Medical Denials Audit

The Essential Role of Regular Revenue Cycle Management Audits in Clinical Billing

PCG Software's Chief Strategy Officer, Will Schmidt, provides a short but impactful analysis on how to find the true cost of medical denials for your medical practice. Included is a FREE fillable PDF you can download to run your audit. Also included is an ROI on running iVECoder for cleaner and faster claims.

Summary of RCM Auditing:

In today’s healthcare environment, efficient and accurate billing is foundational to a clinic's financial health. However, between intricate coding regulations and frequent policy updates from health plans, ensuring compliance and optimizing revenue is a challenge for most clinics. One powerful solution to this challenge is implementing regular Revenue Cycle Management (RCM) audits—ideally conducted at least twice a year, though quarterly audits can maximize effectiveness. These audits serve to validate billing accuracy, streamline claim processes, and shield clinics from revenue losses or penalties. In this article, we’ll explore the key reasons why RCM audits are essential, their impact on claims and encounter data accuracy, and how they safeguard clinics against punitive actions and reimbursement reductions from health plans.

1. The Importance of Accurate Billing for Faster Payments

Accurate billing is the backbone of any revenue cycle. Mistakes in coding or claims submission can delay payments, leading to extended accounts receivable cycles and cash flow issues. By conducting RCM audits regularly, clinics can identify and rectify errors, reduce claim denials, and ensure prompt payment from health plans.

• Verification of Coding Accuracy: Medical coding is a complex process with high stakes—incorrect codes not only result in claim rejections but can also trigger audits from health plans. Routine RCM audits examine billing codes for accuracy and compliance with current standards, which reduces the chances of denied claims due to coding errors.
• Reduction of Payment Delays: Inaccurate claims create bottlenecks in revenue. Clinics that rely on regular audits can proactively address potential issues before submission, leading to faster claim approvals and, consequently, faster payments.
• Increased Efficiency in Claims Processing: Billing departments benefit immensely from regular audits, which help streamline processes. By resolving procedural inefficiencies and validating workflow effectiveness, clinics can build a more efficient, resilient revenue cycle that responds to evolving regulations.

2. Maintaining Cleaner Claims and Encounter Data

Encounter data, or records of patient interactions with healthcare providers, play a crucial role in supporting billing accuracy and compliance. Clean claims and precise encounter data are essential for clinics aiming to minimize rejected or denied claims and maintain their standing with health plans.

• Enhanced Data Accuracy: RCM audits help ensure that encounter data accurately reflects the services rendered. They review data entry processes, check for documentation errors, and confirm that all claims align with the care provided. Cleaner claims lead to fewer denials, which boosts cash flow and reduces time spent on claim corrections.
• Compliance with Health Plan Standards: Regular audits ensure that clinics meet the standards set by health plans for encounter data. By following these standards, clinics can avoid compliance issues, maintain a strong relationship with health plans, and mitigate the risk of penalties related to data inaccuracies.
• Streamlined Data Management for Analytics: Encounter data also has strategic value; it can help clinics make informed decisions about service offerings, staffing, and more. An RCM audit can verify the accuracy of this data, making it a valuable tool for both operational and strategic planning.

3. Protecting Your Clinic from Health Plan Scrutiny

Health plans have become increasingly vigilant about monitoring billing practices, and clinics that engage in "scrupulous" or questionable billing can face serious consequences, including the possibility of being removed from the plan’s network. Routine RCM audits are a proactive way to avoid such scrutiny and safeguard your clinic's standing.

• Avoiding Risky Billing Tactics: Billing errors—whether intentional or accidental—can lead to allegations of fraud or abuse, which can put a clinic’s relationship with health plans at risk. Regular RCM audits uncover any questionable billing patterns, allowing clinics to correct them before they attract unwanted attention.
• Mitigating the Risk of Removal from Networks: Health plans may drop providers from their networks if they believe billing practices are suspect. By conducting regular audits, clinics demonstrate a commitment to ethical billing practices, which can help build trust with health plans and reduce the risk of network removal.
• Safeguarding Reimbursements: Health plans may reduce physician reimbursements if a clinic shows patterns of overbilling or frequent errors. Routine RCM audits ensure that billing practices align with health plan requirements, allowing clinics to protect their reimbursement rates and maximize revenue potential.

4. Reducing Revenue Leakage

Revenue leakage—loss of income due to billing errors, uncollected co-pays, or underpayments—is a significant problem for many healthcare practices. RCM audits help plug these leaks by identifying errors and inefficiencies in the billing process.

• Identifying Missed Charges: One of the biggest contributors to revenue leakage is missed charges, or services rendered but not billed. Audits provide a comprehensive review of documentation and ensure that all services are accurately captured and billed.
• Ensuring Proper Collections of Co-Pays and Deductibles: Regular audits also examine collections processes, verifying that co-pays and deductibles are collected in accordance with clinic policy. This prevents underpayments and improves overall revenue.
• Spotting Patterns of Underpayment by Health Plans: RCM audits can reveal underpayments by health plans that might otherwise go unnoticed. By identifying these patterns, clinics can take corrective action, negotiate with health plans, or seek reimbursement for past underpayments.

5. Maintaining Compliance with Evolving Regulations

The healthcare landscape is constantly evolving, with new coding guidelines and regulations introduced frequently. Staying compliant with these changes can be challenging, but regular RCM audits help ensure that your clinic remains up-to-date.

• Staying Updated on Coding Changes: Coding standards are periodically revised to reflect advances in medical knowledge and practice. RCM audits help ensure that clinics are aware of and compliant with the latest coding updates, reducing the risk of denials.
• Compliance with Health Plan Policies: Health plans may have unique policies that require specific billing practices. Routine RCM audits help ensure that clinics adhere to these policies, reducing the risk of penalties and fostering a strong relationship with health plans.
• Reducing Liability Risk: Failing to follow updated billing regulations can expose clinics to liability risks. By conducting regular audits, clinics can ensure they are compliant with legal requirements, protecting both their financial interests and their reputation.

6. Improving Overall Financial Health

At the end of the day, RCM audits are a tool for improving the financial health of a clinic. They help secure timely payments, reduce the risk of revenue loss, and ensure a steady cash flow—all of which contribute to the clinic’s financial stability.

• Increased Cash Flow: When billing processes are optimized, clinics receive payments more quickly, which improves cash flow. Regular RCM audits provide clinics with the data and insights needed to optimize billing and reduce delays in payments.
• Lowering Administrative Costs: Identifying and eliminating billing errors reduces the amount of time and resources spent on rework and appeals. This streamlining of administrative processes contributes to overall cost savings.
• Enhanced Financial Planning: Clean, accurate data allows clinics to project revenue more accurately, which aids in financial planning and budgeting. RCM audits ensure that revenue projections are reliable, enabling clinics to make more informed financial decisions.

Conclusion: Make RCM Audits a Priority

In a rapidly evolving healthcare landscape, ensuring billing accuracy and efficiency is vital for a clinic’s success. RCM audits conducted at least biannually—and ideally quarterly—play a key role in achieving this accuracy, from minimizing billing errors to protecting clinics from financial risk. These audits aren’t just a safeguard; they’re an investment in the clinic’s long-term financial health and operational stability.

By prioritizing RCM audits, clinics can foster a proactive, compliance-driven culture that prioritizes accuracy, efficiency, and ethical billing practices. This not only strengthens relationships with health plans but also creates a reliable revenue stream that supports the clinic’s mission to provide quality healthcare. With the right RCM audit schedule and strategies in place, clinics can navigate the complexities of billing with confidence, leading to faster payments, cleaner claims, and a stronger financial foundation.