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DME Market Insights

3 Best Practices for Surviving an Audit as a DME Supplier

You might not put fraud in the same sentence as wheelchairs, oxygen tanks, and hospital beds. But in the durable medical equipment (DME) industry, a few bad actors committing fraud have created a mountain of pain and paperwork for the rest of the industry. Today, going through payor audits are now an everyday part of doing business.

Still it’s a lucrative place to be, given the upward trajectory of this market. With a population that’s growing older but not getting healthier, the U.S. DME market size is expected to reach $92.8 billion by 2030, based on expected growth of roughly 6% from 2022 to 2030.

The Threat of Audits at Every Turn

Unfortunately, with that positive trend comes a negative downside. Medical equipment is a growing part of the estimated billions of dollars of fraud that happens each year, according to the National Health Care Anti-Fraud Association.

The prevalence and the cost of fraud has led to an increase in audits including Comprehensive Error Rate Testing (or CERT) audits, Medical Necessity Audits, and Recovery Audits contracted by the Centers for Medicare and Medicaid Services (CMS).

And those are just the audits from one government agency. Now that the pandemic public health emergency is over, the expectation is that audits from all commercial insurers will increase.

Mountains of Paper Compound the Risk

The nature of healthcare in the U.S. means piles of paperwork – from invoices to payments, medical records to insurance forms, workers comp to authorizations. If you run a DME, you’re no doubt handling a high volume of incoming and outgoing correspondence related to your claims processing.

That volume and variety compounds the risk of audits, because it means that when asked to show proof, a DME company has to find the proverbial needle in the haystack.

“The healthcare industry has an amazing amount of complexity in how it documents not only the medical treatments, but payments for those treatments,” said John Koch, COO and co-founder of MediStreams, a leading provider of remittance, reconciliation, and payment automation solutions. “We’ve talked to DMEs who lost money simply because they couldn’t quickly find the information they needed to process a claim, and others who have lost money because they couldn’t respond to an audit in time.”

Best Practices to Streamline Paperwork and Strengthen Compliance

The good news is that both challenges of managing paperwork and responding to audits can be addressed through the same best practices to maximize resources and revenue, while preparing any DME provider for an audit (which also saves money).

Problem Responding to an audit takes time and expertise. How can you best prepare so it’s not a last-minute scramble?	Best Practice Develop a compliance program, even if you can’t staff the role. (In smaller DMEs, leaders wear many hats – but one of them should be compliance. If you’re in a larger DME, it could be someone’s full-time job.) A good starting point for what to include in your program is this list of seven essential requirements of an effective compliance program from the Department of Health and Human Services Office of the Inspector General.
Problem When a DME provider is audited for a specific product (an oxygen concentrator, for example), Medicare will hold payment until the company can show 10 examples of the product being audited. The longer it takes to find those examples, the longer it takes to get paid.	Best Practice Digitize your documents in a system that has indexing capabilities (not just online storage). With data categorization, you can immediately locate examples to speed up payment, which in turn optimizes revenue cycle management.
Problem Recovery Audit Contractor (RAC) and Target, Probe & Educate (TPE) audits are two types of audits from CMS that require a response within 45 days. If you fail to respond within that period, Medicare won’t pay the claim – even if it was accurate and valid.	Best Practice Invest in a system that automates the receipt of paper mail and email, making it easy to upload each type, store it, sort it, and index it (known as paper EOB conversion). The faster you know you’ve been notified, the faster you can respond.

“We can’t reform the healthcare industry or the insurance industry to streamline their processes,” said Koch, “but we can help DMEs and others in healthcare maximize their revenue and frankly, remove a lot of the daily headaches that go with sorting through more than two dozen types of documents.”

Not sure you have the right digital solution in place to face audits?