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Compliance Matters: What External Auditors Offer - Peace of Mind!

January 15, 2021
Compliance By Zenobia Knight

Whether your organization is a solo practitioner practice or a large corporate healthcare entity operating in several states, the necessity of auditing medical documentation to support billing accuracy and medical necessity is no longer debatable.

External auditors provide invaluable findings, which may differ from your internal audit team. External auditors identify documentation risks with fresh eyes, identifying opportunities to improve documentation of medical necessity, quality of patient care, billing accuracy, continuity of care, and accuracy in ICD-10 and CPT coding. Identifying and correcting errors through routine internal and external auditing supports a compliance program’s audit plan, mitigating the risks when a governmental investigational audit occurs or a subpoena arrives alleging negligence and malpractice.


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Every organization should have a system for medical records review. Challenges internal auditors may confront include getting beyond ‘group think’ and recognizing problems or potential for improvement beyond what is familiar or comfortable. Some of the most effective auditing systems LW Consulting, Inc. (LWCI) has observed involved internal and external auditors.

An external auditor brings different perspectives and greater opportunities to enhance quality patient care, mitigate risks, and ensure regulatory compliance. Not only are previously unknown problem areas identified, but outside consultants may offer unique solutions for resolving problems.

Why LW Consulting, Inc. for External Audits?

LWCI consists of team members who have served as staff therapists, clinical managers, regional clinical specialists, regulatory and appeals specialists, and consultants. The LWCI team in regards to conducting audits, traverses various practice settings including general acute, outpatient (pediatric and adult), orthopedics, assisted living, inpatient rehab hospitals, state residential facilities for the physically and intellectually challenged, skilled nursing facilities, and long term acute care hospitals. Our research resources and extensive knowledge of regulations (federal and state), payer guidelines, and best practice professional guidelines are essential to external auditing. The LWCI team serve as expert witnesses in medical negligence cases, which adds perspective to a documentation audit to support medical necessity and complexity.

What are common findings when conducting an external audit?

  • Additional risks may be discovered beyond those identified by internal auditors.
    • For example, LWCI has identified risk areas that increased exposure to malpractice claims were not identified by the internal auditors including patient safety issues related to treatments that were contraindicated, as well as improper supervision of therapy extenders/assistants.
  • The external auditor may be more objective and not as accepting of clinical assessments and the explanations given for the medical necessity of care provided.
    • Internal auditors may accept clinical templates built within the electronic medical record, which lack specificity and are often generic, and sometimes do not meet current requirement. Documentation not specific to the patient may be at a higher risk of denial for lack of medical necessity and skilled need.
    • LWCI has identified errors in outdated clinical templates. We are sometimes called upon to audit the template.
  • Internal auditors may score providers higher in the area of communication with other providers and family.
    • Failing to communicate with the referring provider when there is a change in the patient’s clinical condition may violate state licensure, national organization ethics, and could pose increased liability if an adverse event occurs resulting in a malpractice claim.
  • Internal auditors may score providers higher on ICD-10 and CPT coding accuracy and thoroughness.
    • Internal auditors generally may not document clinicians’ lack of specificity in ICD-10 treatment diagnosis coding. Often the same ICD-10 treatment diagnosis code(s) may be used for every patient.
    • Concerning billing trends are not always noted by internal auditors. One example is therapy outpatient practices consistently billing 23, 38, or 53 minutes, although allowable, may give the appearance of upcoding.
  • Internal auditors viewed treatments to be more effective than external auditors. The need to modify treatments and/or goals was not consistently noted by internal auditors.

What is Best Practice?

Best practice calls for both an internal and external audit. Although it is not the only compliance risk, documentation is the greatest risk and needs to be part of the risk management program. Implementing a comprehensive risk management program is important for all healthcare organizations. A risk management program should include routine documentation audits, staff training to promote patient safety, staff training to promote quality patient care, oversight to ensure staff comply with all regulatory policies and procedures, state practice guidelines, and professional guidelines. There are other regulations which are required to be adhered to, such as Fraud, Waste, and Abuse, HIPAA, OSHA, Compliance, Infection Control, Credentialing, Exclusions monitoring, etc.


LW Consulting, Inc. can assist you with your compliance program and/or conduct a documentation and coding audit. For more information, contact Deborah Alexander at 717-213-3122 or email

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