equipment, technology and human resources which are all important for the provision of care to the patients. It also reduces the risk of human errors and fraud, both of which may compromise patient safety. Accreditation organizations internalize these considerations and audit the revenues cycle in order to see how far a healthcare organization, which is integrated with other concepts, sustains its quality and assures patient safety.

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What RCM auditors look for in every area

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The revenue cycle auditors pay special attention to many factors that constitute a healthcare organization’s revenue cycle to pinpoint the efforts that could be improved and to double-check adherence to the relevant policies. Here is a description of each key area in which RCM auditors check what they usually check:

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 assess and ensure that every billable service offered to the patients is accounted for, as the organization greatly stands to be reimbursed.
• Compliance: They could as well focus on the organization’s coding and billing strategy and seek to find areas that if left unrectified may attract heavy penalties and recoupments from health insurers.

Claims Submission and Denial Management:

• Clean claim submission: An external reviewer examines the claims that are turned in for precision and completeness to reduce instances of non-payment attributable to lack of information or mistakes.
• Denial follow-up: Auditors analyze how well the organization pinpoints distressed assets and takes steps to defend them. Denial management is an essential part of the processes geared towards ensuring that revenue that is rightfully owed to the organization is received within a designed timeframe.
• Coding compliance: They could as well focus on the organization’s coding and billing strategy and seek to find areas that if left unrectified may attract heavy penalties and recoupments from health insurers.

Payment Posting and Reconciliation:

• Accurate coding application: The auditor ensures that the payments made by the third party payers are bridged to the claim and services provided through codes.
• 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:

• Clarity of information on cost prediction: They appraise how clear and accurate a prediction of a patient’s costs without insurance is given before service is striven for.
  
• Point-of-service collections: They evaluate how effective an organization is in performing the patient copay and deductibles collection procedure to enhance cash flow.
• Practices of patient billing: They may find it necessary to check patient billing statements for clarity, correctness and non-confusion revealment to patients so as to avoid possible conflicts.

Upon a detailed assessment of the addressed aspects, RCM auditors examine the revenue cycle management of the healthcare institution and formulate recommendations for its improvement. This includes improving revenue collection, enhancing internal processes and compliance with external regulations.

Conclusion

For the financial viability and operational effectiveness of the healthcare institutions, there is a need for revenue cycle audits. In this context however, because they pinpoint problems such as billing errors, compliance issues and inefficiencies in workflows, these audits serve a greater purpose of improvement. These audits of the revenue cycle include those performed by internal and external teams, regulatory bodies, payers and other accrediting bodies to ensure compliance with regulations and standards.

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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