What Healthcare Providers Need to Know About Medicare Audits

For healthcare providers enrolled in Medicare, a claims audit can present significant operational and financial challenges. When an audit results in denied claims, the appeals process often becomes lengthy, with cases taking months—or even years—to reach a final resolution. Successfully navigating each stage requires careful planning, strategic decision-making, and close attention to procedural deadlines.

Most Medicare audits begin with a request for medical records from a Medicare contractor. From the outset, providers should determine the purpose and scope of the review. Identifying the contractor conducting the audit—whether a Medicare Administrative Contractor (MAC), Unified Program Integrity Contractor (UPIC), Recovery Audit Contractor (RAC), or Supplemental Medical Review Contractor (SMRC)—can offer valuable insight into the government’s objectives. It is equally important to understand the type of audit involved. Is the review occurring before or after payment? Is it part of a Targeted Probe and Educate (TPE) initiative, a Comprehensive Error Rate Testing (CERT) review, or a Provisional Period of Enhanced Oversight (PPEO) audit? Providers should also evaluate whether statistical sampling or extrapolation may be part of the review.

The provider’s own circumstances should also factor into a response strategy. Previous audit activity, recent ownership changes, or situations where records are maintained by another organization may all influence how the audit should be handled. Depending on the issues presented and the potential exposure, providers may choose to supplement the record with additional documentation, obtain an independent clinical review, communicate directly with the auditing contractor, or prepare a comprehensive legal response. In lower-risk situations, however, submitting the requested records and waiting for the contractor’s determination may be the most appropriate approach.

If claims are denied, providers generally have the right to pursue Medicare’s five-level administrative appeals process. Each level provides another opportunity to challenge the determination but is governed by its own procedural requirements and filing deadlines. The first step is Redetermination, conducted by the MAC, which is often the contractor that issued the original decision. If the denial is upheld, the provider may seek Reconsideration before a Qualified Independent Contractor. The third level is a hearing before an Administrative Law Judge (ALJ), where testimony and supporting evidence may be presented. Further review is available through the Medicare Appeals Council within the Department of Health and Human Services, followed, in limited circumstances, by judicial review in federal court.

Every phase of the appeals process involves distinct rules regarding deadlines, evidentiary requirements, the submission of new information, and the applicable standard of review. In some cases, providers may be able to suspend CMS recoupment efforts while an appeal is pending. Although this can provide important financial relief, it often accelerates the appeal timeline and requires prompt, well-coordinated action.

Throughout both the audit and appeals process, providers must make important strategic decisions, including how to frame legal and clinical arguments, whether expert analysis is necessary, and how the audit could affect broader compliance or operational concerns. Experienced legal counsel can help providers evaluate the audit’s scope, develop an effective response strategy, and prepare persuasive appeals that maximize the opportunity for a successful outcome.

For over 40 years, Wachler & Associates has represented healthcare providers and suppliers nationwide in a variety of health law matters, including Medicare audits, and our attorneys can assist providers and suppliers in understanding new developments in healthcare law and regulation. If you or your healthcare entity has any questions pertaining to Medicare audits or healthcare compliance, please contact an experienced healthcare attorney at 248-544-0888 or wapc@wachler.com.