How to Prepare for a Medicaid Audit as a Therapist

As a behavioral health therapist or practice, participating in Medicaid or Managed Care Organizations (MCOs) offers a valuable opportunity to provide care for individuals who may otherwise have limited access to mental health services. However, one of the obligations of participating in these programs is the potential for audits. Audits are a regular part of the Medicaid and MCO landscape, serving to ensure compliance, appropriate use of funds, and quality of care.

This guide will walk through the reasons for Medicaid and MCO audits, what these organizations are looking for, the steps in the auditing process, and best practices for preparing and maintaining compliance to minimize risk and stress.

 

Why Behavioral Health Providers Are Audited

Medicaid and MCOs audit behavioral health providers for several key reasons:

1. Program Integrity

Medicaid is a publicly funded program that is highly regulated. Audits ensure that services provided and billed to Medicaid are necessary, appropriate, and align with the program’s goals. This protects against misuse or fraud.

2. Compliance with State and Federal Guidelines

Medicaid programs operate under both state and federal regulations. Behavioral health providers are expected to follow specific rules regarding documentation, service delivery, and billing practices. Audits check for compliance with these standards.

3. Billing Accuracy and Preventing Fraud

One of the primary reasons for audits is to verify that billing practices are accurate. Medicaid and MCOs are particularly vigilant about overbilling, upcoding (billing for a higher level of service than was provided), and billing for services not rendered. Audits are meant to detect fraud or errors that could lead to unnecessary expenditures of public funds.

4. Quality of Care

Audits also look at the quality of services provided. Medicaid and MCOs want to ensure that recipients are receiving the care they need and that the services are aligned with the client’s treatment plans. Clinical documentation plays a large role in determining whether care is appropriate and effective.

 

 

What Medicaid and MCOs Are Looking for in Audits

When conducting an audit, Medicaid and MCOs typically focus on specific areas to ensure the provider’s practices are compliant and aligned with program rules. Here are some key things they look for:

1. Appropriate Documentation

Documentation is one of the most critical aspects of any audit. Medicaid and MCOs will review client records to ensure that services provided are properly documented, and that the documentation supports the level of care billed. Some specific documentation elements include:

• Treatment plans: Clear treatment goals and progress notes that reflect client outcomes.
• Service notes: Timely and accurate notes for each session, including what was discussed and the interventions provided.
• Assessment documentation: Thorough diagnostic assessments that justify the necessity of treatment.
• Consent forms: Signed consents for treatment, release of information, and any special consents required for specific interventions.

2. Correct and Accurate Billing

Medicaid and MCOs will scrutinize billing records to ensure that the services provided match what was billed. They’ll look for any discrepancies such as:

• Billing for services that were not documented.
• Upcoding or incorrect coding of services.
• Billing for services that were not medically necessary.
• Double billing (billing Medicaid and another payer for the same service).

3. Adherence to Medicaid Guidelines

Auditors will ensure that your practice adheres to state-specific Medicaid guidelines, including provider qualifications, supervision requirements, and service limits. Each state may have its own set of rules, so it is essential to be familiar with the Medicaid manual for your state.

4. Client Eligibility

Medicaid auditors will check to confirm that the clients whose services were billed are actually eligible for Medicaid during the time services were provided. This could include verifying that the provider checked client eligibility and information at appropriate intervals.

5. Treatment Necessity and Compliance

Auditors will look for clear evidence that services provided are clinically necessary and appropriate for the client’s diagnosis and treatment goals. This includes:

• Alignment between diagnosis, treatment goals, and services provided.
• Regular review and updating of treatment plans.
• Documentation that reflects the therapeutic benefit to the client.

 

 

Steps of the Auditing Process

Understanding the typical steps in an audit can help alleviate some of the stress of the unknown. Here’s an overview of what to expect during an audit:

1. Notification of Audit

Most audits begin with a notification letter from the Medicaid or MCO organization. The letter will explain the purpose of the audit, the scope (e.g., a certain number of client charts over a specific timeframe), and what documents they require.

2. Preparation and Document Submission

After receiving the audit notification, the practice will be required to submit records for review. Depending on the scope of the audit, this could include:

• Client records and clinical documentation.
• Billing and claims records.
• Licenses and certifications of providers.
• Policies and procedures.

You may have a limited time to gather and submit this documentation, so it’s crucial to respond promptly.

3. On-Site or Desk Review

Audits can occur on-site, where auditors come to your practice and review records in person, or as a desk audit, where you submit records electronically or by mail for review. On-site audits may also include interviews with staff, observation of practices, and a tour of the facility.

4. Initial Findings and Response

Once the auditors review the submitted documentation, they may present preliminary findings. This can include a list of deficiencies or potential issues they’ve identified. You will typically be given a chance to respond to these findings, correct any errors, and provide additional documentation if needed.

5. Final Report and Corrective Actions

After considering your responses, the auditors will issue a final report detailing their findings. If there are significant issues, they may require corrective actions, such as:

• Repayment of overbilled funds.
• Training or policy changes.
• Improved documentation practices.

In serious cases, non-compliance may result in fines or being dropped from the Medicaid or MCO program.

 

 

Best Practices to Be Prepared for Medicaid and MCO Audits

While the audit process can be stressful, being proactive and prepared will make it much easier. Here are some best practices to help your practice stay audit-ready:

1. Maintain Thorough and Timely Documentation

Proper documentation is the cornerstone of a successful audit. Keep detailed, timely, and accurate records of all client interactions, assessments, treatment plans, and billing. Train your staff to complete progress notes and other documentation as soon as possible after a session. Ensure that all notes and documentation comply with Medicaid requirements.

2. Conduct Internal Audits

Regularly audit your own records to identify potential issues before an external auditor does. This can include spot-checking client records, reviewing billing practices, and ensuring that all staff are properly licensed and certified. Internal audits can help catch mistakes early and allow you to make corrections before they become significant problems.

3. Stay Up-to-Date on Medicaid and MCO Requirements

Medicaid and MCO rules change frequently. It’s essential to stay informed about the latest billing codes, documentation standards, and compliance rules. This might involve subscribing to updates from Medicaid, attending webinars or training, and regularly reviewing your state’s Medicaid guidelines.

4. Train Your Staff Regularly

Training should not be a one-time event. Regularly train your staff on documentation standards, billing practices, and compliance. Ensure that all new hires are thoroughly trained on Medicaid requirements. Providing ongoing education can reduce the likelihood of errors and non-compliance.

5. Establish a Compliance Program

Creating a formal compliance program can help ensure that everyone in your practice follows Medicaid and MCO rules. This might involve appointing a compliance officer or team to oversee adherence to regulations, monitor potential risks, and implement corrective actions when needed.

6. Keep Accurate and Updated Client Information

Make sure that you verify and update client eligibility for Medicaid at regular intervals. Failure to do so can lead to billing errors, which can be flagged in an audit. Additionally, ensure that all client consents and authorizations are up-to-date and properly documented.

7. Be Organized and Ready for Audits

Maintain an organized system for storing and retrieving records. When an audit notice arrives, having a well-organized record-keeping system can reduce stress and help you respond efficiently. Keeping a checklist of required documents for audits can be helpful.

8. Consider Professional Help

If audits feel overwhelming, or if you want to ensure compliance without taking on the full burden yourself, consider hiring a compliance consultant or attorney. These professionals can help you set up internal controls, conduct pre-audits, and ensure you’re meeting all Medicaid and MCO requirements.

 

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While the idea of a Medicaid or MCO audit can be intimidating, being prepared and staying compliant can make the process manageable. By focusing on accurate documentation, appropriate billing, and staying informed of the latest regulations, you can ensure that your behavioral health practice is always audit-ready. Regular self-audits, staff training, and organized records will help you maintain compliance and minimize stress during an audit.

 

Up Next… Article #5 in our Medicaid Blog Series: What are Payer IDs and EDIs? (And Why They’re Important!)