The Department of Justice reports that for each $1 spent on health care-related fraud and abuse investigations, the government is recovering more than $4. With this type of return on investment, we continue to see providers undergoing audits by government payors such as Medicare, Medicaid and TRICARE, as well as commercial payors.

Below are some quick tips to help medical providers survive and persevere in the face of these audits:

1. Know when you are being audited. Medical record requests from payors are a tell-tale sign you are being audited. There is no such thing as a routine records request from a payor.

2. Know how to handle an audit. Do not just blindly copy and send in records. Have them reviewed for completeness. There may be opportunities to amend the records to fix any deficiencies in certain circumstances. All amendments must be based on personal knowledge and recall and dated and timed for when the amendment was made.

Make sure you send the records with proof of delivery (but not signature). Requiring a signature could delay receipt of records if they are delivered when the business office is closed or to a post office box and there is no one to sign. This can result in records not being delivered and missing applicable deadlines. Always send the records with some proof of delivery such as a delivery receipt. It is our experience that the auditors sometimes deny claims claiming they did not receive records that were clearly delivered. This is the only way to prove delivery.

3. Understand what is being audited. This is not always possible, but in some cases, the request letter will tell you what code or service is being audited. If not, you may be able to figure it out by reviewing the claims and finding similarities.

We often see auditors request a single date of service, but indicate they are reviewing claims for medical necessity. The background information or support for the medical necessity of treatment on a specific date may not be in the medical record for that particular date of service. Send records that tell the entire story and support the claim billed even if that date is not specifically requested. We have also seen audits for labs where the lab was ordered during the visit, but the results were not reported until the following day. If the audit involves the lab code, make sure you send the results, even if they are not for the specific date of service the auditor requests.

4. Understand Sampling and Extrapolation. Statistical sampling and extrapolation can turn a seemingly small overpayment amount into a catastrophic amount. Here’s a common scenario. An auditor requests 10 medical records from a provider related to office visits. The visits were all billed as a Level 4, and the provider received $110 per visit. The audit results reflect 5 out of the 10 visits don’t meet medical necessity requirements. The provider receives the audit results and then later an overpayment demand letter for $550. The provider disagrees with the finding, but decides it will cost more money to appeal the findings than it is worth, so allows recoupment to occur on the $550. Later, the provider receives an overpayment demand letter going back 4 years asking for 50% of all Level 4 visits to be paid back. The demand is for millions of dollars. The provider does not understand how $550 turned into millions.

It is well established that payors can utilize statistical sampling and extrapolation to recover over payments without actually reviewing every single claim and proving the billing was incorrect. As such, it is imperative to make sure that you do everything you can to ensure a 100% compliance rate for these audits.

One method we have successfully utilized is to audit the records yourself (or through a third party you hire) before sending the records in as part of the payor audit. If you find claims were billed in error, refund them to the payor before you send in the records. In your cover letter to the auditor, let the auditor know that some of the claims being audited have already been refunded and should not be part of the review. This often takes those claims out of the audit sample, or turns a non-compliant bill into a compliant one.

5. Taxonomy codes. Auditors are increasingly using data mining to identify trends, outliers, and claims to audit. We often see providers audited because they are an outlier for the type or number of procedures or services they perform, showing much greater utilization than their peers. This can often be the result of choosing the wrong taxonomy code when applying for an NPI. For instance, if a practice is enrolled as a physical therapy provider, but provides multi-specialty services, the services that are not physical therapy are going to appear to be an outlier. The practice may get audited for these claims because other physical therapy practices aren’t billing them.

6. Be Proactive. Ask your billing company or personnel for a monthly list of claim denials (a denials report). Why are claims being denied? Develop solutions to fix these issues. If you determine claims are being denied that should be paid, make sure your practice or billing company is aggressively appealing these claims. Do not give the auditors low hanging fruit.

Implement a robust and effective compliance program. Have claims reviewed on a regular basis by an outside reviewer for compliance. Develop action plans to immediately address and refund over payments. If you audit frequently enough and notice errors, you can often correct claims and have a chance to re-bill them versus losing the money if an overpayment is identified years later by an auditor. These audits can be useful in helping your practice identify systemic billing issues in time to correct them. In many cases, we also find that they may uncover under billing, which can also be corrected.

For more information contact Samantha L. Prokop in Gunster’s Health Care Practice at (904) 350-7424; or Gianni Gonzalez at HealthCare Management Solutions (904) 465-2863;

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This publication is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this publication.

About Gunster

Gunster, Florida’s law firm for business, provides full-service legal counsel to leading organizations and individuals from its 12 offices statewide. Established in 1925, the firm has expanded, diversified and evolved, but always with a singular focus: Florida and its clients’ stake in it. A magnet for business-savvy attorneys who embrace collaboration for the greatest advantage of clients, Gunster’s growth has not been at the expense of personalized service but because of it. The firm serves clients from its offices in Boca Raton, Fort Lauderdale, Jacksonville, Miami, Orlando, Palm Beach, Stuart, Tallahassee, Tampa, The Florida Keys, Vero Beach, and its headquarters in West Palm Beach. With nearly 200 attorneys and 200 committed support staff, Gunster is ranked among the National Law Journal’s list of the 500 largest law firms and has been recognized as one of the Top 100 Diverse Law Firms by Law360. More information about its practice areas, offices and insider’s view newsletters is available at


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