A Tale of Two Audits
Medical claims audits are not created equal! Currently, two distinct types of medical claims audits are conducted to find errors in self-insured paid medical claims. Using the wrong audit can cost a company thousands of dollars!
A random sample audit uses an approach where SOFTWARE randomly selects a few hundred claims from the entire data set. The auditor then reviews these select claims for errors in processing and payment.
In a comprehensive sample audit, the AUDITOR selects a few hundred claims, but the claims are not selected randomly. The auditor reviews 100 percent of the claims in a data set and based on prior experience, looks for inconsistencies in the filed claims. Then, if a claim appears to have been processed in error, it is flagged for review onsite and for financial recovery.
Professor Ronald Klimberg, from the Decision and System Sciences Department of the Haub School of Business at Saint Joseph’s University states, “Random sampling misses over 90 percent of the errors caught by the methodology based on the 100-percent-of-claims analysis.”
Healthcare Horizons has performed both types of audits for more than two decades. In our experience, random sample audits are better than not auditing at all, but they don’t give a true picture of data accuracy or address identified systemic issues.
Lost Benjamin Award Nominee Highlights Danger of Using Wrong Audit
Here is a real-world example comparing the two methods. A client asked that we perform a random audit and a comprehensive audit on the same medical claims data set.
Why Would a Company Use the Wrong Audit?
You may wonder why random sample audits are performed since they return a lower number of findings compared to comprehensive audits. The answer lies in the audit rights listed in the employer’s Administrative Services Only (ASO) agreement with their third-party administrator (TPA).
The TPAs often require that only a random sample audit may be performed on the medical claims they file. As illustrated above, this audit restriction makes finding claims errors harder. If the error isn’t found, there isn’t the opportunity to recover claim dollars paid in error. Self-insured employers DO NOT HAVE TO SETTLE FOR THIS. Healthcare Horizons will perform random sample audits when the client is restricted to this type of audit, however, we always recommend that our clients update their audit rights language during the next annual ASO renewal.
You Can Protect Your Company’s Bottom Line
The absurdity of the TPAs only allowing a random sample audit on the client’s own medical claims is beyond reason. Random sample medical claims audits are like broken clocks. They may be right twice a day but will be wrong the rest of the time! Don’t be responsible for a $670,000 mistake for your company. Insist on comprehensive audit rights. We can help!