When an employer is considering a Medical, Pharmacy or Dental Claim Audit, it is important to understand the most common roadblocks to an effective process. Understanding the following points will allow you to properly prepare for an audit of your Third Party Administrator (TPA) or Pharmacy Benefit Manager (PBM).
Limitation of sample size: most ASO Agreements specifically restrict the volume of claims that can be included in an audit. They typically range from 200 to 400 claims. In some cases, the administrator reserves the right to approve the claim size and no specific figure is given. In other cases, the sample size may be restricted based on the enrolled membership size.
Limitation of how far back the audit can go: most ASO agreements restrict how far back you can audit. They range from being limited to the current and prior plan year to as lenient as the prior three full plan years with two years being most typical. Occasionally there is no specific restriction.
Limitation of a re-audit: it is typical to only be allowed to audit a time frame of claims only once unless compelled to do so by law. This can theoretically lead to a problem if you conduct a random audit and uncover issues that you believe require remediation but your administrator does not concur.
Limitation on the duration of the on-site portion of the audit: it is typical and usually not a problem to be limited to conducting the on site portion of the audit within a single week. For jumbo-sized groups, this may be expanded to allow up to two weeks. Even when restricted, there is often the ability add addition time on site for an additional fees.
Restrictions on your free choice to select an auditor: Some ASO Agreements require that you and the administrator mutually agree on the choice of an auditor. While not usually a problem, some vendors that routinely violate formal Claim Audit Agreements that govern the conduct of most audits may be disallowed from auditing certain administrators.
Restriction on how your auditor is compensated: it is becoming more common for ASO Agreements to prevent organizations from conducting audits when the auditor is compensated based on a percentage of recoveries. The concept is that when the auditor has incentive to maximize recoveries that it is a misalignment of priorities and resources. This topic is subject to endless debate and compelling arguments can be made for both sides. Regardless, if the restriction exists, it is likely that the administrator will require you to acknowledge that you understand and agree when negotiating the audit terms.
Requirement to follow an “External Audit Process”: Some administrators insert a seemingly harmless catch-all clause requiring all audits to be conducted in accordance with their External Audit Process. They may indicate that a copy of the policy is available upon request and the usually stipulate that the policy may be changed from time to time and that they are not required to notify you of the changes. While it does not typically create a problem, this clause has potential to enable your administrator to control every aspect of the audit
Additional fees for supporting the audit: there may be fees required to support the audit process. While not customary, this could include all support, but more commonly it only applies when the scope of the audit is deemed excessive. This can occur when the sample size exceeds the specified limit or the duration of the on site portion of the audit exceeds the prescribed length of time. The primary caution is to make sure that additional fees are reasonable and commensurate to the level of resource required. The additional fees should adequately compensate the administrator and not act as a deterrent to conducting the audit. To the extent possible, rates should be explicitly stated in the ASO agreement.
Limitation on recoverability: most administrators limit the recovery process to one that they either control or conduct. This is true for virtually all national and larger regional administrators. Some smaller administrators may not have this capability. Additionally, there may be a limitation on the time frame in which an overpaid claim can be recovered.
Additional fees for recovering overpaid claims: some administrators may charge you to recover overpaid claims that, based on their determination, were not their fault. This can present a challenge as not only does it require the identification of an overpaid claim, but further analysis to understand why it occurred and who was at fault. Additionally, there are several circumstances in which an overpaid claim is legitimately not due to anyone’s error.
