Track and advocate: The revenue integrity value of auditing documentation for noncovered services and items

Wednesday, August 22, 2018

Ensuring that documentation is complete and code assignment is accurate is challenging enough—but how do you convince physicians of the value of accurate documentation and coding when the services might not be covered by the payer?

That was the question Cynthia Holland, internal audit manager at the University of South Alabama (USA) in Mobile, Alabama, faced after she completed an audit of the organization’s audiology department. USA is a teaching facility, and Holland was initially asked to observe an audit exercise the department’s residents performed. The residents were asked to conduct mock audits of their documentation, charging, and billing to determine whether they would be profitable as a standalone business. Most of the residents found they fell short and that poor documentation and gaps in accounting for their time cut into revenue.

After that, Holland was asked to conduct a formal audit of the audiology department. As she dug into the audiology department’s records, a number of complex issues quickly became apparent. Holland reviewed approximately a month’s worth of audiology patient records—more than 200 patients—checking the documentation against the charges and the CPT®/HCPCS codes that were billed. She discovered that many providers in the department were wide of the mark when it came to documentation and charging. Some providers were charging for services that weren’t fully supported by the documentation, while others were documenting services that they were not charging for. Holland also found that the department wasn’t always tracking inventory items, such as hearing aid batteries, or charging for routine hearing aid maintenance.

“Hearing aids are usually not paid for by insurance, so they’re not tracking the inventory appropriately for purchasing more supplies, for battery changing, mold restructures, those types of things,” Holland says. “They do a lot of work, but I don’t think they’re capturing all of it or charging all of it because a lot of it’s not paid by insurance.”

Simply writing off expenses and time without proper accounting is no way to run a business, Holland points out. Even though hearing aids are typically not covered by insurance, the provider organization needs accurate information on costs, including supplies, time, and services provided, to decide how to manage and support the department.

“Do we need to get a grant? Or do we need to allocate more money toward this because this is obviously a service that we’re providing to the community?” she says. “If you do the service, record it, charge it, bill it whether the insurance pays it or not. You need to account for how much time you’re spending on these patients that you’re not getting any payment for as a business. Because if you were standalone and you weren’t part of a hospital, you probably wouldn’t be in business.”

Because CMS does not cover hearing aids, some providers might not see the point in spending time documenting and billing Medicare or Medicaid for those services, Holland says. However, she points out that simply because a service or item isn’t covered does not prohibit it from being reported. In fact, hearing aids and associated services may be reported to CMS using the appropriate HCPCS V codes even though there is no associated charge. It’s important to report these codes because CMS records how often all codes are used and bases future rulemaking, including coverage and reimbursement, on this data.

“If there comes a time when enough people are reporting those services with V codes, CMS may eventually cover them with Medicare,” Holland says. “But if you’re not charging them because you know Medicare’s not paying them, then CMS is not even getting the option to calculate how much anybody is utilizing those codes for hearing aids.”

The audit also found that sales tax was not accounted for. In Alabama, sales tax should be charged and accounted for on all hearing aids, molds, supplies, and batteries. This information was not being captured and returns were not filed as required. The audiology clinic management assumed that accounting or the business office was documenting the sales tax and filing the returns. However, because of the lack of inventory control this step was overlooked, Holland says.  

The business office stated they had no way of knowing how much sales tax was charged or accumulated, especially when the services weren’t charged, according to Holland. They were also confused as to whether sales tax could be charged on hearing aids, she adds. Alabama is one of the few states that requires sales tax to be charged and reported for hearing aids. All insurers, including Medicare, can be charged for sales tax—only Medicaid is excepted. Although insurers don’t pay for hearing aids, the sales tax can be included in the charge, she says. Regardless, if sales tax is applicable to hearing aids or other items, the organization must charge, collect, and report sales tax.