Do I have your attention? Allow me to explain: The Audit Unit is made up of people with backgrounds not dissimilar from most experienced claims professionals. They are given a set of labor codes and case law, along with orders to go out and apply them.
Sounds similar to California’s litigation system, doesn’t it? One side views a law one way; the other side has a different perspective. The difference? The Audit Unit has the authority to assess penalties based on its own legal interpretations, much like the IRS. This recognition can go a long way towards assisting you in handling a dreaded audit.
Bradford and Barthel, LLP is committed to servicing each client. This was evidenced in a recent venture in which we aided a client to prepare and survive an audit. Much can be learned from that once-in-a-lifetime (hopefully!) experience.
The audit began with the “initial meeting”, a venue for claims personnel and the Audit Unit sit down and discuss the ground rules. Everyone “plays nice” at this stage. The Audit Unit expressed its hopes that the claims unit would pass the audit. They further explained the three-stage audit process.
The first stage is the preliminary audit of payments and notices (PAR). If the claims department passes this audit, the process stops there. The fines are waived, and unpaid benefits are issued. The Audit Unit will not darken the door-step of this claims department for another five years.
If the PAR is not passed, phase two requires that the Audit Unit delves into the files further.
As part of phase three, denied claims are reviewed for both timeliness and “bad faith” denials. “Bad faith” means there is intent to withhold a benefit to which an applicant is entitled. This involves the Audit Unit’s subjective interpretation of law and facts. A claim may be denied based on AOE/COE facts. Much to everyone’s surprise in the Claims Unit, several denials were deemed “bad faith” denials even though they appeared solid.
Whose opinion counts in that situation? This remains another area of disagreement. The Audit Unit claims to have the authority to overturn the entire direction of a claim for what it considers a “bad faith” denial, even if the denial met the standards of investigation or medical criteria required to make a decision.
Situations like this require using the dispute process. This can be a valuable exercise. The claims unit we assisted was able to prove that the Audit Unit was incorrect in several instances. However, the appeals were met with extreme resistance; one auditor suggested we “just agree to disagree”!
If the disputes remain unsolved prior to the audit’s conclusion, the Audit Unit sends a letter to the injured worker advising how much the claims administer owes him or her. Yes, even if the dispute is unresolved! There is a final appeals process directed to the state, but the damage is done when the letter goes out to the injured worker.
Food for thought:
- When you receive a “notice letter” from the Audit Unit, treat it as if you are being audited by the IRS.
- Have legal counsel look over your denials before you issue them.
- Make sure your notice letters include the appropriate QME language.
- Remember: when one benefit stops, another should start (unless you have a dispute). Disputes must be supported with letters to the injured workers advising them of their remedy and/or referencing solid medical opinion. Even then, the Audit Unit may not consider these valid factors.
- Put your disagreements in writing when appealing an Audit Unit decision. Document the unit’s position. When they leave your facility, it is too late to influence them before they send notice letters to injured workers.
Each of us has differing opinions as to the appropriate way to handle a file. Unfortunately, rarely is all the detailed analysis that goes into a decision documented in the file. Thus, the thought process is left up to interpretation by anyone reviewing the file, including auditors. Document, document, document all factual issues, and decisions.
You may have read that the Audit Unit recently assessed AIG over $1 million in penalties. Big money is clearly at stake. One must ask, did they prepare for their audit as thoroughly and completely as did our client? How many of the assessments were accurate? How many of them were based on the audit unit’s malleable interpretation of the codes?
A final thought: auditors warned that next year they would be “gearing up” to “really hit the industry hard” on voucher and return-to-work issues. It sounded to me as if they are counting the assessment money before it is made. Is this just a fund-raiser, and they forgot to tell us?
Stay tuned for additional thoughts as the audit progresses.
Sherri Dozier is Bradford & Barthel’s Director of Client Development and Relations.
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