Are You Prepared for a Medicare Audit?

by Government Relations Staff

April 12, 2004 — When someone thinks of a government audit, the Internal Revenue Service is the federal agency that typically comes to mind. But psychologists who provide services to Medicare beneficiaries need to know about another potential audit source: the Centers for Medicare and Medicaid Services and its nationwide network of Medicare carriers. The federal government is intent on rooting out fraud and has used audits in recent years as a tool in its assault on Medicare abuse.

The following questions and answers provide some basic information about Medicare audits.

A key factor that often triggers an audit is claiming reimbursement for a higher than usual frequency of services over a period of time compared to other health professionals who provide similar services.

Further, psychologists who provide services to residents of nursing homes may face greater scrutiny because of past incidents of Medicare fraud by health professionals in the nursing home industry. Complaints from patients or family members about a health professional's charges also may be a factor.

Begin by understanding fully how the Medicare program operates. Know what constitutes 'reasonable and necessary services' as defined by Medicare; they are the only services that the program will reimburse. For example, be aware of what your local carrier wants claims forms and patient records to contain because expectations vary among localities. Such information typically is contained in the Medicare carrier's local medical review policy (LMRP), which is available online.

Above all else, maintain complete documentation in patient records to substantiate the services billed. Record symptoms and diagnoses, details of the services and level of care provided, and complete progress notes. Medicare considers lack of corresponding documentation as evidence that billed services were not reasonable and necessary. The auditor will consider any related reimbursement as an overpayment and require the provider to refund the applicable amount.

As an example, the auditor may question why a psychologist billed a certain number of hours (rather than a lower number) for psychological testing. The record should clearly substantiate why the additional hours were reasonable and necessary.

Respond to an unfavorable audit by asking for a "reconsideration." A psychologist may do so by writing to the carrier and explaining clearly and in detail why each service in question is reasonable and necessary. Request a fair hearing if the results of the reconsideration are unsatisfactory.

There are three different types of fair hearings. An "on the record" hearing means that a decision will be made based on information contained in the case file. A hearing conducted by telephone allows the provider to present oral testimony to supplement the case file. At an "in person" hearing, the provider is able to present both oral testimony and written evidence. Health professionals stand the greatest chance for a favorable outcome if they appear in person for a hearing.

Since Medicare requirements vary among geographic areas, your local insurance carrier for Medicare and the appropriate state psychological association are good information contacts. The APA Practice Directorate provides for APA members a free online publication, "Medicare Handbook — A Guide for Psychologists," that includes information about billing for services and Medicare coverage issues.