Targeted Probe and Educate (TPE) audits have recently become a common tool used by both law enforcement and private insurers in the Medicare program. While they focus on educating Medicare providers about proper billing techniques, the threat of legal action looms in the background if progress is not made. Healthcare providers who fail TPE audits can be excluded from the Medicare program and can even be referred to law enforcement for a Medicare fraud investigation.

1. What is a TPE Audit?

A TPE audit is a close examination of the billing practices that a healthcare provider uses for its Medicare claims. The provider’s Medicare Administrative Contractor (MAC) conducts the auditing process. If unusual billing practices, mistakes, or discrepancies are found between the Medicare claims and the healthcare services that were provided to the patient, the MAC will help the provider fix the problems and show them how to avoid making them in the future.

Even though the MAC conducts the audit, the Centers for Medicare and Medicaid Services (CMS) is behind the auditing program. The CMS created the auditing process as a pilot program in 2017 in an attempt to find inefficiencies in the Medicare payment system. It put a halt to the auditing program in the early days of the coronavirus pandemic but restarted the audits on September 1, 2021.

While the TPE audit program claims that it fixes these problems by educating the healthcare provider on proper billing techniques, the reality is that failing the audit can lead to significant penalties against the provider, up to and including a criminal investigation for healthcare fraud.

2. What is the TPE Audit Process?

Healthcare providers will learn that they are being audited through the TPE program when they receive a Notice of Review letter from their MAC. The Notice informs the provider why it was chosen for audit and requests the medical records that support sampling of between 20 and 40 of the provider’s Medicare claims and the supporting medical records.

Which provider is targeted for a TPE audit is not quite random. MACs use data analysis and often choose providers who have had an elevated rate of claim denials, or who use certain billing codes more often than their peers, and are a financial risk to Medicare.

Once the MAC has received the medical records, it will see if the records back up the Medicare claims. The audit looks for problems like:

• Incorrect coding for the healthcare provided
• A lack of documentation supporting the medical necessity of the procedure
• Missing proof of certification or recertification
• Missing signatures of the certifying physician

If the medical records support the claims that the provider made against the Medicare program, then the provider passes the TPE audit and it will close. Once audited, providers cannot be subjected to another TPE audit for at least another year, unless the MAC detects significant changes in the provider’s Medicare billing practices.

If the medical records do not support the Medicare claims, the MAC will schedule a one-on-one educational session with the provider. This session will show the provider what errors were made and how to fix them. The provider then has 45 days to make the appropriate changes to its Medicare billing system.

The MAC can then conduct a second round of TPE auditing by demanding medical records for another 20 to 40 Medicare claims that were made at least 45 before the educational session.

The review process is repeated in this second round. If the MAC finds that the medical records support the Medicare claims, it will close the audit. If it finds more errors, the MAC will schedule another educational session with the provider, the provider will have 45 more days to implement the changes, and then the MAC will conduct the third round of auditing by demanding the medical records for another 20 to 40 Medicare claims.

If the MAC finds errors in the third round, it can fail the provider and refer it to the CMS for additional action.

3. What are the Penalties for Failing a TPE Audit?

If the healthcare provider fails the third round in a TPE audit, the MAC will send the results to CMS for follow-up action. This can include:

• Extrapolating Medicare overpayments from the sampling and demanding repayment
• Referring the provider to a Recovery Audit Contractor (RAC) or a Zone Program Integrity Contractor (ZPIC) for further investigation
• Refusing to approve future Medicare claims without an onerous prepayment review
• Suspending Medicare payments
• Excluding the provider from the Medicare program completely

The financial repercussions of paying back an extrapolated overpayment can be severe, especially if the CMS also puts a halt on the provider’s Medicare income. The potential for investigation, however, poses more than just a financial threat: It can lead to civil and even criminal charges being filed against the provider for healthcare fraud.

4. Can the Outcome of a TPE Audit Be Appealed?

Healthcare providers can appeal a TPE audit failure. These appeals go through the normal Medicare appeals process.

5. How Often Do Providers Fail TPE Audits?

According to the CMS, Medicare Administrative Contractors (MACs) performed around 13,500 audits between October 2018 and September 2019, examining approximately 435,000 claims against Medicare. Of those 13,500 audits, the CMS estimates that less than two percent of them failed all three of the audit’s rounds.

6. How Can Providers Avoid an Audit Failure?

Given the penalties, avoiding a TPE audit failure is essential for healthcare providers, no matter how rarely it happens.

The best way to make the TPE audit process go smoothly is to have a compliance system in place and follow it to the letter. Regular training sessions with employees can ensure that they know and follow the rules. This can keep Medicare billing errors to a minimum and help providers pass TPE audits in as few rounds as possible.

Creating a compliance system that works, though, often takes the legal help of a Medicare compliance lawyer. With a lawyer who is experienced in the nuances of the Medicare billing process, providers can rest assured that their compliance strategies cover all of the bases.

For healthcare providers who have received a Notice of Review letter from their MAC, hiring a lawyer can reduce the chances of an audit failure even further. Getting a healthcare lawyer on board as soon as possible gives the attorney the time he or she needs to conduct an internal review and uncover potential problems before the audit does. This can end up making a huge difference in the outcome.

As Nick Oberheiden, founding attorney of the Medicare compliance and audit defense law firm Oberheiden, P.C., says, “A skilled and experienced lawyer can help a healthcare provider prepare for the inevitable TPE audit and then guide them smoothly to a pass with little inconvenience to the business.”