Providers See Fourfold Increase in External Payer Audits

December 08, 2023 - 2023 has been a big year for healthcare revenue integrity, with teams managing about four times more external payer audits in the last year.

The finding from the latest “MDaudit Annual Benchmark Report” found that external payer audits rose significantly compared to last year as Recovery Audit Contracts (RACs) and Medicare Administrative Contractors (MACs) sought to reign in overpayments made over the last two to three years. Additional Documentation Request (ADR) letters also became longer, with some providers reporting ADR letters over 100 pages long.

The report said long ADR letters can make it challenging for providers to parse and file appeals in a timely manner, putting healthcare revenue at risk.

External payer audits increased alongside patient volumes, which the report said grew by an overall 23 percent from 2022 to 2023. Specifically, inpatient volumes grew by nearly 32 percent, outpatient volumes by 22 percent, and professional visits by 15 percent.

However, providers also saw a 50 percent increase in risk-based audits across professional and hospital billing and a 170 percent increase in hierarchical conditions coding (HCC) audits. The latter experts attributed to increased scrutiny of Medicare Advantage plans.

The report also found classification, such as specialty drugs, experienced a 54 percent increase in audits while diagnosis-related group (DRG) codes saw a 300 percent increase. Pre-bill audits on the front end saw a slight increase of 10 percent.

What’s more, more than a quarter of providers failed audits both in professional and hospital billing. About a fifth of these audits were also unsatisfactory, respectively.

Providers managed this overall growth in external payer audits with smaller revenue integrity teams. Workforce challenges impacted nearly every area of healthcare this past year, including revenue cycle management. Despite widespread decreases in auditing workforce, revenue integrity teams still did more — upwards of 10 percent more — with support from technology. These technologies, including automation and analytics, helped to bridge the gap between workforce shortages and revenue integrity, the report indicated.

Auditing and revenue integrity teams could work on reducing leakage from undercoding. The report identified professional billing revenue opportunities between $15 for modifiers and $105 for drug units, including a $51 increase in CPT/HCPCS. On the hospital billing side, providers could reduce leakage by $441 for CPT/HCPCS, $457 for modifiers, $1,089 for drug units, $1.305 for diagnoses, and $4,608 for DRG.

Overcoding also presented a risk to revenue, with overcoding on the professional billing side leading to $67 in compliance risk for CPT/HCPCS, $32 for modifiers, and $595 for drug units. The compliance risk for hospital billing was $191 for modifiers, $304 for drug units, $536 for CPT/HCPCS, $1,305 for diagnoses, and $3,987 for DRG.

Some of the most frequently overcoded codes according to MDaudit’s data included evaluation and management (E/M) codes 99214 (Office O/P Est Mod 30-39 Min), 99233 (Sbsq Hospital Ip/Obs Care High MDM 50 Minutes), and 99215 (Office O/P Est Hi 40-54 Min). Top overcoded procedure codes included 90785 (Psytx complex interactive), 92250 (Eye exam with photos), and 99152 (Mod sed same phys/qhp 5/>yrs).

E/M codes frequently undercoded included 99213 (Office O/P Est Low 20-29 Min) 99212 (Office O/P Est Sf 10-19 Min), and 99203 (Office O/P New Low 30-44 Min). Top undercoded procedure codes in the report were 36415 (Routine venipuncture), 96127 (Brief emotional/behav assmt), and 93000 (Electrocardiogram complete).