Unsurprisingly, after the Obama administration pledged additional funding for 2012 fraud and abuse detection efforts, utilization and specialty audits have soared throughout the U.S.

Physicians are receiving letters citing "Section 1842 (a)(1)(c) of the SSA requiring carriers under contract to the Centers for Medicare & Medicaid Services (CMS) to conduct audits to ensure that Medicare claims are being paid correctly." Most of the letters are focusing on evaluation and management services (new/established levels 4 and 5) and hospital admissions (levels 2 and 3). The MACs suggest that the audits are "educational," assisting both providers and carriers with proper submission of codes and accurate payments. Contrary to this, most of my clients have found the post-payment requests quickly graduate to pre-payment status. How soon the RACs will start participating within this new wave of focused audits remains unknown, as the data is highly suspect.

Much like the automated process for RAC contractors, the most recent wave of audits started with probe reviews using specialty peer groups and claims paid to compare providers and focus on the top 10 percent of amounts.

If providers are within that top 10 percent, a post-payment probe review is issued to start the process of "fishing" for potential overpayments based on documentation and medical necessity. Letters are mandating a 30-day window in which to provide necessity documents to substantiate types of service and levels of codes, based on 1995 or 1997 CMS documentation criteria.

There are a few interesting twists to these audits. Remember, MACs can and do communicate with other federal agencies and contracted auditors to share information that may be pertinent to other types of focused audits. For example, one of my clients in the Pacific Northwest received a probe audit letter in July 2011 for being one of the top 10 percent internists (within the state) billing 99214 (based on both volume and allowed charges). Following records submission, approximately 20 days later, a report was issued by the MAC with a demand letter citing "overpayment" for more than half of the audited dates of service. Furthermore, it was found that five out of 30 services were performed by a different provider (PA), who billed under the physician's NPI. The audit extended to the issue of "incident-to" billing along with the proving the CPT level. (Note: If you look at the 2012 OIG Work Plan, incident-to billing happens to be one the new issue areas for government agencies to probe, as this is clearly an area of high billing errors.)

The provider paid the overpayment and hired an outside consultant to review the CMS findings. In the meantime, the provider was issued a second, pre-payment letter for all 99214 services referencing the "Progressive Corrective Action Guidelines" established by CMS. Understand that this correspondence came directly from CMS, not the MAC, and was signed by a new auditor.  Fast forward to December and CMS continued to pend claims until documentation was received by the MAC, requesting all "incident-to" charges billed back to 2007.

Now it's January, and the evaluation and management review portion of the case has been elevated to a second appeal and recently was disputed in a legal hearing. Despite testimony about an independent review conducted by a consultant hired by the health system, the judge was highly focused on the number of follow-up visits for management of chronic problems, along with defining "moderate" and "high" levels of decision-making as outlined by the CMS documentation guidelines. The "incident-to" portion of the audit remains under review.

In a similar instance, another provider in a different state received the same post-payment audit notice. The reviewer found that, based on the area of the hospital, codes were billed incorrectly, as the issue was tied to a unit dedicated to skilled nursing services. Ironically, the second reviewer, CMS (not the MAC) has requested 30 new patient charts going back to 2007. Although HDI has not sent correspondence, it appears based on requested service dates that the provider will comply with the request. This provider is independent (not employed by a hospital or health system) and employs two NPs.

There are several lessons learned from these providers' experiences:

• When CMS sends a letter requesting a "probe" on certain services, assume that they are looking at all aspects of coding and billing.
• Internal audits for professional services are essential to ensure that services are coded and billed appropriately.
• Place of service is significant for assigning the proper category of CPT service. RVUs and reimbursement can differ significantly based on where service is provided.
• Medical necessity ultimately should drive level of service. Relying on encoders and electronic health record algorithms may not provide 100 percent accuracy. Judges are becoming increasingly critical on documentation points and the means used for determining correlation between "reason for visit" and assessment and plan.
• Bell curve analyses of E/M codes may not provide an accurate picture of charge vulnerabilities. Consideration should be made to demographics, specialty and patient population.
• Mid-level scope of service and billing limitations should be researched and communicated to providers and billing personnel.
• Clinics operating under a provider-based status should research billing regulations when both a mid-level and a physician are providing professional services. The Medicare manuals have several areas where "incident-to" services are outlined, yet how they apply in a provider-based setting is quite variable. The first provider case above happens to be "solo," indicating a contracted provider with a health system, and is deemed "provider based" by contractual terms.
• Small and "solo" doesn't equate to less vulnerability with regard to government audits.