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Confessions of an Internal Auditor 2014 Florida HMFA Fall Institute


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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.

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Confessions of an Internal Auditor 2014 Florida HMFA Fall Institute

  1. 1. 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.
  2. 2. 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. 5. 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
  6. 6. PRELIMINARY PLANNING • Auditors are trying to: • Gain a high-level understanding of operations. • Establish relationships. • Identify key personnel and systems. • Determine audit scope.
  7. 7. 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.
  8. 8. 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.
  9. 9. 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
  10. 10. 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.
  11. 11. 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
  12. 12. 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.
  13. 13. 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.
  15. 15. 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.
  17. 17. 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.
  18. 18. 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
  19. 19. 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.
  20. 20. 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
  21. 21. 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
  22. 22. 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)
  23. 23. 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
  24. 24. QUESTIONS