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Coding audits provide insight into the process of coding itself.

The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) has developed several healthcare compliance programs, and within the key elements of these programs you will find forms of auditing, along with monitoring. Auditing is viewed in the regulatory world as a mainstay for compliance, integrity, and fraud identification and/or avoidance.

One of the purposes of auditing is to identify a Medicare overpayment (whether fee-for-service or managed care). A Medicare overpayment is a payment that exceeds proper amounts established via regulation and/or statute. Errors occur, mistakes happen, and because our healthcare system is very “code-dependent,” we cannot function ethically without the inclusion of coding audits in our operations and compliance activities.

When we (you) think of coding audits, do you think of the following?

  • An official examination and validation of the medical record documentation and coding
  • A systematic review of the medical record, including the clinical coding, along with a written analysis and report of findings

I have heard and observed a variety of reactions to the words “coding audit.” Often, those reactions and words are not too positive, to be honest. But this is where we really need to change the perception, reaction, and attitude about coding audits. They need to be viewed as a compliance necessity, a quality assurance activity, an educational opportunity, and a helpful way to improve accuracy. Basically, coding audits are a good thing, and a good activity to perform.

Coding audit frequency will depend on the occurrence of coding changes (ICD-10-CM/PCS and CPT®), regulatory changes, compliance issue discovery, and also if there are ongoing patterns and trends identified in prior audits. Thus, we should not and cannot perform our clinical coding without having coding audits conducted regularly – or at a minimum, semi-annually. Being proactive rather than reactive when it comes to coding audits is really a best practice.

Although coding audits typically are conducted with the review and analysis of the medical record documentation and coding, they really are more than this, and should also include a review of coding (or CDI – clinical documentation integrity) policies and procedures, and even a review of the coding operational functions, along with the query process (forms) – so keep all of that in mind.

Coding audits provide insight into the process of coding itself, and how and why a particular code may or may not have been selected (root cause analysis). In addition, there is a 95-percent (or higher) accuracy standard across the industry for clinical coding against which we want to benchmark ourselves. It is like a scorecard or report card, and this is certainly beneficial to any facility, department, and individual performing the coding to have a goal to strive for – or even exceed.

Understanding all the aspects of a coding audit are beyond the scope of this article, but there are some key steps that are important to include when developing your coding audit plan, or having one performed.

 Seven Key Steps to Coding Audits:

  • Identify who will perform the coding audit, internal or external auditing staff (or both); select those who have the experience and qualifications.
  • Develop the scope of the coding audit: setting types (inpatient, outpatient, physician office, etc.). Also, determine the volume of records (number of encounters), making sure the audit size is relevant and time frame appropriate (by quarter, one specific month, etc.). Also, decide whether the audit will be random versus focused (or a combination). Define a coding variance or error so there are no surprises at the end of the audit.
  • Determine the type of coding audit: pre-bill/prospective and/or retrospective (after the claim/bill has been paid). Ensure that both diagnosis and procedure (both ICD-10-CM/PCS and CPT) codes are audited.
  • Secure auditing resources and tools: ICD-10-CM/PCS guidelines, code books, editions of the American Hospital Association (AHA) Coding Clinic, the CPT code book, American Medical Association (AMA) CPT Assistant, Centers for Medicare & Medicaid Services (CMS) manual, CMS transmittals, etc. (software tools as well). Request the coding policies and procedures as well as query forms or templates. Also, request the workflow (document) of the coding process to gain a clear understanding of the process and data flow.
  • Perform chart review and process (auditing function): while performing the review (reading over the medical record documentation and the clinical coding), often, the claim/UB will also be utilized. Also, document the findings on an audit worksheet tool, and provide a written explanation of the findings and justification (quote official sources).
  • Create an audit summary (include patterns and trends), along with recommendations (include next audit time frame). Ensure these include a written narrative summary report, verbal (virtual) presentation of the audit findings, etc. Allow time for the coding staff to review the findings and provide their input and/or response (this should be done in a timely manner – not more than 7-8 business days). Keep in mind that this is “educational,” not punitive.
  • Implement corrective action and resolution of coding errors (variances): this includes any rebilling of overpayments (rebill within 60 days of the overpayment confirmation) or underpayment that resulted from the changes in the clinical coding. Document this process and confirm its completion. If there are systemic patterns or trends, you may need to include your compliance and legal staff to help determine future corrective actions (refunds) or audits.
  • Provide/conduct education: the health information management (HIM) coding staff, CDI staff, and also physicians; discuss with physician liaison. All of these should receive education that is supportive and helpful.

It’s also a great practice for auditors and coding staff to regularly to view the Program for Evaluating Payment Patterns Electronic Report (PEPPER), which is a free tool developed by the TMF Health Quality Institute, under contract with CMS. Using clinical coding data, PEPPER results in “summarizing provider-specific Medicare data statistics for target areas often associated with Medicare improper payments due to billing, MS-DRG coding, and/or admission necessity issues.” The PEPPER can offer a way to focus your audit targets and compare and contrast the information with national or state data. I have found PEPPER to be helpful when developing a coding audit plan, as well as when conducting post-audit education.

Also, look at the topics that the Medicare Recovery Audit Contractors (RACs) have published, as this may again provide an area of focus for your coding audit. You can find these targets or topics online at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Recovery-Audit-Program

The OIG helps us by conducting coded data analysis and performing audits when they identify a compliance risk. Although published reports by the OIG on “coding” often are extremely focused and specific, there is something to learn and gain from reading through these reports.

Ultimately, coding audits should be performed in all healthcare settings, on all lines of service, and across all payors. This includes auditing any “automated” or computer-generated coding as well. In the healthcare world of regulatory scrutiny, driven by fraud, waste, and abuse, coding audits are necessary and essential to include in your compliance program or plan.


Gloryanne Bryant, RHIA, CDIP, CCS, CCDS

Gloryanne is an HIM coding professional and leader with more than 40 years of experience. She has an RHIA, CDIP, CCS, and a CCDS. For the past six years she has been a regular speaker and contributing author for ICD10monitor and Talk Ten Tuesdays. She has conducted numerous educational programs on ICD-10-CM/PCS and CPT coding and continues to do so. Ms. Bryant continues to advocate for compliant clinical documentation and data quality. She is passionate about helping healthcare have accurate and reliable coded data.

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