Billing Audits: How to Review Your Clinic's Invoices

Among healthcare professionals, it's not always clear when to conduct billing audits or what exactly you should be looking for when reviewing your clinic's invoices. These audits serve a critical purpose, but the process can feel overwhelming especially when you're already managing patient care, staffing issues, and the thousand other details that keep a medical practice running..

For this article, we're drawing on proven billing audit strategies that have helped countless practices recover lost revenue and improve their reimbursement rates. Think of this as your practical roadmap to understanding what billing audits are, why they matter, and exactly how to conduct them.

Now, let's walk through the billing audit process...

What are billing audits?

A billing audit is a systematic review of your clinic's medical billing claims, invoices, and related documentation to verify accuracy, compliance, and completeness. This process checks that what you billed matches what was documented, that services are coded correctly, and that you're following payer requirements and regulations.

Medical billing audits aren't just about catching mistakes—though they certainly do that. They're about understanding your revenue cycle health, identifying patterns that lead to denials, and implementing improvements that boost your bottom line.

Studies show that medical billing errors affect somewhere between 30-80% of medical bills, with an estimated $68 billion lost annually to billing mistakes and claim denials. Many of these errors are completely preventable with regular audits.

Billing audits typically examine:

Claim accuracy | Verifying diagnosis codes, procedure codes, and modifiers
Documentation quality | Ensuring clinical notes support what was billed
Compliance | Checking adherence to coding guidelines and payer policies
Charge capture | Confirming all services performed were actually billed
Denial patterns | Analyzing why claims are being rejected
Payment accuracy | Validating that reimbursements match contracted rates

When you're working with medical billing in Indiana or any other state, the fundamentals of auditing remain the same, though specific payer requirements may vary by region.

Related: Mental health billing services and how specialized billing support can streamline your audit process

Why billing audits matter to your practice.

Regular billing audits provide several critical benefits:

Financial protection: Undercoding means you're leaving money on the table. A practice that consistently underbills by just $47 per visit for a common procedure—and performs that procedure 320 times per year—loses over $15,000 annually. Multiply that across several years, and you're looking at substantial revenue loss.

Compliance assurance: Overcoding or incorrect billing can trigger payer audits, recoupment demands, and even fraud allegations. Catching these issues internally before external auditors do protects your practice from penalties, interest charges, and legal complications.

Operational efficiency: When you identify why claims are being denied, you can fix the root causes—whether that's missing prior authorizations, incorrect modifiers, or documentation gaps. This means fewer denials, less rework, and faster payment cycles.

Staff education: Audits reveal where your team needs additional training. Maybe they're not staying current with annual coding updates, or perhaps they don't fully understand a specific payer's documentation requirements. Identifying these knowledge gaps allows you to provide targeted education.

Revenue cycle optimization: Understanding your denial rates, days in accounts receivable, and clean claim rates gives you baseline metrics to measure improvement against. You can't fix what you don't measure.

These aren't isolated benefits—they work together to strengthen your practice's financial foundation. And if you're partnering with professional billing services like those offered for acupuncture billing or other specialties, regular audits ensure your billing partner is delivering the results you expect.

The difference between internal and external audits

Essentially, internal audits are conducted by your own staff or trusted partners to proactively identify issues, while external audits are performed by payers, government agencies, or third-party contractors—often because they've already identified a potential problem.

Each type of audit serves a different purpose and follows different protocols:

Internal audits:

Conducted on your schedule and terms
Designed to catch and fix problems before they become serious
Allow you to implement corrections quietly without external scrutiny
Can be tailored to focus on your specific high-risk areas
Results stay within your organization unless you choose to report findings

External audits:

Triggered by payer concerns, statistical anomalies, or routine compliance checks
Often involve legal and financial stakes
May result in recoupment demands, penalties, or reporting requirements
Focus areas are determined by the auditor, not by your practice
Can damage payer relationships and practice reputation if significant issues are found

The goal of internal audits is simple: find and fix problems before external auditors do. It's far better to discover an overcoding pattern during your quarterly review than to receive a surprise audit letter from Medicare.

When in doubt about your billing practices, conducting regular internal audits provides peace of mind and documentation that you're taking compliance seriously. This proactive approach demonstrates good faith efforts to maintain billing integrity.

Setting up your billing audit framework

Here's how to establish a sustainable audit program that catches issues without overwhelming your staff.

Most successful practices use a three-tiered approach:

Monthly spot checks

Review a random sample of 10-20 claims each month. This lightweight audit doesn't require significant time investment but keeps you connected to what's happening in your billing operations.

For monthly audits, focus on:

High-volume procedure codes
New services your practice recently started offering
Claims from providers who joined your practice recently
Payers with historically high denial rates

Quarterly deep dives

Every three months, conduct a more thorough review of specific areas. You might examine one category per quarter:

Q1: Evaluation and Management (E/M) coding levels and documentation Q2: Denial patterns and root cause analysis Q3: Modifier usage across all procedure codes Q4: High-dollar claims and complex procedures

This rotating focus allows you to be thorough without trying to audit everything simultaneously.

Annual comprehensive audits

Once a year, bring in fresh eyes for a complete evaluation—either internal staff from outside your billing department or external consultants who specialize in medical billing audits. Annual audits provide a holistic view of your billing health and often catch systemic issues that smaller spot checks might miss.

This layered framework means you're always monitoring without burning out your team or yourself. It also demonstrates to external auditors (should they come calling) that you maintain robust internal controls.

Step-by-step: How to conduct a billing audit

Now let's walk through the practical steps of conducting an effective billing audit from start to finish.

Step 1: Gather your documentation

Before you can audit anything, you need the right materials assembled. Pull together:

Patient medical records and clinical documentation
Submitted billing claims (both paid and unpaid)
Explanation of benefits (EOB) and remittance advice from payers
Denial letters and related correspondence
Your current fee schedule
Updated coding resources (CPT, ICD-10, HCPCS manuals)
Payer-specific billing guidelines for your top insurance companies

If your practice is still managing paper records, this is a clear signal that digital solutions might improve efficiency. Modern healthcare is increasingly leveraging technology—7 AI career opportunities for healthcare workers are emerging precisely because these tools dramatically streamline administrative processes like billing audits.

Most practice management software will offer reporting features that make pulling these records easier, though some systems handle this better than others.

Step 2: Select your audit sample

For routine audits, use a random sampling method to select claims for review. A statistically valid sample doesn't require reviewing every single claim—typically 20-30 claims per provider or per billing period provides sufficient insight.

You can also conduct targeted audits when you want to focus on specific concerns:

All claims for a particular CPT code
Claims from a specific payer that's showing high denial rates
Claims for services that require prior authorization
High-dollar claims above a certain threshold

The American Medical Association and various specialty societies provide guidance on appropriate sample sizes based on claim volume and risk level.

Step 3: Match documentation to billing codes

This is where the detailed work begins. For each claim in your sample, verify that what was billed accurately reflects what was documented and performed.

Start with administrative accuracy:

Is patient demographic information correct (name, date of birth, policy number)?
Does the date of service on the claim match the medical record?
Is the rendering provider correctly identified with accurate NPI?
Is the provider properly credentialed with this payer?

Then move to clinical coding:

Do diagnosis codes (ICD-10) accurately represent the patient's documented condition?
Are procedure codes (CPT/HCPCS) supported by provider documentation?
If multiple procedures were performed, are appropriate modifiers present?
Does the level of service (for E/M codes) match the documented complexity?

A common error involves billing preventive visits along with problem-focused E/M services. When a provider addresses both during the same appointment, you must use modifier 25 on the E/M service to indicate it was significant and separately identifiable from the preventive visit. Without that modifier, the E/M charge gets denied or bundled—costing practices thousands per month in lost revenue.

Step 4: Review charge capture processes

Understanding how services become billable claims is crucial because this is where many errors originate. Shadow your workflow from clinical encounter to claim submission:

How do providers document services during patient visits?
Who translates clinical notes into billing codes?
What checks exist to ensure all performed services are captured?
Are charge tickets or encounter forms current and complete?
Is there a system to verify that services don't fall through the cracks?

Consider a physical therapy practice where providers perform multiple therapeutic exercises per session. If the documentation template doesn't prompt them to record each service, billing staff can only code what appears in the notes—meaning performed services go unbilled.

The solution isn't always working harder—it's implementing better systems. Structured EHR templates, automated charge capture tools, and clear documentation protocols can dramatically reduce missed charges.

Step 5: Analyze denial patterns

Your denial reports contain valuable intelligence about where your billing process is breaking down. During audits, pull denial reports for your review period and look for patterns:

Are specific payers denying claims more frequently than others?
Is one particular procedure code repeatedly rejected?
Are the same denial reason codes appearing consistently?
Are denials concentrated with certain providers or departments?

If 15% of claims to a specific insurance company are denied for "missing prior authorization," that reveals a gap in your authorization process. Either certain services aren't being flagged as requiring precertification, or authorizations are obtained but not properly documented on claims.

Frequent "timely filing" denials suggest bottlenecks in your revenue cycle—perhaps claims sit in queues too long before submission, or there's delay in clearinghouse transmission.

Each pattern tells a story. Your job is to decode these patterns and fix root causes, not just resubmit individual claims.

Step 6: Check for compliance red flags

Compliance issues aren't something you want external auditors to discover first. Your internal audits should specifically screen for common compliance risks:

Upcoding concerns: Are you consistently billing higher-level E/M codes than documentation supports? Review a sample of your highest-level codes and verify documentation meets requirements.

Unbundling problems: Are you billing separately for services that should be bundled according to National Correct Coding Initiative (NCCI) edits? Run claims against current NCCI tables.

Duplicate billing: Are services ever billed twice? This happens more easily than you'd think when multiple staff access billing systems.

Medical necessity questions: For each service billed, can you demonstrate it was medically necessary based on the patient's documented condition?

Modifier misuse: Are modifiers being used correctly and only when appropriate? Overusing modifier 25, incorrect bilateral modifiers, or liberal use of modifier 59 are red flags.

If you identify compliance concerns, don't ignore them. Consult with a compliance specialist or healthcare attorney about appropriate next steps. Self-reporting issues, when warranted, is always better than being caught.

Step 7: Calculate key metrics

At your audit's conclusion, quantify what you found. Numbers demonstrate the audit's value and provide baseline metrics for measuring improvement.

Calculate:

Error rate: Percentage of audited claims containing mistakes
Total underpayments: Revenue you should have received but didn't
Total overpayments: Amounts received that shouldn't have been
Denial rate: Percentage of submitted claims being denied
Clean claim rate: Percentage paid on first submission without issues
Days in A/R: Average time from service date to payment
Error breakdown: Categorize errors by type (coding, documentation, demographic, etc.)

These metrics aren't just report cards—they're actionable intelligence showing where to focus improvement efforts and measuring progress over time.

Common billing errors to watch for

Recognizing frequent billing mistakes helps you spot them faster during audits. Here are the most common errors we see:

Patient demographic mistakes

Billing to the wrong patient account happens more often than expected, especially with similar patient names or during rushed registration. Even small errors like transposed policy numbers cause instant denials.

Missing or incorrect modifiers

Modifiers provide crucial context about how services were performed. Missing a 25, 59, or bilateral modifier can mean the difference between payment and denial. But using modifiers incorrectly creates compliance risks.

Documentation-coding mismatches

The provider's notes might support one level of service, but billing submits a different code. This creates either underpayment (when documentation exceeds the code) or compliance risk (when codes exceed documentation).

Date of service errors

These seem minor but cause surprising headaches. Services dated incorrectly, claims submitted past timely filing deadlines, or dates that don't align between claims and supporting documentation all trigger denials.

Provider identification problems

Using wrong rendering provider NPIs, missing supervisory relationships for mid-level practitioners, or billing under providers not credentialed with specific payers causes instant rejections.

Bundling violations

Certain services can't be billed together. If you're not checking claims against NCCI edits before submission, you're creating denial patterns and compliance exposure.

Missing prior authorizations

Some services require precertification. Billing without proper authorization virtually guarantees denial. The challenge is that authorization requirements vary by payer and change regularly.

Conclusion

To recap, in this article we covered:

What billing audits are and why they matter
The difference between internal and external audits
How to set up a sustainable audit framework
Step-by-step audit process from documentation to metrics
Common billing errors to watch for

Recognizing billing errors before they become costly patterns can feel challenging, but this knowledge applied correctly is hugely beneficial to your practice. Regular audits are a key part of revenue cycle management that impacts your bottom line, compliance posture, and operational efficiency.

When you work with billing experts like those at Delon Health, you can access specialized knowledge if you're having doubts about coding, documentation, or claim accuracy. Professional billing services review claims before submission to ensure accuracy for quick reimbursement.

Ready to optimize your billing process? Delon Health offers comprehensive medical billing services with built-in audit programs designed to maximize your reimbursements while ensuring compliance. From detailed claim reviews to complete denial management, their team helps practices capture every dollar they've earned.