Medicare audits are becoming more frequent, more aggressive, and more precise—shrinking the margin for error. To protect against inflated findings, healthcare organizations must rely on statistical modeling, independent coding reviews, and specialty-specific expertise.
In a recent Becker’s Healthcare webinar, VMG Health’s Pam D’Apuzzo, Managing Director of VMG Health’s Coding Audit & Compliance division and Frank Cohen, Senior Data Scientist at VMG Health, shared how to recognize when the math warrants a challenge—and how to respond effectively.
Here are three key takeaways from the discussion.
1. The 100% Error Rate Myth
According to Mr. Cohen, Medicare audits now occur every three to five years and extrapolated findings can inflate repayment demands by 10 to 50 times. Yet 85% of practices pay without contesting the results, even though 60% of appeals are ultimately decided in the provider’s favor.
In the sessions’ featured case, a 15-provider cardiology practice was hit with a 100% error rate on 100 claims, leading to a $1.8 million extrapolated repayment demand. In this case, auditors cherry-picked claims, excluded those under $75, and ignored underpayments. Their sample had a 14% higher average paid amount than the full claim universe, indicating bias in favor of high-dollar claims.
For Cohen, this case perfectly illustrates why detailed audits are needed because these types of outcomes are statistically implausible.
“I have never seen a legitimate 100% error rate in a functioning practice,” said Cohen. “When we see those higher error rates, it’s because they picked two or three codes that are controversial, and they have their own way of determining whether or not they were appropriate.”
2. Specialty Expertise Is Critical
A major flaw in audits is the lack of cardiology-specific expertise among the auditors.
D’Apuzzo stressed the importance of independent coding reviews. In the mentioned case study, a review included two seasoned experts, one with Medicare contractor experience and the other with two decades in cardiology, yielding a much lower error rate. Their reviews aligned 89% of the time and identified only 46% of claims with issues, half of which were related to medical necessity, not coding errors.
“These audits are very intricate work that take time and attention to be able to have an outcome that is reliable,” said D’Apuzzo. “Really understanding even those professional standards that are being used to determine the audit results is incredibly important.”
D’Apuzzo emphasized that audits often rely on general Medicare guidelines without understanding cardiac anatomy or specialty-specific abbreviations, leading to misinterpretations. For her, accurate audits require not just access to guidelines, but deep clinical context and knowledge of specialty-specific coding standards.
3. The Three-Pronged Defense
VMG Health implemented a three-part strategy: a statistical challenge to discredit the extrapolation, clinical validation by independent coding experts, and evidence-based negotiation.
Ultimately, the repayment demand dropped from $1.8 million to $160,000. The practice invested $25,000 in legal, coding, and statistical support, yielding a 6,500% return on investment.
The keys to success for both Cohen and D’Apuzzo are knowing basic compliance metrics, preparing response protocols for audit letters, and never accepting improbable findings at face value. D’Apuzzo urged providers to “demand appropriate expertise and assess the auditor’s credentials,” especially for high-risk specialties.
“Trust your operational reality and ask what’s happening in your practice,” D’Apuzzo said. If there’s misalignment with what you know you’re doing in the practice, you want to further investigate that.”
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