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Research & Analysis

Medical Billing E&O – The First Thing Retail Agents Need To Know

October 20th, 2014 | 2 min. read

By David Huss

(Part 1 of a 3-Part series of posts that will explore the need for Medical Billing E & O insurance)

For physicians and administrators of medical facilities in the U.S., medical billing audits are a hot topic these days – and for good reason. Not only is the possibility of any particular physician practice or medical facility becoming a target of a medical billing audit very real, but the impact of such an audit on their business is potentially enormous. If you are a retail agent with clients in the healthcare industry the first thing you need to know about Billing E&O is this – virtually every one of your healthcare clients has the exposure these products are designed to cover.

The growing exposure to medical billing audits started in earnest in 2010 when a permanent Recovery Audit Program was implemented by the Secretary of the Department of Health & Human Services at the directive of the U.S. Congress. It was evident at the time that massive fraud, waste and abuse were costing the Medicare and Medicaid programs many billions of dollars every year. For example, according to the U.S. Department of Health & Human Services website, in 2010 the Centers for Medicare & Medicaid Services reported there were $47.9 billion in “improper payments” in the Medicare program alone – nearly 10% of total Medicare spending that year!

Despite the increase in activity taking place every year to combat improper payments in the Medicare and Medicaid programs since 2010, improper payments within these programs is still a massive problem. Not surprisingly, the U.S. Government’s response has been to continue to ratchet up the pressure on medical providers and medical facilities alike to get this problem under control.

Today your healthcare clients face the possibility of an audit not just from Recovery Audit Contractors (RAC) being paid on a contingency basis under the Recovery Audit Program, but from numerous other contractors funded under the Affordable Care Act including Program Safeguard Contractors (PSC), the Health Care Fraud Prevention and Endorsement Action Team (HEAT), Medicaid Integrity Contractors (MIC), Medicare Administrative Contractors (MAC) and Zone Program Integrity Contractors (ZPIC). They also face the possibility of an audit and/or investigation by representatives of the Office of the Inspector General, Federal Bureau of Investigations and the Department of Justice. The bottom line is the reduction of improper payments under the Medicare and Medicaid programs has become a top priority for the U.S. Government.

And yet it is important to understand what an improper payment is. Many people think of fraud when they hear the term “improper payments”. In fact, it is estimated that fraud represents just 15% of the total of improper payments paid out under the Medicare and Medicaid programs. The other 85%, or the vast majority, of improper payments involve determinations by auditors of things like unnecessary services, excess administrative costs, inefficient delivery of care, inflated prices and prevention failures. The harsh reality is that such determinations by an auditor often include some level of subjectivity. This means even the best run healthcare operations can and do find themselves the target of medical billing audits.

Next Month: Part 2 of this series on Medical Billing E&O will detail the available product options and the primary coverage differences that need to be understood and considered to ensure proper placement.

David Huss

As the Co-Founder and Chief Production Officer of Ethos Insurance Partners, David, with decades of experience in the insurance industry, has a rich background starting in reinsurance brokerage and later specializing in healthcare professional liability placements. Co-founding Ethos Insurance Partners in 2004, David possesses a comprehensive understanding of professional liability exposure in the healthcare industry and is well-versed in the products and capabilities of carrier partners. His role at Ethos involves assisting production support staff efficiently solving healthcare professional liability-related problems for retail customers. Personally, David finds joy in building, from home projects to business ventures, and enjoys sharing good meals and wines with friends and family. He looks forward to continuing to build Ethos through collaboration and serving retail customers.