Third-Party Payor Audits, Abuse, and Fraud

Board takeaway

• Respond to an audit by establishing its type and scope in writing and reviewing the supporting records through a reliable compliance process.
• Distinguish an improper payment from intentional fraud.
• Fair review: AAPD supports fair, clinically informed review by appropriately qualified auditors and opposes recovery-based incentives.

Essential distinctions

• Fraud: knowing, intentional deception or misrepresentation that could produce an unauthorized benefit for oneself or another person.
• Abuse: unsound fiscal, business, or clinical practices causing unnecessary Medicaid costs, or payment for unnecessary/substandard services; beneficiary practices can also cause abuse.
• Audit: examination of records/accounts, or post-treatment records/clinical findings, to verify claim accuracy.
• RAC: recovery audit contractor reviewing already-paid claims.
• Third-party payor: an entity financing care other than the patient or provider.
• Medically necessary care: reasonable, essential diagnostic, preventive, therapeutic, and follow-up services determined by qualified providers to support health, growth, and development.

Distinguish the audit finding

Why audits occur

• Payors investigate improper conduct, recover overpayments, and monitor utilization/costs. Providers owe ethical treatment/billing; payors owe timely payment and responsible oversight.
• Improper payments include wrong recipients, incorrect amounts, absent supporting documentation, and improper use—not only fraud or abuse.
• The policy traces expanded oversight to the Deficit Reduction Act and ACA. State-contracted RACs follow that state's Medicaid laws; they may lack dental or pediatric dental expertise.
• Billing problems can carry serious financial and potentially criminal consequences. Burdensome or misguided investigations may reduce Medicaid participation and access.

Audit preparation and documentation

• On receiving notice, obtain the audit's type and scope in writing to clarify expectations and guide compliance.
• Develop a credible internal self-audit/compliance system covering documentation, coding, and billing; use it for external-audit readiness and practice improvement.
• Educate residents, dentists, and staff through AAPD continuing education, state/district programs, state Medicaid manuals/FAQs, online updates, and AAPD/CMS compliance resources.
• Include claim-submission compliance in office procedures. Confirm the audit’s deadlines and appeal requirements from the applicable notice and program rules.

Fair selection, review, and outcomes

• Auditor credentials: AAPD calls for credentials comparable to the audited provider—pediatric dental expertise and familiarity with specialty guidance for pediatric dentists.
• Selection: AAPD opposes provider profiling. Compelling outlier evidence should compare the same specialty, similar geographic areas, and similar patient populations.
• Claims codes cannot fully describe care; consider baseline disease, socioeconomic circumstances, treatment adherence, and access.
• Financial incentives: AAPD opposes paying auditors incentives tied to money recovered.
• No intent to defraud: AAPD supports peer review instead of financial penalties to improve documentation, coding, and billing.
  • Review should resolve disputes promptly, fairly, and confidentially, supporting accountability and professional standing.

Medical necessity and Medicaid conflicts

• Dental care prevents/treats disease, infection, and pain; restores dental form/function; and addresses facial disfigurement or dysfunction.
• Use recognized clinical guidelines/best practices; weigh expected benefits against risks of treatment or no treatment. Changing disease risk requires continued reassessment and preventive maintenance.
• Early intervention may improve health and development and save costs. Cost-effective care need not be the cheapest treatment.
• AAPD encourages auditors to use its clinical guidance and opposes conflicting Medicaid policies that harm care. The policy cites denial of age-one services covered by Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) as an example.
• AAPD endorses enforcement of the requirement that state Medicaid agencies inform eligible families about EPSDT benefits.

Common board traps

Answer aloud

An audit notice arrives. What is your initial approach?

Obtain the audit type and scope in writing and review the supporting records through the practice's compliance process.

• Check documentation, coding, and billing.
• Confirm deadlines and appeal requirements from the actual notice/program rules.
• AAPD supports qualified reviewers and clinically informed, fair review.

Claims volume exceeds a general dentist's. Does that establish misconduct?

No. Compare similar specialties, geographic areas, and patient populations before interpreting an outlier.

• Disease burden, access, socioeconomic circumstances, and treatment adherence affect utilization.
• Codes alone cannot fully characterize care.
• AAPD opposes provider profiling and recovery-linked auditor incentives.

An audit finds billing errors without intent to deceive. What does AAPD favor?

AAPD favors confidential educational peer review in lieu of financial penalties when no intent to defraud is present.

• An improper payment is not automatically fraud.
• Fraud requires knowing, intentional deception or misrepresentation for possible unauthorized benefit.
• Correct errors and their causes; this advocacy position is not a guaranteed legal outcome.