Medical billing is a complex process that involves submitting and following up on claims with either health insurance companies or government-sponsored medical programs to receive payment for services given by a healthcare provider. Many doctors run their own busy medical practices, and even if they are well-versed in the codes and practices of medical billing, mistakes can happen. Some physicians invest in a third-party medical biller in order to ensure accuracy. Overall, doctors and healthcare providers should take steps to internally audit their medical billing practices to avoid a costly investigation or punishment down the line.

Whether the doctor does his own medical billing, hires someone trained in medical billing, or outsources the task completely, there are certain things he or she must do to avoid an investigation by an insurance company or the government. Procedures must be reviewed regularly to improve billing and payment. Continuing education and training for staff should be invested in, as coding and laws in healthcare can change.

Medical billing is a long process, with many health insurers rejecting up to 50% of all healthcare claims, either based on incorrect codes, services not covered by the insurance plan, or suspicious coding practices. First, claims are submitted by the doctor to the insurer for reimbursement, at which point reviewers check for proper documentation or irregularities. If it is ‘clean,’ then the insurers will pay the claims within 30-60 days. If it is not ‘clean’ the claim is denied, which can be appealed by the healthcare provider. At each step of the way, errors can be responsible for delay or denial of payment. Medical providers must ensure internal compliance by conducting regular audits of its billing practices. The problem is, audits reflect the complexity of the medical billing system, presenting multiple problems to healthcare providers.

First, the sheer number of medical claims presented can make auditing tedious, and choosing a sample that have a representative number of errors must be carefully chosen in order to have an effective audit. Second, medical records are used to back-up codes for services; therefore, the records should be complete (including a full patient history) and legible. There should be a doctor’s rationale for prescribing or ordering certain treatments or services, and track the responsiveness of the patient or result of the treatments. Thus, the doctor must be extremely thorough in his or her record-keeping. The advent of electronic record keeping has enabled healthcare providers to quickly, thoroughly and legibly maintain documentation to assist in medical billing practices. Auditors must examine the records and accompanying documents closely, in order to identify significant errors – otherwise, there is a risk to the provider or losing money, or being asked for a return of money in the event of an overpayment. The nature of billing (that it is done by a human and manually) means that there is a high likelihood of mistakes being made. Auditors must be able to identify patterns of errors quickly and efficiently, which can be a challenge given the burdensome amounts of documents and codes they are required to examine.

Finally, internal audits are the first line of defense for healthcare providers to detect fraudulent billing practices, which could result in criminal or civil penalties. In the event that fraud is found and a legal action is brought, appropriate steps for auditing and internal investigations can act as a mitigating factor when litigating. A company that has taken steps to avoid and detect fraud surely could not have acted intentionally to defraud either the government or the medical insurer. An attorney that is well-versed in healthcare fraud can give guidance as to the importance of internal investigation, as well as provide advice as to the specific steps that healthcare providers should take in auditing their own billing practices.