The Challenge: Billing Compliance and Audits
Financial leaders have a golden opportunity to reassess their billing and compliance procedures, given the convergence of internal and external market dynamics. Externally, both federal and commercial payors are intensifying audits and scrutinizing pre-payment claims, resulting in delayed cash flow and increased risk of penalties and clawbacks, jeopardizing the financial bottom line of healthcare organizations across the country.
In its 2023 Semi-Annual Report to Congress, the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) identified $200.1 million in expected audit recoveries and $277.2 million in questioned costs between October 2022 and March 2023. Expect those numbers to increase should OIG be granted its requested budget for 2024, which includes funding for combating fraud after resource limitations forced it to turn down “300 to 400 viable criminal and civil health care fraud cases” in previous years.
Internally, hospital and health system leadership are intensifying pressure on billing and compliance teams to optimize the revenue cycle as provider organizations continue their slow climb back from the financial brink of 2022 when about half of U.S. hospitals finished the year with negative margins. While 2023 margins improved by more than 15% through the end of the year (compared to 2022), progress remains a cautious endeavor.
This means traditional approaches to revenue cycle management (RCM) – billing compliance in particular – are no longer sufficient to protect provider organizations in today’s hostile environment. Instead, provider organizations need to take a multi-faceted approach that leverages a hybrid, risk-based audit strategy supported by advanced compliance technology.
Disrupt the Status Quo in Your Audit Strategy
In today’s financially uncertain healthcare landscape, maintaining the status quo in terms of audit strategy can create unforeseen risks. Conducting annual retrospective audits on all providers and coders or auditing random sample groups throughout the year may cause key issues to be missed within the billing process, leaving potential problems lurking in overlooked areas.
Periodic coder audits also fall short as problems can quickly build up to disastrous levels if left unchecked for an extended period. Nor is it wise to rely solely on information from the OIG regarding its areas of focus to drive audit strategies as doing so misses the other half of the picture – what other payors are scrutinizing.
Ignoring denials or focusing only on coding-related denials – as was typically the case just a few years ago – also overlooks a plethora of other correctable causes for claims to be rejected. Indeed, claims reviews are more critical than ever, as 69 percent of healthcare leaders report that denials have increased.
In a perfect world, billing and compliance departments would be able to prospectively audit every claim for accuracy and appropriateness. It’s an infeasible approach in today’s healthcare environment, both because it would bring the revenue cycle to a halt and require significant resources at a time when revenue cycle leaders are struggling with severe labor shortages. In one recent survey, 41 percent indicated up to 75 percent of their RCM and billing department roles were vacant.
Even those departments that are not short-staffed are likely ill-equipped to manage the influx of audit requests pouring in from all sides. According to the MDaudit Benchmark Report, more than 25 percent of providers failed audits in both professional and hospital billing. DRG audits increased by 300 percent, while HCC audits increased by 170 percent, and risk-based audits increased by 50 percent in 2023. While the right denial management technology tools would make managing such a significant uptick feasible, the reality is that nearly 40 percent of organizations continue to rely on spreadsheets to track audits and fewer than 25 percent track trends related to clinically avoidable denials.
The good news is that the increased focus on billing compliance and denials management has convinced revenue cycle leadership of the value automation and artificial intelligence (AI) can bring to RCM. Nearly 23 percent of respondents to one survey indicated they are moving to more use of automation/AI, and 20 percent recognized the need to do so.
An Optimal Approach to Billing Compliance
The adoption of advanced AI-enabled denial management technology plays a critical role in an optimal approach to billing compliance, which employs a hybrid auditing approach and RCM tools for a true risk-based billing and compliance strategy.
While prospective audits target high-risk DRGs, new providers and coders, and other problem areas, retrospective audits look at all denials to determine root causes and systemic issues impacting compliance and the overall revenue cycle. Powering this technology is an AI- and automation-enabled RCM platform that streamlines internal audits and accelerates response to external audits.
The right RCM platform will democratize data insights and provides robust reporting tools, thereby breaking down both data and communications siloes to ensure access to the actionable information needed to drive informed decision-making. It will also ensure compliance with timeframes and information demands, fill in talent gaps created by the staffing crisis, reduce overall costs of a robust audit strategy, and stop denial-related revenue leakage.
An additional step in an optimal approach to risk-based billing and compliance is to establish a partnership with payors that promotes both payment integrity and revenue integrity. Again, RCM platforms and data analytics play an integral role in the process of taking a proactive approach to identifying and correcting billing issues before they occur.
Finally, wrapped around the audits and technology tools, should be a comprehensive and tailored provider and coder education that is informed by audit results and analytics.
How DHR Health Achieved a 99.9% Coding Accuracy Rate
DHR Health, located in Edinburg Texas is a rapidly growing, premier for-profit, physician-owned health system with multiple locations across Texas’s Southern border. DHR Health is nationally recognized as a best-practice model minority-serving hospital, with 120 clinics, 70 specialties, approximately 22,000 annual discharges, 600 providers, and 1+ million outpatient visits annually.
While the health system’s Corporate Compliance Team experienced tremendous growth from two to seven team members- DHR Health’s landscape before MDaudit struggled with low audit volume (PB and HB) due to manual processes. On the hospital side, their DRG validation audits ran around 100 encounters a month, pre-bill.
A pioneer for the professional side, Claribel Alvarado, Compliance and Privacy Analyst shares her experience before MDaudit. “One of the major challenges was converting our manual process to an electronic process.” On the professional side, DHR Health has over 80+ clinics and over 250+ physicians.
Backed by MDaudit data, the DHR Health compliance team was equipped with the information necessary to support implementation. Auditing reports were presented up the chain of command from the VP of Compliance to the DHR Health Board. These resources paved the way for DHR leadership to support implementation measures.
“Because of MDaudit’s real-time data, we did not have to spend time and resources researching the latest regulations. MDaudit automatically provided those updates, allowing us to ensure that our internal and external auditors always had them in hand.”
– Claribel Alvarado, Compliance and Privacy Analyst
Additionally, MDaudit’s Benchmark Data allowed leadership to see how DHR Health and its providers compared nationally to other facilities and providers in the same specialty. “MDaudit’s platform, and real-time, evidence-based data reports supplied us with evidence to present to our physicians and executive teams. This really brought an awareness across the hospital of the Corporate Compliance Team’s efforts” shares Alvarado.
Following the distribution of MDaudit reports, Alvarado and Mayra Mendez, Compliance and Privacy Coding Audit Manager at DHR Health identified key stakeholders within the organization supporting direct compliance workflows. These leadership members were presented with proposals for new processes around implementation. Although this was met with initial pushback, the reinforcement of MDaudit’s industry and benchmark data prevailed and buy-in was achieved.
“Now that everything is electronic and we can see it in real-time along with other people, our department is growing. MDaudit gives us the opportunity to grow in many ways.”
– Mayra Mendez, Compliance and Privacy Coding Audit Manager
DHR Health has electronically converted its compliance processes and is on their way to using different scopes of audits to audit their 600+ providers, every 90 days. With the anticipated growth of the health system, DHR Health now has a solid foundation to build from.
- Provider accuracy improved by 22%
- HB DRG audits expanded from 100 to 800 encounters per month, with a special focus on high-dollar accounts
- Accuracy rates improved from 78% to nearly 100% of physicians being at 95% accuracy
- 900% increase in monthly retrospective audits
- 200% increase in monthly prospective audits
- 99.9% coding accuracy
Benefits of a Technology-enabled Approach to Audits
With audits on the rise and provider organizations still struggling to shore up their bottom lines, savvy finance leaders are realizing the benefits that come with a technology-enabled approach to audits. This ability to rapidly look forward and backward provides the level of insights needed to correct systemic issues that impact the revenue cycle and is possible with the right mix of education and technology tools to accelerate and streamline audit processes while bridging staffing gaps.
