Conducting an Internal Coding Audit: 10 Must Know Tips for the Auditing Team

Healthcare organizations and physician practices are experiencing continued demands to contain medical costs and improve efficiency. An internal or external coding audit is not one of the more inviting events in the medical practice, however it has proven to be one of the more important ones. A review of coding accuracy, along with your peripheral policies and procedures, can provide reassurance that you are running an efficient and potentially liability-free operation.

Conducting an internal audit may seem overwhelming, particularly in today's busy medical practice. Who will perform the audit? Do you have qualified staff to do so? What is an appropriate sample size? Which set of documentation guidelines will be used? By following these simple steps, you can make the most of your audit and provide meaningful results that will benefit everyone in your organization.

1. Define the scope of your audit.

It's important to determine what types of services to include in your review. You may want to audit only Evaluation and Management services, or you may want to include surgical procedures, modifiers and ancillary testing, also. Will your audit be prospective or retrospective to claim submission? A baseline review can be a good place to start if you've never conducted an audit as this kind of audit can provide information about the medical record itself as well as coding practices.

2. Determine key players.

Who will perform the audit? An internal audit is typically performed by on-staff coders who are skilled at interpreting guidelines and have a positive perspective. It's critical to include your physicians in the planning process to ensure acceptance and collaboration of all parties. An audit should not be undertaken without the approval of your compliance officer, administrator and legal advisors.

3. Assemble reference materials such as current editions of coding manuals, NCCI edits, and CMS or other third party policies.

You'll need to determine which set of CMS Documentation Guidelines are appropriate for the review and have the corresponding E&M Audit Worksheet available. Some physicians or specialties have customized variations of the standard worksheets. Depending on the types of services included in your audit, you may need CPT code specific audit worksheets, such as a diagnostic imaging report checklist, operative report criteria checklist, or a worksheet for time-based codes.

4. To verify the accuracy of billed services, obtain copies of the corresponding CMS claim form, along with a copy of the charge ticket.

By examining these documents, problematic areas may be identified, such as data entry errors, use of outdated code sets, or improperly sequenced surgery CPT codes (which can result in inappropriate payments).


5. The basic coding audit should include, at minimum, validation of CPT code use, including the level of E&M visit assigned, undocumented or under-documented services, correct use of modifiers, accuracy of diagnosis codes, and whether the source document supports medical necessity.

Additional areas of review may include verifying the correct place of service was billed, the correct category of service was billed and whether there were services documented but not billed.

6. You may decide to incorporate the review of a few basic compliance items.

These areas could include signatures and authentications of physicians and other providers (including e-sigs), patient identifying information (such as complete name, date of birth, other identifier), proper use of CMS Advance Beneficiary Notice forms, compliance with 'incident-to' requirements, or verification of orders for lab and radiology.

7. When the audit is complete, prepare a summary of findings, which should include the raw data.

An easy-to-read spreadsheet format or dashboard report is recommended and can be incorporated into your provider feedback sessions. Data columns should show pre-audit CPT and ICD-9-CM codes (coded by physicians), and post-audit codes as reviewed by your coder audit team. Including a simple set of review codes is a way to communicate common documentation errors such as overcoding ("OVE"), undercoding ("UND"), or missing signatures ("SIG"). Too often, the focus is on errors and problematic areas, so be sure to include a review code such as "COR" to identify correctly coded encounters, thus providing positive feedback.

8. Schedule meetings with the physicians to provide feedback and recommendations.

Typically this works best to have individualized examples so the cases can be reviewed and discussed. The provider should be given the opportunity to explain the rationale behind his or her coding, and perhaps even provide additional information to help the coder further understand a particular clinical term.

9. After the audit is complete, there should be written recommendations.

These can vary from recommending a more frequent focused audit, to implementation of improved documentation templates, to targeted education on CPT or ICD-9-CM coding. It's important to include identification of claims, which may need to be corrected or payments that need to be refunded.

10. After you have addressed issues that have been identified, you'll need to set up a process to monitor these areas.

Formal training programs, one-on-one coaching, regularly scheduled re-audits, and updating practice policies and procedures are a few of the areas that will need to be monitored on a regular basis. Designation of the individual responsible for each area of compliance and documentation of follow-through is important.

Jeri Leong is president and CEO of Healthcare Coding Consultants of Hawaii.

A registered nurse by profession, she is certified as a CPC and CPC-H, and is also an AAPC-approved PMCC instructor. Jeri and her coding team provide support and education for physicians and health care organizations in Hawaii, the South Pacific, and on the mainland.

She is the founder and past president of the Honolulu Hawaii AAPC Chapter, and served as president of the AAPC's National Advisory Board from 2003-2005.

She is currently serving on the AAPC Chapter Association (AAPCCA) Board of Directors.

Visit for more information.