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How to Avoid a Laboratory Audit

By Sean McSweeney  bio
Laboratory audits have a much harder impact on your lab than intended. As detailed by the NCBI, the audit's intent is to review and…

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By Sean McSweeney  bio

Laboratory audits have a much harder impact on your lab than intended. As detailed by the NCBI, the audit’s intent is to review and assess laboratory performance to identify areas for improvement. However, in practice, they slow you down, cost you large amounts of money, and pose potential threats to your operations. Knowing how to avoid a laboratory audit is crucial to maximizing your workflow and profits.

The Golden Rule—document properly

The best way to avoid an audit is to make sure that you have all the appropriate documentation from the ordering physician to support the need for the test. Always. You’ll probably get tired of us mentioning it, but it is vital to your operations to keep your documentation in order. It not only helps you prove medical necessity and proper record keeping in case you’re audited, but it has immense potential to drastically decrease the likelihood of an audit taking place!


With those orderly records, you use them to respond timely to requests from payers for supporting documentation. Do it every time.

This means progress notes, signed office visit notes, physician’s orders, etc., have to be signed and maintained! When you don’t have the proper documentation kept, you don’t maintain evidence to back up your testing, and that doesn’t fly with payers. This also means that you’ve got to keep the documentation handy to show payers in case they come looking. If they deny enough claims for lack of medical necessity, you’ll eventually get a call about that audit you can’t satisfy, and you’ll have to give a lot of money back. 

The documentation you keep should answer three questions:

1. “What testing are you performing and why?”

Medicare is explicit in their instructions, so writing “performing lab tests” or “lab panel” in the patient’s record isn’t enough.

Of course, you’re performing lab tests. You need incredible specificity about both your intent in testing and what the testing is.

2. “What is it about the patient that indicates the need for testing?”

Including this helps payers understand why the patient is receiving testing for this as well as provide authenticity to your testing purposes. Does your patient have a familial history of breast cancer? That would be useful to include on the documentation for a cancer genomics (CGx) test. Does your patient have prior drug abuse on their criminal record? Including this would be beneficial to prove why you’re testing for drugs outside of their prescribed medication.

3. “How will the results of the test impact the patient’s treatment?”

Identifying the intake of a substance contraindicated in certain tests (i.e., MRI or CAT scans) would alter the treatment regimen by the primary care provider (PCP). Certain variations in test results will alter medication doses or types, and depending on the results, the adjustments are vital to the patient’s health. With these best practices in place, it’s hard to determine what proper documentation should look like.

As an example, your entry into the patient record should be something like, “Molecular/genetic testing for BRCA due to hereditary history”. This way you establish the testing (molecular testing), need (breast cancer), and impact (in the BRCA).

Covering medical necessity

Payers typically have policies in place regarding medical necessity for lab services. Therefore, keeping those three questions in mind as you work with clinicians ordering lab services is crucial to avoiding audits. If the ordering PCPs don’t document medical necessity then payers will continue billing lab services that aren’t medically necessary under their guidelines. This implements further scrutiny on your lab, and an audit usually isn’t far behind.

What about “standing orders”? These are agreements between the clinician and the lab that stipulate certain tests run when the clinician submits a patient’s samples for testing. Practicing this way is tricky because it can trigger an audit when so many patients have tests ran without thorough documentation (despite the fact that’s just how labs and clinicians operate. Payers avoid paying in these instances because they assume patients aren’t getting treatment or services specific to their individual case even if they’re frequently testing for the same thing.

Coding to avoid audits 

Correct coding is a goal to strive for. Don’t over-bill or upcode. Now, this area is tricky because when you code correctly there’s a probability that the payer will deny it because…that’s just what they do, but you’ve got to strive for accuracy and efficiency. The coding should indicate only the tests performed (with correct modifiers) and units for frequency.

While every provider wants to maximize their reimbursement, there’s a fine line between that and over-billing for services. Payers that believe a lab is over-billing may be subject to further scrutiny by payers. Once a few personal claim audits are found, they look for a pattern, and, if identified, will trigger an audit.

In conclusion

As stated before, the most effective strategy to avoid an audit is to use the proper documentation on all services and be ready to provide it if asked.

Lisa Novakoff at Apache Medial Billing gave her expertise by saying:

“The easiest way is to document services and be ready to present that documentation. In my experience, as long as you can do this, there is no compliance issue that would suggest to them to look at additional records or suspect any particular errors, which are the reasons why they would institute an audit on a larger scale.”

Make sure your documentation covers the questions:

  1. What are you testing for and why?
  2. What is the reasoning for testing?
  3. How will it impact treatment?

Answering medical necessity is vital because most payers have guidelines in place regarding establishing that prior to paying.

Coding is also important, so make sure you’re not trying to cheat insurers out of money. Don’t over-bill and upcode.