Prospective vs. Retrospective Audits in Revenue Cycle Management

Maintaining a steady and reliable revenue stream is essential for healthcare organizations. Revenue cycle managers strive to send claims as promptly as possible, since any delays in claim submissions can negatively impact cash flow. In addition, the Centers for Medicare & Medicaid Services (CMS) expect organizations to achieve a claim accuracy rate between 95 and 98 percent. Falling below this threshold can trigger an external audit, which can be both disruptive and costly to the organization.

Types of Audits

Healthcare organizations must perform both prospective and retrospective audits as part of their compliance efforts. The ongoing debate within the industry centers on which approach is most effective in meeting increasing compliance demands: prospective or retrospective audits.

Prospective Audits

Prospective audits are conducted prior to claim submission and focus on reviewing specific, targeted cases. These cases are typically selected based on guidelines from the Office of Inspector General (OIG) or identified as high-risk areas from previous external audits. The primary objective of a prospective audit is to detect and correct any billing or coding errors before the claim is submitted for payment.

Retrospective Audits

Retrospective audits, on the other hand, involve reviewing claims that have already been submitted and adjudicated—either paid, denied, or pending. The focus here is on conducting an in-depth analysis of the internal claims process to identify underlying issues or high-risk areas based on the outcomes of claim adjudication.

Pros and Cons of Each Approach

Prospective Audits: Advantages and Limitations

The main advantage of prospective audits is the ability to prevent incorrect claims from being submitted, thus reducing the likelihood of claim denials. Prospective audits also demonstrate to CMS and other payers that the organization is proactive in its billing and coding processes. Proponents of this approach argue that submitting clean claims leads to quicker payments and improved cash flow.

However, prospective audits have limitations. Most organizations do not have the resources to audit every account before billing. Typically, only a small number of claims—such as about ten cases per provider or high-risk areas—are reviewed before submission. This means a significant percentage of claims remain unaudited and may still contain errors.

Retrospective Audits: Strengths and Drawbacks

Retrospective audits benefit from not being subject to the same time constraints as prospective audits. Since claims have already been submitted and adjudicated, auditors can conduct thorough, in-depth reviews of as many cases as needed. This allows for comprehensive review of chart documentation, appropriateness of procedures, and diagnostic code selection without the pressure to submit bills quickly.

One major advantage of retrospective audits is the ability to gather and analyze large amounts of data. This broader scope leads to more realistic audit results and outcomes. Ultimately, retrospective audits can inform a more comprehensive corrective action plan, targeting areas such as registration, pre-authorization, clinical documentation, or coding.

Combining Prospective and Retrospective Audits for Optimal Results

The most effective approach is to combine both prospective and retrospective audits. This integrated strategy forms the foundation of a revenue integrity program focused on continuous process improvement and corrective action. By utilizing both methods, organizations can pinpoint the sources of errors and provide targeted education to staff, ultimately reducing the incidence of inaccurate claims and supporting ongoing compliance.