Stethoscopes and Green Eye Shades: Using Medical Record Reviews in Single Audits

Abstract

Using Medical Record Reviews in Single Audits Invite doctors, nurses and other medical specialists to join you at the document review desk in the midst of an audit? The idea has caused some controversy in the nonfederal audit community-and may seem revolutionary to the traditional auditor-but the involvement of medical professionals is necessary, according to recently issued federal guidance. It is also highly desirable. In fact, erroneous Medicare payments estimated to total billions of dollars were uncovered this past year by the U.S. Department of Health and Human Services (HHS), Office of the Inspector General (OIG), thanks largely to the help of medical professionals. The need for using medical specialists to review patient records during single audits is detailed in the Office of Management and Budget (OMB) Circular A-133 Compliance Supplement, which was last updated June 30,1997. The circular requires that state and local governments, colleges and universities, and nonprofit organizations receiving federal awards have an organizationwide audit of all federal money they receive. These audits, known as single audits, are conducted by nonfederal auditors, such as public accounting firms and state auditors. To assist the auditors in planning and conducting these reviews, OMB publishes guidance in the form of the Compliance Supplement, covering most federal programs subject to single audits. This article focuses on the Medicaid portion of the supplement and on two of the supplement's new requirements-clustering and review of medical records-that have caused some concern among nonfederal auditors. Both of these requirements were based primarily on experience gained during recent HHS/OIG audits of the Medicare and Medicaid programs. The Medicaid Program The Medicaid program, which is the largest federal program covered by the single audit, provides payments for medical assistance to low-income persons who are age 65 or over, blind, disabled, members of families with dependent children, or qualified pregnant women or qualified children. The HHS Health Care Financing Administration (HCFA) administers the Medicaid program in cooperation with state governments, and the program is jointly financed by federal and state governments. Total federal expenditures for this program were $91 billion in federal fiscal year 1996. Within broad federal guidelines, each state decides eligible groups for Medicaid assistance, the types and range of services, the payment levels for services as well as administrative and operating procedures. This is a highly complex, decentralized program, as illustrated below: The program depends on large, complex automated data processing systems to process a huge volume of transactions. Payment systems do not normally include a review of original detailed documentation supporting the claim prior to payment. Medical services are provided directly to an eligible beneficiary, normally without prior state approval. Medical service providers normally determine the scope and medical necessity of the services. The program involves complex billing structures, with different payment rates for various types of medical services such as inpatient hospital care, physicians, prescription drugs and drug rebates. Obviously, any audit of such a complex program will present a challenge in terms of both audit cost and time expended. To assist auditors in planning and performing audits of the Medicaid program, the revised Compliance Supplement clusters Medicaid with two additional programs: the State Medicaid Fraud Control Units program and the State Survey and Certification of Health Care Providers and Suppliers program. Clustering is defined as treating multiple programs as a single program for the purpose of meeting Circular A-133 audit requirements. Believing that more effort will be needed to test the two additional programs, some nonfederal auditors have taken issue with the new cluster. …