A practice audit is a comprehensive, systematic examination. Professional practice audit or medical billing audit companies examine your medical practice’s entire revenue cycle management system, with a specific focus on accounts receivable performance, claims processing efficiency, and operational effectiveness.
Did you know that your medical practice is probably losing 5-10% of its revenue to medical billing errors and inefficiencies?
For a healthcare practice generating $2 million annually, that’s up to $200,000 slipping through the cracks… it is the money that should be funding better patient care, staff development, or practice growth.
Your practice audit is about compliance, recovering your lost revenue, preventing future leakage, and building a financially sustainable healthcare business.
What is a Practice Audit?
It is unlike standard medical billing audits that usually review coding accuracy or documentation compliance. The practice audit takes a holistic business approach. Analyzing the financial health indicators that directly impact your bottom line.
It is a complete financial diagnostic for your practice. Just as you would not treat a patient based on a single symptom without understanding the full clinical picture, you cannot optimize your revenue cycle by examining only one aspect of billing operations.
Core Components of Practice Audits
A thorough practice audit encompasses these critical pillars:
Current Aging: Breaks down unpaid claims by aging buckets to identify delays and high-risk balances. Shows exactly where money is stuck in the revenue cycle.
Billed Charges & Averages: Reviews charge volumes, patterns, and averages to identify underbilling risks and revenue trends. Highlights fluctuations that impact overall financial performance.
Payments & Averages: Analyzes payment patterns, reimbursement averages, and payer behavior. Reveals underpayments and inconsistencies affecting cash flow.
PC Ratio (Payment-to-Charge Ratio): Measures how much of your billed charges are actually collected. A low ratio signals underpayments or systemic RCM inefficiencies.
Days in AR (DAR): Calculates how long it takes to collect payments. Higher DAR indicates workflow delays, payer issues, or revenue cycle slowdowns.
Rejections: Identifies all front-end rejections by reason and payer. Helps eliminate preventable errors that cause avoidable revenue loss.
On Hold Claims: Tracks claims delayed due to pending documents, coding issues, or authorization gaps. Pinpoints bottlenecks that slow down reimbursements.
Credentialing Statuses: Verifies each provider’s credentialing across all payers. Highlights gaps causing claim denials or suppressed billing.
Together, these components provide complete visibility into your practice’s financial operations. Revealing both: immediate problems requiring attention and strategic opportunities for revenue enhancement.
Why Your Medical Practice Needs a Practice Audit?
A structured evaluation helps uncover errors, optimize claims, and strengthen financial performance.
Every medical practice, large or small, faces medical billing challenges. Coding inaccuracies, documentation gaps, and outdated billing habits lead to avoidable denials and lost revenue. With the rise of value-based care and stricter CMS guidelines, medical billing auditing is essential for financial stability and compliance.
Who Benefits from Practice Audits?
Every healthcare provider managing accounts receivable can benefit from practice audit services:
→ Solo practitioners. With internal billing audits, solo practitioners can gain clarity on financial performance without dedicated billing management staff.
→ Group practices. Auditing can identify provider-specific patterns. Also, it can systematize billing across multiple clinicians.
→ Multi-specialty clinics. Billing audit for medical practice serving multiple specialties addresses the unique challenges of diverse service lines and payer relationships.
→ Growing practices. Practice audit can ensure billing processes are scaling appropriately with expanding operations, to maximize revenue.
→ Struggling practices. With a comprehensive practice audit service, struggling practices can diagnose the root causes of financial difficulties and chart recovery paths.
Types of Practice Audits
Different audits serve different purposes. Together, they create a complete picture of your revenue cycle health. Major types of practice auditing services are:
1. Internal Billing Audit
Proactive, in-house reviews to catch problems early.
An internal billing audit is conducted within your practice to analyze coding accuracy, claim submissions, payment posting, and documentation quality.
It helps:
- Identify billing errors early.
- Prevent repeat denials.
- Improve staff training.
- Maintain compliance with Medicare and Medicaid.
2. External Audit
A third-party, unbiased review for deeper insight and full transparency.
An external audit provides an objective evaluation by independent practice audit/medical billing audit companies or medical claims auditing firms.
This type of audit is ideal when:
- Compliance issues are suspected.
- You want a neutral assessment of billing quality.
- Your practice is preparing for accreditation or regulatory review.
- You want validation of internal RCM processes.
External auditors often detect gaps that internal teams miss, making them critical for high-risk specialties and fast-growing practices.
3. Comprehensive Practice Audit
A full-scale evaluation of your entire revenue cycle from scheduling to cash posting.
A comprehensive practice audit includes and reviews:
- Medical coding audit
- Documentation audit
- Medical billing audit
- Charge capture
- Claim accuracy
- Payment posting review
- Denial patterns
- Medicare & Medicaid compliance
- Staff performance
- Workflow efficiency
This type of auditing gives practice leaders a complete understanding of where revenue is leaking and what operational changes are needed.
How is Practice Audit Done?
The practice audit process is a systematic approach that ensures accuracy and reliable revenue cycle management.
A typical audit process includes:
- Initial Assessment: For internal auditing, the auditor, and if you choose an external audit, the practice audit or medical billing auditing company reviews your practice specialty, services, payer mix, and current challenges.
- Data Collection: The auditing process includes gathering claims, encounter forms, payer reports, EHR notes, and financial data.
- Coding & Documentation Review: Team check for correct CPT/ICD-10 coding, medical necessity, and modifier usage.
- Claim Accuracy Evaluation: The patterns of denials, rejections, underpayments, and late submissions are identified during the practice audit process.
- Compliance Check: Practice audit compliance includes comparison of processes with CMS, Medicare, Medicaid, and commercial payer rules.
- Risk Analysis: The areas vulnerable to fines, audits, or takebacks are highlighted.
- Audit Report: Your healthcare audit management team will provide detailed findings, financial impact, and compliance risks.
- Corrective Action Plan: You will get expert recommendations to improve your billing quality and revenue cycle efficiency.
What is Included in a Comprehensive Practice Audit?
A comprehensive practice audit process consists of the following critical pillars:
→ Aging Report Analysis: Understanding Where Your Money Is Stuck
The aging report represents your practice’s financial vital signs. Showing how long claims remain unpaid. Reveals financial health, workflow problems, and follow-up failures.
Aging Buckets & Ideal Benchmarks
- 0-30 days (50-60%): Normal cycle; healthy cash flow.
- 31-60 days (20-25%): – Early warning zone; may indicate front-end or payer delays.
- 61-90 days (10-12%): Red flag; often unresolved denials or rejections.
- 91-120 days (3-5%): Critical; high risk of timely filing issues.
- 120+ days (<5%): Bad-debt territory; collection probability under 40%.
Claim Count Insights
- High early-bucket claim count + low dollar amounts → undercoding or missed charges.
- High claim count in older buckets → follow-up failures.
- Even distribution across buckets → poor workflow movement.
Healthy Distribution Targets
The gold standard aging distribution looks like this:
- 0-30 days: 50-60% of total A/R
- 31-60 days: 20-25% of total A/R
- 61-90 days: 10-12% of total A/R
- 91-120 days: 3-5% of total A/R
- 120+ days: Under 5% of total A/R
Why do these targets matter?
→ Cash flow predictability. When most A/R sits in early buckets, you can predict incoming revenue with reasonable accuracy
→ Collection probability. Industry data shows collection rates decline dramatically with age:
- 0-30 days: 95-98% collection probability
- 31-60 days: 85-90% collection probability
- 61-90 days: 70-75% collection probability
- 91-120 days: 50-60% collection probability
- 120+ days: Under 40% collection probability
Every dollar aging beyond optimal timeframes loses value. A practice with $100,000 sitting at 120+ days can expect to collect perhaps $35,000-40,000 of that amount. Effectively losing $60,000+ that was legitimately earned through patient care.
→ Claims Analysis: Following the Money
While aging reports show where money is stuck, claims analysis reveals how money flows (or doesn’t flow) through your revenue cycle.
This pillar examines the relationship between what you bill. Or what you get paid, and the volume of transactions involved.
Key Metrics
→ Total charges billed: Revenue ceiling.
→ Claim volume: High vs. low volume workflows.
→ Average charge per claim: Indicates complexity and billing completeness.
→ Charge distribution: Reveals top revenue sources by payer, provider, or service line.
Advanced Audit Methods
- Payer mix analysis: Identifies profitable vs. high-burden payers.
- Provider productivity: Detects coding/documentation disparities.
- Service line profitability: Reveals which services generate or drain income.
- Time-series trending: Identifies seasonal changes and hidden problems.
- Benchmarking: Compares to specialty standards.
- Denial rate impact: Quantifies revenue lost to denials.
What Claim Audit Reveals About Practice Health?
Patterns in claims analysis diagnostically indicate specific problems:
High charge volume with low payment ratio. Suggests systematic underpayment.
Declining average charge per claim over time. May indicate upcoding avoidance to the point of undercoding, a shift toward lower-complexity patients, or missed charge capture for ancillary services.
Increasing claim volume with flat total charges.: Suggests average charge per claim is declining. Possibly due to case mix changes or conservative coding practices.
Widening gap between billed and paid claims. Indicates a growing backlog of unresolved claims, potentially due to staffing issues, system problems, or increasing denial rates.
Payer-specific payment delays. Certain payers consistently taking longer to pay suggest credentialing issues, claims submission problems, or a need to evaluate relationship value.
Medical billing audit companies conducting practice audits use these analytical techniques. It is to diagnose revenue cycle dysfunction and prescribe targeted treatments.
Pattern recognition by external claim auditing firms or practice audit companies enables the identification of problems providers might not recognize from inside their own operations.
→ Claim Status Investigation: Why Claims Remain Unpaid?
Aging reports show where money is stuck; claims analysis shows how much is stuck. The third pillar reveals why claims remain unpaid: the diagnostic information needed to fix problems and recover revenue.
Common Claim Status Categories
Pending/In process: Should not exceed 15-30 days.
Paid: Should close once posted.
Rejected: Technical errors; fixable.
Not on file: Claim never reached the payer.
Denied: Payer refuses payment; requires correction or appeal.
Suspended/Review: Requires documentation or clarification.
Adjusted: Paid at modified amount.
What causes Claims Denial?
Payer processed but refused payment due to:
→ Coverage Denials. Eligibility issues, non-covered services, and exhausted benefits.
→ Authorization Denials. Missing or mismatched authorizations.
→ Coding Denials. ICD-CPT mismatch, unbundling, and wrong modifiers.
→ Documentation Denials. Insufficient documentation, missing records.
→ Timely Filing Denials. Claim submitted too late. Commonly, when “not on file” issues are discovered late.
→ COB/Duplicate Denials. Another payer is responsible for the claim already processed.
→ Credentialing Status Review: The Foundation of Payment
You can submit perfect claims with flawless coding and comprehensive documentation, but if your providers aren’t properly credentialed with payers, you won’t get paid.
Credentialing status represents the foundation upon which all billing rests, and credentialing gaps are among the most financially devastating issues practice audits uncover.
Comprehensive practice audits begin credentialing review of a basic but critical inventory. Auditing services inquire:
- How many physicians practice in your group?
- How many advanced practice providers (nurse practitioners, physician assistants)?
- How many of each are employed vs. independent contractors?
- Are any providers new (within the past 12 months)?
- Are any providers leaving or recently departed?
Why does this matter?
→ Only properly credentialed providers can bill payers.
→ Claims must be billed under correctly credentialed rendering providers.
→ Billing under the wrong provider NPIs violates payer agreements and can trigger audit red flags.
The credentialing gaps often persist for months or even years, undetected until a systematic medical billing auditor review of credentialing across all provider-payer combinations.
Practices simply accept denials or write off certain claims without investigating why particular providers consistently face denials with specific payers.
Your Practice Audit Checklist!
A strong audit follows a clear and structured checklist.
A complete practice audit by a reputable practice audit/medical billing auditing company covers:
✔ Coding accuracy (CPT, HCPCS, ICD-10)
✔ Documentation completeness
✔ Modifier correctness
✔ Charge capture accuracy
✔ Timely claim submission
✔ Medicare & Medicaid compliance
✔ Denial management process
✔ Payment posting accuracy
✔ Underpayment identification
✔ Refund and takeback review
✔ Staff productivity & workflow efficiency
✔ Revenue leakage assessment
How to Select the Right Medical Billing Audit Company?
When engaging external practice audit services, choosing the right partner dramatically affects audit quality and value.
Questions to Ask Potential Audit Partners
- What specific experience do you have with practices in our specialty?
- Which credentialed professionals will actually conduct our audit?
- Can you describe your typical practice audit process and methodology?
- How do you determine sampling sizes and selection criteria?
- What deliverables should we expect and in what format?
- Do you provide implementation support beyond identifying issues?
- Can you share example reports or case studies from similar practices?
- What’s your typical timeline from audit start to final report?
- How do you handle follow-up questions after report delivery?
- Do you offer any guarantees or performance commitments?
Maximize Your Practice Revenue Today with Health & Billing!
Stop leaving money on the table. Partner with Health & Billing, the experienced, specialty-focused medical billing and coding audit and comprehensive practice audit provider.
We identify your hidden revenue, reduce denials, and optimize your entire billing workflow.
Our revenue cycle management and credentialing experts dig deep into your claims, uncover errors, and the reasons for denials. We provide actionable solutions that improve cash flow and compliance fast.
Take the first step toward a healthier revenue cycle. Schedule your FREE consultation with us now and start recovering lost income!
FAQs
What is a practice audit?
During a practice audit, a professional medical billing auditing team reviews your practice’s medical coding, medical billing processes, claims, credentialing, and revenue cycle. It is done to identify errors, inefficiencies, and lost revenue.
Why is a practice audit important for your practice?
Practice audit is very important to maximize revenue, minimize claim denials, and keep your practice compliant with payer regulations.
What types of errors can a practice audit uncover?
Practice auditors or medical billing auditors are trained to uncover coding mistakes, duplicate claims, missed charges, eligibility errors, and credentialing and documentation gaps.
What’s the difference between external and internal medical billing audits?
Internal billing audits are conducted by your staff to check processes. External audits are performed by expert third-party medical billing audit services providers for an unbiased, detailed review.
Why do healthcare providers need billing audits?
Billing audits prevent revenue loss, reduce denials, ensure compliance, and optimize overall financial performance.
How long does a practice audit take?
Depending on practice size and complexity, auditors can take from a few days to several weeks for a thorough review.
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