Conducting a Health Claims Audit for Your Plan

Linh Crider, CPA, CFE

When do you need to have a health claims audit performed for your plan? Hint: the answerhealth-claims is not “never.” Audits can be one of several tools in Plan management’s arsenal to assist in analyzing cost and utilization anomalies. It is a very effective way to find out what has happened in a specific time period. All you need are reliable claims paid data and a knowledgeable audit team.

Here are some trends you may see in your annual or quarterly data reports that indicate a potential issue. Often, a targeted claims audit can help drill down and find the root cause of the problem.

Plan Design Changes – Is the Claims Processing System Programmed Correctly?
In a perfect world, this audit can be performed proactively before the annual plan changes take effect, in a simulated or test environment. But, it can also be very useful in real time, especially when the plan design changes concern benefits that are heavily utilized. We regularly perform audits targeting preventive care claims and have assisted clients in programming requirements and updates to ensure that preventive claims are paid according to the Summary Plan Description (SPD).

Payment Increases – Not the “Usual Suspects”
If your plan has seen an increase in payments, but plan enrollment numbers or high-dollar claims volume did not significantly increase, an audit can help determine the reason. Possible sources for the increase in payments could be duplicate payments, claims paid for ineligible members or dependents, payments for noncovered individuals or unbundled services.

Increase in Volume of Denied Claims
Our audit team always reviews denied claims to ensure they are being denied correctly. If the volume increases unexpectedly, is there a claims processing system “glitch” that is erroneously denying claims?

Non-Preferred Provider Organization (Non-PPO) Claims Volume Increase
An audit of Non-PPO claims will indicate if there is a pricing issue or network coding issue in which PPO provider claims are incorrectly paid as non-PPO. It might also highlight provider access issues.

COBRA Claims Volume Increase
Performing a COBRA compliance audit will help determine if there are eligibility errors. This is important because COBRA participation has built in adverse selection and can significantly add to a Plan’s claim costs.

Accurate PPO Discounts
Are you getting the discounts delineated in your provider contracts? An onsite PPO network contract audit will provide that information. You may be paying providers more than the contractual rates.

Longer Claims Processing Turnaround Time
You may note a significant increase in your average claims turnaround time. A targeted audit can help reveal any claims processing system issues and/or claims examiner issues that are contributing to this situation.

Potential Fraud and Abuse
There are some “hot buttons” for potential fraud and abuse that may be audited, such as specific providers, durable medical equipment purchases, ambulance rides, alternative therapies such as massage therapy and acupuncture. Health claims fraud often centers around these types of benefits. This is not an inclusive list, and the audit focus may be based on client requests or items that have surfaced in health care fraud literature.

As you can see, there are a variety of targeted audits that can help explain unusual trends in health claim payments or processing irregularities. It is important to periodically ensure claims are being administered accurately and according to your SPD. A claims audit is an important tool for preventing fraud and ensuring effective operations for your health and welfare plan.

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