How to Survive A Payer Audit – And Avoid Future Ones

[Joanna] Welcome to our third forum on Delivering Recovery. Today, I'm going to be speaking with Erin Burke, CEO and founder of Hansei Solutions, about how to survive a payer audit and avoid future ones. So Erin, I think you and I started our companies about the same time.

I started Vista in the summer of 2015 because I was so frustrated by the lack of actual outcomes data that allowed families to identify which treatment centers were doing good treatment and which were not. When did you start Hansei and what was your reason for doing so? 

[Erin] That's a great question.

So summer of 2015 is when I was actually working. I'd started my own LLC and I was doing independent consulting work for revenue cycle management. And that actually was the catalyst for Hansei because I was like, I'm going to teach you how to fish instead of fish for you.

That was my consulting group. And I realized that there was a huge gap in the business model in that people didn't want to learn how to fish. They wanted me to fish for them.

So that's really what started Hansei Solutions. So we actually are celebrating our 10-year anniversary next month. We were founded one year after you, summer of 2016, May of 2016.

But we were off to a running start. So I think it's very much like an entrepreneurial story. It was just me.

And on day two, I had to call someone because I was overwhelmed and they started. Then I had a clinical person on day three and it was the three of us. And then we needed two more people by the end of the second week.

And then we'd signed on three accounts. And then we just grew very quickly in the first two years. And then since then, we've been really strategic about how we kind of go about things.

[Joanna] Oh, fantastic. Well, hopefully most of our listeners aren't in a payer audit now. So I wanted to start off by asking you - what do centers need to do to avoid finding themselves in a payer audit?

[Erin] That's a great question. So it really depends on the payer. There are some payers where I will say it's not a matter of if, it's a matter of when.

And there are different types of audits. So the first type of audit that I'll talk about is something that we call a post-payment audit. Post-payment audits are a regular part of just basically doing business.

It's when the payers have a right to do them. It's when they say periodically, hey guys, we want to take a look at your charts and just make sure that your documentation is lining up with what our expectations are. So that is a general post-payment audit where you send your charts in.

We expect everyone should get one of those from their local Blues, from Optum, and from Cigna at any given time. And I would say what we would normally see is a cadence of maybe once every five years to have some post-payment review of just a small sampling of charts.

[Joanna] But I don't think that's what I'm hearing about from a lot of our clients. What I'm hearing about is something where they're actually like cutting off all funding.

[Erin] That's the second type of audit. So when people say they're in audit, usually what that means is they're in a prepayment review or an SIU or any type of audit where basically what happens is the payer completely shuts off the faucet to cashflow. No money is coming in at all.

You have to send in all claims with the charts attached to them. They go through a review process by the payer and the payer is scoring you. And you have to hit a certain score in order for the audit to be released.

Now the issue is that they don't tell you what criteria they're scoring you against. They also are backlogged because they're doing so many of these. We've really seen the frequency increase.

So right now, I remember in February, we got the scoring for charts that were submitted in October because there was such a backlog. So that means October dates of service at best were going to be paid in February. So we're talking about cashflow that can actually completely devastate a business financially.

And when we're working with family-owned and operated providers, even private equity-backed centers, this is not a disruption to cashflow. This is an absolute like emergency. It's a catastrophe.

It is a catastrophe. That's correct. To avoid getting into that situation, what really is fundamental is number one is your charting and your documentation.

Everything we want to make sure is documented appropriately because then when you get the post-payment review, which you will get at some point and you send your records in, they're going to be scoring you based on those charts. And those charts are what will ultimately determine whether or not you get into an audit. 

The second thing that I would say is make sure that you are in compliance with whatever your financial agreement program looks like through the patient registration process.

So as people admit into your treatment center, if you have a hardship opportunity, make sure you're having them file hardship forms, that you're collecting W-2 information to validate that they really are in financial hardship so that you can discount the patient cost share in a compliant manner. The payers want to see, especially if you're in network, you have a requirement to ensure that you are doing your best to collect on patient cost share based on what the patient can afford. So I always say, think about it as if you were going to the hospital.

When I was 23 years old, I went to the hospital for a kidney infection. I got a bill for like $6,000, which I could not afford at all. And this was before the Affordable Care Act.

So I wasn't on my parents' insurance anymore. I don't even know what the circumstances were. But I do remember that I flipped over that bill and it said, if you're in financial hardship, let us know.

So I filled out the paperwork. I said, listen, this is my income. I can't afford to pay this bill.

And they said, no problem. We're going to reduce it to $1,000 and we'll let you pay 20 bucks a month for the next 50 months. Which is much more reasonable.

So you can do those things, but you need to have the conversations. You need to have them documented and you need to have processes and procedures around it. Because a number of times, the post-payment audit requests also include financial records, which includes, you know, have you been doing your job in collecting patient financial responsibility?

The third thing that I'm going to talk about is what really flags people for those post-payment audit requests. There is some where we just expect it to happen once every five years. It's been five years.

I haven't had an Optum request; it's probably around that time. But there are billing patterns and behaviors that will trigger one.

And it's essentially when they identify irregularities in your billing processes. And I will give a few examples of those. If you go from a census of zero to a census of 100 in three months and there's a huge increase in your volume, that would stand out in their analytics.

If there's an abrupt shift in your coding practices, that would stand out in their analytics. If you have a whole bunch of people that are starting treatment on May 1st and they all have brand new Ambetter policies, that's going to stand out in their analytics. Any type of change in volume, in coding, in billing cadence will be indications of fraud, waste, and abuse and could trigger a post-payment audit, which will then ultimately turn, they'll find a reason to turn it into a prepayment review.

[Joanna] And how about coding irregularities or everyone coming in with the same sort of problem? Is that another thing that the algorithm will tend to flag?

[Erin] Coding irregularities, I think, are one of the biggest pieces. So we found people who have come to us and nobody comes to Hansei because their revenue cycle is going great. I've never gotten a call where they're like, things are awesome.

We've got the best partner in the world, but we just want to move to Hansei. They call us because there's an issue. They're stuck in an audit.

Their AR is growing. Their census is growing, but their cash is staying flat. They don't have visibility or transparency into their revenue cycle processes.

There's always a catalyst that drives that phone call. And oftentimes, it is an audit. And we have a very strong department to help people get out of audit, both through medical records and clinical education and audit prevention, helping establish some of these policies and procedures.

But in addition to that, on leveraging our relationships and our knowledge around regulations, what is legal, what isn't legal, what the payers can and cannot do, what is a parity violation? These are things that I'm not equipped to handle, but we employ people who are specialists. They are senior revenue integrity analysts, and they are looking at things through the same lens that the payer is looking through.

So I completely lost track of what the question was.

[Joanna] The coding for algorithms.

[Erin] Oh, yes. Okay. So when they come to us, oftentimes what we'll see is that they were, that there was noncompliance in coding.

And the noncompliance in coding or the change in coding practices is what triggered the audit. So an example of that would be a place that's doing IOP and PHP services, but they're also billing routine outpatient on top of it. It could be a place that is billing IOP and PHP services, but on Saturdays, they're going to a therapist and the therapist is billing for the same exact diagnosis.

It could be that they changed the revenue code, that they've always used revenue code 9-1-2, and now all of a sudden everything's a 9-1-3. Another thing is that it could be that everybody has a very generic diagnosis code. We want specificity with diagnosis codes.

If everybody comes in with opioid dependence, noncomplicated or uncomplicated, that is going to trigger something because they would expect that there's complications. They would expect that they have secondary diagnoses. They would expect there to be, just like we want to deliver individualized treatment and have an individualized treatment plan with a multi-modality treatment team, your diagnosis code should represent the same thing.

One of my favorite things to do when we're working with a group is bring in therapists, the case managers, and we shut down the EMR. And we, at Hansei, look at the EMR and the therapist and the case managers and the treatment teams don’t. And we pull a random patient that's in treatment and I'll say, hey, Jerry, tell me about Sam P. And Jerry goes, oh my gosh, Sam P, poor thing, going through a divorce, you know, the relationships with the children, there's a custody battle, they're in a financial hardship, they just got fired from their job, they're not sure what they're going to do about COBRA.

To make matters even worse, when they were on their way to treatment, they slipped and they fell on the ice, they hit their head. And like, Jerry knows everything about Sam P. Then we go and we say, okay, let's pull up their chart.

We're not seeing the divorce in there. We're not seeing the, you know, the family dynamics. We're not seeing family therapy with the children, which should be included as part of that treatment plan. And I see nothing about the head injury at all. So that's an example of the type of documentation that we want to see.

And then that documentation would support a more complicated diagnosis code. So the payers are also looking at diagnosis codes in addition to your revenue codes, your HCPCS codes and your type of bill codes if you're an institution or your CPT codes if you're billing for professional services.

[Joanna] All right. So let's dive into the nitty gritty here. One of our centers, one of your centers, gets a notice that they're being audited.

What do they do first?

[Erin] The very first thing they should do is contact the investigator on that document, on the notice that they receive, and establish a relationship and say, hello, I'm going to use an investigator that we work with a lot. Hello, Raina, we've received the notice. Just want to acknowledge receipt.

If it's a post-payment audit request for medical records, immediately ask for an extension because it is very labor intensive to actually produce medical records for somebody who had a 30-day treatment episode. It could be hundreds of pages of documentation per patient. And it's a burden.

So if it's a post-payment audit, reach out to the investigator, introduce yourself, acknowledge receipt, let them know that you're in network and you value the relationship, but you want to kindly and respectfully request an extension. I have never seen an extension not granted. 

If it's a pre-payment audit, same thing.  I would reach out to the investigator, email them, let them know that you're in receipt, acknowledge the receipt of the pre-payment review notice, and then ask for the reasons that you were placed in that pre-payment review. So keep it exploratory and kind. The second thing I would do is I'd hang up the phone and I would call somebody who knows regulatory matters for insurance in your state very well because what we found to be the most effective way to get out of audit is not through sending in months and months and months of good documentation, but it is actually leaning on the regulators in that state, whether it's the Department of Managed Health Care or the Department of Insurance or the insurance commissioner, you know, looking at the contract language in your contract with the payer if you're in network, looking at what the state guidelines are for that specific license that you carry, looking at comparable CMS guidelines and identifying where the payers are actually in breach of withholding payment and leaning on it from a regulatory aspect. Hansei, we're an example of an institution that has that level of expertise. We're certainly not the only ones out there.

I'd be really looking for a senior revenue integrity analyst that specializes in institutional substance use or mental health practice. But in your particular state? Yeah, they don't necessarily, if they are a certified coder, a certified revenue cycle specialist and a certified revenue integrity specialist, then they will have the resources to have the knowledge for your state.

So I'd be looking for somebody that has that level of certification.

[Joanna] Can you talk a little bit more about the regulatory angle? You know, what exactly you can do to challenge on a regulatory basis? Yeah, I can give a recent example.

[Erin] This is one that hit home for me. We had a client, one of our clients at Hansei, we've been working with for a decade. Good program, family owned and operated, not very big, really good patient outcomes.

They actually use Vista Research Group for patient outcomes tracking. They have an extensive alumni community and just a really good reputation in their community. And I actually had a cousin who was in treatment there at the time.

I'm Irish, so there's a lot of us. Irish, many generations of alcoholism in my family tree. So they're in pre-payment review with Anthem.

And the reason is because we keep getting the same denial, consent form and admissions agreement.

[Joanna] I'm sorry, can you explain a little bit more? What were they looking for that they didn't have?

[Erin] We weren't sure because we sent in the consent form and the admissions agreement. So in the original submission of medical records, we didn't include those because it's unusual to include registration paperwork when you're sending in medical necessity for a specific claim. So they were already in a pre-payment review.

The pre-payment review was triggered from a coding issue. So they're already in a pre-payment review. The coding issue is resolved, but they're unable to get out of it because the pre-payment review team isn't seeing the consent in the admissions agreement.

So of course, what we do is we send them in. That's what the natural next step is. Well, they said, well, they didn't attach it to the medical record.

So you have to reprint the whole medical record out, attach it and then resubmit the claim all together to the pre-payment review team. This goes on for two months. I finally am like, okay, this needs to be escalated.

They are in a cash flow crisis that could jeopardize the continuity of this program and patient care. And they've been a member of the community for over a decade. And they have thousands of alumni that have sought recovery.

And I just felt really close and passionately about getting them out. So we'd already had these revenue cycle integrity specialists at Hansei. I just was using them for other reasons to evaluate our own internal processes.

But I brought one over and I said, I said, listen, I'm doing all the research in the world, but I need help. And she pulled all the regs for the California Department of Managed Healthcare. She pulled the regulations for that specific license that they carried.

She pulled the regs for the contract that they had and put it all together. And what we learned is that it is non-compliant for the payer to withhold payment for medically necessary services due to an administrative error. A consent, an admissions agreement has nothing to do with the medical necessity.

Those documents do indeed exist. And therefore the payer was out of compliance for withholding the cash. So we sent in a very long - I think it was in the neighborhood of 80 pages - letter asking for immediate relief from the audit.

And not only did we send it to the prepayment review team, but we also sent it to the Department of Insurance or to the Department of, whoever the regulatory body was, I think it was the Department of Managed Healthcare. And the audit was lifted within two weeks. And I'm just so grateful that that approach worked.

It's not the first time we've taken the approach of involving the state, but now we have an even better system because we've got the tools and the people with the expertise instead of just me basically saying, hey, this is a good treatment provider. They're not doing anything wrong. We have the people who actually have the certifications and the expertise to be able to pull the regulations.

And it could, something that could take me 12 hours, they can get done in one hour and something that I could never do, they can do. So now that we have that talent, we're able to crank these out a lot faster.

[Joanna] So you mentioned in this case, it was a Vista client. Does having Vista outcomes, how does that help your work in getting people through audits and avoiding audits in the first place?

[Erin] You know, I think tracking outcomes is essential. It's not only essential for a payer audit, it's essential for payer negotiation. I mean, if we're talking about just revenue cycle, it's essential for you, the facility, to know if they're doing a good job so that they can have a culture of continuous improvement so that they can continue to deliver better and better clinical outcomes.

That aside, from a revenue cycle standpoint, I think it's imperative in an audit situation because we can say, hey, listen, this is a good treatment provider. They are doing good work. Or, look at the last five years, they've been investing in order to improve their work.

So, you know, they had X percent satisfaction in 2023, Y percent satisfaction in 2024 or, you know, whatever it might be. We actually, in this letter, included the Vista research report and a summary of the findings as part of our appeal and sent that to the Department of Managed Healthcare. We said not only do they embrace a culture of continuous improvement, but they're going above and beyond and they're investing in it.

They're paying for it. They're not doing it themselves. Even if they were doing it themselves, that's still helpful, but it's much more helpful when we can show they're using a third party where there's no bias and, you know, it's being benchmarked against other treatment programs.

And we were able to show that, like, these are the good guys. Like, these are the types of people that you want in your network, that you want in your community. You want the ones that are investing and tracking their own work and their own performance so that they can get better and better at their jobs and that they can stay mission aligned, which is helping people get recovery.

So, yeah, but we also use it for payer negotiations, just FYI. So, you know, we can show really good outcomes, clinical outcomes. It reduces the lifetime spend that the payer needs to spend on that member.

And that allows for us to negotiate better rates with the insurance companies. So, you know, we want to be able to show not clinical outcomes just for while the person is in treatment, but post-discharge clinical outcomes is really when the rubber meets the road. We want to show that they are no longer a burden to society through jails and other institutions.

We want to show that there aren't any emergency room visits. We want to show that they're not overdosing and landing in the ICU. And that they are not, you know, that the insurance companies are thinking about it from a cost standpoint.

If we can show those things, then we can do better negotiations, improve the actual rate, but we're also now moving in a direction of value-based care where we can negotiate case rates. We can negotiate longer lengths of stay. We can negotiate things like that based on clinical outcomes.

So, outcomes are essential all the way around. Terrific.

[Joanna] I want to change the subject to something else we talked about the other day, and that is the struggle that we're having in the SUD industry with mental health parity. Can you talk a little bit about some of the issues that you're running into? About my Erin Brockovich?

[Erin] Yes. Erin Burke turned into Erin Brockovich? I'd be happy to discuss that.

So, it's been my hypothesis for several years that mental health and substance use providers were being treated differently than their medical counterparts. So, I guess if you are a residential treatment center, the best medical kind of like equivalent would be a long-term care facility or something like that, or a SNF, a skilled nursing facility. But it was a hypothesis, right?

So, then we started working outside of the vertical and started billing for ambulatory surgical centers, which could be comparable because it's facility-based and it's an outpatient service. And we started looking at denial patterns. We're like, hmm, this is interesting.

Only 5% of claims for this payer, only 5% of claims request medical records from this payer when it's a medical diagnosis. But when we send in a substance use diagnosis for the same payer, we're getting 30% of claims requesting medical records. But I only had like that one population of ASCs to compare it to.

But it started opening up the thought process for me that these are what I would call sneaky parity violations because they're not obvious. It's not a $10,000 deductible for substance use and a $2,000 deductible for the hospital. It's sneakier.

It's the frequency in which medical records are being requested based on diagnosis code. It's the frequency of audits. It is, hey, when you audit a hospital, do you ask for their patient registration paperwork too?

Or do you only ask for that when you audit a treatment center? It is Cigna is a good example of this. When they do a post-payment audit, they always 100% of the time ask for money back.

I've never seen one where they haven't asked for money back. It's a revenue arm for them. And they use extrapolation to do so.

Do they do the same thing when they're auditing skilled nursing facilities? I don't know the answer to that question, by the way, but I want to know the answer to it. When we receive audits for facilities, we usually see that it's for every single service that they deliver.

So if they're doing PHP, IOP, mental health and substance use disorder, we'll see that the prepayment review is for all four lines of service. Whereas in a hospital environment, we would see that it's only for a single service. Maybe they're only looking at their orthopedic shoulder replacements.

And they're not looking at every single, they're not shutting off cashflow for the whole hospital for every service the hospital is rendering.

[Joanna] And yet what they're doing for the substance use disorder treatment centers because they're looking at everything. So they are continuing to send patients, but they're not paying anything for six months. That's correct.

[Erin] And you have to continue taking patients in order to get out of the audit. You can't just stop taking the patients. And also there's an ethical, there's an ethical, real challenge for the provider because they know they want to help the patients.

They've got the patients in treatment, but they are not going to get paid right now. Hopefully they'll get paid in six months. Hopefully they'll get paid in three months.

Hopefully we can get them out of it even faster, but they know they're not going to be paid. But at the same time, they can't just stop admitting that entire population, because if you stop admitting the population, you're never going to get out of the audit. So it's a real conundrum.

And the last thing that I'll finish up with with this is that we are now proving the hypothesis. So my dream of proving that it's not just an instinct or intuition or something that I can prove with this group of ASCs and these payers in California. We have now, as Hansei has been able to mature, I would say we started off as infants, then we were teenagers, and now we're becoming adults.

And as we've matured into adults, as I've matured, you know, I'm now 40. I was 30 when I maybe I was 30 when I opened the business. We're now able to afford to bring in real talent that has those certifications and that skill set.

And we're able to invest in technology to be able to identify these patterns so that we can hopefully make a sea change through some type of a mass action and then have regulatory oversight. So that's my goal.

[Joanna] If any of the folks that are watching this have a personal experience with mental health parity issues, they should reach out to you?

[Erin] Please do. Or if you've been adversely impacted through an audit, whether it's a prepayment review or a postpayment audit or there's a major recoupment or you're seeing a high rate of denials and you're not sure why. Let's say, oh my gosh, half of my UMR claims are getting denied and I have no reason and I don't know why. Reach out because we want to find as many providers as possible. And we're really looking for a way to do this where it's at no cost to the provider.

So I think that there's enough support through advocates around the country that we're able to raise enough funds to be able to do this at no cost to the provider.

[Joanna] Fantastic. One last thing. You very generously offered to give anyone who was attending or watching this webinar information that can help them identify how they're doing with revenue cycle compared to norms.

Can you just mention a little bit about that?

[Erin] Oh, yeah. Thank you so much for bringing that up. So one of the things as we've matured into adults is that we've been really able to invest in our technology.

And as part of that technology, we've been able to create AI solutions that allow for us to quickly ingest data, de-identify data, of course. Even though we're happy to sign a BAA, we still don't want PHI. We just need the claims information with some unique identifier.

We can ingest that data and then we can quickly benchmark it against what we are seeing across the country or in your state specifically. So Hansei is in 42 states. We've processed millions of claims.

We have a very, very, very robust data set and we can use that for benchmarking purposes. And we can basically say, hey, how are you doing against benchmarks? How are you doing against your peers?

What does your DSO look like against your peers? What do your collections rates look like against your peers? We can't say how your contract rates compare to other individual providers.

We can say, how do your contract rates compare to Hansei's benchmarks? How quickly are you getting paid? Are you getting paid in 40 days or are you getting paid in 18 days?

And what is the benchmark there? What do your denial rates look like? We can red flag anything that looks like it could be a coding problem.

So yes, we're happy to do that. We're happy to do that as it courtesy for anybody who's interested. And the reason why we're able to do it now as a courtesy is because we have been able to invest in those technology solutions.

So we have tools available where it's a pretty, pretty low cost for us to be able to deliver that.

[Joanna] Why don't you tell me afterwards where you'd like people to, what you'd like people to do if they're interested in getting one of those?

[Erin] Okay. Yeah. Yeah, absolutely.

So I would actually say you can email me. I mean, you, I, my, I've had the same phone number since 2001 and that's a little bit embarrassing, but everybody has my phone number and I tried getting a personal line so that I could, you know, put work away sometimes because I'm sure a lot of us, if we're our owner operators on this call, know that being on your phone all the time can be, could cause spousal disputes. Uh, so I was like, okay, I'm going to get a new phone and I'm only going to tell my friends and family that number.

And I'm going to put my other phone away. I'm not a two phone person cause I kept losing one or the other. So I had to throw away the pink phone.

I'm back to the, just having the one phone with the same phone number I've had since I was 15 in 2001. And yeah, and it's public, it's publicly available. My phone number is (330) 807-4509.

You can shoot me a text message and I will text back who to get in touch with at Hansei. Or you can email me directly at Erin@HanseiSolutions.com and that's H A N as in Nancy, S as in Sam, E as in Edward, I as in Indigo, solution plural dot com.

[Joanna] Beautiful. Erin, I can't thank you enough for this, taking the time to share your expertise and the wonderful advice. Um, thank you so much for joining us and I look forward to talking with you again in the future.

[Erin] Well, thank you for inviting me. We've known each other for a very long time now. Um, I think we first met in person in 2017 probably.

And, uh, it's been really a pleasure to see, uh, Vista Research Group thrive over the last decade. And it's been, it's always nice to have a community of peers where we are maturing together and we are all mission aligned and wanting to see the same thing, which is making sure that good treatment centers are being treated fairly and that everybody is being funded fairly so that they can deliver good clinical outcomes. Um, and I know that you and I have been mission aligned since day one, so thank you for having me.

And also I could talk about revenue cycle for forever and ever and ever and ever. So I apologize if I, if I became too, uh, nerdy.

[Joanna] You were perfect.

[Erin] Okay.

[Joanna] Absolutely perfect. Thank you so much.

[Erin] My pleasure. Thank you.