From Panic to Power: Tackling Health Insurance Audits

Lately, insurance companies have been swooping in for audits, resembling hungry buzzards on the hunt for a meal. This holds especially true for Medicare. Do you know what you need to do if you get audited? Keep reading to find out.

Reacting to the Audit Call: Fight, Flight, Freeze, or Fawn!

When you receive an audit letter from your health insurance company, it can trigger the classic fight, flight, freeze, or fawn response. The shockwaves can leave you feeling disoriented, even traumatized. Have you experienced this?

When faced with such a letter, the initial first step is to keep breathing!

Once you’ve calmed down a bit, carefully read the letter.

When therapists find themselves in this situation, numerous questions arise. Lately, I've been inundated with requests from therapists seeking assistance in reviewing audit paperwork.

"Andy, a 46-year-old therapist from Colorado who works with transgender youth, contacted me when they received an audit letter. Within the first 3 minutes of our conversation, it was obvious their racing thoughts kept them from absorbing the information even though they reread the letter many times. All they could remember was the deadline – “send immediately.” After listening to and validating their fears, my next task was to read the letter and explain the finer points in a way that their muddled brain could hear. They calmed down immediately. Together, we planned their strategy for submitting their notes."

Understanding Clinical Insurance Audits

A clinical insurance audit is a comprehensive review of treatment to “identify fraud, abuse, and waste” in the healthcare industry. Regrettably, the introduction of the new mental health parity laws on February 10, 2021, led to an unforeseen and continuing outcome: a surge in insurance audits. The intention was to spread responsibility for health care costs among insurance companies. Though well-intentioned, it has become another impetus for insurance companies to restrict client services and withhold payment from healthcare providers, which is not how the law was intended.

While most therapists may never encounter an audit, a significant number will. It's essential to be prepared.

Understand What Health Insurance Companies Seek in an Audit

The moment you receive that ominous letter from your health insurance company, the first question that likely pops up is, “Why me?” Most of the time, getting an audit is just bad luck. So don’t get stuck trying to figure that out. Instead, ask yourself, “What exactly should I send?”

The good news is the letter itself usually contains the answers but audit anxiety can interfere with understanding. Instead of freezing in a haze of anxiety or resorting to a chocolate binge, let's break it down.

Where to Start: Know the Difference Between Psychotherapy Notes from Progress Notes

Think of psychotherapy notes as your "Memory Notes" because their primary purpose is to jog your memory from one session to the next. However, insurance companies aren't interested in your memory notes. Your memory notes are confidential.

What insurance companies want are your Progress Notes, which we'll refer to as your "Medical Record." The medical record is what substantiates medical necessity.

What to Anticipate During a Health Insurance Audit

Despite one’s fears, the insurance company won't storm your office like a SWAT team on a mission to ransack your files or confiscate your computer. Audits are typically initiated through a letter from the insurer. The letter will request evidence of medical necessity by asking for documentation related to the claims within a defined timeframe. They often ask for a year's worth of notes (though sometimes more), for example, from November 1, 2022, to October 30, 2023.

The requested documents generally include:

1. Diagnostic Assessment: Also known as an Intake Summary or Intake Assessment or Bio/Psycho/Social Assessment.
2. Treatment Plans: Outlining the course of therapy and the goals to be achieved.
3. Progress Notes (part of your medical record): Records of each client's session, including what was discussed and any changes in their condition.
4. Consultation Records: Any correspondence with individuals involved in the client's care.
5. Discharge Summary: A summary of the client's progress and the reasons for terminating therapy.

The insurance company will only demand access to your online program or client records stored on your computer if they suspect fraud. Our goal here is to avoid any such suspicions and ensure a smooth audit process.

Avoiding Clawbacks: Protecting Your Reimbursements

Health insurance audits operate on a straightforward "pass/fail" scoring system, where a passing grade is typically set at 80%. Falling below this threshold introduces the unnerving concept of a “recoupment," or “affectionately” known in the therapy world as a "clawback." A clawback is essentially a demand from the insurer for the repayment of previously disbursed payments. There are two primary methods for calculating clawbacks:

1. Specific Claims Review: In this method, clawbacks are determined based on the specific claims under scrutiny during the audit.
2. Sampling and Extrapolation: This approach involves the insurer reviewing a small sample of your prior claims and applying your audit score to all other claims submitted within a specific time frame.

In either case, the result can lead to you having to repay the funds. If you don’t repay the funds, they will deduct the owed amount from your future payments.

Failing an audit entirely is a rare occurrence, but it can happen. Typically, it's a result of therapists not knowing the requirements or what’s expected and being afraid to reach out to the insurance company for clarification, fearing that any interaction could potentially be used against them. In the following sections, we'll delve into strategies and best practices for achieving a passing grade and minimizing the risk of clawbacks during a health insurance audit.

“Isaiah, a seasoned therapist in Chicago, sought my help after he submitted two years of notes for five clients. His notes were based on an audit he passed 20 years earlier because he didn’t know the standards had changed. Even the start and stop time of the sessions were missing. He scored 12%, which resulted in a $17,000 claw back that he had to repay over time.

Crestfallen yet determined to not let that happen again, he took my course and used my forms. I reviewed his treatment plans and session notes so that he was able to complete records quickly and confidently. Two years later, he contacted me again. He passed another extensive audit by 100%.”

While it's true that some insurers, like the reviewer who audited Isaiah, may not grant the opportunity to correct and resubmit records, many companies do allow for this crucial step. However, that doesn't mean you should rush into submitting your notes without a thorough review. Even though the review process takes time, it's in your best interest to "get it right" on the first attempt.

In the following sections, we'll explore effective strategies to streamline the review process and ensure your records meet the insurer's requirements, reducing the likelihood of having to revise and resubmit.

Health Insurance Audits: The Do's and Don'ts

DON'T

Don’t Procrastinate or Avoid: Waiting for a convenient time to read the audit letter is risky. If you miss the deadline, the insurance company will assume you’re not submitting the notes and you’ll automatically forfeit payment for all notes under the audit. Don’t wait until you feel ready to face the audit. You’ll never feel ready.

Don’t Skim the letter due to Anxiety: Skimming is probably unavoidable at first but read it thoroughly after you’ve calmed down. Skimming the letter can lead to missing essential details or opportunities for extensions. Reread it as many times as needed to understand the scope of the audit.

Don’t Avoid Asking for an Extension: An extension helps reduce the pressure by buying you valuable time. Request an extension if needed due to real-world circumstances. Are you going on vacation, caring for a sick family member, dealing with your own illness, or a client crisis? We all seem to be super busy. You likely didn’t carve out time to deal with an audit when planning your calendar! And though it may have happened, I’ve never heard of anyone’s request for an extension being turned down.

Despite advising Lorraine, another clinician, to ask for an extension during our initial consultation, an anxious part of her personality couldn’t bring herself to call and ask until I read and explained the clause in the letter about how to request an extension if needed. She called, got the extension and was able to complete the audit process without having to shut down her practice for 3 weeks to do it.

Don’t Submit Without Reviewing: Never turn in your documents without a thorough review. Mistakes happen, and this proactive step can prevent them from becoming costly errors down the line. You may be able to amend your notes if the amendment is clearly labeled with a date and your initials.

Taking these precautions can help you navigate health insurance audits with confidence and increase your chances of a successful outcome.

DO:

Breathe: Keep in mind that this too shall pass. While an audit can feel like an assault on your professional dignity, it's essential to remember it's not a personal attack and there’s nothing to be ashamed about. Maintaining your composure helps to bring clarity to this challenging episode in your professional journey.

Read the Letter Promptly and Thoroughly: Though asking for an extension is perfectly reasonable, don't set the audit letter aside for a more convenient time because an audit is never convenient. If you fail to respond or miss the deadline, you’ll automatically fail the audit. Read the audit letter carefully. Revisiting it when you're calmer can help you grasp the details more effectively.

When in Doubt, Ask: Speak with the Insurance Company: Don't hesitate to reach out for clarification. For example, if you’re unsure what kind of audit you’re being subjected to, ask, “What is the purpose of the request for records, and is participation mandatory?” Some requests for records are not to “root out fraud.” Instead, they are to determine the most common diagnosis being treated and to estimate future costs of treatment. This kind of request is not an audit because there is no potential penalty associated with your notes. If the audit's purpose is unclear, inquire about the financial consequences of not passing the audit. What is the method the insurance company uses to calculate recoupments? This information will indicate if there is potential financial risk.

Learn your state statute of limitations on insurance audits: Some states limit audits to 1 year, some to 18 months or more. Some states have no statute of limitations. If the audit dates fall outside your state’s statute of limitation, the insurance company cannot conduct the audit – unless they suspect fraud.

Estimate the time you’ll need and make a plan of action. Do this by knowing the specific date range being audited and counting the number of progress notes you need to review. Multiply that number by the amount of time you think you’ll need to review your notes and schedule the time into your calendar.

Review Your Notes and Seek knowledgeable Input: Mistakes are a part of life, and they can creep into your documentation. Self-editing is important and can be challenging. Even I, the Documentation Wizard, would have my notes reviewed before submitting them.

Consider your wellbeing: Ultimately, make a decision that supports your overall welfare. Assess if the effort involved in preparing your notes for an audit is worth the potential outcomes.

“Marcia, a sandwich generation therapist in California, received the dreaded letter during the Covid-19 pandemic. She was already caring for her ill mother, managing remote learning for her two children, and seeing too many clients due to the increased need for services. After talking to me, she decided that the loss of income was worth her peace of mind. She was in the position of being able to absorb that loss, so she traded a claw back for less aggravation. Then she resigned from the insurance panel, but still had to repay the amount in question.”

Appeal a failed audit: If you incur a claw back that does not explain the reasons, or the reasons seem arbitrary or unfounded – appeal. There is an appeal process. This is when you really need an attorney.

Navigate Audits, Safeguard Your Income, and Avert Clawbacks

Receiving a health insurance audit letter can trigger that primal flight, fight, freeze, or fawn response—something you can't entirely prevent. However, understanding the audit process can help you stay grounded and keep a clear mind. So can getting support from a documentation expert. Knowledge and support are your compass for navigating this unwanted experience swiftly and successfully.If you haven't yet taken my PESI workshop, Mental Health Documentation & Medical Necessity: Simple, Clear Guidelines that Maintain Quality of Care and Protect Your Practice, comprehending the intricacies of clinical documentation can indeed be overwhelming, especially when you're learning under the pressure of an audit. To equip yourself with the necessary skills for writing treatment plans, documenting sessions, and managing the administrative aspects of a private practice, consider exploring my templated forms approved by an attorney and bioethicist. These resources offer a step-by-step approach to transform your clinical intuition into comprehensive and effective documentation.

Even though the audit vultures may be buzzing, staying informed and adequately prepared, you not only enhance your chances of passing audits but also secure your income and reduce your anxiety. Embrace the tools and knowledge available to you, and face audits with confidence, knowing that you have the expertise to emerge successfully from this challenging professional experience.