Surviving a Medicare audit

Cracking the Code

Dirk Elston

Dr. Elston, who serves as director of the Ackerman Academy of Dermatopathology in New York, has served on the AMA-CPT Advisory Committee.

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I’ve been notified that I am going to be audited. What should I do?

Don’t panic. Don’t change any documentation. Be honest and explain why you coded visits as you did. To prepare for the audit, access the American Academy of Dermatology Audit Survival Tool Kit, which can be found online at

The most common audits are: Recovery Audit Contractor (RAC) audits, Comprehensive Error Rate Testing (CERT) audits, and the Medical Contractor Review (MR) audits. RACs are becoming increasingly common and are covered in detail in the AAD Audit Survival Toolkit.

The best way to survive an audit is to ensure that your documentation is well-organized and you have an effective compliance plan in place. Common reasons to be audited include:

  • You are an outlier in your billing practices.
  • A disgruntled employee has reported suspected irregularities in your billing practices.
  • A recent ex-spouse has done the same.

It is to your benefit to have an effective compliance plan in place and to do internal audits. The compliance plan should require at least 10-15 medical records to be reviewed every year for established physicians and 10-15 records to be reviewed every six months for new physicians. The AAD toolkit provides an audit tool for you to use. My advice is to audit records that have not yet been billed to Medicare, so any mistakes found can easily be corrected before the bill goes out. It is helpful to have a stated policy as to when you use 1995 and when you use 1997 documentation criteria. (CMS defines these criteria at This will make it easier for the auditor to understand how you determined the appropriate level of service for each visit.

Common reasons why practices do poorly in an audit include the following:

Illegible or unsigned medical records

Legible signatures are as important as legible clinic notes. Ancillary staff notes should be clearly identified, signed and dated as well. If your signature is a bit messy, but clearly recognizable, I recommend that you maintain a log with your signature and that of all ancillary staff clearly identified so that an auditor can match the signature to that recorded in the record.[pagebreak]

Additional documentation requests from the auditor

It is best to log the receipt of each request, and confirm the response to each of these requests. Provide whatever additional information might be helpful. In some instances, explanation of custom and habit may prove beneficial.

Poorly documented components of the E/M service

For new patients, all three key components are needed to determine the correct code selection: (1) history, (2) physical, and (3) medical decision making. For established patients, two of the three are needed. Make sure the elements are appropriate to the chief complaint. For the physical exam, a notation of “normal” is acceptable for uninvolved areas that are medically appropriate to examine. For dermatology visits, the number of diagnoses and risk generally determine the level of medical decision making.

Review of Systems (ROS)

Some carriers allow auditors to “double dip” in the history of present illness to find elements of a review of systems. While this can be helpful, it is generally best to template your notes so the ROS can easily be found. If a ROS cannot be obtained, document why. Make sure one relates to the skin, that you count organ systems instead of bullets, and that all systems asked are appropriate to the presenting complaint.

Time used to determine the E/M service but not documented

Document the total time you spent with the patient and the time that was face-to-face counseling (must be >50 percent).

Misuse of modifier 25

In order to justify modifier 25, there must be documentation of significant, separately identifiable E/M services above those included in the procedure.