How to Survive Health Insurance Audit?

Fawn, fight, flight, or freeze! When you receive an audit letter from a health insurance company, your mind goes blank, and your body goes numb. Was this letter sent to you? First of all, take a deep breath when receiving a letter like this. Read the letter carefully. There are many questions that therapists ask when they do. Nearly daily, therapists are asking me to review forms for audits. 

Understanding the healthcare insurance company process from start to finish is the best way to be prepared for an audit. Consider these tips before a potential auditor knocks at your door about preparing for an audit. 

How Does A Clinical Insurance Audit Work?

The clinical insurance billing services audit examines how health care is delivered to root out fraud, abuse, and waste. As it turns out, there was an unexpected consequence of the new mental health parity laws when they went into effect on February 10, 2021. Audits in the insurance industry increased significantly. Patients perceive parity as (and for some reason) a way to limit services and keep providers from receiving adequate compensation. The majority of therapists are not required to perform audits. Hence being prepared is important. 

The Key Findings From Health Insurance Companies 

What do I send first? That is always the first question. You can tell how to proceed from the letter if you read it carefully. Due to audit anxiety, students tend to stare blankly at the paper or dissociate while eating chocolate instead of studying what the letter says. Psychotherapy notes can easily be confused with progress notes. Rather than calling them notes, people prefer to call them Memory Notes, as their purpose is implicit in the name. During a session, notes can affect our memory. Medical Insurance verification software is interested in this type of information. 

Health Insurance companies request a copy of these records during an audit. These records include an intake summary, progress notes, treatment plans, and consultation notes. As an alternative, all documents associated with our medical records must be between specific dates. 

Patient Expectations 

The health insurance companies do not swarm your office like a swat team and confiscate your files or computers. The best health insurance company initiates an audit through a letter. Your past claims may be underpaid. You may also have to submit documentation associated with your claims to demonstrate your medical necessity. A list of treatment dates is usually required. Examples include: 

  • The diagnostic assessment is also called the biopsychosocial assessment or a biopsychosocial assessment. 
  • Plans for treatment, 
  • records of progress. 
  • After discharge summaries, 
  • Communicate with anybody associated with the client case. 

It is necessary to prove medical necessity by fulfilling specific documentation requirements. Practice management systems will only request to see your online records or program by your insurance company if they suspect fraud. 

How To Prevent Clawbacks 

The medical insurance verification software is based on a pass/fail scoring system. If you fail to reach 80%, however, recoupment will occur. A clawback, or recoupment, refers to a demand for reimbursement by the insurer. Calculating a clawback can be done in two ways. 1) The score is calculated based on the specific claims that you make, or 2) it is calculated by sampling and extrapolation. The sampling and extrapolation process is when the insurer examines a small sample of your prior claims and extrapolates that score to all subsequent claims over a specific period. Repayment is possible, or you can deduct the amount from future payments. 

Medicare standards are the most stringent requirements, and most companies follow them. Health insurance companies may audit you if you document to Medicare standards. Although audits are rare, it is possible to fail them completely. Most often, this happens because the therapist does not know the medical necessity requirements — and for the same thing, they are afraid to call the insurance company.  

Do’s and Don’ts of Health Insurance Audits


It is advisable to set aside letters until the appropriate time arrives to read them. Choosing a suitable time is impossible. You will be presumed unable to provide the notes if you do not respond. In this case, you will automatically forfeit all patient billing services for those sessions. Reading the whole letter would take too long, so you skip it.  


Take a deep breath! It will pass. Even though an insurance billing services audit feels like an attack on your professionalism, it is not. Your professional life will be simpler if you are calmer during this unfortunate episode. 

I suggest you read the letter carefully shortly after receiving it, if not immediately.  

 Consult your insurer. Clarify any questions you have with them. For example: 

  • Make sure you understand the purpose of the request and inquire whether participation is required. Records requests are not always for rooting out fraud. Instead, they determine which diagnoses are most common among patient billing services. These are not mandatory requests but rather research requests. 
  • Ask the auditor about the purpose of the audit. If you do not receive a clear answer, inform the person what could happen if they do not respond.  
  • Health insurance companies inform the clients what record they are required to send. You may have just one client to attend as well. Other times, it several. 
  • When is the service to be provided? When is it to be offered? The health insurance companies may require specific forms, and want records for six months and a year’s worth, while others need. 
  • How quickly must it be completed? In some letters, you will find the words, and possible. Other documents give a specific date, sometimes two weeks after mailing. Despite its arbitrary nature, this date seems to come out of nowhere. Ask for an extension if necessary. Describe your actual situation. If you don’t plan for an audit, you likely won’t have enough time to complete one. You are sick looking after a sick relative, trying to balance your work and your kids’ online learning.? The first time is always a challenge, but I haven’t heard anyone refuse. 
  • Understand how your insurer calculates any recoupment. Does it draw its conclusions from the audited notes or those derived from sampling? Knowing the amount of money at stake will help you better understand the matter. 
  • Review your notes with a knowledgeable person so you can correct any mistakes. As with any writing endeavor contacting your editor is difficult because you know your work too well. Documentation Wizards would ask someone with knowledge of documentation requirements to review their notes before submitting them. 
  • Risk Retention Specialists are provided free of charge by your liability insurance policy. Since preventing a problem costs less than defending you when one occurs, your liability insurance provides this service free of charge. Based on this discussion, you can determine whether you need to consult a psychotherapist-experienced attorney. Typically, attorneys offer free consultations of 20 minutes. The attorney uses this discussion to decide whether or not to take your case. These consultations may provide you with helpful information. 
  • Choose a path that is supportive of your wellbeing. Making notes for an audit could prove too much trouble for you. 

Final Thoughts

Have you ever wondered what your audit revealed? Three months have passed after tendering copies of your records. Health Insurance companies immediately notify practices when they discover a problem. Keep going. You will clear your first audit. 

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