A Roadmap to Medical Billing and Coding Audits for Wound Care Providers : Advances in Skin & Wound Care

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A Roadmap to Medical Billing and Coding Audits for Wound Care Providers

Skeldon, Sabrina JD, CPC-A, CPMA, CIA, CHC, CCEP, CFE

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doi: 10.1097/01.ASW.0000889908.60942.f6
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This article defines a medical billing roadmap for wound care providers to assist them in strengthening the accuracy and completeness of their clinical documentation and in using evidence-based clinical practice guidelines to establish compliance with medical necessity and payer coverage policy requirements.

In-house medical billing audits are useful for evaluating compliance with payer policies and guidelines and federal and state law, identifying billing errors, implementing corrective action, and identifying areas where provider education is needed. A focused audit is risk based and examines either the areas where errors have the greatest financial and reputational impact or those with the greatest likelihood of error. Thus, the scope of a medical billing audit frequently includes an audit of the top 10 denial codes, denials related to highest reimbursed services (application of skin grafts, hyperbaric oxygen therapy), and/or denials related to the services most frequently performed (negative-pressure wound therapy, debridement). The provider’s case mix may also be considered; this enables the auditor to identify medical necessity denials based on the failure to meet specific payer criteria.


An audit can either be retrospective or prospective. A retrospective audit looks solely at claims denials to evaluate patterns in miscoded diagnoses and procedure codes. The audit compares the explanation of benefits to the underlying claims and the patient charts to determine the accuracy of the coding, whether the codes are supported by the clinical documentation, and whether medical necessity requirements have been met. In contrast, a prospective audit performs a claims review prior to submission, to avoid rejection and denial of claims. It enables providers to evaluate code overutilization.

Retrospective Audit

As part of a retrospective audit, a medical auditor would calculate the denial rates and compare the provider’s denial rates against the Comprehensive Error Rate Testing denial rate, the annual Health and Human Services (HHS) improper payment rate. The Comprehensive Error Rate Testing denial rate is a yardstick for measuring a provider’s performance because it reflects all claims processed by the Medicare Fee for Service program during the reported period and calculates a national improper payment rate.

In addition, auditors would historically trend the provider’s denial rates to determine whether denials have recently increased. A provider with higher denial rates than his/her peers may be subject to Targeted Probe and Educate (TPE) audits that could result in prepayment and postpayment medical reviews. Providers with the highest error rates or those who bill codes with the highest error rate are subject to TPE audit. The data analysis used to identify providers selected for audit follows a historical data approach and includes provider denials, as well as utilization, statistical, and reimbursement data. Essentially, the government uses the findings of a retrospective audit to identify physicians whose error rates are outliers. A retrospective audit approach within your own practice not only can improve coding accuracy, but also serves as a preventive measure to avoid being selected for TPE audit or prepayment and/or postpayment review.

Prospective Audit

As part of a prospective audit, the auditor would calculate utilization rates and compare them with reported usage in the CMS public data sets.1,2 Reporting of higher utilization rates than a provider’s peers could result in prepayment medical reviews or postpayment reviews. To the extent that the errors have extended over a long period, the pervasiveness of the billing errors may be deemed sufficient to satisfy the False Claims Act intent requirement.

Wound care has repeatedly been identified by CMS, the Office of Inspector General (OIG), and Medicare contractors as an area potentially subject to fraud and abuse. In its 2005 to 20073,4 and 20175 Work Plans, the OIG expressed concern that claims submitted by wound care centers for debridement were not medically necessary. In a 2018 OIG HHS audit,6 the HHS Office of Audit Services reviewed 120 claims for hyperbaric oxygen therapy services paid by a Medicare Administrative Contractor (Wisconsin Physician Services) over a 2-year period. The OIG estimated fraudulent payments totaling $42.3 million had been made to wound care centers, after extrapolating the fraudulent claims to the entire universe of claims. Of the 120 claims reviewed, the government concluded that 85% had not been eligible for payment.6,7 Several qui tam actions were settled relating to allegations of fraud pertaining to upcoding in the area of wound care and submission of claims for noncovered services.8–10

Audits of provider denial rates and utilization highlight potential weaknesses in billing and coding practices and identify areas where the risk of upcoding or overutilization is greatest. Internal audits identify gaps in provider education and revenue cycle management that can be addressed through corrective action plans and provider education. A billing auditor will test the accuracy and completeness of International Classification of Diseases, Tenth Revision assignment, correct use of modifiers, compliance with code descriptions, adequacy of documentation, alignment of charting with coding (ie, the accuracy of the provider’s coding when compared with charted information), compliance with local coverage determinations (LCDs) and national coverage determinations (NCDs), commercial payer policies, and accurate reporting of supplies used and units reported (eg, Medicare will not reimburse for dressings or Unna boots. Units of cellular and/or tissue-based product grafts must be tracked so that commercial payers and Medicare can assess the reasonableness of the amounts used).


Adequate documentation is at the heart of commercial payer and Medicare medical necessity requirements. Patient charts must:

  • Demonstrate that standard conservative therapy has failed.
  • Comply with the requirements of LCD/NCD and payer policies. These policies set the minimum requirements for meeting the medical necessity standard.
  • Document the thought processes of the provider. All treatment plans should specify why a particular therapeutic modality was chosen, what treatment options were considered, and the weighing of the benefits of those therapeutic modalities. In addition, physicians should document the number and complexity of the problem or problems addressed at each encounter and the risk of complications and/or morbidities or mortality of patient management decisions made at each visit. This level of detail is required to support the treatment plan put in place.
  • Identify the type of wound, such as chronic wound (diabetic ulcer, arteriosclerotic ulcer, venous ulcer) or traumatic wound (disruption of surgical wound), surgical complication of graft and flaps (delayed healing, failed or compromised graft or flap), or complication with amputations.
  • Provide the measurements of the wound both at the time of assessment and at reassessment as well as descriptions of the wound (eg, consistency and quantity of drainage, color, odor), the condition and appearance of the periwound skin, and the presence or absence of infection.
  • Record all diagnostic testing performed (eg, review hemoglobin, A1C testing, duplex scans, ankle brachial index, MRI scans, computed tomography scans, laboratory tests), and counseling performed (nutrition, tobacco cessation) and the documented results. The inclusion of all diagnostic testing results provides evidence-based support for the continuation of a specific therapy.


It is not sufficient to state that a wound is nonhealing and record the duration of time it has been present. Medicare defines a “failed response” as a wound that has increased in size or depth, shown no change in baseline size or depth, or shown no signs of improvement or indication that improvement is likely (eg, granulation, epithelialization, or progress toward closing) despite conservative therapy efforts and patient counseling. Reimbursement for care depends on documentation meeting the threshold requirement that conservative therapy efforts have failed after being performed over a specific period.


To support medical necessity, the patient assessment and treatment plan must clearly define all diagnoses the provider is managing during a visit. For an established diagnosis, include whether the patient’s condition is stable, improving, or worsening; when diagnostic tests are ordered; and the rationale for ordering the tests and performing specific therapeutic treatments. Commercial payer and Medicare LCD/NCD requirements are an overlay based on established evidence-based clinical practice guidance. Each therapeutic modality in the area of wound care has specific Medicare or commercial payer policies that establish medical necessity requirements as per that payer. Differences exist among various payer policies, so the specific payer requirements must be assessed for each type of wound care treatment.


The central principle in a review of coding is determining whether the provider has coded accurately and to the highest degree of specificity. Accuracy requires that diagnosis codes are selected by the type of wound treated, the sequencing of the codes is correct, and modifiers are used appropriately. If providers can identify the focus of the wound care, they will likely code diagnoses correctly and select the appropriate codes to indicate active treatment or aftercare. The treatment of an uncomplicated surgical wound, for example, would be coded as aftercare following surgery.1–16 If the condition is still present, that should be coded as well. If the wound is complicated, specifically a complication with an amputation, surgical wound dehiscence relating to an abdominal or sternal wound, or an infected postoperative wound, this would be coded as an initial encounter for a condition being actively treated.17–24 The existence of a complication is shown by charting incisional separation, infection,25 dehiscence, drainage, or failure of a flap or graft. To the extent laboratory findings identify the viral or bacterial infection, it should be coded as well. Surgical wound infections have specific diagnoses codes that should be used to code with the highest level of specificity.26–29

The diagnosis codes selected for diabetic ulcers and their ordering vary. Coding a diabetic ulcer is complex. Diabetes with peripheral vascular disease and peripheral arterial disease should be coded as diabetic peripheral angiopathy. The coding is further refined by whether the diabetic ulcer is a venous stasis ulcer or a neuropathic ulcer.30–35 Comorbidities associated with diabetic and other ulcers should be coded because they could raise the merit-based incentive payment system score for the treatments performed.

Complicating the assignment of the accurate International Classification of Diseases, Tenth Revision, Clinical Modification codes is that all wounds must be coded. If wounds are present at multiple sites, the provider must select the diagnosis code that identifies each wound, the anatomic location, and laterality. They should be coded separately according to the therapeutic treatment performed, along with a modifier to clarify the separate and distinct nature of the services performed.


Clinical coding and charting must align, and the treatment plan must fall within payer-covered indications. Confusion as to what is an acute wound (laceration, trauma, or surgical wound or complication) versus a chronic ulcer can lead to the miscoding of claims. However, the nature of a wound can change, and the coding should reflect the current state of the wound.


The CMS has approved nine wound care quality measures for 2022:35

  • USWR29 Adequate offloading of diabetic foot ulcer at each visit
  • USWR32 Adequate compression of venous leg ulcer at each visit
  • USWR30 Noninvasive arterial assessment of patient with lower extremity wounds and ulcers for determination of healing potential
  • CDR6 Venous leg ulcer healing or closure
  • DR2 Diabetic foot ulcers
  • USWR31 Non-lower extremity pressure ulcer healing or closure
  • CDR8 Appropriate use of hyperbaric oxygen therapy for patients with diabetic foot ulcers
  • USWR22 Patients reported nutritional assessment and intervention plan in patients with wounds and ulcers
  • USWR26 Patient reported outcomes of late effect radiation symptoms following treatment with hyperbaric oxygen therapy

Adequate chart documentation will capture the relevant data under the quality measures reported to CMS as part of merit-based incentive payment system. Charting of comorbidities is critical, so that risk stratification can be taken into account as part of the reported healing rates.


In addition, comorbidities should be coded because they may increase reimbursements under Medicare Advantage Plans. Payments under Medicare Advantage Plans are risk adjusted. Under the CMS Hierarchical condition categories, three factors that relate to reimbursement are impacted by the coding of comorbidities. If the patient uses greater resources than the average patient, the risk adjustment factor is adjusted upward; the patient’s demographic score (age, sex, disability) is included in the calculation; and an additional amount is added to the extent the interaction between the combination of two or more chronic diseases would result in more costs than the cost of each condition individually. Coding comorbidities actively treated as part of the care of Medicare Advantage patients could increase reimbursement of claims.


To the extent that providers can demonstrate compliance with Medicare and commercial payer policies relating to the therapies provided and the clinical efficacy of those therapeutic modalities, they can demonstrate the medical necessity of the services they have billed. Although wound care has been identified as a high-risk area for fraud and abuse, adherence to evidence-based practices and compliance with medical necessity requirements for clinical documentation should protect clinicians in the event of payment reviews and any further government action. The use of audits focused on provider charting provide an opportunity to correct patterns in billing and coding errors and can assist in identifying those providers in need of training.


1. Centers for Medicare & Medicaid Services. Medicare physician & other practitioners—by provider and service. https://data.cms.gov/provider-summary-by-type-of-service/medicare-physician-other-practitioners/medicare-physician-other-practitioners-by-provider-and-service. Last accessed September 7, 2022.
2. Centers for Medicare & Medicaid Services. Medicare physician & other practitioners—by geography and service. https://data.cms.gov/provider-summary-by-type-of-service/medicare-physician-other-practitioners/medicare-physician-other-practitioners-by-geography-and-service. Last accessed September 7, 2022.
3. Office of Inspector General. Work Plan fiscal year 2005. https://oig.hhs.gov/publications/docs/workplan/2005/2005%20Work%20Plan.pdf. Last accessed September 7, 2022.
4. Office of Inspector General. Work Plan fiscal year 2006. https://oig.hhs.gov/publications/docs/workplan/2006/WorkPlanFY2006.pdf. Last accessed September 9, 2022.
5. Office of Inspector General. Hyperbaric oxygen therapy (HBO) services—provider reimbursement in compliance with federal regulations (W-00-16-35780). 2016 Office of Audit Services audit report. https://oig.hhs.gov/reports-and-publications/workplan/summary/wp-summary-0000064.asp. Last accessed September 9, 2022.
6. Department of Health and Human Services, Office of Inspector General. Wisconsin physicians service paid providers for hyperbaric oxygen therapy services that did not comply with Medicare requirements (A-01-15-00515), February 2018. https://oig.hhs.gov/oas/reports/region1/11500515.pdf. Last accessed September 7, 2022.
7. Department of Health and Human Services, Office of Inspector General. First Coast Service Options, Inc., paid providers for hyperbaric oxygen therapy services that did not comply with Medicare requirements (A-04-16-06196). December 2018. https://www.oig.hhs.gov/oas/reports/region4/41606196.pdf. Last accessed September 7, 2022.
8. US ex rel Arnold v Healogics, no. 14-cv-1064 (MD Fla. 2014).
9. US ex rel Wilcox v Healogics, no. 15-cv-1510 (MD Fla. 2015).
10. US ex rel Van Raalte v Healogics, no. 14-cv-283 (MD Fla. 2014).
11. Z48.812: encounter for surgical aftercare following surgery on the circulatory system.
12. Z48.815: encounter for surgical aftercare following surgery on the digestive system.
13. Z47.81: encounter for orthopedic aftercare following surgical amputation.
14. Z48.00: encounter for change or removal of nonsurgical wound dressing.
15. Z48.02: encounter for removal of sutures.
16. American Medical Association. CPT 2022 Professional Edition. Synovec MS, Jagmin CL, Hochstetler Z, Barney LM, Bossler AD, eds. American Medical Association; 2022.
17. T87.41: infection of amputation stump, right upper extremity.
18. T87.42: infection of amputation stump, left upper extremity.
19. T87.43: infection of amputation stump, right lower extremity.
20. T87.44: infection of amputation stump, left lower extremity.
21. T87.9: unspecified complications of amputation stump.
22. T81.30: disruption of a wound, unspecified.
23. T81.31: complications of procedures, not elsewhere classified.
24. T81.33: disruption of traumatic injury wound repair.
25. A00-B99: certain infectious and parasitic diseases.
26. T81.41XA: infection following a procedure, superficial incisional surgical site, initial encounter.
27. T81.42XA: infection following a procedure, deep incisional surgical site, initial encounter.
28. T81.43XA: infection following a procedure, organ and space surgical site, initial encounter.
29. T81.44XA: sepsis following a procedure, initial encounter.
30. E.11.621: type 2 diabetes mellitus with foot ulcer.
31. L97: non-pressure chronic ulcer of lower limb, not elsewhere classified.
32. E11.42: type 2 diabetes mellitus with diabetic polyneuropathy.
33. E11.621: type 2 diabetes mellitus with foot ulcer.
34. E11.51: type 2 diabetes mellitus with diabetic peripheral angiopathy without gangrene.
35. US Wound Registry and US Podiatry Registry. Measure the right thing quality measures. I87.2: venous insufficiency (chronic) (peripheral). https://uswoundregistry.com/quality-measures/. Last accessed September 11, 2022.
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