Commercial Insurers Actively Reviewing Patient Records for Healthcare ‘Waste’

By Paula E. Hartman-Stein, Ph.D.
July 21, 2014

Commercial insurers actively reviewing  patient records for health care “waste.”Psychologists who think that not participating in Medicare can avoid audits of patient files need to think again. Commercial payers such as Aetna, Anthem and Humana have in-house special investigation units that are becoming aggressive in reviewing clinical records.

According to health care attorney and psychologist, James Georgoulakis, Ph.D., JD, federal audits focus on fraud and abuse. Commercial payer audits include fraud, abuse and “waste.” He said waste is overutilization of services or other practices that result in increased costs and is not generally considered to be caused by criminal negligence but by misuse of services.

“I’d much rather work with the federal system because the rules are so much clearer,” Georgoulakis said. He said commercial payers define “waste” by comparing patterns of similar services among similar providers. “So if you’re outside whatever is two standard deviations, three standard deviations, even a standard deviation and a half, then they’re going to take a look at you.”

Humana’s website shows that its special investigation unit uses software that looks at billing for services at a frequency that indicates the provider is an outlier compared to peers. Aetna’s website indicates it targets unusual billing practices and providers who pressure for quick payments. Georgoulakis said commercial payers that don’t have special investigation units may contract with a private company such as Verisk.

From an informal poll by The National Psychologist on a listserv of psychologists who provide services to long-term-care facilities, several psychologists who asked to remain anonymous, said in the last few months they are under audit by Aetna. Most said they had never been audited by an insurance company previously, but others had clinical records reviewed the previous year by Aetna as well.

Georgoulakis said companies such as Aetna get a 15 percent return on their investment for their efforts. The special investigation units don’t differentiate whether a person is a psychologist, psychiatrist or an ophthalmologist. No special group looks just at psychologists, but there may be someone in the investigation unit with mental health expertise. Georgoulakis said if a psychologist treated patients on average for about 20 sessions in a region where the average is 12, a review may be triggered.

Medicare auditing is very active this year as well. If a provider is asked to pay back money, the provider has the right to request a redetermination. “The agency that refused your records doesn’t review your records again, Georgoulakis said. “Another agency does and if they agree that you owe ‘X’ number of dollars then you can appeal it up to the third level, the administrative law judge level,” he said, adding there’s currently a large backlog at the administrative law judge level.

Advice to prepare for audits

Georgoulakis suggests that before sending copies of your records to an auditing agency, hire a professional to review charts of about 30 patients. “You don’t want your friend. You want someone who is going to point out every ‘i’ that should be dotted, every ‘t’ that should be crossed. Then put the recommendations into place and add them to your practice’s individual compliance plan.”

The first defense against fraud is an individual compliance plan, Georgoulakis said. At one time compliance plans were only at the federal level, but now that commercial payers are prosecuting and using data mining to reduce fraud, compliance plans are useful in the defense of both commercial and federal audits.

Georgoulakis also recommends participation in the Physician Quality Reporting System (PQRS). “Consider how it looks to the auditor if the provider is not willing to be involved in a program that improves quality.”

Paula E. Hartman-Stein, Ph.D., is a consultant and practitioner in Kent, Ohio. She is a member of three technical expert panels for PQRS measures and provides training for psychologists and social workers regarding professional practice involving the treatment of older adults. She may be reached through her website which is located at:

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