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Audits are no longer someone else's problem. Neurologists are being increasingly singled out for audits by Medicare carriers and third-party payers. And those facing audits risk monetary fines, requests for huge over-payments based on prior years of practice, and even criminal charges. The Office of the Inspector General (OIG) within the HHS is responsible for Medicare fraud and abuse enforcement.

According to the 2004 OIG Work Plan, several areas affecting neurologists have been selected for scrutiny due to their high overall cost and potential for fraud. These include billing for consultations, billing for nerve conduction velocities, and billing for E&M codes on the same day as a procedure – the use of modifier −25 – such as a neurological consultation performed on the same date as a lumbar puncture.

Marc Raphaelson, MD, a member of the AAN Medical Economics and Management Subcommittee currently in solo practice in Washington, DC, has survived several audits successfully. “Once you have been notified of an audit, the game is up; it's too late to improve your documentation,” he told Neurology Today. “You'll either be fined $100,000 or sent to jail. If those are the rules, we have to learn how to make our documentation transparent to reviewers.”


Dr. Raphaelson attributes his positive outcomes to investing time into his documentation. When he was audited, he supplied copies of all chart documents – not only his encounter notes but also patient questionnaires and forms – and created exact copies for his files. He also took names and recorded every contact, including follow-up calls with the auditors. He suggested that the correct approach is “polite cooperation.” He also recommends consulting with an attorney and contacting your local or state medical society, which may offer consultants and other resources to assist in these situations.

James A. McNally, a third-party payer coding consultant for several medical and specialty organizations who works with physician audits, said: “The Center for Medicare and Medicaid Services (CMS) has instructed Medicare carriers to focus their audit efforts on areas where there may be major potential abuse. Furthermore, commercial, ‘for profit’ insurance carriers and managed care organizations are actively seeking ways to contain costs by recovering payments from physicians. These efforts involve audits or reviews of services that insurance carriers may deem to be excessive, non-covered, medically unnecessary, or not properly documented.”


Mr. McNally pointed out that physicians may be selected for Medicare medical review based on several factors: atypical billing patterns, particular kinds of problem (for example, errors in billing), and at random.

“It is critical that physicians are aware of and adhere to Medicare policy directives,” he said, especially in light of their audit and review process. “The proper use of Medicare policy resources can go a long way towards protecting your practice, allowing you to respond confidently to any request for medical records.”


Saty Satya-Murti, MD, a neurologist and the Medicare Medical Director for a Blue Cross-Blue Shield contractor with CMS, agrees that the physicians being audited should provide the information that a contractor has requested and they should not hesitate to ask questions. “Both the CMS and local contractors have developed extensive Web resources with connecting links to administrative, clinical, and scientific information,” he said. “This process has made Medicare and contractor operations accountable.”

However, this is not the case with commercial carriers, with whom the audit process is generally much more ambiguous. “The unfortunate reality of commercial audits is that most (if not all) times, the physician is at a significant disadvantage due to the entity's failure to routinely disseminate policy guidelines to help the physician submit claims properly,” Mr. McNally said.

Most practice management experts agree that knowing the normal office and hospital visit profiles for a given specialty – benchmarking E&M coding – and comparing individual physician profiles and aggregate practice profiles to such norms, can serve as a valuable tool to assess for over-coding. By recognizing statistical outliers, neurologists can perform our own internal audits and include this as part of a coding compliance program. There are few sources of reliable coding profiles, but the CMS Medicare database is generally accepted as the best available source. Benchmarking is also a useful strategy for convincing otherwise reluctant practice members to change behaviors and engage in appropriate charting habits.


Dr. Orly Avitzur is a neurologist in private practice in Tarrytown, NY. She holds joint academic appointments at Yale University School of Medicine and New York Medical College.

“Once the carrier has determined that a group or individual provider has an unusual billing pattern in comparison to ‘peers’ in a given locality, an expanded investigation is undertaken,” Mr. McNally said. “The carrier then selects a sample of claims at random from all claims submitted during a particular period. Subsequently, medical records are requested from the physician to determine whether or not they support the services billed and a response is expected within 30 to 45 days. The carrier then contacts the physician in writing to notify him or her of their final review determination. Unfortunately, in many cases, this is posed in the form of a demand for refund based on their contention that the level of services billed is not supported in the medical record.”

If you receive a request for a refund from a carrier without any details supporting their request, demand in writing a specific accounting of the patients and services being questioned before talking or negotiating with the carrier, Mr. McNally advised. More importantly, he said, ask for the specific carrier policy document that is being questioned.

The problem is that many carriers do not publicize or distribute their review standards criteria for physicians to study and incorporate into their medical record documentation, Mr. McNally explained. “Repeated inquiries about standards in medical record reviews frequently go unanswered.”

Just how many audits are taking place? This information is not disclosed by the private carriers. Although in January the Washington Post reported that Medicare is expected to audit 150,000 claims this fiscal year – compared with 128,000 and 6,000 audits in the two previous fiscal years, respectively – Dr. Satya-Murti could not confirm these numbers. “The carriers do not have access to these figures and CMS no longer tells us how many claims we have to audit,” he said. “Rather, we determine this number based on our data analysis of unusual patterns and variances from peer data.”


Dr. Saty Satya-Murti: “… CMS no longer tells us how many claims we have to audit. Rather, we determine this number based on our data analysis of unusual patterns and variances from peer data.”


James A. McNally: “The proper use of Medicare policy resources can go a long way towards protecting your practice, allowing you to respond confidently to any request for medical records.”

He pointed out that Medicare has changed the objective of audits. “In the past, these reviews were viewed as punitive,” he explained. In the last few years, however, there has been more of an educational emphasis. Generally, we look at only a small number of claims, determine if there is a problem, and help the provider correct the problem for future claims. The physicians and their staff who are under review find the education helpful and have expressed an appreciation of this shift in emphasis.


Mark G. Goetting, MD, a child neurologist and sleep specialist at a hospital-based practice in Evansville, IN, said, “I believe that billing is ultimately my responsibility. I am accountable for the veracity of the claim, making sure that the services billed have been provided, and that the coding is correct. Neurologists need to accept that part of our practice responsibility is in appropriate coding and billing.”

Initially, when Dr. Goetting finished his training in 1986, he had no interest in this side of medical practice. “We receive no preparation for these skills during residency and are ill-equipped to perform them. But, over the last several years, I have found it absolutely essential to learn about them.”

In fact, he has attended several practice symposia at the AAN Annual Meetings and tries to go to at least one every year. “I was incredibly impressed with how informative these courses are,” said Dr. Goetting. “They have helped me code correctly, improve collections, and assist patients in getting their insurance benefits for office procedures and visits.” He now asks his patients to complete extensive questionnaires in advance and includes documentation of time spent or medical complexity in his dictations. He advises all neurologists to attend a seminar or get a consultant to help them understand these issues. He warned, “Neurologists who neglect this subject will be in real trouble if they are audited.”

This year's AAN Annual Meeting will feature several courses on billing and coding issues – including, for example, a full-day course, “Issues in Coding and Reimbursement,” on April 24. Orly Avitzur, MD, will discuss E&M benchmarks at “Practice Survival for Neurologists: Business Strategies for Thriving in the Office and Avoiding Financial Pitfalls” on April 27.


  • Consultation codes: The OIG will study the appropriateness of billings for physician consultation services, codes frequently used by neurologists and other specialists.
  • Use of modifier −25: In general, a provider should not bill evaluation and management codes on the same day as a procedure or other service unless the evaluation and management service is unrelated to such procedure or service. A provider reports such a circumstance by using modifier −25; several such circumstances exist for neurological services.
  • Place of service errors: Claims will be reviewed for whether physicians properly coded for services provided in ambulatory surgical centers and hospital outpatient departments.
  • Billing for diagnostic tests: Specifically, there will be attention paid to nerve conductions studies. Medicare-allowed amounts for nerve conduction studies increased from $136 million in 2000 to $186 million in 2001 – approximately 37 percent.
  • Incident-to services: These services for allied health professionals – for example, physicians assistants (PAs) and nurse practitioners (NPs) – are paid at 100 percent of the Medicare physician fee schedule and must be provided by an employee of the physician under the physician's direct supervision. Neurologists are increasingly working with NPs and PAs and should review these guidelines carefully.
  • Long-distance physician claims: Medicare claims will be reviewed for face-to-face physician encounters where the practice setting and the beneficiary's location were separated by a significant distance.


Mr. McNally distinguishes the various types of audits outlined in Medicare training material:

Medicare Prepayment Review

Most medical reviews fall into this category. Physicians who have been identified as having problems submitting correct claims may be placed on “prepayment review,” in which a percentage of their claims are subjected to medical review before payment can be authorized. This practice ensures that an appropriate payment is made in the first place, rather than paying incorrectly and then “chasing” after the overpayments. Once the physician has reestablished a practice of billing correctly, the practice is removed from prepayment review.

Medicare Post-payment Review

Post-payment review can be done on individual claims or a sample of claims, including a statistically valid random sample. The advantage of sampling is that an overpayment (if one exists) can be estimated without requesting all records on all claims from a physician. This balances the desire to reduce administrative burden and costs for both the Medicare program and the physician. This is known as extrapolation.

Dr. Satya-Murti noted, however, that it is no longer the practice to extrapolate an error rate through the universe of claims based on a sample. “With the implementation of Progressive Corrective Action, contractors request the actual overpayment in the initial sample,” he said. “Follow-up samples may lead to an extrapolation of the error rate, but this is now quite rare.”

Private Carrier Audits

The issue of carriers and their agents demanding refunds for claims they have paid on a historical basis continues to grow. This process is, by far, the most onerous. A physician will be contacted by letter stating that the carrier wants the money back for claims paid over a number of years saying that it was not their policy to pay these claims. These entities never disseminate their payment policy alerting physicians how they make payment or process a claim. They contend that the information is proprietary and cannot be formally released in writing. This position persists despite the fact that they paid these claims on a historical basis and gave the affected physician no indication that what they were doing was incorrect in any way as the claims were paid, indicating tacit approval.