American College of Physicians: Internal Medicine — Doctors for Adults ®


A look at Medicare's kinder, gentler auditing process

Last year's Medicare reform bill and a new CMS program give physicians some relief from onerous audits

From the July-August ACP Observer, copyright 2004 by the American College of Physicians.

By Brett Baker

Q: What action has Congress taken to change how Medicare audits physicians?

A: The Medicare Prescription Drug Improvement and Modernization Act (MMA) calls for several changes to the medical review process, the process Medicare uses to audit physicians. These provisions are meant to ensure that the contractors Medicare carriers use to process claims and/or conduct audits treat physicians fairly.

These provisions were included in the act because of advocacy efforts of groups like ACP and the AMA.

Q: What specific changes does the law call for to better protect physicians during an audit?

A: The law requires the Centers for Medicare and Medicaid Services (CMS) to establish a standard methodology that carriers must use when deciding how to sample a physician's claims during an audit. The CMS must establish the sampling methodology by December of this year.

The law also requires Medicare carriers to follow new rules to make audits more fair to physicians. While the law failed to give a specific implementation date for many of the following provisions (unless noted), ACP will work with the CMS to make sure all the provisions are implemented in a timely manner:

  • Carriers cannot use attendance lists from educational sessions and seminars to target individual physicians for audits.

  • Random prepayment reviews are allowed only to identify a carrier-wide or Medicare program-wide error rate. This provision takes effect December 2004.

  • Carriers must give physicians written notice before they conduct a post-payment audit, and they must explain any findings in a way that makes it easy for physicians to develop a corrective action plan. Carriers must also tell physicians about their rights to an appeal and settlement, and give physicians an opportunity to furnish additional information to justify the payment in question.

  • Carriers cannot retroactively apply regulations that took effect after physicians have provided and been paid for a service.

  • If physicians appeal an audit decision, carriers cannot recoup overpayments until the initial carrier overpayment decision is upheld at the first level of appeal. This level is known as a reconsideration appeal.

  • Physicians may be given an extended repayment plan ranging from six months to three years in cases of hardship. The CMS can extend repayments to five years in cases of extreme hardship.

  • Carriers must limit the use of extrapolation, a process by which they project a claim error rate identified over a limited period of time to claims submitted over a much longer period. Extrapolation can be used in cases where the physician has a sustained payment error level (a term that has yet to be defined by the CMS) or where documented educational intervention has failed to correct the error. This provision takes effect December 2004.

Q: Had the CMS made other improvements to the Medicare medical review process before the new law was enacted?

A: The law comes on the heels of the CMS' progressive corrective action (PCA) program, implemented in 2002 to improve the fairness of the medical review process. (The CMS acted in response to complaints from ACP and other physician organizations.)

The PCA program aims to make sure that medical review activities are proportionate to the perceived problem.

The provisions in the new law supplement the PCA program by addressing many problematic issues that the PCA initiative failed to address. Together, the changes represent a significant improvement to the Medicare medical review process.

The PCA program includes the following key elements:

  • Medical review should be no more extensive than needed to address the nature and extent of the identified problem. For example, a small level of noncompliance does not warrant a comprehensive prepayment review.

  • Carriers should decide to conduct medical review based on data, comparing individual physicians to other doctors in the same payment specialty in the same area.

  • Carriers must give physicians data comparing them to other providers in the same payment specialty area or locality.

  • Carriers must consider the amount of the undercoding, the past history of physicians' billing errors and their willingness to address the problems.

  • Carriers must consider the administrative law judge reversal rate in deciding whether or not to implement medical review. The CMS does not want carriers to deny claims and take other actions that are routinely appealed and reversed.

  • Carriers must make a reasonable effort to accommodate a physician's request for a meeting to discuss the audit process.

  • The CMS acknowledges that physician education and feedback is essential to solving problems with individual physicians or with widespread billing problems among specialties or locations. As a result, carriers must provide educational feedback to an individual physician whether it identifies minor or major concerns. And if a problem is widespread, carriers must work with specialty and state medical societies to educate physicians.

  • Carriers must notify in writing physicians who are placed on and removed from medical review.

  • Carriers must remove a physician from medical review as soon as possible when the physician demonstrates compliance with Medicare billing requirements.

  • If a carrier must contact a physician as a result of more than one problem, the carrier must ensure that its contacts are necessary, timely and not redundant.

Q: What do these new procedures and processes mean for practicing internists?

A: ACP recommends that you become knowledgeable about the Medicare medical review process and aware of these recent improvements. If you are audited, you should use this information to ensure that your Medicare carrier follows the rules.

If your carrier deviates from the improved process, you can contact ACP for assistance. E-mail Carol McKenzie in the College's regulatory and insurer affairs department at While ACP can't determine whether medical record documentation supports the medical necessity of a service questioned in an audit, the College can help make sure that your Medicare carrier treats you fairly throughout the audit process.

Q: Does ACP plan to advocate for more improvements to Medicare's medical review process?

A: While ACP believes that the provisions of the Medicare law and the CMS' PCA program have improved physician reviews and audits, the College will continue to press the CMS to better target audits and reduce the reliance on detailed documentation guidelines for evaluation and management services, which present a particular problem for internists.

Brett Baker is a third-party specialist in the College's Washington office.


Resources to avoid a Medicare audit

You should consider conducting a self-audit to make sure you are meeting Medicare's documentation requirements. ACP offers sample auditor-worksheet documents you can use to determine whether your documentation justifies the services you are billing.

Visit the Practice Management Center's Patient Care Documentation Forms page, and look for item number 5, "Coding/Documentation Auditor Worksheets." Periodic self-audits can also help you make sure that you are not underbilling.

The Practice Management Center also offers a publication, "Medicare Medical Review: Safeguards and Advice for Internists and Their Staff," for physicians who are being audited. The publication, which describes how the CMS conducts Medicare medical review and provides guidance to physicians, is online. (Registration is required.)


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