How to Do an Audit on Medical Claims

by Jackie Lohrey; Updated September 26, 2017
Woman doctor in her office with male patient

Self-funded health insurance is an option for managing insurance costs in businesses with as few as 10 employees. However, if you choose this option, regularly scheduled medical claims audits are critical make it a cost-effective solution. To audit paid claims accurately, you’ll need good math skills and claims processing knowledge. This may require contracting with, and working alongside, one or more professional auditors.

Select a Claims Audit Method

An audit process that focuses solely on verifying payment accuracy by recalculating charges might be all a small business with relatively healthy employees really needs. For businesses that process large or complex health claims, the Society for Human Resource Management recommends conducting focused process reviews in addition to charge recalculations. This helps ensure that both the payment and the process used to calculate the payment are correct.

What to Look For

A medical claims audit measures the claim administrator’s performance in the areas of financial, payment and procedural accuracy. The goal is to uncover payment discrepancies that result in overpayment. This includes duplicate payments, paying for uncovered services or for services not performed, and paying for a medical specialist without first getting a required referral. A complete audit also requires comparing annual, per visit or per day benefit maximums to insurance payments.

Conducting the Audit

Audit all medical claims within a specific period or choose a random sample of up to about 250 claims. According to the Society for Human Resource Management, a randomly chosen sample must include both the lowest and highest paid claims for the period. If it's necessary to refresh your memory, review both the contract you signed with the plan’s administrator and the insurance plan. Then review each claim, look for proper turnaround time, and recalculate the charges. If you’re also conducting a process review, continue analyzing each claim for proper categorization and coding.

What Happens Next

Prepare a final report with the complete audit and meet with the plan administrator. Discuss any claims processing errors or procedural inefficiencies the audit uncovered. Set a date for the administrator to submit plans for improving claims processing and reducing errors. If the claims audit uncovers overpayments, instruct the administrator to initiate the recovery of any funds owed to your business.

About the Author

Based in Green Bay, Wisc., Jackie Lohrey has been writing professionally since 2009. In addition to writing web content and training manuals for small business clients and nonprofit organizations, including ERA Realtors and the Bay Area Humane Society, Lohrey also works as a finance data analyst for a global business outsourcing company.

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