Reviewed by Paul E. Walker

Key Takeaways

  • Commercial plans generally cannot recover payments older than 24 months.
  • Medicaid audits look back six years, so keep records that long.
  • Auditors extrapolate from small samples, so the sample is worth challenging.

Medical billing audits are performed to ensure that medical providers are properly billing insurance companies for procedures. Audits of medical billing may be conducted for a number of reasons.

Common Reasons That Medical Providers Are Audited

Some reasons why a medical provider may be audited include:

  • Improper procedural and diagnosis coding: This can send a red flag to an insurance bill reviewer, and that can lead to an audit.
  • Protection from fraudulent claims: Fraudulent claims can include billing for procedures that never occurred.
  • Issues with unbundling procedures: If an insurance company has a code that includes multiple components of a procedure, that code should be used, and a provider should not bill separately for those components.
  • Use of outdated codes for procedures: Sometimes a medical provider may not have the most up-to-date codes for procedures. If they use old codes, they risk having their claims denied, and the insurance company may become suspicious of the activity.
  • Determining medical necessity: If an insurance company questions the medical necessity of a procedure, they may deny the claim. If a provider is constantly having claims denied for medical necessity, they may be targeted for an audit.

Who Audits Physician Billing in New York?

Several different entities will review billing, and each one follows its own rules:

  • Commercial health plans and HMOs, which often hire outside auditing companies
  • Medicare, through its contractors
  • New York Medicaid, through the Office of the Medicaid Inspector General (OMIG), which runs field audits, desk audits, and recovery audit contractor reviews
  • Self-insured employer plans, which are not governed by the state insurance rules described below

Prospective vs. Retrospective Audits

Audits fall into one of two broad categories, and the difference is important as one catches issues before money changes hands, while the other seeks money back:

  • Prospective Audits: These occur before a claim is paid. Prospective audits can be conducted internally by staff or as pre-payment reviews by the payer. This is the cheaper place to find a coding problem.
  • Retrospective Audits: These happen once a claim has been paid. These look back at billing that has been completed, and these may result in repayment demands.

Notification of an Audit

If a provider and an insurance company cannot resolve billing issues, the insurer may decide to conduct an audit. These audits can occur on site at the provider’s location. The audit includes a review of medical records, including medical bills. The review can identify and answer questions that the auditor may have regarding the provider’s billing.

What the Rules Limit in New York

Audits are not intended to provide payors with unlimited reach. In New York, two rules are extremely important:

Commercial Health Plans

Under Insurance Law § 3224-b, a health plan must give providers 30 days’ written notice prior to starting overpayment recovery. This notice must identify:

  • The patient
  • The date of service
  • The amount paid
  • The proposed adjustment
  • A reasonably specific explanation

However, it is critical to understand that a plan cannot start recovery efforts more than 24 months after the original payment, unless the case involves reasonable belief of fraud or abusive billing, a self-insured plan, or a government program.

New York Medicaid

OMIG audits have a six-year look-back period, which is measured from the date OMIG notifies you of its intent to conduct an audit, with a longer period possible when fraud is potentially involved. Medicaid providers are also required to retain records for six years. OMIG issues a draft audit before its final report, which provides you with a window to respond with documentation before the findings are locked in.

Sampling, Demand Letters, and What Comes Next

Auditors typically do not review every patient chart. They generally pull a sample, calculate error rates, and apply that rate to a much larger set of claims, which is how a modest sample can result in a six-figure demand. If you receive an audit, please refer to our guide on defending unfair audits, which covers hiring your own auditor, challenging the sample, and the arbitration clauses buried in many payor contracts.

Do I Need a Lawyer?

If you are subject to a medical billing audit, it may be a good idea to consult with an attorney. An attorney experienced with defending medical providers and handling medical audits can handle a response on your behalf.

Contact an Experienced New York Professional Defense Firm

In the event you are a medical professional facing a medical billing audit, it’s critical to understand that you do not have to navigate this matter alone. At Walker Medical Law, our firm is committed to helping you fight for the best possible outcome. If you need help, do not hesitate to contact our firm today.