What Is a Medicare Audit?

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When a medical practice treats patients on Medicare, they are going to be subject to a potential audit by the Center for Medicare and Medicaid services (CMS). 

what is medicare audit

This auditing is done to ensure that there are not any fraudulent charges or medical cases being claimed by the medical professionals. Sometimes these audits can trigger a larger civil or criminal investigations by law enforcement. 

What Is the Process for a Medicare Audit?

The CMS will be in contact with insurance companies to review claims made by physicians, to pay out claims and also to investigate any allegations of fraud. 

Medicare will use a method that looks at billing patterns to start the process and determine if they need a more in-depth audit of that physician. 

All information is now stored electronically, so that makes it incredibly easy for auditors to pick out physicians whose billing patterns may be much higher than other doctors for certain procedures. 

In most cases, auditors will select to audit what are known as the “outliers”, so the physicians who have billed a lot more of a specific procedure may raise a flag for audit. 

Now that doesn’t mean that just because one doctor does a lot of more of one procedure that they are doing anything wrong or that it’s fraud. They also need to keep in mind what area the doctor practices in and what their expected claims submissions would be. 

For example, there could be an ophthalmologist that has submitted for an aberrant amount of cataract procedures when compared to other doctors. 

There are a lot of other factors that need to be kept in mind about this doctor: is this doctor primarily practicing in a retirement community that is densely populated with seniors on Medicare? Well that could be a very good reason for why the claims they submitted are higher than their peers. 

Now it’s logical that this doctor’s billing patterns can be explained, but since their billing patterns have been flagged as suspicious they still may be subject to a full audit by CMS. 

Is this fair? Their behavior can definitely be explained and, when it’s taken into consideration where they practice and the demographics of their patients. But still, CMS may determine that they are going to be audited anyways. 

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What Happens When You’ve Been Selected for an Audit?

One of the questions physicians will ask is how will they know if they have been selected for an audit? 

In the majority of cases, the doctor will be notified via a letter that requests a copy of a select number of patient records. The letter may state that they are requesting records for certain procedures, with a list of patients and dates of service or that the procedure was done. 

Further to this, the CMS may request to speak to the patients in question and with employees of the medical practice. 

What Does an Audit Involve?

A post-payment audit – which means that the provider has already been paid for the service or procedure and the CMS is looking into it to make sure the payment was justified – will look at a couple things. 


They will need to confirm, via the patient charts, that the services they are claiming were reasonable and necessary for what they noted the diagnosis of the patient’s illness or injury was. They will also ensure the patient’s chart was documented properly and thoroughly – the notes are clear as to what their illness, injury or complaint was. 

In some cases, the auditing team will employ a consultant (which is also a physician) with expertise in the particular procedure to make sure the physician who is being audited provided the expected treatment. 

Sometimes, the audit will conclude that there was an overpayment to the physician. The reason for an overpayment could be one of many, but the most common ones are 

  • Providing insufficient, or no, documentation to support the procedure you submitted a claim for 
  • Using the incorrect medical billing codes for the procedures performed 
  • Performing (and billing for) services or procedures that were not medically necessary 
  • Billing for services that are not covered by Medicare 

Is Being Audited Difficult?

The feedback received from the majority of physicians who have been selected for audit is that the documents required are quite tedious. 

This is not to say that they don’t keep accurate records or they don’t want to comply. It’s more that being auditing is quite a process and it takes a lot of time out of their medical practice where they could be seeing patients, or they need to pay staff to put together the documentation packages. 

Auditors will often say that if the doctor has not documented the services and procedures accurately and thoroughly then the claim should be denied. This is not saying that the medical treatment wasn’t necessary, or even that it wasn’t performed, but just that if the documentation isn’t there Medicare will be within its right to deny the claim. 

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What Happens if There Has Been an Overpayment Found?

It’s, unfortunately, not just about that one overpayment situation. If the audit concludes there has been an overpayment then CMS will start to extrapolate for that physician. 

A regular audit will cover a certain number of claims over a specific period of time. For example, for one doctor they may select to look at 30 claims over a period of 6 months. 

So if they determine there has been an overpayment on one claim of $1,500 made to that doctor. Unfortunately the audit doesn’t end with that, though. From there, the auditor will extrapolate to cover a much broader period of time (usually 6 years) before the audit period. 

Depending on the size of the practice and the amount of overpayment determined through the audit, this could turn into a huge financial bill for the physician. The records selected for audit could be 30 but when it’s a large practice that could turn into hundreds or even thousands of claims where, through extrapolation, it was determined there was an overpayment to the doctor. 

Further, depending on the overpayment on the one claim it could mean $500,000 or $1,000,000 payback to Medicare. 

When this is found, CMS will typically offer the doctor a few options. 

  • Pay the estimated overpayment amount and waive their rights to an appeal
  • Pay the estimated overpayment amount and waive rights to an appeal, but continue to submit evidence to the auditing team in an effort to try to prove this overpayment is not really an overpayment to the physician. 
  • Submit to a full audit which consists of a statistically valid random sample of claims during the period of projected overpayment. 

The auditor may take several months to complete the audit, and the physician will never really know where they are in the auditing process. However, a physician usually only has a few weeks to respond with how they want to proceed once an overpayment is found. 

The Best Way To Respond to a Medicare Audit 

Getting that letter, as a physician, that you are being audited by Medicare is dreaded by almost all doctors. However, there are no shortcuts or secrets when it comes to dealing with an audit. The best thing you can do is be honest and forthright – work with them and not against them. 

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Your goal here is to prove to them that everything you did was medically necessary and you documented the patient’s records as such. You will also need to make sure you coded the claim appropriately to the carrier when you submitted it. 

You may want to review all of the records that have been requested by CMS so that you are familiar with what they are looking at and are able to respond to questions quickly and honestly (if they have them). Physicians see a lot of patients so reviewing records that are being audited may be a good way to refresh your memory. 

In a worst case scenario, you want to show that you and your office did not knowingly submit a false claim to Medicare and that any discrepancies found are honest mistakes. 

When you are notified that you are being audited, you may want to retain your own counsel with experience in this area. This will help make sure your best interests are represented and you have someone on your side should further investigation or action be required. 

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Making Your Practice Audit Proof

Can a physician really make their medical practice audit proof? Well, no but the best thing you can do is to make sure you run your practice as best you can with all applicable rules and regulations regarding reimbursement. 

You can do this by making sure you take the time to properly write things down when it comes to your patient records and notes. Additionally, avoid coding errors by making sure the codes you submit accurate describe the services you are providing to your patient. 

There are a few voluntary programs doctors can enroll in that outline policies and procedures which are consistent with the best way to reduce billing errors and prevent claims submitted by in error. 

By participating in these programs, doctors can have a step up when it comes to auditing and make sure the chances of them having an overpayment is minimal.