The Insurance Vultures are Circling
Insurance companies have recently been conducting audits, like vultures looking for dinner. Especially Medicare.
Fight, flight, freeze, or fawn! An audit letter from a health insurance company is enough to send shock waves through your body and make your mind go blank. Have you received this letter? The first thing to do when you get one of these letters is take some deep breaths. Then read it. Many therapists have and they have a lot of questions when they do. Lately, I’ve been getting requests from therapists to review paperwork for audits almost daily.
Andy, a 46-year-old therapist from Colorado who works with elders, contacted me when she received an audit letter. Within the first 3 minutes of our conversation, it was obvious her racing thoughts kept her from absorbing the information even though she reread the letter many times. All she could remember was the deadline – “send immediately.” After listening to and validating her fears, my next task was to read the letter and explain the finer points in a way that her muddled brain could hear. She calmed down immediately. Together, we planned her strategy for submitting her notes.
WHAT IS A CLINICAL INSURANCE AUDIT?
A clinical insurance audit is a review of treatment that is meant to root out fraud, abuse, and waste in the health care system. Unfortunately, it seems that when the new mental health parity laws kicked into effect February 10, 2021, it had an unexpected consequence. Insurance audits jumped. So the new parity law is experienced as (and not without merit) a way to limit services to clients and deny payment to providers to keep healthcare costs down.
Though most therapists will not be audited, many will. So be prepared.
WHAT HEALTH INSURANCE COMPANIES ARE LOOKING FOR IN AN AUDIT
The first question is always — what do I send? If you read the letter closely, it tells you exactly what to send. But because of the anxiety audits generate, it’s easy to just stare blankly at the paper or dissociate and eat a bunch of chocolate instead of absorbing the content of the letter.
To start with, it’s easy to confuse psychotherapy notes with progress notes. I call psychotherapy notes, “Memory Notes” because the name describes their purpose. They are notes we write to trigger our memory from session to session. Insurance companies do not want our memory notes.
The insurance company wants our Progress Notes. I call these notes, the “Medical Record,” because they are written to justify medical necessity. During an audit, insurance companies want our medical record. This includes our intake summary, progress notes (memory notes), treatment plans, and any consultation notes we may have. In other-words, they want all the notes associated with our medical record and they want them between specific dates of service. They often ask for a year’s worth of notes, say for example, between November 1, 2019 to October 30, 2020.
WHAT TO EXPECT
The insurance company will not swarm your office like a swat team to pillage your files or seize your computer. An audit is usually initiated through a letter from the insurer. They may indicate that you were overpaid for one or more past claims. Or they may simply demand proof of medical necessity by way of submitting the documentation associated with the claims. They will most likely request documentation for a client’s file between specific dates of treatment. This will likely include:
- the diagnostic assessment (also known as an intake or bio/psycho/social assessment),
- treatment plans,
- progress notes,
- a discharge summery,
- any communications you may have had with others associated with the client’s case.
They are looking for fulfillment of specific documentation requirements and proof of medical necessity. The only time an insurance company will demand to look at your online program or records is if they suspect fraud. Let’s not give them the opportunity.
PREVENTING CLAW BACKS
Audits are based on a “pass/fail” scoring system. 80% is passing but if you do go below that magic number, you will incur a “recoupment.” A recoupment, grimly referred to by psychotherapists as a “claw back,” is a demand to repay the insurer prior payments. There are two ways to calculate a claw back. 1) It’s based on the specific claims reviewed or 2) it’s calculated through “sampling and extrapolation.” Sampling and extrapolation means the insurer reviews a small sample of prior claims and applies your score to all other claims that you submitted over a specific time. You either pay the money back or it’s deducted from future payments.
Most companies follow Medicare standards, which are the most stringent. If you document to Medicare standards, you should be able to pass any audit from a commercial insurance company. Failing an audit 100% is rare, but it does happen. It’s usually because the therapist doesn’t know what’s required to justify medical necessity — and is too afraid to call the insurance company, worried that anything they say, can and will be used against them.
Nathan, a seasoned therapist in Chicago, sought my help after he submitted two years of notes for five clients. His notes were based on an audit he passed 20 years earlier because he didn’t know the standards had changed. Even the start and stop time of the sessions were missing. He scored 12%, which resulted in an $21,000 claw back that he had to repay over time.
Crestfallen yet determined to not let that happen again, he took my course and used my forms. I reviewed his treatment plans and session notes so that he was able to complete records quickly and confidently. Two years later, he contacted me again, this time with good news. He passed another extensive audit by 100%.
Though the insurer that audited Nathan didn’t allow him to correct his records and resubmit, many companies do. That doesn’t mean you want to submit your notes without first reviewing them. Even though the review process is time consuming, it’s best for your nervous system to “get it right” the first time.
DO’S and DON’TS OF HEALTH INSURANCE AUDITS
… put the letter aside for when it’s convenient to read. Timing will never be convenient. If you don’t respond, the insurance company will assume you don’t have the notes to submit. The result is automatically forfeiting payment for all the sessions under review.
… skim the letter because you’re too anxious to read it carefully.Despite advising Andy to ask for an extension during her initial consultation, a very frightened part of her couldn’t bring herself to call until I read that clause in the letter to her. Had she thoroughly read the letter when she got it, she would have saved herself a lot of heartache.
… turn in all your documents without reviewing them first. Mistakes happen. Period. You’re allowed to amend your notes as long as the amendment is clearly labeled with a date and your initials.
DO REMEMBER TO …
… BREATHE! This too shall pass. Though an audit feels like an attack on your professional dignity and identity, it’s not. The calmer you are, the more clarity you bring to this unfortunate episode in your professional life.
… read the letter thoroughly, if not when you get it, soon after. Then read it again after you’ve calmed down.
… speak with someone at the insurance company. Call and ask for any clarification you need. For example:
- Find out the purpose of the request for records and ask if participation is mandatory. Some requests for records are not “to root out fraud” but to determine the most prevalent diagnoses being treated. This request is research, not an audit, and not mandatory.
- If you don’t get a clear answer by asking about the purpose of the audit, ask about the consequences of not responding to the letter. This answer should indicate if your bank account will be affected by your compliance.
- If the letter does not specify, ask which clients you need to send records for. Sometimes, it’s just one client. Other times, it’s several.
- What are the dates of service being requested? Is there a date range or specific dates of service? Some insurance companies want specific notes, others want 6 months of records, others want 1 year, while others want 2. I once helped a psychologist prepare for a 4-year retrospective Medicare audit (which she passed 100%). Some states have laws limiting the length of time to one year.
- What is the deadline? Some letters state, “… send your records immediately.” Others give a specific date, often two weeks from the date of the letter. However, this date seems somewhat arbitrary. If you need more time, ask for an additional month. Explain your very real-world circumstances. It’s quite likely you didn’t carve out time to deal with an audit when planning your calendar. Are you going on vacation, sick, caring for an ill family member, managing your kids’ online learning while working full time, etc.? Though there’s always a first time, I have not heard of anyone being turned down.
- Find out how the insurer is calculating possible recoupments. Is it based on the specific notes being audited or is it based on sampling and extrapolation? This will give you an idea of how much money could be at stake.
- Find someone knowledgeable to review your notes so you can correct what might be wrong. Like anything you write, it’s hard to be your own editor because you know your work too well. Even I, the Documentation Wizard, would have my notes reviewed by someone knowledgeable in documentation requirements before submitting them.
- Get a free consult with the Risk Retention Specialist provided by your liability insurance. Your liability insurance offers this free service because it’s cheaper to prevent a problem than to defend you if a problem develops. The result of this discussion should help you decide if you need to consult with an attorney who specializes in working with psychotherapists. Attorneys usually provide a “free 20-minute consult.” This discussion is how the attorney decides if there is a reason to take your case. You can get some useful advice during these consults.
- Make a decision that supports your well-being. You may decide that preparing your notes for an audit it more trouble than it’s worth.
Marcia, a sandwich generation therapist in California, received the dreaded letter during the Covid-19 pandemic. She was already caring for her ill mother, managing remote learning for her two children, and seeing too many clients due to the increased need for services. After talking to me, she decided that the loss of income was worth her peace of mind. She traded a claw back for less aggravation. Then she resigned from the insurance panel, but still had to repay the amount in question.
- Appeal if you incur a claw back that does not explain the reasons or seems arbitrary. This is when you really need an attorney.
PASS AUDITS, PROTECT YOUR INCOME, AND PREVENT CLAW BACKS
You can’t prevent the flight, fight, freeze, or fawn response to a health insurance audit letter. But perhaps knowing how the process works will help you keep your feet on the floor and your mind clear. This is the way to get through this unwanted experience as quickly and successfully as possible.
If you haven’t taken my workshop, Misery or Mastery: Documenting Medical Necessity for Psychotherapists, wrapping your head around all the details of clinical documentation can be overwhelming… especially if you wait to learn this skill until you are being audited. If you need more guidance on how to write treatment plans, document sessions, or manage the administrative side of a private practice, I offer templated forms and online workshops that give you a step-by-step approach to turn your clinical intuition into thorough and effective documentation.