Articles and Case Studies

When Medicare Comes Knocking

07 Dec 2012

Yvonne Baldwin, Claims Manager highlights two cases that exemplify the importance of medical practitioners understanding the nature and purpose of the Medicare audit process.

Medicare conduct annual compliance audits to determine if claims made by health professionals are appropriate and correct. Previous compliance audits have targeted practice nurse item numbers, wound care item numbers and immunisations. In recent months, Medicare has been targeting skin excision item numbers and the rendering of consultation and procedure item numbers on the same day.

Under the previous audit system, Medicare could not compel a medical practitioner to provide copies of his or her clinical notes to substantiate services rendered for a particular MBS item number. The Health Insurance Amendments (Compliance) Act 2001 came into force on 9 April 2011 and applies to all Medicare services provided on or after this date. Although the legislation has been in force for over 12 months, Medicare is only now starting to review services and issue audits for services that post-date April 2011.

Under the new provisions, Medicare has the power to request that a medical practitioner provide documents to substantiate the provision of a service and subsequent rendering of an MBS item number. In the case of skin excision item numbers, the most commonly requested document is a copy of the histopathology report or a specialist’s letter confirming a previous diagnosis of SCC or BCC (in cases of serial excision).

Case history 1

Dr A received a letter from Medicare informing him that he was being audited in respect of serial curettage excision items. The audit was triggered because Medicare's analysis of Dr A’s claims for the period 1 May 2011 to 1 May 2012 identified that he was claiming relevant items that did not have an associated histopathology item on the patient's Medicare history within 90 days prior to the service. This indicated to Medicare that the item descriptor may not have been met, which in the case required malignancy to be proven by histopathological proof or confirmed by specialist opinion.

Dr A was provided with a 12 page audit schedule that contained the names, dates of birth, Medicare card numbers, date(s) of service, the MBS item claimed and the MBS benefit claimed in respect of each of the patients listed. To complete the audit, Dr A needed to review the clinical notes of each of the patients listed in the schedule of services and the date of service in respect of each patient and then ascertain whether he had proof of malignancy for each patient and if so, provide a copy to Medicare.

When he reviewed his clinical notes, Dr A noted that he had proof of malignancy for all but four patients in the schedule. Dr A sought advice from MDA National in relation to finalising the audit and was assisted to draft a cover letter to send to Medicare when he returned the audit. Dr A’s letter provided an explanation for the patients for whom he did not have documentary proof of diagnosis – in each case the patient had previously been treated elsewhere and Dr A had relied on the history given by each patient, namely that they had been treated for recurrent skin lesions by their previous doctor. In relation to a fifth patient, Dr A realised that he had inadvertently claimed the wrong MBS item number and on the audit form he noted the item number that should have been used. Several months later, Medicare wrote to Dr A to advise that they accepted his explanation in relation to the services which did not comply with the relevant MBS item descriptor and he was asked to repay approximately $400. Medicare provided a Voluntary Acknowledgement of Incorrect Payments form for Dr A to sign and return with payment of the sums incorrectly claimed.

Medicare conduct annual compliance audits to determine if claims made by health professionals are appropriate and correct.

Case history 2

Dr B received a letter from Medicare informing her that she was being audited for the period 1 January 2011 to 1 January 2012. The audit was triggered because Medicare’s analysis of Dr B’s claims showed that she had rendered consultation and procedural items for the same patients on the same day. Instead of being asked to complete an audit schedule, Dr B was informed that a medical advisor from Medicare would be attending her practice to interview her. Dr B telephoned MDA National for advice, as she was unsure why she was being interviewed when other colleagues had received audit schedules to complete. The claims manager who assisted Dr B informed her that Medicare’s concerns could not be addressed by a paper audit, and that Medicare would need to know whether the consultations had any connection with, or relevance to, the procedures performed on the same day. The claims manager advised Dr B that Medicare needed to be satisfied that there was no connection between the services (or this may be viewed as a “double dip”) and that Medicare may ask to see clinical notes to substantiate Dr B’s assertions that all services were properly rendered. The claims manager also told Dr B that Medicare had the power to request to review relevant clinical notes, but only for services that post-dated 9 April 2011.

After being advised about the purpose of the audit meeting, Dr B met with Medicare’s Medical Advisor. Dr B explained to the medical advisor that all of the patients identified were elderly and had difficulty travelling to and from her practice. When such patients required a general consultation and treatment or excision of a skin lesion, she would arrange to perform this on the same day so that the patients did not have to see her twice. The medical advisor was satisfied with Dr B’s explanation and the matter was closed.


Although it can seem intrusive, Members are encouraged to cooperate with the compliance audit system. Under the new compliance audit regime, if a medical practitioner refuses to provide information to Medicare to substantiate the services he or she has rendered, Medicare has the legislative power to serve a Notice to Produce on the medical practitioner to compel production of the requested material (usually clinical notes). Administrative penalties* may be levied against a medical practitioner who fails to substantiate services claimed, where the unsubstantiated services total more than $2,500. Similarly, a civil penalty may be levied against an individual or corporation (e.g. a practice owner) who is responsible for documents relating to claimed Medicare services but has not complied with requests in a Notice to Produce documents.

These cases exemplify the importance of medical practitioners understanding the nature and purpose of the Medicare audit process before they engage in any communications with Medicare. We recommend that Members seek early advice if they are contacted by Medicare, so that they ensure that they “put their best foot forward”.

Summary Points

  • Medicare has the power to request that a medical practitioner provide documents to substantiate the provision of a service and subsequent rendering of an MBS item number.
  • Members are encouraged to seek advice from MDA National if they receive any correspondence from Medicare in relation to a compliance audit or review of their practice profile.

* Such penalties are calculated on a sliding scale and can be increased or decreased (to zero) depending on various factors. The base rate of the administrative penalty is 20% of the amount repayable.

Anaesthesia, Dermatology, Emergency Medicine, General Practice, Intensive Care Medicine, Obstetrics and Gynaecology, Ophthalmology, Pathology, Practice Manager Or Owner, Psychiatry, Radiology, Sports Medicine, Surgery


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