Corrective Action Plans: Leveling the Audit Playing Field with CAPs

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Dana Finnegan

By Dana Finnegan, MDaudit.

The Centers for Medicare and Medicaid Services (CMS) has made no secret of its intentions to crack down on fraud, abuse, and waste, throwing more budget dollars into audits, heightening program integrity oversight of Marketplace plans, and exploring new methods of using advanced technology to conduct more rapid and thorough documentation reviews.

Historically, as CMS goes, so do commercial payers, putting healthcare organizations in the crosshairs of an unprecedented level of third-party external audits. To emerge relatively unscathed, organizations need to put in place proven processes that guide immediate and effective actions in the wake of adverse findings.

With limited time to correct the internal processes or billing practices that contributed to the problems, many organizations are turning to corrective action plans (CAPs) to streamline and accelerate their response to unfavorable outcomes. Those that do also realize the added benefit of having their chances of future billing compliance risks significantly reduced while their ability to achieve revenue integrity is enhanced.

The Audit Environment

The signs of an aggressive audit environment are everywhere. The Department of Health and Human Services (HHS), in its 2022 budget, allocated a staggering $2.6 billion to halting fraud, abuse, and waste in its Medicare and Medicaid programs – up from $180 million in 2021. A primary target is Medicare medical review of fee-for-service claims – which CMS has likely increased due to a robust rate of return to the Trust Funds (estimated to be more than $9-to-$1, based on a three-year rolling average).

The Office of the Inspector General (OIG) has also ramped up its scrutiny of how well provider organizations complied with requirements tied to the use of nearly $180 billion in Provider Relief Funds and with recently enacted mandates such as the No Surprises Act. One survey found that almost 25% of hospitals respond to as many as 2,000 external audit-related monthly requests from multiple sources. While results of many of those audits are confidential, Medicare Fee-for-Service data show a 6.26% improper payment rate in their 2021 report.

When audits by commercial payers identify problems such as overpayments, they may require the provider organization to generate and implement an actionable CAP for the relationship to continue. And while a CAP is not required when a RAC audit uncovers issues with billing practices, the offending provider organization should act swiftly to not only remedy the immediate problem – generally by refunding the overpayments – but also to identify and address any underlying practices or processes that may put the organization at risk for future issues and liability.

Audit pressure isn’t just external. Many healthcare organizations are also ramping up internal scrutiny – and they’re not always happy with the findings. When looking specifically at internal audits, the Healthcare Auditing and Revenue Integrity: 2021 Benchmarking and Trends Report from MDaudit found that more than 30% of the time, audit outcomes are unsatisfactory and have not met acceptable thresholds.

Enter the CAP

The current state of the audit landscape has made CAPs more essential than ever. They provide healthcare organizations with a road map to improve the circumstances or conditions that contributed to the problematic audit findings and allow organizational leadership to look for additional improvement areas.

Particularly when faced with significantly high numbers of audit requests and higher rates of poor audit performance, healthcare organizations that aren’t implementing CAPs will find themselves trapped in a response process that is a maze of multiple departments attempting to locate information from across the enterprise, resulting in missed deadlines and duplicated efforts. Putting a CAP in place establishes internal processes that streamline actions and ensure task owners are properly engaged.

CAPs are vital because they provide a step-by-step plan to follow once the audit notice is received so the problem can be swiftly addressed. An added benefit is that the initial resources required to establish and manage CAPs are offset by lower billing compliance risks, accelerating and enhancing the revenue cycle by reducing denied claims and helping achieve revenue integrity.

CAP Creation

While CAPs can be essential for helping healthcare organizations quickly and appropriately respond to problematic audit findings, they are not all the same. A quality CAP will encompass key elements, including:

  1. Identification – the originating incident or the reason for the audit
  2. Evaluation – reviewing the incident to determine what triggered the audit (the who, what, when, how, and why)
  3. Root Cause Analysis – determining the specific cause of the negative findings
  4. Action Plan – devising the specific response strategy
  5. Implementation – enacting the response strategy and any remediation actions
  6. Post-Mortem – evaluating the effectiveness of the response, identifying lessons learned, and determining any targeted education opportunities

The most effective CAPs start with identifying and evaluating the various components contributing to the audit, its impacts, and its consequences. A root cause analysis typically follows these actions to dig deeper into the issues to reveal the underlying cause(s) so a path towards resolution can be set.

Next is the action plan, which sets out the process for correcting the root cause, followed by the implementation phase spelling out how the plan is communicated and enacted internally, including training employees (e.g., providers) on the corrective actions. The final step is to follow up on the CAP, measuring its effectiveness in permanently resolving the issue.

Along with the standard elements of a CAP, some additional information points can help make navigating and following the plan easier. These include:

Spell out any recommended changes to policies, procedures, and forms to prevent any issues that contributed to the problematic audit findings from being repeated. At the same time the CAP is being executed resubmit the corrected claims, return any overpayments, and make the appropriate organizational changes to ensure the highest coding quality and integrity level.

Automating the Process

A growing number of healthcare organizations are employing various technology options to enhance CAP management through automation of core tasks. Specifically, automation can help with such CAP components as:

Ultimately, streamlined CAPs ensure that all necessary follow-up activities are carried out swiftly and accurately, empowering healthcare organizations to mitigate further tangible financial and compliance risks associated with problematic audit findings. Technology can help plan for, mitigate, and respond to audits while revealing gaps and weaknesses to correct faulty practices.

CAPs are a critical component of a thoughtful and effective audit response strategy. They provide an important road map to address future audits and improve the circumstances or conditions contributing to any incidents flagged in the audit.


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