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Legal Services

by Richard D. Weber, J.D.
MDA Legal Counsel
Published in the September 2003 issue of the Journal

Question: I recently received a letter from an insurance company advising me that they wished to audit my records. Please advise what dentists need to know about audits.

Answer: Your question does not indicate the type of audit, but the following general information should be helpful to you and other MDA-member dentists.

Dentists who have been selected for audit shouldn't feel they've been accused of fraud simply because a payor intends to audit them. The question in most audits is whether the payor has paid the dentist the correct amount, not whether fraud has been committed.

Payors can select dentists for audit by various means. For instance, some dentists are selected randomly, while others are selected by profiling or other methods. Whistleblowers, such as disgruntled employees, can also trigger audits.

Payors typically regard a dentist's failure to comply with technical coding, billing and documentation rules as resulting in an overpayment. The payor will assert that it is owed a refund for any claim that fails to satisfy the technical rules. By the use of statistical extrapolation, some payors will apply the overpayment resulting from claims manually audited to all claims paid to the dentist over the entire audit period. A relatively nominal overpayment on the manually audited claims can escalate to a repayment demand exceeding tens of thousands of dollars over the entire audit period.

Claims involving disputes over medical necessity are typically excluded from statistical extrapolation. This means that repayment is required only for those claims for which medical necessity has, in fact, been found lacking.

In some circumstances, overpayment audits can trigger separate civil and criminal fraud investigations. This underscores the need for dentists to work proactively with knowledgeable legal counsel from the outset.

Payors unilaterally establish procedural rules for audits, and these rules are often legally enforceable. It's not uncommon for payors to use time deadlines and other procedures to their advantage. Some payors are required by law to provide an informal managerial-level conference, which includes a method for resolving a dispute promptly, informally and in good faith. Dentists need to know their rights and responsibilities before the audit process begins.

The legal rights that dentists have may vary from payor to payor, and are largely contractual in nature. Unless a legal or contractual basis for a payor to conduct an audit exists, dentists may dispute the payor's ability to do so. In some circumstances dentists can become contractually subject to the payor's audit process simply by accepting payment.

Dentists have the right to representation by legal counsel and to retain their own consultants. Dentists also have the right to be informed of the audit results, including the claims audited, the findings, and the basis for the findings. Likewise, dentists are entitled to know why they are being audited. Audit findings may be challenged, as well as the use and validity of statistical sampling methodologies that are not authorized by law or contract. Dentists have the right to be free from threats and coercive tactics that have been used by some payors to broker settlements through fear and intimidation, rather than through the facts.

Any decision by a payor disputing medical necessity or standard of practice issues should be made on behalf of the payor only by a dentist in active practice in the same specialty, not by other practitioners who lack the education, training, and experience.

Dentists can best protect themselves by becoming educated on the relevant legal and technical rules before being selected for an audit, and by having compliance assessed on an ongoing basis. This way, a dentist will have assurance that everything possible to minimize the risk of an adverse audit result was done beforehand.

A knowledgeable health care attorney should be consulted at the time when dentists are initially selected for audit, not after the payor completes its audit and asserts its repayment demand. It is not necessary to spend thousands of dollars for an experienced attorney to explain the audit process and legal rights and responsibilities. If the auditors review records on-site, dentists will want to know ahead of time how to prepare and what to expect. Notes should be kept on information communicated to the auditors and the questions the auditors ask.

Having their own team helps dentists to level the playing field. Most audits present not only legal issues, but technical billing, coding and documentation issues. Sometimes, clinical issues are presented as well. Experienced legal counsel can recommend a consultant who is best-equipped to advise on the technical issues. The attorney, not the dentist, should directly engage the consultant. This approach allows the attorney to coordinate the investigation and utilize the attorney/client and work product privileges that, in appropriate circumstances, may be applied to shield confidential communications from disclosure.

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