What to Know About Section 111 Audits

by B. Smith

Section 111 audits are an important cost-containment measure to prevent potential Civil Money Penalties (CMPs) and conditional payment exposure. However, the thought of an audit can be intimidating, scary even, especially for those who work so hard to develop a thorough reporting  program. But understanding the purpose of an audit, identifying the right partner to conduct the audit, and ensuring that recommendations from the audit are implemented, can make all the difference when making the decision to move forward with this valuable tool.

The Purpose of a Section 111 Audit
There is no pass or fail grade that comes with an audit. Rather, it is meant to help identify strengths in your process and areas that may need improvement. The IMPAXX Section 111 Auditing team has conducted audits for all types of organizations including government entities, insurers, self-insured employers, and third-party administrators. The common denominator in all audits is that no one is perfect, and no one is doing absolutely everything wrong. We found errors in every audit we have completed, and we have found areas of reporting where little to no issues were identified. Section 111 reporting is, and can be, confusing so it goes without saying that mistakes in reporting can, and will be, made. The purpose of an audit is not to establish that your process is perfect, but rather to determine which types of mistakes are prevalent, whether patterns exist, and to identify the type of training and tools needed to correct these issues and prevent significant exposure.

Keeping these truths in mind should ease some of the potential hesitation about moving forward with an audit. The real, and significant, benefits of undergoing a Section 111 audit clearly outweigh any initial hesitation. We all know that CMPs are looming for late reporting of Total Payment Obligation to Claimant (TPOC) and Ongoing Responsibility for Medical (ORM). What is the potential cost implication of a penalty? If CMS were to audit a Responsible Reporting Entity (RRE) and determine that ORM or TPOC had been reported untimely, penalties could be as high as $521,220 per claim, if reported over one year late.

A thorough audit will not only include a review of what you have reported but delve into the claim itself to determine if the data was correct and timely. In addition, and equally as important, an effective audit will delve into errors that could prevent CMS from accepting your report, which can also create potential penalty situation.

Your organization may never be subject to a CMS audit, or you may find yourself in this predicament. In either scenario, the best course of action is a proactive approach. A Section 111 audit provides the necessary lens into your reporting to identify issues and put you in the best position to prevent and avoid penalties.

Bear in mind however, that the potential costs for failing to properly report involves more than just the imposition of CMPs. Reporting the wrong ICD codes, ORM on denied claims, ORM termination, and TPOC information can also lead to increased conditional payment costs.

For example, looking at a billing statement, an adjuster enters an ICD-10 code related to the claimant’s unrelated diabetes treatment. Medicare now considers this an injury-related cost, and the diagnosis is included in Medicare’s search and collection efforts. If Medicare paid for any of related treatment, CMS would demand repayment unless the reporting was corrected, and the payment disputed.

Improper reporting can also impact beneficiaries who rely on correct reporting to obtain medical treatment. Using the example above, if ORM remains open and diabetes is reported as part of the claim, Medicare can deny payment for this condition as there is now a primary payer responsible for the same. This can result in calls from the claimant and providers requiring the adjuster to spend time to correct the situation, which may also cause a delay in claimant’s treatment.

Who Should Conduct Your Section 111 Audit?
Now that you know the significant benefits of an audit, it is important to identify the correct partner to conduct your audit. Having a professional team of seasoned Section 111 auditors is as important as the audit itself. A Section 111 or Medicare compliance audit requires auditors with more than one-dimensional experience. Auditors who do not have a mixture of Section 111, litigation, claims, legal, Medicare compliance, and allocation backgrounds may not be able to really dig into the merits of the claim to determine what is actually happening and what should be reported. Audits should include more than a cursory review of what was reported. A skilled auditor also offers insight into other areas of compliance and claim concerns as well.

In addition, you should inquire how many years of experience the auditor has with Section 111 compliance and audits. You can also ask for references from those who have used the auditor in the past. These are good ways to determine if a particular auditor is the right partner for you.

Should the same vendor who is reporting for you conduct your audit? The answer depends on several factors. First, does the vendor have a separate auditing team to complete the review? Second, what is the background and experience of the auditor(s)? Third, do you need an outside review of your claims? These are all important questions to ask and get answered before making your decision.

Post-Audit Resources
Audits should not just summarize findings for you to digest. Findings should be clearly laid out, reviewed in detail with you and your team, and be accompanied by recommendations, solutions, tools, and training tailored specifically to your organization. In addition, follow-up reviews should be scheduled to measure improvement and areas of vulnerability. This true partner approach to the audit process also provides significant value by helping you prevent future errors.

A successful Section 111 audit can give you the tools you need to understand your current program, make any needed adjustments, and prevent unnecessary exposure. If you have any questions about Section 111 audits or would like more information about the IMPAXX Section 111 Audit program, please contact our Settlement Consulting team at [email protected].