Rethink the Audit: How to Turn External Coding Reviews Into a Compliance Advantage
Many healthcare organizations think their coding is under control — until recurring denials or a payer audit show otherwise. External coding audits are often seen as reactive tools to catch and correct errors. However, when used strategically, these audits can develop programs that ensure proactive compliance.
Every error caught is money saved, but an organization’s internal processes may not catch all the issues until it’s too late. Routine external audits minimize the risks by uncovering blind spots early and ensuring coding practices align with regulatory expectations. When an organization is compliant, everything else — reimbursement, accuracy, and financial stability — falls into place.
From Compliance Check to Improvement Strategy
External coding audits are necessary to ensure compliance for regulatory and payer requirements, but the true value of an audit goes beyond just oversight. When used proactively, audits become a powerful strategic tool that not only protects your organization from risk but also drives performance and growth.
When an organization is compliant — coding aligns with policies, documentation is accurate, and processes are sound — denials decrease, revenue becomes more predictable, and operational efficiency improves. Prioritizing compliance does not slow down the revenue cycle — it strengthens it. It’s when quantity is put above quality that the risk of errors increases. The time and resources required to resolve issues are far greater than getting it right the first time. Routine external audits ensure that quality comes first. They catch risks early, reducing the chance of financial losses or potential legal liabilities, but they also do more than that.
Audits provide valuable insights that can be used for organizational improvement. They can uncover gaps in clinical documentation, outdated codes, and even areas to improve patient safety and quality. When treated as a learning tool, audits can transform reactive workflows into proactive strategies for continuous improvement. To make the most of an external coding audit, these insights should be used to train and educate coders and clinicians.
Audit Results Empower Coders and Providers with Education, Not Just Correction
The results from the audit can be used to help coders and clinicians understand where and why something went wrong and how to improve. Audits highlight areas where outdated codes are being used, documentation may be incomplete or unclear, and detail how notes may not fully support the codes being submitted. Since clinical documentation is used as the legal basis for a claim, it must be aligned with the codes to ensure compliance and avoid denials.
Even though an organization may conduct internal audits, there are often blind spots that go unnoticed. External coding audits conducted by certified professional coders (CPCs) provide objective outside feedback to prevent errors or misunderstandings from becoming institutionalized and leading to long-term compliance risk and revenue loss. Leveraging a combination of advanced automated tools and expert manual reviews, coding auditors strengthen financial integrity, enhance coding accuracy, uncover gaps in documentation, and clarify evolving coding rules. This is especially important in today’s healthcare environment where coders and clinicians are expected to keep up with shifting guidelines, changing payer policies, and evolving documentation standards.
Using the results from external audits to provide training creates alignment across the clinical and coding teams and reduces common and recurring coding errors. Over time, this alignment improves documentation quality, strengthens compliance, and more accurately reflects the services and care provided.
Common Coding Errors that Impact Compliance
The saying “what you don’t know can hurt you” is even more true when it comes to coding errors. The Coding Network refers to errors as “the silent killers of compliance in the healthcare sector.” That’s because minor errors can end up causing major compliance and financial issues as they may go unnoticed by internal audits until they begin to trigger denials, payer audits, or even regulatory penalties. Some of the most common errors include:
- Upcoding and Downcoding: Assigning codes that indicate more complex care than was provided can result in fraud and penalties, while coding for a lower level of service than was provided leaves unclaimed revenue on the table.
- Incorrect or Missing Documentation: When clinical documentation is incomplete or does not fully support the codes submitted, it increases the likelihood of denials which cause more work and expenses on the organization to retroactively address.
- Medical Necessity Denials: Inconsistencies between the diagnosis and the procedures performed can result in payers rejecting claims based on lack of medical necessity.
- Overlooked Modifiers or Code Linkage: Missed modifiers or improper diagnosis-to-procedure code links can result in delayed payments or denials.
External audits are essential for not only catching these types of errors but looking into the root causes for why they happen — whether it’s coding issues, unclear documentation, or inefficient workflows. They are also key for identifying recurring errors that may be a sign of larger systemic issues.
These recurring errors cause major havoc when it comes to compliance. Over time, they may cause a loss of trust in the organization, trigger targeted audits, and result in denials. They can also lead to CMS scrutiny and regulatory noncompliance penalties. By identifying these errors early, external audits help correct any underlying causes before they cause damage to the organization.
IKS Health Coding Audit Framework: Strategy in Action
A coding audit should not be a one-time check. IKS Health’s approach to coding audits is as an ongoing strategic initiative to ensure compliance, improve clinical documentation and coding accuracy, and prevent systemic issues before they impact the organization’s success.
According to MGMA, there are many goals for an audit to accomplish: Identify errors in documentation and inefficiencies in payer reimbursement; determine usage of incorrect medical codes; uncover areas of payer rules if the organization is billed inappropriately; identify fraudulent billing practices and error in claim scrubbers or software deficiencies; and identify any areas of risk that may trigger an outside audit or investigation.
IKS Health has created a four-point approach to external audits:
- Data Review
Our team performs a deep analysis of 12 months worth of coding data to assess the overall performance, identify patterns, and look for any potential compliance risks. The historical data enables us to find trends that may be signs of larger systemic issues. - Compliance and Risk Analysis
Our experts look for any signs of upcoding, incorrect usage of E/M coding, or areas where clinical documentation may be lacking. In addition to finding errors, IKS will also flag missed opportunities for revenue optimization to make sure the organization receives appropriate reimbursement. - Benchmarking and Comparison
Once the review and analysis are complete, IKS Health will measure the current coding performance against industry standards, showing where it falls short or exceeds the market. Any areas of improvement or discrepancies that could impact compliance and reimbursement are identified. - Strategic Action Plan
IKS Health does not just provide a detailed report — we provide a customized plan with immediate, mid-term, and long-term corrective measures as well as training and education for CDI, coders, and clinicians in either one-on-one or group sessions. To help prevent future errors, IKS Health also provides recommendations for workflow improvements and policy adjustments.
What sets us apart is our commitment to continuous improvement. We view audits as part of an ongoing feedback loop that supports education, insight, and error prevention. Our expert medical coding team of AHIMA and AAPC-certified professional coders use the power of GenAI tools and deep domain expertise to deliver exceptional results. This approach enables our clients to maintain a 95%+ accuracy rate with a 8%-9% improvement in coding quality impacting denial rate and reimbursement. In fact, one client has seen a 10% increase in coding accuracy across patient types.
IKS Health understands that coding accuracy is a strategic advantage in today’s healthcare market, and organizations that treat external coding audits as proactive tools gain more than compliance. They find clarity, guidance, quality, and improved performance, plus peace of mind. The IKS Health audit framework is part of our larger, comprehensive coding suite for complete end-to-end revenue cycle management solutions — ensuring accuracy and compliance are always aligned to drive the best outcomes.
Contact us to learn how IKS Health can help your organization move from reactive compliance to proactive strategy with coding audit services tailored to your goals and backed by deep RCM and clinical expertise.
