As providers are faced with increasing pressure to their bottoms lines, the importance of both generating and protecting existing revenue is paramount. With Medicare and Medicaid at fixed rates, that leaves managed care contracts as the prime source for growing patient-generated revenue. With such tight margins, that means there’s also a greater need to protect that growing revenue source.

One tool that can be used to protect revenue emanating from managed care payers is the audit.

Audits are internal checks on payments from payers. Providers are checking actual versus expected payments from commercial payers.
PhyBus, LLC, believes that providers can benefit greatly from checking up on their payers, especially as managed care contracts have become increasingly complex, leaving plenty of room for differences in interpretation and outright errors.

Tips on “Why audit?”

Providers use audits as a way to ensure that they’re getting paid the correct amount according to their managed care contracts. The burden falls on us to make sure that we’re paid correctly.

How often?

PhyBus, LLC conducts audits monthly on all of its 20 managed care contracts. they says it’s important to conduct audits in a timely fashion because generally a managed care contract will include a time period for how long a claim can be under review before it is considered paid in full.

Providers that are not vigilant face compounded difficulties, because payers also are narrowing the appellate window.

If a provider does find an underpayment, but only after that defined period has expired, any recovery is unlikely. Audits, therefore, must be conducted on a regular basis in conjunction with the time period for review stated in the contract. There is still a benefit however, if the audit uncovers an error in the payer’s process that is resulting in underpayments. Such problems can then be corrected for future payments.

Manual or computer?

A combination of automatic and manual methods of auditing methods is effective. Auditing tools like coding scrubbers and managed care contract systems can effectively capture lost revenues because of the capability to review volumes of claims. Manual auditing is required for the more complex areas that need to be reviewed by an individual that can compare the payment with the terms of the contract.

Provider’s must devote considerable effort to ensuring that payers live by the terms of the negotiated amount.

Who conducts the audits?

A team approach works best. The team should include an Vice President of Revenue Cycle Management, plus staff from revenue cycle and managed care. They need to identify what are the current problems they’re having with payers, and then outline what the issues are.

Revenue cycle staff review expected versus actual payments. Once a variance is identified, revenue cycle staff works with managed care staff to discuss the issue with the payers to correct the problem and, if needed, implement changes to avoid re-occurrence.

Once a variance in a clinical area has been determined, the VP of RCM focuses on recovering the underpayment, PhyBus, LLC feels its VP of RCM often works directly with the medical director of the payer to work out issues. “A lot of times payers, once they know that you have taken a strong position, they’re more careful with reference to denying or underpaying a claim.

Where Should the Focus Be?

High-cost areas that are prone to payment errors or differences in interpretations of the contractual terms include cardiology, orthopedics, neurosurgery, pediatrics, outpatient surgery, and behavioral health. Such areas have outliers that can be the source of confusion, resulting in underpayments or denials.


PhyBus, LLC underscores the use of a collaborative approach as one of the keys to implementing a successful auditing program. Specifically, there needs to be one person heading the team. Generally that leader is the VP of RCM.

Perhaps fundamentally, PhyBus, LLC says a provider needs to pay special attention to the contract. Try to keep our contract simple and easy to implement. If contracts are too complex, it just creates problems on the revenue cycle side because no one can understand it.

And, finally, PhyBus, LLC says that as more government funded plans are administered through third party payers, providers should also audit these payments.

There should be a portion of our resources to the Medicare Advantage and Medicaid programs, as well..