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Q2 2007 Main Page Fight Audit Unit, Save $1,000,000 by Sherry Dozier  
The results are in. We win!
In the B&B Blog, November/December 2006, Volume 2, Number 6 issue in an article entitled "The Audit Unit Is Made Up of People Too", I discussed various strategies we recently developed while assisting a client during an Audit Unit Investigation. We knew the strategies were working, but we had no idea how much money would be saved! We reduced a $1,200,000 penalty assessment to $55,000! What a difference a few months of diligent preparation and arguing can make! This process was long and tedious, but it was well worth the time and effort. As a brief recap, Bradford & Barthel, LLP, assisted a client through a state audit. This experience was enlightening to say the very least! Having spent many years inside of claims operations, I have experienced several state audits. None had fully prepared me for what was in store. The audit started October 23, 2006, and it was not completed until the end of January 2007. Throughout the process, penalties assessed kept climbing. Here is a shocking fact: only 26 files were audited! How can 26 files be assessed $1,200,000 in penalties? If you do not pass "PAR" (the initial stage of the three phase audit process), penalties increase exponentially. Our client had a very small inventory. The audit codes require that a minimum of 26 files be audited, regardless of whether the inventory is 26 or 5,000 files.1 The total number of files subject to audit is 56. If you have 5,000 files, 56 will be audited. If you have 26 files, all of your files will be audited. Who has the better odds in that scenario? The main areas of concern were the second and third phases. The second phase involves the auditing of all denied cases. Our client had 17 denied cases. The Audit Unit determined that all 17 files were inappropriately denied and assessed bad-faith penalties plus a "business practice" penalty of approximately $400,000. I personally reviewed every file. They were well documented with investigations and medical reports where appropriate. Many denials had been staffed with attorneys to assure they were legally sound. How the audit team determined these were in bad faith was beyond comprehension. We forced the auditors to have their legal team review their decisions. Lo and behold, the state's legal team overturned the bad-faith claims and all of the penalties that went along with them. As a part of the third phase, each and every bill was reviewed for timeliness and accuracy of payment. A $100 penalty attaches for each bill not found in the file. This can quickly add up. In this case, the Audit Unit assessed over $42,000 in penalties. To rebut this assessment, we reviewed every bill. This process took weeks to complete, but we were able to overturn all but five penalties.2 How the Audit Unit could have overlooked so many bills is beyond my ability to understand. As you prepare to undergo your own audit, remember: Never assume the assessed penalty has been correctly applied. Be prepared to fight. Pointers:
Need help? B&B is here to help you through the process! Sherri Dozier is a Director of Client Development and Relations at Bradford & Barthel, LLP. 1 Our client, an independent adjusting agency, handles a few clients on behalf of a large carrier. We unsuccessfully argue that the files selected should be in combination with the large insurance company and not the just the adjusting agency. This approach would have resulted in only 6 or 7 of our client's files being audited. They would have passed PAR and avoided the astronomical penalties. The audit team had a difficult time finding enough files to meet initial PAR audit requirements. If you read the audit code literally it provides a minimum number of files to audit. If your inventory is at the minimum file count, your entire inventory is subject to an audit. 2 These five penalties were mostly related to our own medical clinic not submitting a bill or not applying payment appropriately. |
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