TODAY’S OBJECTIVES

• Identify strategies to engage Internal Audit and focus their efforts on bottom-line outcomes and departmental priorities.

• Explore audit methodologies designed specifically for the revenue cycle and hospital/clinic operations.

• Review common findings related to the revenue cycle and patient care operations.

• Describe strategies to respond to internal audit reports.

ABOUT VANDERBILT UNIVERSITY MEDICAL CENTER

• $2.3 Billion Annual Healthcare Operating Expenses (excludes academics and research)

• $471.6 Million Annual Sponsored Research Budget

• $843.6 Million Annual

• Charity Care, Community Benefits, and other Unrecovered Costs

UNDERSTANDING AUDITORS

THE CLAW HAS SPOKEN

PREVIOUSLY CHOSEN

Bad Debt & Charity Care Write-offs Data Center Security Preoperative Services:

Implants & Supplies

Blood Bank Electronic Claim & Payment Processing

POS Collections & Deposit Process

Center for Women’s Imaging

User Account Security Reference Lab

Chemotherapy Pharmacy & Infusion Clinics Otolaryngology Administration Respiratory Care

Meaningful Use Pediatrics Sponsored Research Software Change Management

Controlled Substances Retail Pharmacy Physician Practice Acquisitions

PRELIMINARY PLANNING

• Auditors are trying to:

• Gain a high-level understanding of operations.

• Establish relationships.

• Identify key personnel and systems.

• Determine audit scope.

PRELIMINARY PLANNING

• Client departments need to:

• Provide prompt responses.

• Explain operational strengths and weaknesses.

• Share current trends and industry issues.

• Clearly communicate management’s audit goals.

WHAT TO EXPECT AT THE ENTRANCE CONFERENCE

• Meet all audit team members.

• Review audit objectives and scope.

• Discuss audit progress/timeline.

• Send out scope memo.

PROCESS DOCUMENTATION

• Orders/Referrals

• Registration/ Pre-authorization

• Check-in/ POS Collections

• Medical Records

• Charge Capture

• Denial Follow-up

FRONT-END

• Charge Interfaces

• Claim Edits

• Claim Submission

• Payment Processing

• Denial Management

• Account Follow-up

• Patient Collections

BACK-END

CHARGE CAPTURE

• Compare arrived appointments/schedule or orders to posted charges.

• Look for charges that should always be together (e.g., chemo drugs & infusion).

• Data entry controls (e.g., batch totals).

• Compare medical record to posted charges.

• Identify issues with the charge interface by comparing original charges to posted charges.

CHEMOTHERAPY INFUSION

CPT Description Billed Minimum Correct

96409 Push, first drug 0 1 0

96143 Infusion, first drug 1 0 1

96411 Push, additional drug 0 2 1

96417 Infusion, additional drug 0 0 1

96415 Infusion, additional hour 0 0 2

HCPCS Description

J9070 Cyclophosphamide, 100 mg

J9000 Injection, doxorubicin hydrochloride, 10 mg

J9370 Vincristine sulfate, 1 mg

J7510 Prednisolone oral, per 5 mg

CLAIMS & PAYMENTS

• Compare original charges (codes, quantity, and dollars) to final claim submission.

• Discuss problem payers with Contracting, Informatics, and Business Office.

• Compare contracted payments to actual payments.

• Look for no charge services or write-offs before claims are submitted.

• Review co-pay collection rates.

DENIALS

• Category (e.g., registration, coding, business office, and authorization)

• Payor

• Clinic/Service

• CPT/HCPCS Code

• Date of Service

• Provider

REVIEW DENIALS BY

• What denial reports are provided to management?

• Any recent changes to contracts or payor procedures?

• Any staffing changes, leaves, or issues?

• Changes to coding regulations.

ASK ABOUT

DENIALS BY PATIENT ADDRESS

FINANCIAL REPORTING

• What are the data sources?

• Who prepares the reports?

• How often are they updated & distributed?

• What benchmarks are used & what are the sources?

QUESTIONS TO ASK

• Reconcile reports to source systems and re-perform calculations.

• Review methodology for any estimates, allowances, or allocations.

• Review variances and trends with similar or related departments or services.

TESTS TO PERFORM

AUDIT REPORTS & COMMON FINDINGS

EXECUTIVE SUMMARY

• Summary of two to four key issues and recommendations.

• Background about the area audited including an overview of unique process and/or information systems.

• Key financial metrics and/or key performance indicators to support highlighted issues.

WHAT TO EXPECT

• Scrutinize the wording, this is negotiable.

• Review the background, some of this may not have been explicitly discussed during the audit and could contain errors or assumptions.

• Recalculate/reconcile financial metrics and KPIs.

WHAT TO DO

AUDIT OBJECTS & ASSESSMENT

Audit Objectives Assessment1 Determine that charge capture is complete and

accurate.

2 Payroll transactions are appropriate, properly supported, and approved.

3 Equipment is properly maintained and monitored by Clinical Engineering.

Effective Needs Improvement Ineffective

RECOMMENDATIONS

• Grouped by topic or function.

• Include a benefit and basis.

• Specify the area/department responsible for implementation the corrective action.

• Allow space for management’s action plan with target implementation date.

COMMON ISSUES: FRONT-END

• Cash Controls

• Co-Pay Collections

• Upfront Collections for Self-Pay Services

• Missing Charges

• Security of PHI

• Inaccurate Pricing Calculation (Implants, Pharmaceuticals)

• Equipment

• Asset Tags

• Preventative Maintenance

COMMON ISSUES: BACK-END

• Segregation of Duties

• Transaction Review

• Overtime Approval

• Authorized Vendors

• Executed Contracts

• Invoice Accuracy

• Use of Procurement Cards

• BAA Agreements

• Inventory Management

COMMON ISSUES: IT

• Storage of PHI on unsecured media

• CD/DVD with Medical Images

• Department File Servers, Local PCs, Laptops, etc.

• Inadequate Password Policy/Enforcement

• Unsecured/Sharing of Clinic Workstations

• Disaster Recovery

• Documented Downtime Procedures

• Oversight/Security of Portable Devices (e.g., iPads)

FOLLOW-UP REVIEWS

• Depends on the Severity of Findings

• Often Requested by Senior Management

• 12 to 18 Months After Report is Issued

• Limited to Items in Audit Report

• Significantly Reduced Time Compared to Original Audit

QUESTIONS

Brad Adams, CPA (615) 875-9554

brad.adams@vanderbilt.edu !

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