💙 How to Survive a Payor Audit: Legal Tips for Small Medical Practices

Getting an audit letter from Medicare, a Medicaid Managed Care Organization (MCO), or a commercial insurer can feel like a punch to the gut—especially for small healthcare practices without in-house legal or compliance support.

But here's the good news: most audits are manageable with the right approach. This guide breaks down why audits happen, what to do when one lands on your desk, and how to protect your revenue, license, and reputation.

🔍 Why Healthcare Providers Get Audited

Payor audits can be triggered for many reasons—and not all of them mean you've done something wrong.

Common Audit Types:

• Random Audits
  Routine reviews of selected claims

• Targeted Audits
  Based on specific billing patterns, high-risk codes, or utilization rates

• Post-Payment Audits
  Conducted after payment has been issued, often prompted by complaints or anomalies

• Retrospective Audits
  Review of past claims for possible overpayments or documentation deficiencies

Pro tip: High frequency billing, missing modifiers, or upcoding can all raise red flags—even unintentionally.

🚨 What to Do When You Receive an Audit Letter

1. Don’t Panic—Read the Letter Thoroughly

• Identify the scope of the audit (codes, dates of service, providers involved)

• Note all deadlines for document production or appeal

• Clarify exactly what is being requested (medical records, billing, notes, etc.)

2. Only Submit What’s Requested

• Don’t volunteer additional information

• Avoid adding explanations or commentary unless legally advised

• Keep your tone neutral and professional

3. Pull Your Payor Contract

• Review the audit terms in your provider agreement

• Check for:

  • Time limits for audits or appeals

  • Recoupment rules

  • Dispute resolution procedures

4. Gather and Organize Records Carefully

• Include:

  • Progress notes

  • Billing sheets

  • Coding justifications

  • Proof of submission or authorization

📌 Highlight clear examples of proper documentation that support your case.

5. Consult a Healthcare Attorney

Before responding, have a healthcare lawyer:

• Review the audit request for legal validity

• Identify potential coding or documentation issues

• Draft a response that preserves your appeal rights and avoids unintentional admissions

• Guide you through negotiation or appeals if needed

⚖️ What Happens After the Audit?

If the audit identifies alleged overpayments, you may receive a recoupment demand. Don't panic—this is not the final word.

You May Be Able To:

• Dispute the findings

• Appeal the decision

• Negotiate repayment terms

If the audit involves Medicare or Medicaid, assess whether you need to disclose potential issues under:

• The CMS Self-Referral Disclosure Protocol (SRDP)

• The OIG Self-Disclosure Protocol

✅ Best Practices to Avoid Audit Trouble in the Future

• Implement internal documentation audits

• Train billing staff on coding accuracy and modifier use

• Keep detailed payer-specific policies

• Maintain clean, signed progress notes for each encounter

• Respond to payer feedback or rejections promptly and formally

🧠 Final Thoughts

Payor audits are intimidating—but they don't have to derail your practice. With legal support, strategic documentation, and a clear understanding of your payor contract, your small practice can respond with confidence—and come out stronger on the other side.

Need help responding to a payor audit or protecting your practice from future audits? Let’s talk.

Hurley Law Group
Healthcare Law for Small & Midsized Providers
📞 308-383-1867
🌐 hurleylawgroup.com
✉️ eric@hurleylawgroup.com