Evan Schwartz, founding partner of New York-based law firm Quadrino Schwartz, said his organization used to see the occasional case of private insurers retrospectively auditing health care providers - they only litigated about 10 or so each year.
Most insurers have sophisticated analytics that seek providers who may be committing fraud, but recently, the law firm has seen a dramatic spike in the practice of retrospective audits. Schwartz said they have probably 100 different cases across the country.
"There is a trend of insurers trying to take money back and ... they don't have a right to it," Schwartz said.
Most insurers have sophisticated analytics that seek providers who may be committing fraud. While Schwartz questions the legality of retrospective audits, providers say the tactic isn't pervasive and insurers claim to be well within their rights to audit the providers to whom they pay for services.
Schwartz said these audits are happening across the country and typically are performed by larger insurance companies. He said they can begin as a quality review, but end in a request for reimbursement.
"I know one particular carrier that had a test they didn't like paying for and went after a number of clients demanding refunds on those tests," he said. "They realized they didn't have a legal basis for getting their money back, so instead they had to change their policy to say we won't pay for it anymore."
Over the years, providers have become accustomed to offering data and records to insurers without question, Schwartz said. But the problem with retrospective audits is that they may violate the Employee Retirement Income Security Act, or ERISA. This legislation is designed to protect employees and if an audit would impact the beneficiary, it could be in violation of the law, Schwartz said.
For instance, if a provider bills $87 for a treatment and is paid that amount, but is contracted to pay $79, the insurer is within their rights to recover the money. Or if an insurer can prove a provider has committed fraud by billing for services never rendered, Schwartz said neither of these would impact a beneficiary.
On the other hand, if an insurer claims that a test is not clinically supported or medically necessary, that would impact a beneficiary's ability to receive that treatment. This could trigger an adverse benefit notification and a provider can demand that insurers provide documentation showing why they are being audited. Schwartz said this kind of litigation with ERISA is just "on the edge of being litigated."
"We have stopped so many audits by saying they triggered an adverse benefit notification," Schwartz said. "Insurers were using ERISA as a sword, but it is more of a sword for providers."
While Schwartz sees a rise in retrospective audits, others dispute that anything unusual is going on.
David Evans, chief operating officer of Texas Neurology P.A. in Dallas, said he has seen a small change in auditing practices but not to the same extent as Schwartz. Insurers used to come in to physician offices, look over charts and offer education on coding. As long as providers complied with changes, there was "no more interaction," he said. Then he saw a spike in post-service, but pre-payment reviews. But he said he hasn't seen, or heard of, an increase in retrospective audits.
Brian Barefoot, chair of the finance committee board for Blue Cross Blue Shield of Massachusetts, said audits have always been part of the insurance process. He likens them to credit card providers: if unusual activity shows up on a person's statement, it gets flagged and the company checks it out. For insurers, this usually occurs before claims get paid, he said.
"We're not in the business of chasing providers who have overcharged," he said. "We want to head that off in beginning."
Barefoot said he cannot imagine that any large insurers haven't for years had "significant auditing functions" that would allow for retrospective audits if they chose to perform them.
"To suggest there is something new or different or there is more auditing going on isn't true," Barefoot said. "The industry is far more sophisticated than that. There is no smoking gun here."