EntreMD Live 2024! Join the No. 1 conference for physicians who want to build 6- and 7+ figure businesses

Close this search box.

Key Factors to Consider in a Medical Coding and Billing Audit

Systematically reviewing your healthcare organization’s medical coding and billing practices is essential to ensure accuracy and compliance while preventing fraudulent activities. It can be a bit nerve-wracking to conduct an audit– whether you’re taking it on yourself internally or having a third party come in for an external audit– but understanding a bit more about the process can help alleviate any uncertainty you might have.

The coding and billing audit process will closely examine the reliability and effectiveness of clinical documentation and the entire medical billing process. Health records, medical billing data, billing practices, and more are monitored in order to identify inaccuracies and, if necessary, offer insight into the changes your organization can make.

What are some of the most important factors you’ll need to consider when conducting a medical coding and billing audit? What are the best practices for undergoing an audit in your organization?

What Is a Medical Coding and Billing Audit?

A medical coding and billing audit strategically evaluates a healthcare organization’s complete medical billing procedure. The main purpose is to ensure that the coding and billing process is both dependable and effective.

Performing a Medical Coding and Billing Audit

There are two types of medical coding and billing audits: prospective and retrospective. The former refers to performing an audit before claims are submitted to payers, while the latter refers to conducting this audit after claims are submitted to payers.

Beyond the ability to conduct audits before or after payers receive claim submissions, there is also a distinction between internal and external coding audits.

Internal Coding Audits

During an internal audit, the healthcare organization will direct staff members to conduct the audit.

Internal Coding Audit

Depending on the size of the facility, this could mean having a dedicated audit department in charge of conducting reviews of the procedures and processes used during coding or training a medical coder to conduct these audits.

External Coding Audits

Medical coding and billing audits can also be performed by third-party companies. While an organization can receive quite a bit of value from internal coding audits, third-party audits add the additional benefit of objectivity. Furthermore, companies that specialize in offering auditing services to healthcare organizations often can perform more advanced auditing processes than the facilities themselves can accomplish internally.

External Coding Audit

Though an external audit can be a stressful event in a healthcare organization, preparation can help reduce tension around the event. You can also work to help your team understand that the third-party audit will ultimately help them develop and improve.

Why Conduct a Medical Coding and Billing Audit?

Undergoing a medical coding and billing audit provides a number of benefits to healthcare organizations. Let’s look at some of the primary reasons a healthcare provider would want to conduct an internal or external audit.

Coding Compliance

Billing audits are a primary tool you can use to identify and fix any issues before they are challenged by insurance payors or the government. When you conduct an audit, it allows you to identify inaccuracies and help instruct your staff on how to correct any problems. This doesn’t just ensure coding compliance, but it can help build confidence among your staff.

Conducting a Billing Audit

As part of the audit, those charged with conducting it can identify areas where training and education could benefit the organization to ensure that all staff members follow the proper protocol.

Ensuring Compliance

Beyond coding compliance, auditing medical claims can help protect your organization from fraudulent claims and billing activity. As a part of the process, you might turn up reimbursement deficiencies or identify ways where inappropriate coding is causing inaccuracies.

Ensuring Compliance

When you are able to reveal areas where reimbursement isn’t up to snuff, it can boost your revenue. The auditing process also helps to ensure that all files are processed as efficiently as possible and not slowed down by improper payments.

Boosted Practice Revenue

When you conduct an audit at your healthcare facility, it helps to protect you from billing and claims fraud.

Boosted Practice Revenue

Having an internal system of checks and balances in place makes it very easy to figure out whether electronic health data is effectively being used and ICD-10-CM compliance is occurring. This helps reduce the chance of denials, which, in turn, helps boost the revenue of the practice.

Improves the Payer-Provider Relationship

A medical audit can help create a stronger relationship between the payer and the provider.

Improved Payer-Provider Relationship

Payers want to know that claims are being filled out properly and submitted through the proper avenues. By scheduling regular audits, you can help strengthen the business relationship between all parties involved.

Administrative Benefits

Your administrative staff can also benefit from the audit process. By confirming the claims’ accuracy, it helps create a culture of compliance and a positive, stable work environment.

Conducting an Audit

Rather than getting bogged down by unnecessary frustration, audits can help to set a standard where inaccuracies are minimized and the coding and billing process is optimized.

Are you starting to feel like it’s time for you to take more control of your professional life? If so, make sure you check out our articles about other career options for physicians and medical professionals, including physician consultants, independent medical examiners, and starting a medical staffing agency.

How Often Should You Have an Audit?

There are a number of factors that can influence how often an organization will conduct a medical coding and billing audit. These include:

  • The rate of staff turnover
  • The size of the organization
  • Frequency of regulatory updates

Though organizations can vary depending on these and other factors, experts often recommend audits be conducted at least once a year. At some healthcare facilities, however, external coding audits are conducted on a monthly basis. Organizations can ensure consistency, clinical document improvement, coder development, and compliance by performing monthly coding audits.

A Healthcare Organization Audit

When you engage in monthly audits, errors can be identified more quickly and with more frequency. This means that mistakes that result in lost revenue occur less often and can be rectified when caught.

The overall coding process can be greatly improved when conducting monthly audits, as this gives the organization access to insights that enhance the entire procedure. 

Key Factors to Consider When Conducting a Medical Coding and Billing Audit

Conducting a medical coding and billing audit can feel like a huge task, but breaking it down into smaller pieces can help make the whole process much more manageable. Let’s look at some of the key factors you’ll want to keep in mind as you plan and implement your audit.

Selecting Your Auditing Team

One key factor you’re going to want to consider when conducting a coding and billing audit is whether you want to run an internal or external audit. If your company is large enough to have an auditing department, this would fall into their sphere of responsibilities. However, for smaller companies, staff will need to be selected and trained to conduct the audit accurately.

An Auditing Team

If you’re planning on hiring an external company to help get another set of eyes on the situation, you’ll want to take the time to research your options. Consider what your objectives are and which company will best be able to help you meet your goals.

There can be quite a bit of variation between auditing companies, and you’ll want to make sure that the one you go with offers all of the services you’re looking for. For example, you’ll want to consider whether they include both a prep call and an exit call as a part of their communication strategy. Beyond that, you’ll want to research whether they provide any continuing coder education, as well as the types of reports you can expect to receive once the audit has been completed.


At first glance, the auditing process can seem incredibly costly. The truth is, though, that what you stand to gain far outweighs the investment you are making. When coding isn’t being reviewed on a regular schedule, it means that problems such as underpayments or overpayments can go unnoticed for long stretches of time.

A Budget Audit

When you conduct an audit, it allows you to identify dollars that are potentially at risk. For example, Medicare defines an overpayment as any payment that is a greater amount than is considered properly payable according to the Medicare statutes and regulations. When Medicare identifies an overpayment, the amount you owe becomes a debt that must be paid to the Federal government. These types of overpayments in Medicare often arise from issues such as insufficient documentation, incorrect coding, administration errors, and medical necessity errors.

When an overpayment has been made, there is a timeline that must be followed in order to return this payment. The organization can face serious consequences if you fail to meet the sixty-day deadline.


As a part of the overall auditing process, accuracy is absolutely key.

Ensuring Accuracy in an Audit

Regular coding audits can help ensure that coding accuracy is the norm in your organization.


In addition to accuracy, productivity is another immensely important part of an audit.

Organizational Productivity Audit

As an operational/management indicator, understanding productivity as a metric can help you identify the strengths and weaknesses of your coding staff. This, in turn, can help you more effectively manage your department.

Are you considering branching out and starting your own business? Check out our guide to finding the perfect niche as a medical entrepreneur.

Areas of Focus During an Audit

Now, let’s take a closer look at some of the areas where auditors will focus their attention during the process.

Patient Record Verification

As a part of a medical coding and billing audit, patient IDs and authorization verifications will need to be included.

Patient Record Verification

Personal health information such as name, date of visit, date of birth, place of service, date of service, and so on will need to be cross-matched with the documents associated with the claims. Patient insurance coverage plans will also need to be verified as a part of the process. 

Provider Information Verification

Another part of the process involves verifying information about providers. Documents must be checked to ensure they are properly authorized by the right provider.

Provider Information Verification

Beyond that, auditors will need to ensure that the providers have the licenses and credentials required at the state level.

Duplicate Records

Sometimes, duplicate records will be turned up during the audit process. For example, a healthcare provider may have a history of paid or denied claims with matching codes or service dates.

Duplicate Records

It’s essential to confirm whether these are duplicate claims as well as whether the billing process has been accurately completed is essential.

Electronic Health Records Verification

Another important element of an audit is ensuring that electronic health records are checked against the IDs in all of your records.

Electronic Health Records Verification

For example, you’ll want to make sure that the information included is complete and clear, the dates are correctly entered for all procedures and visits, past medical history is accurately recorded, and data about allergies and other contraindications are consistent across records.

Diagnostic Reports Verification

A medical audit can also include verifying that all diagnostic tests that were ordered were actually appropriate for the condition that was suspected by the medical professional.

Diagnostic Reports Verification

Any and all lab results must have the correct dates and any necessary authorization included.

Are You Ready to Tap Into Your True Potential?

One of the primary reasons physicians are leaving their posts in droves is due to the increasing administrative burdens placed on them. Rather than being able to focus on what they’re best at– providing the best possible care to their patients– they are saddled with paperwork, documentation, and endless administrative tasks.

A Medical Entrepreneur

It doesn’t have to be that way. Though medical school doesn’t provide you with the business education necessary to break free and become a medical entrepreneur, the EntreMD Business School can. Designed to give you the business education you didn’t receive when you were training to become a doctor, this is the program you need in order to achieve real-world success.

After reading today’s article, did you have any questions? If so, please feel free to let me know at any time, I’d be more than happy to assist you however I can!