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We talk a lot about WHY you should be getting external healthcare claims audits. (These statistics emphasize the importance.) So, in this article, we are going to assume you have made the excellent decision to have audits. Congratulations! But did you know that all audits aren’t created equal? Do not assume that your self-insured healthcare plan’s audit rights are covered by the TPAs standard language. These are the top two questions you need to ask your TPA to make sure you are not paying for a less-than-thorough audit.

1.    Do you allow for full 100% comprehensive auditing, without restricting the audit to random sample selection?

TPAs are entrusted by clients to manage the claims and payments of the plan, but their money is not at stake – yours is. Your company deserves the same protection a TPA would require for their own fully-funded plan.

There are two primary types of audits: random sample and comprehensive. Insist on comprehensive audits.

The typical outdated methodology for medical claims auditing is random sample selection. In this type of audit, auditors randomly select 200-300 claims out of millions of transactions. Auditors examine those claims for errors based on predetermined criteria and extrapolate the results to determine a claims error percentage of the entire data set. This approach historically has been considered standard practice when handling a large number of claims, but it carries a high margin of error that can work against the company in three ways.

• If the auditor encounters an error on a randomly selected sample claim, it is virtually impossible to determine if the error is isolated or systemic in nature.
• It is likely that significant one-off errors exist outside of the random sample selection.
• It is often difficult to convince payers to issue settlements based on the results of a random-sample audit.

We are different because of our comprehensive auditing process. We review every healthcare claim and Healthcare Horizons leadership submits a specifically targeted selection of claims to review onsite with the carrier. Our approach yields much better results because we identify both isolated and systemic errors and assign actual dollar impact to those errors, making a much stronger case to the payer.

If you are settling for a random sample selection audit, you are throwing money away. Unfortunately, many TPAs only want to allow random sample selection audits. They know the likelihood of any error being found using this method is much smaller. When comprehensive audits look at every claim, data errors will be found. But finding mistakes is a GOOD THING – for you. Insist on comprehensive audits.

2.     Do you limit the number of audits that can be performed?

Service agreement audit language may contain many stipulations. A common restriction is on the number of audits conducted over a set length of time. Much like restricting audits to random sample selection, restricting audit frequency significantly limits the potential for errors to be discovered. Therefore, your ability to recover overpaid dollars is also greatly reduced.

Service agreements should not limit the number of times you can request healthcare claims audits. We recommend annual audits, not every other year as many TPAs enforce. One of the reasons that annual audits are so important is that claim recoveries are subject to time limits. It is common for the service agreement language to restrict claims recovery to two years or less. Here is the basic problem: when audits are not performed each year, claims may be too old to recover.

For example, in 2022 we can look back at the 2021 claims dataset for errors. If the audit is not performed until 2023, these 2021 claims will be too old to recover. If you are not having regular audits and a claim falls out of the timeline eligible for review, you will be out the dollars overpaid.

For our largest clients, we may audit quarterly, but annual reviews protect self-funded companies and their employees from overpayments and out-of-pocket expenses. In addition, our auditors are there to improve processes by providing suggestions and identifying inconsistencies, which will help eliminate overpayments and systemic errors.

The Top Two Questions Make the Difference

Now you know the top two questions to ask your TPA to ensure you are receiving the fullest scope of audit rights. Your next step is to work with someone that understands your rights, can execute a comprehensive audit, and return the most money to your bottom line.

In our 23 years of providing comprehensive healthcare claims audits, we have seen virtually every benefit setup, provider contract method, and claims administration policy that one would expect on claims audits of the world’s largest self-insured employers. Because of this experience, we quickly assess gaps in the healthcare audit rights in your service agreement. We offer a free audit rights assessment to make sure the audit language in your service agreement is not limiting your ability to recover funds. It is YOUR data and, more importantly, YOUR money. Don’t leave it on the table!

Healthcare Horizons is a leading expert in providing healthcare claims audit services, identifying overpaid or erroneous claims through its 100% Difference model, recovering millions of dollars for clients’ bottom lines with uncompromising ethics and accuracy. Since 1999, the Knoxville, Tennessee-based company has provided superior healthcare claims audits for some of the world’s largest self-insured employers. We have successfully identified and facilitated the recovery of millions of dollars of overpaid claims for employers.

Each year, companies – and their employee benefits manager or health insurance broker – hold negotiations with third-party administrators (TPAs) to handle the details of self-funded healthcare plans. These agreements can directly impact a company’s bottom line.

Considering the rising cost of healthcare and incidences of significant overpayments of claims, including fraudulent or abusive claims, ensuring the plan addresses its fiduciary responsibilities is very important. If you are currently in the important “negotiations season,” be sure your self-funded healthcare plan is fully protected.

Did You Know?

You don’t have to accept the standard audit language in a proposed TPA agreement. It is an ERISA fiduciary responsibility of human resource managers or benefits consultants/brokers working on behalf of their plan to ensure that the language included in a services agreement is beneficial to everyone, but most importantly to the company.

The Most Common Mistake in Negotiations

Most TPAs will tell clients that they do in fact have audit rights within their agreements. However, in too many cases, the language is very restrictive and doesn’t really protect the company. Not negotiating for full audit rights is a HUGE mistake!

Full audit rights include these key components:

• Comprehensive claims review, not just random sampling
• Non-restrictive targeted sample size
• Minimum of two-year period for recovery of overpayments
• Fee structure based on recovery, not fixed

Random Sample vs. Comprehensive Audits

Random sample audits are usually listed as the allowed audit type the standard audit found in
most TPA agreements. Sometimes TPAs do not allow any type of audit. The biggest downside to random sample audits is that they, obviously, do not allow for a full review of all the data. When only a randomly selected portion of a data set is analyzed, it is nearly impossible to identify any patterns of abusive billing or systemic issues.

While benefits consultants claim they are performing audits and don’t need an external audit company, most of these audits only consist of

• high dollar claims,
• eligibility reviews, or
• obvious fraudulent charges.

Here is one example of how a random sample audit works.

• Auditors randomly select approximately 200-300 claims out of millions of transactions.
• Auditors examine those claims for errors based on predetermined criteria.
• Auditors extrapolate the results across the entire range of millions of claims to determine a claims error percentage of the entire population.

This approach carries a high margin of error that can work against the company. The fallout from the random sample approach is significant.

1. If the auditor encounters an error on a randomly selected sample claim, it is virtually impossible to determine if the error is isolated or systemic in nature.
2. It is likely that significant one-off errors exist outside of the random sample selection.
3. It is often difficult to convince payers to issue settlements based on the results of a random-sample audit.

Random sample audits may leave undiscovered mistakes, and therefore money, on the table. This penalizes not only the company but the employees as well.

Conversely, a comprehensive audit starts with a review of the entire data set and an identification of known trouble areas. Audit companies with decades of experience can see red flags in data sets and start reviews at this point. Then, the comprehensive audit can pinpoint isolated and systemic errors in the audit process. Actual dollar amounts are assigned to these mistakes, making it very easy for payers to see where reimbursement is owed. As a result, employers can recover significantly more in overpayments and can correct root causes of the issues, which will prevent future claims from being paid in error.

Demand Comprehensive Audits Rights During Negotiations

There are numerous misconceptions about working with an outside auditing firm. The most common is that many TPAs believe working with a company like Healthcare Horizons will penalize them. At Healthcare Horizons, we work WITH a TPA to ensure errors are found and corrected. The TPA has the interest to see that their client is protected.

During the next negotiations cycle, HR departments, benefits consultants/brokers, and TPAs need to work together to demand accountability in healthcare claims and protect the financial interest of the client.

Use this checklist to make sure you have comprehensive audits rights in your TPA agreement. It’s YOUR money and your fiduciary responsibility to make sure that your medical plan is being administered appropriately.

Healthcare Horizons offers a free assessment of administrative service agreements to determine the proper inclusion of audit rights. Contact us so we can help you manage your fiduciary responsibility as it pertains to your company’s self-funded healthcare plan.

Healthcare Horizons is a leading expert in providing healthcare claims audit services, identifying overpaid or erroneous claims through its 100% Difference model, recovering millions of dollars for clients’ bottom lines with uncompromising ethics and accuracy. Since 1999, the Knoxville, Tennessee-based company has provided superior healthcare claims audits for some of the world’s largest self-insured employers, involving all national and most regional payers. We have successfully identified and facilitated the recovery of millions of dollars of overpaid claims for employers.