Ask Our Lawyer: Disputing A Health Plan's Audit Findings

Ask Our Lawyer: Disputing A Health Plan's Audit Findings

by Daniel J. Schulte, MSMS Legal Counsel


A health plan that I participate with sent me a letter indicating that it was going to audit my practice.  I sent copies of the medical records it requested.  Without first speaking to me first, the health plan has concluded that many previously paid claims were improper and that I owe them a large refund.  The refund is based, in my view, on incorrect conclusions and statistical extrapolation.  The notice states that if I do not send the health plan a check it will withhold the amount of the refund from its future payments for my services.  Is this proper? How can I dispute this?



The situation you describe is common.  Physicians are frequently being audited by both governmental and private health plans with refunds claimed based on alleged failures to comply with coding, billing and documentation requirements.  Pursuant to common terms in participation agreements, a payer has the right to audit claims and may deny payment or seek a refund based on lack of documentation, incorrect coding, the payer’s belief that medical necessity for a procedure is lacking, etc.

            Statistical extrapolation can greatly increase the amount of the requested refund.  The refund amount resulting from the claims the health plan has audited is extrapolated to all similar claims paid over an entire audit period.  Using such a method, what may be a minor refund on actual audited claims can escalate to a refund demand of a much larger amount. 

            In order to dispute the audit findings, you first need to consult with an attorney experienced in these matters who will  carefully review the terms of your participation agreement with the health plan and any policies and procedures of the health plan that have been incorporated into the contract by reference.  The following information must be obtained and evaluated:

  1. Can you dispute the health plan’s right to conduct an audit?  Does the contract, directly or indirectly, specifically allow the health plan to conduct an audit?  If so, how often and under what terms and conditions, if any?  Is there a limit on how far back claims may be audited and/or refunds sought?
  2. Do the issues raised by the health plan require you to retain your own coding, documentation or other consultants/experts? 
  3. The health plan should be required to disclose the complete audit results including an itemized list of the claims audited and the findings and the basis for the findings on a per claim basis. 
  4. Is the use of statistical extrapolation specifically authorized by the contract or the law?  If so, the health plan should disclose the details of the method used so that its validity can be assessed.
  5. If findings are based on medical necessity or other diagnosis or treatment issues, were they made by a physician in active practice with the same training, qualifications and experience as you or by a layman in the claims or underwriting department? 
  6. Does the contract, policies or procedures provide for mediation or managerial-level conference or other dispute resolution process prior to you seeking a legal remedy or pursing your rights with Michigan’s Department of Insurance and Financial Services or pursuant to the Patient Right to Independent Review Act or other law? 

            The starting point is always understanding what your contract and the applicable policies and procedures provide.  This is should be followed by obtaining the documentation/information from the health plan so that you can fully understand the audit process and findings.  This is a process that requires a health care attorney experienced in these matters.