The dreaded Medicare audit. While Medicare audits for Physical Therapy practices are on the rise (meaning it is highly likely you will bear the brunt of one at some point in the near future), there are actionable steps and tools you can use to quell your fears and breeze through an audit. 


Before we dive in, let’s break down the different types of Medicare audits and what they entail so you have a full understanding of what your practice is up against. 


1. Recovery Audit Contractor (RAC)

A RAC reviews Fee For Service (FFS) claims on a post-payment basis in order to recover overpayments made on claims of services provided to Medicare beneficiaries. These audits generally focus on medical necessity, the site of care, and up-coding. 

2. Certified Error Rate Testing (CERT)

CERT audits review a ‘statistically valid’ random sampling of Medicare Fee For Service (FFS) claims to determine whether they were paid appropriately under coverage, coding, and payment rules. The improper payment rate calculated from the sampling of audited notes is then applied across all visits during the report period to determine the amount recouped by the CMS.

3. Targeted Probe and Educate (TPE)

TPE audits occur before a payment is made and only targets providers who meet certain criteria, mainly those who have high claim error rates, unusual billing practices, and services that have high national error rates. Medicare Administrative Contractors (MACs) work with individuals to identify and correct errors before claims are submitted. 


Now that you have an overview of the different types of Medicare audits, let us explore the various ways to ensure you are prepared for an audit.

On a Day-to-day Basis

While there are certain red flags that can trigger a Medicare audit - such as an excessive use of the KX modifier, billing more than the average number of codes, and multiple therapists billing under a single provider - the most desirable protection is to have best practices and safeguards in place on a regular basis for your practice. Here are some tips to ensure you remain compliant on a daily basis:


  • Use the 8-Minute Rule (or Total Time Rule) to identify how many units you can bill for each encounter. The 8-Minute Rule allows the treating therapist to bill based on the total time spent with a patient, rather than the time spent with each treatment code. The breakdown is as follows:
    • 8 to 22 minutes - Can bill one unit
    • 23 to 37 minutes - Can bill two units
    • 38 to 52 minutes - Can bill three units
    • 53 to 67 minutes - Can bill four units
    • 68 to 82 minutes - Can bill five units
  • Be sure therapists are documenting appropriately. Essentially, you need the documentation to support the work that is being done (and billed for) accurately and should reflect medical necessity. This means therapists should have adequate information for each section of the note, but not any more information that is required as over-documenting often leads to disproving medical necessity (and it creates unnecessary work and time wasted for therapists!).
  • Avoid too much copy-forward. While copying forward a section of the note is sometimes appropriate (such as interventions or procedures), using copy-forward too often or when not appropriate (such as patient response to last treatment, subjective progression statement, clinical impression of the day, or assessment of progression) will raise a warning signal for Medicare that you are not accurately documenting and billing for what is actually happening during treatment. 
  • Use a variety of codes when billing. When therapists are constantly billing for the same number of codes, this is another red flag for Medicare. Consistently treating patients exactly the same signals to Medicare that therapists are not adjusting treatment according to patient needs/improvement and across an episode of care.
  • Utilize technology to help with compliance. Many EMRs these days now have compliance tools built into the user interface to help with items such as 8-minute rule calculations and ICD-10 code selectors. Be sure you have a thorough understanding of what is included in your EMR so therapists can be taking full advantage of the software. Additionally, there are some amazing new technologies being introduced into the market, such as PredictionHealth’s PT Practice Intel. This solution uses Artificial Intelligence to analyze every word of every sentence across 100% of therapists’ notes to identify compliance gaps in documentation, billing and coding inefficiencies, and clinical care gaps per therapist. Using the latest technology is far cheaper than hiring a human auditor and can also catch nuances that a human most likely would miss. Use technology like this to your advantage!


During an audit

Chances are, your practice will be the subject of a Medicare Audit in the next year or two. If you have taken every measure to ensure compliance on a day-to-day basis, you will feel much more confident when the audit comes. Of course, an audit is bound to be nerve-wracking, so here are some helpful hints to survive the audit process:


  • Clean up the clinic. If an auditor is coming in person, you will want to take extra care to ensure the practice looks spic and span. After all, PT practices are a healthcare facility and a dirty or untidy practice will immediately give an auditor pause. First impressions are everything! Do a deep clean of the space. Make sure all papers are filed away appropriately and locked if they contain PHI. Have everyone’s desk be cleared of junk and papers. Be sure all treating staff’s credentials are visible and unexpired. 
  • Organize requested documents. If documents have been requested, you want to take the time to carefully organize and review them. Never, ever change a medical document before submitting it and be absolutely certain you make copies of everything you send to the auditors. Additionally, if you feel you are unable to meet the deadline placed on you, ask for an extension.
  • Be honest. The worst thing you can do during an audit is fib or stretch the truth. As much as you can, try to relax and appear calm and professional. Answer every question truthfully and if you do not know the answer to a question, don’t lie! Simply say you do not know the answer and you will be happy to follow up.
  • Contact your attorney. You do have a legal right to have your attorney present at the audit. This is recommended as the attorney can monitor the auditors activities and questions and can assist you with requests of a legal nature.


After an audit

Once an audit is complete, you will be informed of the outcome decided by the CMS. Whether good or bad, understanding your options after an audit is crucial. 


  • You can appeal. Appealing an audit is generally a very painstaking and often expensive process. However, if the sum of money is great or you feel the denial was completely unwarranted, it may be worth it to appeal. You can find the CMS guidelines for the appeals process here.
  • Pay the fee. Of course, the preferred option for CMS is simply to pay the fee. This may not be the worst option for the PT practice owner, either. If the concluded overpayment is not a business-ending sum of money, this option will certainly save a lot of time, headache, stress, and potentially, money. Remember, you can always ask for clarification and use the feedback as a learning opportunity for you and your staff. 


The bottom line when it comes to Medicare audits is that preparation is your best defense. Spend time and energy focusing on building up best practices for remaining compliant and use the many tools available to assist with internal auditing and teaching therapists how to improve their personal compliance with documentation and coding. When the CMS comes knocking, your PT practice will feel calm and confident heading into the audit. 

Topics: Clinicians, Physical Therapists, Compliance

Keenan Hartman

Keenan Hartman

Stay up to date on the latest from PredictionHealth

Leave your comments