Larry Elisco, CPA, ABV, CCS-P Member Weltman Bernfield LLC 847.941.0245...

Audit Your Practice

Larry Elisco, CPA, ABV, CCS-PMember

Weltman Bernfield LLC847.941.0245

[email protected]

Presented By:

My disclosure is in the Symposium Syllabus and in the AAOS database.

I have no potential conflicts with this presentation.

AAOS Disclosure Information

The Definition of Auditing*:

“An official examination and verification of accounts and records, especially of financial accounts”

*Dictionary.com

Auditing

Benefits Internal control/safeguarding of assets Educational to physicians Performance measurement for employees Possible support in the event of an OIG

investigation (attorney client privilege must be considered)

Costs◦Significant up front work as well as ongoing

time performing testing and maintaining records of results

Auditing – Cost vs. Benefit

Design of Accounting System Contract Documentation Compliant Reimbursement Collection Performance Safeguarding of Assets Independent Review of Coding

AUDIT ISSUES TO BE ADDRESSED

1. Billing and Reimbursement Contracts Adjustments

2. Accounts receivable Aging Collection performance

3. Financial Auditing and Controls4. Coding

4 Areas of Focus

• Documenting system design • Identify processes and parties responsible for

those processes• Test compliance

• Review a sample of transactions during a specified period

• Review of results by Management

Auditing Process

Develop Job Descriptions Define Functional Responsibilities

◦ Daily◦ Weekly◦ Monthly

Evaluate Opportunities for Errors or Irregularities

Consider implementing checks & balances

Documentation and Evaluation of Processes

Source: microsoft.com/images

The Billing Manager is responsible for the following: Design of procedural systems and manuals Monitoring accounts receivable including approval of

adjustments Monitoring accuracy of billing and reimbursement Managing staff responsible for billing and reimbursement Reviewing medical coding as documented by doctors Preparing practice management reports as needed Reporting to management on effectiveness of billing and

reimbursement procedures Preparing end of day reports and making bank deposit

Example of Functional Responsibilities

Practice Manager prepares the end of the day deposit from the PM system.

Practice Manager makes the deposit at the bank.

Practice Manager has the ability to make adjustments to patient balances in the PM system.

Practice Manager then has the ability to divert funds to a personal account and write off the balance as a bad debt.

Example for Implementing Checks and Balances

In this case, someone other than the Practice Manager should be making the bank deposit and completing the end of day report.

Preference would be having a physician making the bank deposit after reviewing the end of day report and deposit slip.

Example for Implementation of Checks and Balances

(continued)


Review written procedures in place for recording and approving adjustments (or have procedures developed)

Using payor contracts, document the details of the reimbursement terms for each contract in place for the practice and maintain in a centralized location (example to follow) on the practice’s network

• Include the basis for reimbursement (generally a formula utilizing the percentage of the Medicare fee schedule for each CPT code)

Billing and Reimbursement

• In some cases payment is made on the basis of the payor’s usual and customary reimbursement for a given CPT code, particularly for out-of-network payors where no contractual relationship exists• In those cases it may be necessary to

“reverse engineer” the reimbursement by comparing the reimbursement to the Medicare fee schedule to arrive at the formula


◦ The payor may only be willing to provide reimbursement on a limited number of CPT codes per contact, making it difficult to establish comprehensive fee schedules for a given payor.

oFocus on the CPT codes most frequently used by the practice



Payor Plan Formula

Blue Cross HMO 102% of 2013 Medicare Fee Schedule

Blue Choice Select 105% of 2013 Medicare Fee Schedule

United Health Care 105% of 2013 Medicare Fee Schedule

Aetna 118% of 2013 Medicare Fee Schedule

Blue Cross PPO 115% of 2013 Medicare Fee Schedule

Hospital Plan Usual and Customary(1)

(1) Fee schedule derived from EOBs

Example of Contract Details

Source: Courtesy of Larry Elisco, CPA

Obtain the population of encounters paid in a given period (monthly, quarterly, annually). For each encounter:

Stratify (segregate into groups) the sample by payor and by responsible biller

Select an aggregate sample of 100 transactions*

Obtain Explanation of Benefits statements for the encounters sampled

Follow each transaction through the cycle documenting exceptions such as denials, bundling, payments less than contract

*generally considered a reasonable annual sample size (per group of accounts) without doing a statistical sample


Trace the reimbursement from each sample to the contractual terms for the given payor

Quantify the exceptions and document the cause, e.g. bundling of procedures, denials for medical necessity

Develop a list of denial reasons and quantify by payor and overall

Document process for appealing on claim denials and note for each sample if process was adhered to

Document result of appeals process for each sample


Quantify the results of testing

List error rate for sample List the result by payor to establish a pattern

of improper reimbursement and/or denials

Maintain statistics on a cumulative basis for a given period


Total 9/12 Total BSBS UHC MEDICARE

AETNA

Total collected $110,000 $50,000 $20,000 $30,000 $10,000

Errors $1,000 $500 $0 $400 $100

Rate 0.91% 1.00% 0.00% 1.33% 1.00%

Summary:

Medical Necessity $800 $400

Bundling $500 $100

Uninsured $200

Total $1,000 $500 $0 $400 $100

Example - Testing Results


In September 2012, The practice incurred an error rate of .91% on the items tested.

BCBS bundled procedures for ________ which are being appealed

Medicare denied _______ because of medical necessity, we have an ABN from the patient and will make it their responsibility

Aetna bundled ______ which was a billing error and is being written off as a contractual adjustment

Example – Summary of Testing Results

For the entire population of collections for a given period, develop a report that lists all adjustments sorted by payor and then CPT code

Adjustments should be analyzed for outliers where the adjustment within a payor and CPT code differs from the population

Billing and Reimbursement- Adjustment Report

Outliers over a certain amount require investigation and explanation

Quite often the outliers are the result of modifiers to a CPT code, which are generally acceptable.

Other causes for outliers could be Denials Bundling Payor error Bad debt write-offs Irregularities such as writing off co-pays where

employee is stealing CCI Edits

Report on Adjustments

Payor Patient CPT Code Billed Adjustment

BCBS Smith 99214 150 60

BCBS Jones 99214 150 60

BCBS Johnson 99214 150 90*

UHC Adams 99214 150 70

UHC Miller 99214 150 70

UHC Morgan 99214 150 150*

Medicare Michael 99213 100 26

Medicare George 99213 100 26

Medicare Irving 99213 100 66*

*Outlier

Report on Adjustments


BCBS – Johnson – Reimbursement error, being appealed

UHC – Morgan - denial due to demographic error in address, being rebilled

Medicare – reimbursement error being appealed

Adjustment Report-Summary of Results

Review written procedures in place for accounts receivable collection (or have procedures developed)

Develop a checklist of procedures to be performed in accounts receivable collection efforts

Accounts Receivable


Obtain end of month accounts receivable aging and identify balances greater than 60 days old

Where multiple employees are assigned to a range of balances (e.g. alphabetical assignments) stratify the balances so that each employees work is audited.

Review collection process for each item in excess of a nominal amount such as $500 and retain documentation

Based on balances sent to collection, compute monthly bad debt expense for each employee and quantify as a percentage of collections EG – billed X wrote off Y for month and cumulatively for

the year to date

Accounts Receivable

Establish a grading system where bad debts as a percentage of collections equal a grade for purposes of employee evaluation

0% to .5% = Outstanding .6% to .8% = Good .9% to 1.0% = Acceptable > 1% = Unacceptable

Maintain testing results for the period being tested and cumulatively report over given periods, such as month and year to date

Accounts Receivable

Document the results of each monthly review, scan and save to practice computer network

Reference prior month’s documentation each month when discussing current status

Accounts Receivable


Radiology practice consisting of 4 physicians was disbanding, we were engaged to handle the financial affairs of the winding down of the practice

We immediately noted accounts receivable balances of approx. $1.5 million that were more than one year old (net was approximately $900,000)

When this was raised with the physicians they didn’t understand what accounts receivable were and never saw an accounts receivable aging.

Case Study Accounts Receivable

Subsequent discussions with the billing service responsible for collections became hostile, however did yield quite a bit of action.

The practice ended up collecting approximately 40% of the old balance and writing off over $500,000 of net accounts receivable

Case Study Accounts Receivable, (continued)

For a given period, obtain a check register (listing of all checks and disbursements including automatic bill payments and wire transfers)

Scan the list to determine if any disbursement to a vendor appears unusual

Select a sample of transactions and trace the sample to: The actual check to ensure the payee matches what is

reflected on the check register (Quickbooks can be altered)

The bank statement to ensure the amount cleared agrees to the check register

Financial Auditing and Controls

For a given period, obtain all end of day reports for the practice

Trace the total for each day report to the cash deposit reflected in the practice’s general ledger (often Quickbooks)

Trace the amount deposited to the bank deposit slip

Trace the amount on the bank deposit slip to the bank statement

Any variances require investigation and explanation


For a given period, obtain the payroll journal for the period

Scan the list to ensure all employees reflected on the list are actual employees

For new and selected existing employees, review personnel files to ensure that proper documentation is in place such as:

W-4 forms Copy of a form of Identification (driver’s license) Election forms for retirement plans


Quickbooks is the most common accounting package used by medical practices.

Transactions recorded in Quickbooks can be changed/altered at a later date.

The payee on large payments made to vendors like the IRS, medical suppliers or employees can be changed after the fact

Discovery of this type of embezzlement may take an extended period of time

Financial Auditing - Quickbooks

Practice processes payroll internally, does not use an outside service

Bookkeeper has a gambling problem, makes out a series of checks to a fictitious company she owns and changes the payee in Quickbooks to the IRS

Bookkeeper also opens the mail, and destroys tax notices received by the practice on the shortfalls

Practice loses over $250,000 which can’t be recovered

Actual Incident of Embezzlement

This could have been prevented by:◦ Comparing the payee reflected in Quickbooks

check register to the actual cleared check from the bank (auditing)

◦ Using an outside payroll service◦ Having the mail opened by someone other than

the bookkeeper (segregation of duties)

Actual Incident of Embezzlement(continued)


Prepare these reports 1. Payor mix for a given period

and compared to other periods

2. Average reimbursement rate as a percentage of Medicare by payor

3. Average days to collect charges by payor for a given period of time and compare to prior periods

Financial Reporting on Payor Performance

For a given period select a sample of Encounters using CPT Codes (e.g. office visits)

Stratify the sample by physician (assuming group practice)

Obtain op reports or electronic ticket (superbill) for the charge

Physician or coder that did not perform the service should code the procedure based on the SOAP notes or op report

Independent coding should then be compared to actual coding for procedure

Results should be reported on and differences investigated and discussed with physician

Coding

For a given period, list CPT codes by physician (group practice)

Quantify (list) in a graphical format the codes used by each physician and compare to the overall coding results for the practice

Physicians coding significantly different from their peers and their practice as a whole, either over or under, should be discussing their coding practices with the group

Coding

99215 99214 99213 99212 992110%

10%

20%

30%

40%

50%

60%

70%

80%

PracticeSmith

Coding Patterns for Dr. Smith


Handouts are checklists for:◦ Billing and Reimbursement◦ Accounts Receivable◦ Financial Auditing and Reporting◦ Coding

Checklists

Larry Elisco, CPA, ABV, CCS-PMember

Weltman Bernfield LLC847.941.0245

[email protected]

Thank You!

Larry Elisco, CPA, ABV, CCS-P Member Weltman Bernfield LLC 847.941.0245...

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