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What is a Medical Billing Audit?

By Steve Smith

The information presented here is true and accurate as of the date of publication. DeVry’s programmatic offerings and their accreditations are subject to change. Please refer to the current academic catalog for details.


April 9, 2024

5 min read


Accurate medical billing and coding are central to the healthcare revenue cycle. A medical billing audit can help healthcare providers such as hospitals, nursing and rehabilitation facilities, surgery centers and others identify problems that if left unresolved could cause them to fall out of compliance with regulations or lose revenue. 


In this blog, we will define what a medical billing audit is, outline the different types and describe several ways a medical billing auditing can be beneficial to healthcare organizations. If you’re interested in preparing to pursue a career in medical billing and coding, this information will help you gain a more thorough understanding of the field and how your skills can contribute to the successful operation of a healthcare organization.

Medical Billing Audit Defined

What exactly is a medical billing audit? This internal process covers all the areas of the medical billing lifecycle, beginning with the insurance verification process (confirming that the patient has coverage in place and what type), the International Classification of Diseases (ICD) or Current Procedural Terminology (CPT®) coding itself. It also looks at claim submission, payment posting, follow-up and management of any claims that may have been denied by payers.

The medical billing auditing process reviews the health records that are maintained by health providers, and the medical billing data submitted to payers so that it can identify, monitor and correct inappropriate billing practices. 

To understand the medical billing audit process more completely, it’s helpful to think of it as a checklist with several key components:

  • Claims accuracy: Maintaining a high level of accuracy in medical claims helps to substantially reduce the number of denials from payers. It also helps to ensure the medical provider receives the appropriate reimbursement for their services.

  • The billing and collections process: An effective medical billing audit will evaluate the effectiveness of the provider’s processes for billing and collections. Are medical claims being submitted in a timely manner? Are the statements that are sent to patients clear and accurate? Spotting opportunities for process improvements can enhance a medical practice’s cash flow and reduce billing mistakes.

  • Regulatory compliance: A medical billing audit can verify that the provider’s medical billing and coding activities have been compliant with the Health Insurance Portability and Accountability Act (HIPAA), the Affordable Care Act (ACA) and other laws that have been enacted to protect patient privacy. Failure to comply with regulatory requirements could result in fines. 

  • Coding practices: Compliance with the guidelines of ICD, CPT® and other coding classification systems when documenting procedures and diagnoses is essential to ensuring accuracy, and can potentially reduce claim denials. 

  • Documentation quality: Any services billed by a medical provider should be supported by documentation that includes information about the medical necessity, the treatments provided and a patient’s information. A medical billing audit can help to improve the accuracy and reliability of clinical documentation.

  • Denial management: To reduce revenue loss and improve the billing cycle, providers should review the effectiveness of their denial management processes. This may include analyzing the reasons why claims are denied, track patterns and take actions to minimize denials in the future.

  • Internal controls: An assessment of internal controls to prevent fraud, errors or misuse of financial information is another important component of a medical billing audit. It can protect the provider’s integrity and security, as well as the security of patients’ medical records or their personal and financial information.

  • Reimbursement accuracy: To minimize situations where a provider is over or underpaid by an insurance company, this final review is intended to verify that the provider’s billed charges match up with the insurance provider’s or payer’s contracted rates. 

Types of Medical Billing Audits

Medical billing audits can be conducted internally or externally. Several factors, including the size of the organization’s staff and the resources available to them, are considered when deciding whether an audit is conducted internally or externally.

Internal billing audits

As its name implies, an internal medical billing audit is conducted by a healthcare setting’s own staff. Organizations with large staffs may have a dedicated internal audit group with the ability to conduct billing audits on a regular basis. The findings can provide information that can be used to continually improve the accuracy of billing records or raise efficiency.

External billing audits

External audits are a good choice for small medical practices that may not have the resources to conduct regular internal reviews with an internal team. Therefore, an impartial, third-party medical billing auditor comes in to do the examination. Their insights eliminate potential conflicts of interest and may catch errors that an internal auditor may accidentally miss.

One finding than an external auditor might uncover is something called upcoding, where providers submit billing codes to payers like Medicare or insurance companies for services that are more expensive than the ones the patient actually received. This practice is a violation of the False Claims Act and can result in substantial penalties. 

Post-audit recommendations for improvements may also carry more weight when coming from an outside auditor than an internal team.

Benefits of a Medical Billing Audit

Regular medical billing auditing and revenue cycle management can benefit providers in several ways, including helping them to comply with regulations, enhance revenue through the optimization of claim payment and improve their relations with medical payers:

  • Accurate coding: Medical billing audits have the potential to improve the accuracy of a medical provider’s coding. An audit can uncover coding mistakes before government or private insurance payers do. The medical billing audit process can boost the confidence of the coding team and make sure the most up to date codes are used for patient billing.

  • Improved payer relations: By preparing and submitting claims that accurately reflect the services provided, healthcare providers can maintain positive relationships with payers. 

  • Consistent compliance: Regular billing audits can help providers verify their compliance with federal regulations, such as HIPAA and ACA, and focus their attention toward areas where deficiencies are identified.

  • Optimized patient care: Because the billing process is an important part of the patient experience, efficient billing practices should be prioritized. Efficiency in the billing office can support patient care by reinforcing patient confidence and satisfaction in their provider.

Break into the Medical Billing Field in as Little as 10 Months2

At DeVry, we can help you prepare to a pursue a career in medical billing with our online Undergraduate Certificate in Medical Billing and Coding programs. These 100% online certificate programs explore natural sciences, anatomy and health information technology. Simulated patient records in a powerful, web-based learning platform allow you to gain first-hand experience practicing your medical billing and coding skills. 

DeVry University has the highest number of Medical Billing and Coding Certificate program graduates for 5 consecutive years, according to IPEDS.1 Our Undergraduate Certificate in Medical Billing and Coding program can be completed in as little as 10 months on an accelerated schedule, and 1 year and 2 months on a normal one.2 Coursework in this certificate program can also help you prepare to take the Certified Professional Coder (CPC®) certification exam. 

Our Undergraduate Certificate in Medical Billing and Coding - Health Information Coding (HIC) program can be earned in as little as 1 year and 2 months on an accelerated schedule, or 1 year and 6 months on a normal one,3 and includes material addressed in the Certified Coding Specialist (CCS®) certification exam.

Graduates of these certificate programs may consider such careers as Medical Records and Health Information Technician, Billing Specialist, Insurance Claims Specialist, Medical Biller or Coding Professional.

1According to completions data from the Integrated Postsecondary Education Data System (IPEDs) for undergraduate certificates between 1-2 years in length categorized under CIP code 51.0707 conferred during academic years 2018-2022.

Normal schedule 2 semesters of year-round, full-time enrollment in 6-13 credit hours a semester per 12 month period. Accelerated schedule does not include breaks and assumes 3 semesters of year-round, full-time enrollment in 6-13 credit hours a semester per 12 month period.

Normal schedule assumes 2 semesters of year-round, full-time enrollment in 6-13 credit hours a semester per 12 month period. Accelerated schedule does not include breaks and assumes 3 semesters of year-round, full-time enrollment in 6-13 credit hours a semester per 12 month period.

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