Frequent External Audits faced by Practices and Prevention methods

 Wayne Carter Billing & Collections, Medical Billing, RCM

Social Shares

Challenges of Hospital External Audits and Solutions

Hospital care has seen an increased emphasis on quality and safety concerns in recent times, driven by a greater focus on both clinical outcomes and patient satisfaction. As a result, health authorities and organizations have adopted audits as a key approach for quality improvement (QI). Audits involve systematic evaluations of care delivery, identification of areas for improvement, and implementation of changes to enhance overall quality. Various types of audits, including external and internal audits, peer reviews, and clinical audits, have been used. However, a common challenge is that the improvements recommended by audits often fail to close the quality gap identified.

The limited success of audits implies that the audit process and implementation of suggested improvements are not straightforward. While several explanations have been suggested for how audits work, there has been little in-depth theoretical analysis of the causal mechanisms that determine the effectiveness of audits in specific contexts.

Audits aimed at improving healthcare can broadly be classified into three categories: 

  • External Audits Provides insights into a hospital’s compliance with external standards such as accreditation, certification, and external peer reviews.
  • Internal Audits Often carried out in preparation for external audits.
  • Clinical Audits initiated by healthcare professionals as a local initiative 

Although audits may differ in scope and approach, their objective is consistent, which is to improve the quality of hospital care.

What are audits driven by external factors in healthcare practices?

Audits driven by external factors such as accreditation, certification, and external peer reviews are firmly grounded in quality assurance (QA), which involves initiatives aimed at ensuring compliance with minimum quality standards. The term “quality assurance” refers to the aspect of quality management that aims to instill confidence in meeting the required standards of quality External audits are employed to evaluate the quality system of a healthcare organization based on predefined standards and are carried out external auditors.

Top 5 reasons for frequent external audits:

An external revenue cycle audit in healthcare organizations is typically conducted by an independent third-party auditor to assess the accuracy and completeness of the organization’s financial records, billing and collection procedures, and compliance with relevant regulations and standards. Some reasons for conducting an external revenue cycle audit in healthcare organizations include:

Compliance: Healthcare organizations are subject to numerous regulatory requirements, such as HIPAA, Medicare, and Medicaid, and an external revenue cycle audit can help ensure that the organization is complying with all applicable regulations.


Financial Accuracy: An external revenue cycle audit can help identify errors or discrepancies in financial records, billing and collection procedures, and other financial processes, which can help improve the accuracy of financial reporting and prevent financial losses.

Revenue Optimization: An external revenue cycle audit can identify opportunities for revenue optimization, such as improving coding and documentation practices, optimizing charge capture and billing processes, and reducing denials and rejections.

Risk Mitigation: An external revenue cycle audit can help identify areas of risk in the revenue cycle process, such as compliance risks, fraud risks, and operational risks, and provide recommendations for mitigating those risks.

Risk Management

Benchmarking: An external revenue cycle audit can provide benchmarking data on key performance indicators (KPIs) such as revenue cycle metrics, patient access metrics, and payer performance metrics, which can help the organization compare its performance to industry benchmarks and identify areas for improvement.


Overall, an external revenue cycle audit can help healthcare organizations improve financial performance, reduce risk, and ensure compliance with regulatory requirements.

The following are the steps involved in conducting a medical audit:

Defining the scope of the audit: Before assembling an auditing team, it is important to estimate the number of healthcare providers, billers, medical coders, and other individuals involved in the billing process to determine the size of the team needed. This information is critical for conducting regular, in-depth evaluations.

Assembling an auditing team: The American Association of Medical Audit Specialists provides guidelines for the qualifications of auditors and coordinators. The team should be capable of auditing principles and standards, billing procedures, medical coding audits, medical terminology, state and federal regulations, HIPAA, and confidentiality protocols. BillingParadise has a team of auditors who are experienced in coding, billing, compliance, and high-specificity coding practices. They can evaluate existing documentation and claims for risk factors and provide suggestions for improvement.

Auditing team

Developing an auditing strategy: To ensure an unbiased audit process, it is recommended to randomly select a set number of documents from each insurance payer for every healthcare provider in the facility. With the team assembled and the scope of the audit defined, the team can begin reviewing medical records to identify errors, disparities, and ambiguities in the data. The documents can be distributed strategically among the team for evaluation.

Auditing strategy

Reviewing electronic health records and bills: Electronic health records and bills are critical records to be evaluated during the audit process. All charges captured, codes assigned, and billing reports for each selected case should be investigated. The key areas evaluated include verifying if the documentation supports the treatment rendered to the patient, checking if all relevant documents are attached to the patient encounter appropriately, verifying if the back-end services match the healthcare provider’s treatment plan, evaluating if all services billed out are appropriately captured and documented, checking if the reimbursement covers all the codes captured in the claim according to the terms of the contract, and verifying whether any errors or risk factors identified in previous audits have been rectified.

Electronic health records and bills.

Discussing audit findings: Any discrepancies found during the audit should be discussed. A meeting should be held between the authorities of each service on the provider side to review the audit results. Any risky areas should be rectified as soon as possible, and overall performance should be re-evaluated periodically. If the provider does not agree with the audit findings, they can contest them according to their terms. BillingParadise provides cross-references and recommendations to reduce denials and improve revenue inflow while staying compliant with standard rules and regulations.

Audit findings

Healthcare auditing offers many benefits for hospitals, including:

Identifying Improper Billing Practices:

Medical Billing mistakes can lead to compliance issues, fines, and reputation loss. Regular audits help identify issues such as lack of medical documentation or the creation of erroneous bills, decreasing risks, and increasing reliability. This leads to better profits, competitiveness, and increased revenue flow.

Improper Billing Practices

Finding Coding Errors Early:

Claim denials, often caused by incorrect Medical coding, can severely affect a hospital’s cash flow and patient loyalty. Audits can quickly identify discrepancies with outdated codes and incorrect inputs, allowing for timely error resolution.

Coding Errors Early

Increasing Positive Patient Experiences:

Mismanaged hospital systems can impact the quality of care and documentation accuracy, leading to costly errors. Audits provide a clearer view of financial management, allowing for proper budgeting to invest in new clinical methods that improve patient treatment.

Positive Patient Experiences

Holding Staff Accountable

Audits identify departments prone to errors and educate staff on proper policies and procedures. This increases accountability saves costs and reduces compliance issues for the organization.

Staff Accountable

The primary objective of all medical audit processes is to improve healthcare delivery and patient outcomes while maintaining practice revenue. Regularly evaluating these processes can bring clarity to your data management and enhance compliance. Having the support of top-notch medical billing and coding services can also speed up insurance reimbursements and minimize financial losses.

If you’re seeking a trustworthy and efficient medical audit team to review your healthcare business’s billing process, BillingParadise can help. Our high-level auditing process can assess and improve your business’s growth potential.

 Appointment Scheduling using Robotic Process Automation

Subscribe to Billing Paradise Newsletter

Social Shares

Wayne Carter

I've been working in healthcare industry of the United States in various types of departments since 2013. Started my career from the bottom as a Accounts Receivable executive, Practice management team handler, Entire Practice Management and now I'm employed at BillingParadise as a Content Lead. Areas of Expertise: End-to-End Revenue Cycle Management, Content Writing, Digital Marketing, RCM applications and Software, Healthcare Business Development, Healthcare Sales, and Healthcare Automation.

Get paid Three times faster with our 24/7 medical billing services.

Work with medical billers who understand your EHR's billing process backwards and forwards

Avail Free RCM Audit Worth $2,000! Check out 19 different KPI reports that stops your cash flow.