Operations traditionally views Internal Audit as a necessary evil that hopefully doesn’t show up during budget season. With constant budget cuts and reduced reimbursement, Internal Audit can help improve both financial and operational outcomes with in-depth revenue cycle and hospital/clinic operations reviews at no cost to the department.

2. TODAY’S OBJECTIVES
• Identify strategies to engage Internal Audit and focus their
efforts on bottom-line outcomes and departmental
priorities.
• Explore audit methodologies designed specifically for the
revenue cycle and hospital/clinic operations.
• Review common findings related to the revenue cycle and
patient care operations.
• Describe strategies to respond to internal audit reports.

3. ABOUT VANDERBILT UNIVERSITY
MEDICAL CENTER
• $2.3 Billion Annual
Healthcare Operating
Expenses (excludes
academics and research)
• $471.6 Million Annual
Sponsored Research
Budget
• $843.6 Million Annual
• Charity Care, Community
Benefits, and other
Unrecovered Costs

5. UNDERSTANDING AUDITORS

6. THE CLAW HAS SPOKEN

7. PREVIOUSLY CHOSEN
Bad Debt & Charity Care
Write-offs Data Center Security Preoperative Services:
Implants & Supplies
Blood Bank Electronic Claim &
Payment Processing
POS Collections &
Deposit Process
Center for
Women’s Imaging
User
Account Security Reference Lab
Chemotherapy Pharmacy &
Infusion Clinics Otolaryngology Administration Respiratory Care
Meaningful Use Pediatrics Sponsored
Research Software Change Management
Controlled Substances Retail Pharmacy Physician Practice
Acquisitions

8. PRELIMINARY PLANNING
• Auditors are trying to:
• Gain a high-level
understanding of
operations.
• Establish relationships.
• Identify key personnel and
systems.
• Determine audit scope.

9. PRELIMINARY PLANNING
• Client departments need to:
• Provide prompt responses.
• Explain operational
strengths and weaknesses.
• Share current trends and
industry issues.
• Clearly communicate
management’s audit goals.

10. WHAT TO EXPECT AT THE
ENTRANCE CONFERENCE
• Meet all audit team members.
• Review audit objectives and
scope.
• Discuss audit progress/
timeline.
• Send out scope memo.

12. PROCESS DOCUMENTATION
FRONT-END
• Orders/Referrals
• Registration/
Pre-authorization
• Check-in/ POS
Collections
• Medical Records
• Charge Capture
• Denial Follow-up
BACK-END
• Charge Interfaces
• Claim Edits
• Claim Submission
• Payment
Processing
• Denial
Management
• Account Follow-up
• Patient Collections

13. CHARGE CAPTURE
• Compare arrived appointments/schedule or orders to
posted charges.
• Look for charges that should always be together (e.g.,
chemo drugs & infusion).
• Data entry controls (e.g., batch totals).
• Compare medical record to posted charges.
• Identify issues with the charge interface by comparing
original charges to posted charges.

14. CHEMOTHERAPY INFUSION
CPT Description Billed Minimum Correct
96409 Push, first drug 0 1 0
96143 Infusion, first drug 1 0 1
96411 Push, additional drug 0 2 1
96417 Infusion, additional drug 0 0 1
96415 Infusion, additional hour 0 0 2
HCPCS Description
J9070 Cyclophosphamide,
100 mg
J9000 Injection, doxorubicin
hydrochloride, 10 mg
J9370 Vincristine sulfate, 1
mg
J7510 Prednisolone oral, per
5 mg

15. CLAIMS & PAYMENTS
• Compare original charges (codes, quantity, and dollars) to
final claim submission.
• Discuss problem payers with Contracting, Informatics, and
Business Office.
• Compare contracted payments to actual payments.
• Look for no charge services or write-offs before claims are
submitted.
• Review co-pay collection rates.

16. DENIALS
REVIEW DENIALS BY
• Category (e.g., registration, coding,
business office, and authorization)
• Payor
• Clinic/Service
• CPT/HCPCS Code
• Date of Service
• Provider
ASK ABOUT
• What denial reports are
provided to management?
• Any recent changes to
contracts or payor procedures?
• Any staffing changes, leaves,
or issues?
• Changes to coding regulations.

17. DENIALS BY
PATIENT ADDRESS

18. FINANCIAL REPORTING
QUESTIONS TO ASK
• What are the data sources?
• Who prepares the reports?
• How often are they
updated & distributed?
• What benchmarks are used
& what are the sources?
TESTS TO PERFORM
• Reconcile reports to source
systems and re-perform
calculations.
• Review methodology for any
estimates, allowances, or
allocations.
• Review variances and trends with
similar or related departments or
services.

19. AUDIT REPORTS &
COMMON FINDINGS

20. EXECUTIVE SUMMARY
WHAT TO EXPECT
• Summary of two to four key
issues and recommendations.
• Background about the area
audited including an overview of
unique process and/or
information systems.
• Key financial metrics and/or key
performance indicators to support
highlighted issues.
WHAT TO DO
• Scrutinize the wording, this is
negotiable.
• Review the background, some of
this may not have been explicitly
discussed during the audit and
could contain errors or
assumptions.
• Recalculate/reconcile financial
metrics and KPIs.

21. AUDIT OBJECTS &
ASSESSMENT
Audit Objectives Assessment
1 Determine that charge capture is complete and
accurate.
2 Payroll transactions are appropriate, properly
supported, and approved.
3 Equipment is properly maintained and monitored
by Clinical Engineering.
Effective Needs
Improvement Ineffective

22. RECOMMENDATIONS
• Grouped by topic or function.
• Include a benefit and basis.
• Specify the area/department responsible for
implementation the corrective action.
• Allow space for management’s action plan with
target implementation date.

23. COMMON ISSUES: FRONT-END
• Cash Controls
• Inaccurate Pricing
Calculation (Implants,
• Co-Pay Collections
Pharmaceuticals)
• Upfront Collections for
• Equipment
Self-Pay Services
• Asset Tags
• Missing Charges
• Preventative
• Security of PHI
Maintenance

24. COMMON ISSUES: BACK-END
• Segregation of Duties
• Invoice Accuracy
• Transaction Review
• Use of Procurement
Cards
• Overtime Approval
• BAA Agreements
• Authorized Vendors
• Inventory Management
• Executed Contracts

25. COMMON ISSUES: IT
• Storage of PHI on
unsecured media
• CD/DVD with Medical
Images
• Department File Servers,
Local PCs, Laptops, etc.
• Inadequate Password
Policy/Enforcement
• Unsecured/Sharing of
Clinic Workstations
• Disaster Recovery
• Documented Downtime
Procedures
• Oversight/Security of
Portable Devices (e.g.,
iPads)

26. FOLLOW-UP REVIEWS
• Depends on the Severity of Findings
• Often Requested by Senior Management
• 12 to 18 Months After Report is Issued
• Limited to Items in Audit Report
• Significantly Reduced Time Compared to Original
Audit

27. QUESTIONS