United States: Quarterly Coding And Billing Reviews And Your Internal Audit Plan

Last Updated: July 4 2019
Article by Susan Rohde and Rachel Pugliano

If your facility is struggling with developing a properly risk based internal audit plan within resource limitations, you are not alone. With the myriad of changes that happen each year in healthcare and the subsequent risks that are presented, it is imperative to develop an internal audit plan that fits the needs of your organization.

An internal audit plan is simply a plan to provide a review of an organization's processes and procedures over selected areas to ensure financial and operational controls are in place and assure they are mitigating risk for the organization. In healthcare, a common key component of any internal audit plan is compliance-related risks. The Office of Inspector General (OIG) has stated there are basic elements when constructing the compliance portion of your internal audit plan, one of which is conducting internal monitoring and auditing focused on billing and coding issues through performance of periodic reviews. This component of the compliance plan can provide documented evidence to the OIG in their assessment of whether reasonable efforts were taken to avoid fraud and abuse. We have created a checklist below to ensure best practices are met:

Establish an Auditor

We recommend the reviews be performed by qualified and credentialed coding and billing staff. If your facility does not have an internal qualified reviewer, an independent consultant should be utilized. If your facility does choose to perform coding and billing reviews internally, we recommend that an independent review be conducted on an annual basis.

The determination of who will perform the audits is an internal organizational decision. Some organizations have the resources to perform quarterly audits as mentioned above, and ensuring the personnel have the proper credentials and have some level of independence is important for an effective audit process in this area. For other organizations, having the proper resources available is not feasible, in which case, an external resource can be engaged. In other cases, a blend of both may be more appropriate. The organization can engage with an audit partner to assist when needed or for specific types of audits.

Determine the Frequency of the Reviews

Best practice states to perform reviews at least on a quarterly basis. If significant issues are noted, this may require more frequent reviews. Once issues are identified, and resolution is agreed to by all parties involved, a plan should be put in place to discuss appropriate actions to resolve errors noted and/or provide necessary education to the appropriate staff. Also, follow up audits should be considered, particularly if a higher level of errors are identified.

Establish an "Accuracy" Goal

A minimum accuracy threshold needs to be established by the organization. A coding and billing audit can serve as a baseline and identify any areas with a high error rate. Reviews can also identify areas of weakness that can serve as a basis for education and remediation of issues identified.

An accuracy goal gives the organization some parameters to reach towards. Once audits are completed, these accuracy goals will allow for prioritization for follow-up audits and assist in determining where educational resources should focus. Each area identified in the review should be assigned a risk category based on severity. Here is a suggested guide:

Degree of Risk and Priority of Action


Notes an issue identified that if not addressed immediately has a high likelihood of impacting the completion of the organization's strategic or operational objectives.


A finding with a high probability of material adverse effects that requires immediate action in order to address the concern and reduce risk to the organization.


A finding with a medium probability of material adverse effects that requires management action in order to address the concern and reduce risk to the organization.


A finding with a low probability of material adverse effects that requires management to address the concern and reduce risk to the organization.


A finding identified by auditors with no risk or impact but typically represents informational or educational purposes.

Establish the Audit Size

Sample size is essential in determining accuracy. Smaller sample sizes may not pick up coding and billing error trends. For professional reviews, we typically recommend auditing 10 encounters per provider. This allows for a comprehensive review of a variety of levels. For hospital inpatient/outpatient reviews, the sample size would be dependent on the size of the organization and the volume of patients seen within the various departments.

As noted, quarterly audits of randomly chosen encounters/cases are considered best practice. However, depending on the size of the organization, including all outpatient hospital claims in the population sample will likely be unrealistic. Narrowing the focus to specific areas—the Emergency Department, encounters or a specific type of high volume surgery, for example—may be an option based upon the situation. The focused areas/topics can be planned out for each quarter in advance while allowing flexibility in case an area of concern arises during the audit period.

Selection Process

There are multiple methods for choosing audit areas to review. One common method is to follow the OIG Work Plan. In the past, the OIG came out with a yearly work plan, identifying areas of concern. However, as of June 15, 2017, the OIG has changed their process. There will no longer be an annual workplan, instead the OIG website will be updated monthly to ensure it aligns with evolving issues. New additions will be found under the "Recently Added" tab on the website, while completed Work Plan items will be removed. Monthly additions will ensure that audit cases are timely and relevant. For instance, the OIG website includes a section for Active Work Items. As of March 2019 the list includes:

  1. Identifying Opioid Misuse
  2. Billing Off the Shelf Orthotic Devices
  3. Hospital Billing for Severe Malnutrition
  4. Payments for Podiatry and Ancillary Services
  5. Duplicate Payments for Home Health Services

Other methods of choosing cases could include the following:

  1. Monitor the Center for Medicare and Medicaid Services (CMS) guidelines and transmittals
  2. Sign up for notifications and guidance from your local Medicare Administrative Contractor (MAC)
  3. Review denial information which will provide insight into areas where there may be potential compliance risk
  4. Conduct reviews for new services lines or areas of growth
  5. Other targeted regulatory audits- UPIC, RAC, etc.

Flexibility should also be allowed for new service lines that are starting within the organization. An evaluation of the coding as well as a review of the claim should be performed to ensure that all elements of the coding and billing are processing correctly.

Issue a Report of Findings

Once the review is completed, the appropriate billing and coding staff should have the opportunity to review the detail results and offer any rebuttals and/or explain their rationale for decisions made in the billing process. After all the information has been reviewed and rebuttals taken into consideration, a final summary should be provided to the appropriate responsible individuals within the billing and coding area, along with the internal audit and compliance officer. Problem areas are now identified, an action plan developed, and appropriate education should be provided to coding and billing staff.

Once an initial report of findings has been reviewed and shared with the applicable departments, the internal audit team, working with the compliance department, will want to examine the findings and identify any trends or errors that require urgent attention. For example, if a department is billing for infusion services without documenting start and stop times, a focused review may need to take place sooner, rather than later. There should be some flexibility built into the internal audit plan to allow for these types of focused reviews. However, action plan and remediation should also be established to ensure appropriate and timely resolution of issues based upon degree of risk in the area, and these action plans should be followed up on to ensure risk areas are appropriately resolved.

In our experience, a 95% accuracy rate is required when under a Corporate Integrity Agreement. It's best practice to apply this same level of accuracy when determining the organization's acceptable threshold for error. If the findings of the review show less than a 95% accuracy rate, procedures should be in place to address the issues noted. Oftentimes, an action plan outlining the issue and recommendations can serve to engage the key stakeholders, establish deadlines and provide a roadmap with accountability for issue resolution. An example action plan may look like this:


Actions Taken/To be Taken

Responsible Party


Improper billing of IV infusion and drug administration charges. Misuse of hierarchy and modifier 59.

Identification of the departments that utilize these charges. Outline of the charge capture process for these areas. Determination of coding involvement and focused education provided for proper coding and modifier assignment.

Revenue Integrity, Chargemaster Coordinator, Coding Manager and specified clinical areas.

Completed 3/11/2019 following identification of these errors.

Issue: Improper principal diagnosis code sequencing and code assignment in sepsis-related cases.

Review of the Coding Guidelines and Coding Clinic guidance related to principal diagnosis code assignment, secondary diagnosis code assignment and proper coding for sepsis specifically.

Coding Manager

To be completed by second quarter 2019

In the example above, certain findings may encompass solely the coding team while other findings may pertain to a different department. It is not unusual for multiple departments or areas to overlap with respect to billing and coding responsibility for certain pathways. Therefore, it is important to include all the relevant parties in the process early, along with input on finding, resolution and action plan for remediation.

In conclusion, we believe a partnership approach between the organization (compliance department) and the internal audit team is essential. Whether one leader is responsible for both areas or separate leaders are working together, communication is key. Internal audits can identify potential risk areas and can help to recommend improvements to mitigate risk. Organizations are encouraged to perform routine internal audits to identify opportunities and provide staff education.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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