Modernizing Auditing and Compliance in Healthcare


Modernizing Auditing and Compliance in Healthcare

The Importance of Auditing - Regular auditing of medical charts and coding documentation is indispensable for identifying errors, ensuring regulatory compliance, and reducing the risk of fraud. Audits not only uncover coding inaccuracies but also offer valuable insights into areas for improvement within the organization's processes and procedures.


While internal audits can be advantageous, they also present potential risks, particularly when disclosing findings to external entities such as government agencies or insurance payors. There have been situations where audit results were used against healthcare providers and organizations, resulting in penalties and further legal issues. To mitigate these risks, it's important to at least consider conducting audits under the protective umbrella of legal privilege.


Modern Legal Protections

In today's healthcare landscape, two primary legal protections come into play during audits: the attorney-client privilege (ACP) and the attorney-work-product doctrine.


  • Attorney-Client Privilege: The ACP safeguards confidential communications between a client and their attorney when seeking or providing legal advice. It exists to foster open and honest communication between attorneys and clients, particularly in heavily regulated industries like healthcare. However, not all communications related to internal investigations are protected under the ACP, and specific criteria must be met for communication to be deemed privileged.


  • Attorney-Work-Product Doctrine: This doctrine shields documents and tangible items prepared in anticipation of litigation by or for a party or its representatives. Internal investigations conducted in anticipation of government enforcement actions may fall under this doctrine, protecting from discovery.


How Attorney-Client Privilege Works

Working with counsel under ACP begins with the process of identifying legal risks within the organization's operations. Once potential legal issues are identified, it is advisable to consult with legal experts to assess the need for legal representation. If the decision is made to proceed with engaging counsel, the organization should follow a structured approach.


It's crucial to establish clear communication channels with the chosen attorney or law firm at the beginning of the relationship. This includes outlining the scope of engagement, defining the objectives of seeking legal advice, and establishing expectations regarding confidentiality and privileged communication.


Formal engagement should occur through the issuance of an engagement letter or agreement, outlining the terms and conditions of the legal representation. This document should detail the responsibilities of both parties, the scope of services to be provided, the fee structure, and any other relevant terms.


Furthermore, when engaging counsel under ACP, it's essential to ensure that all communications and interactions with the attorney are conducted to seek legal advice or representation. This includes maintaining confidentiality and refraining from disclosing privileged information to third parties.


Finally, organizations should diligently follow the advice and guidance provided by their legal counsel, as well as maintain accurate records of all communications and actions taken under ACP. By adhering to these procedures, organizations can effectively engage counsel under ACP to protect their interests and mitigate legal risks.


Auditing, ACP, and DoctorsManagement

To engage counsel under ACP for auditing purposes, a medical practice initiates a structured routine of auditing its providers, driven by a desire for legal protection. The practice collaborates with experts such as DoctorsManagement (DM) and outside counsel to ensure comprehensive oversight.


As discussed above, outside counsel is retained first to supervise the audit process, enlisting DM's expertise. DM conducts the audit under the direction of the law firm, with all communication and documentation shared with or copied to the legal team.


Following the audit, DM delivers the results to the law firm, which in turn provides those results to the client. Additionally, DM offers further review and education to the client as directed by the law firm, ensuring compliance and informed decision-making.


Legal Cases and Precedents

Recent legal cases offer insights into the application and limitations of legal privileges in healthcare auditing:


  • United States ex rel. Baklid-Kunz v. Halifax Hosp. Med. Ctr.: This case illustrates how courts may narrowly apply the attorney-client privilege to documents and communications of healthcare providers, emphasizing the importance of meeting specific criteria for communication to be deemed privileged.
  • Craig v. Rite Aid Corp.: In this case, a United States Magistrate Judge emphasized the importance of clear intent when invoking attorney-client privilege, highlighting that mere copying of in-house attorneys on internal compliance communications may not suffice without a clear showing of legal advice-seeking intent.
  • In Re Kellogg Brown & Root: The D.C. Circuit court's ruling in this case underscores the broader implications of attorney-client privilege in internal investigations conducted by businesses required to maintain compliance programs. The decision emphasizes the significance of legal advice as one of the significant purposes of an internal investigation for the privilege to apply.
  • U.S. ex rel. Garbe v. Kmart Corp.: Here, Medicare data was provided voluntarily, in an "easier to understand format," to the federal government after being served with an administrative subpoena. While the company argued that they had really only "selectively waived" the data (which was work product) to the agency they had turned the Medicare information over to, and not the relator that brought the case, the deciding court rejected that argument. The court also noted that the company had turned over the work product as part of a strategy to gain an advantage during the investigation, which ultimately worked against them in this case.


There are also court cases that highlight the importance of making sure that the primary purpose of communication with an attorney is to ". . . relay, request, or transmit legal advice" to ensure that it falls under attorney-client privilege (United States v. Davita, Inc.; U.S. ex rel. Schaengold v. Memorial Health, Inc.).


Seek Guidance From a Qualified Professional

Auditing and compliance remain critical components of healthcare practice management. However, navigating regulatory requirements and legal risks necessitate a strategic approach. By working closely with legal counsel and adhering to best practices for audit execution and documentation, healthcare organizations can safeguard themselves from potential liabilities and ensure ongoing compliance with regulatory standards.


As always, it's vital to seek guidance from qualified legal professionals when dealing with auditing and compliance matters. A healthcare attorney can provide tailored advice and support to help your practice navigate the auditing process effectively and mitigate legal risks. Contact DoctorsManagement today to learn more.


By Jesse Overbay, JD
Associate Director, General Counsel, DoctorsManagement


Simplifying the Business of Medicine
DoctorsManagement simplifies the business of medicine so that healthcare professionals can focus on caring for patients and controlling the future of their business.





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