Practice audits: How to obtain meaningful results

August 31, 2006

Radiology practices frequently use outside auditors to evaluate their billing service. These audits provide a valuable service to a practice. But physicians often have a misconception of the actual scope of an audit and the meaning of its outcome.

Radiology practices frequently use outside auditors to evaluate their billing service. These audits provide a valuable service to a practice. But physicians often have a misconception of the actual scope of an audit and the meaning of its outcome.Most auditors report on specific predetermined elements of the billing function. Typically, they do not express an overall opinion of how the billing company is performing, nor do they offer observations on the billing company's management philosophy or offer specific recommendations. By expanding the audit to include additional areas, the final report will be much more useful.A typical billing service audit includes several steps. An initial planning meeting comes first. At this stage, physicians tell the auditor what it is they want the auditor to do. This stage is essential. The next step is audit program development, in which the auditor plans the work to be performed, documents the strategy he or she will take, and develops parameters for the testing to be performed. This phase should produce the audit program. An audit program is a step-by-step outline of the work to be performed, as well as a timetable for completing each step. The last phase involves conducting the audit and generating a final audit report. This final report comments on the areas reviewed by the auditor and the results of the tests performed. The goal is to plan the audit so that the final report provides a good idea about where the billing service stands with regard to the particular items audited.Involvement by the group's physicians in the planning stage is essential. Without broad input from the physicians, auditors will determine what they think is important and design the audit around their experience. As a result their work will focus on comparing transactional data elements to national or other established benchmarks. The audit should include the areas that the auditor believes are important based on extensive experience. But the planning stage is the group's opportunity to expand the auditor's role beyond simply looking at the transactional aspects of the business to include a broader evaluation. In this way, the practice gains a more complete picture of the billing service.The list at the end of this article contains some of the items that can be included in the audit program that will increase its value. By staying involved and providing input at each phase of the audit, physicians can understand the strengths and weaknesses in the audit's approach. The specific, or transactional, data elements reviewed are typically compared to national or other established benchmarks. Don't take the benchmarks at face value. Take the time to understand how the benchmarks were calculated and how much data went into the calculation. This is not to say that the benchmark figures may be wrong. But the calculation of all benchmarks uses statistics, and understanding how benchmarks are calculated will help understand the results.Many times the benchmarks need as much explanation as the audit results. The auditor should comment on how the audit results compares with those performed for other, similar practices. Benchmarks are just general guidelines; they do not consider the specifics of the practice, such as local demographic issues or your hospital's cooperation in supplying accurate and timely billing data. The group may determine that, based on local issues, it needs to be outside the benchmark to optimize collections. By expanding the auditor's role past the transactional aspects of the business to include a broader evaluation, physicians can add value to the audit, gaining a more complete picture of the billing service. The audit report should also include the auditor's observations and recommendations on each area, both specific and general, which have been reviewed. It's best to be clear in your directions to the auditor. Before the audit starts, have a discussion on what recommendations and observations you would like the auditor to make. When physicians participate in the development of the audit program, the auditor will give the practice the information it needs.Mr. Reinitz is president of Comprehensive Medical Data Management in Powell, OH.

AREAS FOR INCLUSION IN AN AUDIT PROGRAM

1. Conduct an interview with the billing service's management to assess their commitment. Are they ready to retire? Are they privately held or a large public company with salaried bureaucrats?
2. Determine the company's commitment to IT investment and innovation.
3. Discover if the proper capital investments in technology have been made.
4. Has the billing company under-bid its fee and now must cut costs and services to make a profit?
5. Is the billing company willing to guarantee its work?
6. Determine if staffing levels are appropriate, and how this company's staffing levels compare to other companies.
7. Learn about the company's software development policy.
8. Get an idea about the company's reputation in the industry.
9. Develop an overall opinion on the company compared to its peers.
10. Are physicians dictating to maximize collections?
11. Ascertain if the billing company performs systematic checks to verify that all exams are billed.
12. Learn if the billing company performs systematic checks to verify that managed care companies are paying the contracted rate.
13. Determine if the billing service has a denial management system to quantify and proactively solve issues.