The ABCs of Wound Care Auditing

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Caroline Fife, MD, FAAFP, CWS

  Although most clinicians are committed to excellence in patient care and honesty in service charges, the actions of unscrupulous practitioners and companies are bringing increased scrutiny on everyone.

  In February, federal authorities in Dallas arrested a Texas doctor and six others for perpetrating a scheme that cheated the government out of nearly $375 million in Medicare and Medicaid fees by registering homeless people for home healthcare services they never received.

  With only four doctors and 15 nurses on staff, the company owned by the physician in question is said to have certified more than 11,000 patients since 2006, more than any practice in the US. The US attorney’s office in Manhattan described the magnitude of the fraud as “astonishing.” It also raises the question: Why did it take so long to figure out there was a problem?

  The answer likely lies within the numbers. Medicare provides health coverage for 47.5 million people. It processes more than 1.2 billion claims annually, or more than 4.5 million claims per day. In 2010, Medicare spent $516 billion for covered items and services.

  As this article will show, all efforts aimed at uncovering those who file improper payments are focused on the detection of statistical anomalies in various aspects of claims analysis. (This is a theme that is more thoroughly explored in the article “The Coming Audit Storm” on page 18.)

  Despite the efforts of claims-processing contractors, Medicare remains among the top three federal programs with “improper payments.” To combat this problem, the federal government has launched new audits that organizations and providers must contend with. As clinicians, we must recognize that there are people out there who take advantage of the reimbursement system and be knowledgeable as to what can raise red flags regarding our own practices.

  Healthcare providers who are involved in an audit may find themselves overwhelmed in their attempts to comprehend and/or prepare for the investigation.

  The purpose of this article is to help clinicians make sense of the “alphabet soup” that the scope of auditing can appear to be and to present an overview of current governmental auditors, their respective scopes, and the appeals processes that exist.

Governmental Auditors

  There are more than a dozen US governmental auditing bodies currently at work in our healthcare system, which has most recently seen additions that include Recovery Audit Contractor (RAC) audits and Zone Program Integrity Contractor (ZPIC) audits. Other audits such as Comprehensive Error Rate Testing (CERT) have existed for many years, and their auditors may have overlapping jurisdiction.

  Governmental auditors are authorized to investigate claims submitted by any entity or provider that provides Medicare beneficiaries with procedures, services, and treatments. In addition, anyone who submits claims to Medicare and/or one of its fiscal intermediaries, regional home health intermediaries, Medicare Administrative Contractors (MACs), durable medical equipment suppliers, and/or carriers is also subject to investigation.

  Below are brief descriptions of the major auditors and their objectives. We focus on the RAC programs first, then provide an alphabetized list of auditors.


  The Tax Relief and Health Care Act of 2006 made permanent the RAC program to identify improper Medicare payments in all 50 states. RACs engage in two types of claims reviews in order to identify improper payments: automated reviews and complex reviews.

  An automated review is a review of claims data without a review of the actual records supporting the claim. A complex review consists of a review of actual medical records and is used in situations where there is high probability that a claim includes an overpayment. RAC auditors work strictly on commission, receiving anywhere from 9-12.5 percent of everything they collect, and they can extend their reviews as far back as 36 months. The RAC program’s mission is to reduce improper Medicare payments through the detection and collection of overpayments, the identification of underpayments, and the implementation of actions that will prevent future improper payments. Many of these procedures involve data-mining activities based on billing information.

  Some industry experts have suggested RAC audits may impose the largest operational impact to healthcare organizations and providers, in part due to their contingency basis. Recent changes have increased RAC record requests to 500 records every 45 days. The RACs use proprietary software programs to identify potential payment errors in such areas as duplicate payments, fiscal intermediaries’ mistakes, medical necessity, and coding.

  Again, remember that these auditors are looking for statistical anomalies. Thus, it is imperative that you know not only whether you can justify your billed level of service, but whether the distribution of your charges falls in an acceptable range from a statistical standpoint.

  To understand just how successful the RAC program has been, consider these numbers:
    • From March 2005-March 2008, RACs succeeded in correcting more than $1.03 billion in Medicare improper payments, according to the Centers for Medicare and Medicaid Services (CMS). Approximately 96 percent ($992.7 million) were overpayments collected from providers while the remaining 4 percent ($37.8 million) were underpayments repaid to providers. As part of this demonstration project, RACs were given six years of claims data for all Medicare providers to review.

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