Updated on: September 29, 2016

Future of Medicare Audits, Part III: Artificial Intelligence and the Audit-Free Future

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Original story posted on: September 28, 2016

EDITOR’S NOTE: This is the third and final installment in an exclusive RACmonitor three-part series documenting the implementation of cyber audits by third-party auditors.

In Part I of this series, we discussed the exploding number of Medicare claims and the inability of the current appeals system to handle the workload. We also reviewed how special computer algorithms are being used to downcode diagnosis-related group (DRG) claims and argued that these actions are not really “audits” because artificial intelligence (AI) algorithms using statistical comparison are being substituted for medical judgment. 

In Part II, we examined the emerging arguments being made in “algorithm law,” but suggested that this area of litigation will need to be developed further, and that the type of experts needed in the appeals hearings will change dramatically because they will need to be familiar with artificial intelligence.

In this closing part of the series, we will examine scenarios of the future. But in looking at the future, we first must make a few reasonable assumptions.

  • The number of audits will continue to increase; one reason for this is that due to automation, the cost of audits is dropping rapidly.
  • The appeals system (redetermination, reconsideration, administrative law judge, or ALJ, Medicare Appeals Council) will remain under pressure to handle the litigation workload.
  • The quality of audits, which most agree is now very poor, will not improve, primarily because there is no incentive for the Recovery Auditors (RAs) to improve it.
  • Healthcare providers will be forced to allocate an ever-increasing amount of their already scarce resources to dealing with audits. 

Given these assumptions, there are a number of scenarios that seem reasonable 10 to 15 years from now.

Future Scenario No. 1

Speaking simply, there will be more of the same. The system will continue as is, but will simply become worse for healthcare providers. The burden of audits (uncertainty, takebacks, and litigation expenses) will continue to grow. Healthcare will become a sector that few will wish to enter. More providers will go bankrupt.

Future Scenario No. 2 

There will be a change in appeal procedures. The Centers for Medicare & Medicaid Services (CMS) already has recognized the backlog problem in appeals and has started to take action. In these proposals, there is little discussion aimed at rethinking the overall auditing process. The primary proposed change is in improving the capacity of CMS to handle litigation. 

There are many variations of scenarios Nos. 1 and 2. But let’s take a look at the future using an “out-of-the-box” approach. 

Future Scenario No. 3

In this scenario, algorithms leveraging artificial intelligence continue to be used, but the provider’s medical information system will be designed to intervene before the claims billing stage. Here is the logic: if it is possible to find a different coding solution looking backwards, as current auditing approaches now work, then it should be possible to apply the same algorithms to prevent bad claims from being filed in the first place. 

The optimum solution would be to replace the auditing system and instead situate the artificial intelligence algorithms between the healthcare provider and the government. Instead of being brought in after the fact, these algorithms will be leveraged beforehand. (See Figure) The artificial intelligence system would simply stand as a front end for claims processing. It would correct deficient claims and prompt for additional information as needed.

The standing algorithm could be standardized across the United States, and as we know, today’s technology allows for constant updating to the algorithm software, much like computer security updates today are pushed out from vendors.

And what would happen to the RAs? We don’t want these poor people to lose their jobs. They would transition into working for the healthcare providers and operating the algorithm engines. In so doing, they would focus on making sure that the AI reflects sound medical judgment, and not merely the desire to extract as much money as possible out of the hide of the provider (which is the case now).  

This would eliminate the need for auditing altogether and end this scourge of litigation and chaos that sits on the shoulders of providers. Perhaps this type of solution might be considered by public policymakers, and perhaps CMS needs to think about a more intensive research and development (R&D) program. Carpe diem – the future is there for the taking.

About the Author 

Edward M. Roche is the founder of Barraclough NY LLC, a litigation support firm that helps healthcare providers fight against statistical extrapolations. Prior to entering law, Dr. Roche served as the chief research officer of the Research Board (Gartner Group) and chief scientist of the Concours Group, both leading IT consulting and research organizations.

Contact the Author 

Roche@barracloughllc.com 

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