By Dr. Robert Haskey, M.D., F.A.C.S., Chief Medical Officer 

When it comes to today’s healthcare system, everyone pays the price of payment inaccuracy—whether we realize it or not. 

Medical audits play a critical role in protecting health plan dollars. They reduce dollars lost through fraud, waste and abuse (FWA) and help ensure providers are reimbursed fairly and on time.  Audit processes, however, require significant resources from both payers and providers—including time, staff, and technology—and can carry substantial associated costs.

When audits are overlooked, mismanaged or underutilized, the costs are even greater: higher premiums, increased co-pays and deductibles, reduced benefits, falling provider reimbursements, and missed opportunities to strengthen the system as a whole.

Healthcare Billing Errors Drive Up Costs for Everyone 

According to the Centers for Medicare & Medicaid Services (CMS), U.S. healthcare spending reached $4.9 trillion in 2023—about $14,570 per person. At nearly 18% of the national GDP, even small payment inaccuracies can have an outsized impact. 

FWA alone siphons off between 3% ($147 billion) and 10% ($490 billion) annually, even when audits are in place. And that’s before you factor in the costs to identify and recover those dollars. 

Compliance isn’t cheap, either. For every $1,000 in Medicare savings generated through audit, providers incur an average of $173 in compliance costs, according to Columbia University. Still, the return is significant: HHS’s Office of Inspector General reported more than $7 billion in expected recoveries and receivables from audits in FY 2024.

No matter the type of healthcare coverage—commercial, self-funded or government—these costs don’t disappear. They’re redistributed across the healthcare system in the form of higher premiums, increased out-of-pocket expenses, reduced reimbursement, and added administrative overhead. In short, we’ve all been paying a hidden healthcare “tax” for decades. 

The Art and Purpose of a Medical Audit

At its core, a medical audit examines claims submitted by providers to ensure they accurately reflect the services delivered. It’s a complex translation: turning a three-dimensional clinical event or diagnosis into a two-dimensional code. That code must be supported by multiple parameters across the chart—not just a single value.

And so, an auditor must answer a deceptively simple question: Do the reported codes logically and accurately represent the care provided for the patient’s documented conditions? To do that, an auditor must review the entire episode of care and compare multiple data points from current and past claims.

The goal isn’t just regulatory compliance. It’s transparency. It’s accuracy. It’s making sure the system works the way it’s supposed to for payers, providers, and patients alike. Done well, medical audits can reduce that hidden “tax” we have all been subject to in a cost-efficient, nonabrasive way, while also unlocking new opportunities for clinical outcome analytics that will reward everyone—especially recipients of future healthcare interventions.

The Real Cost of Flawed Healthcare Audit Systems 

Years of tension between payers and providers have led to overly complex, defensive audit processes. The result? More administrative work and higher costs that inevitably get passed down to members. 

It’s not unlike retail loss prevention: anti-theft measures like surveillance and loss prevention teams aren’t free. Their cost gets baked into the price of every item on the shelf. The same holds true in healthcare. Every dollar lost to inappropriate payments or spent trying to recoup them is a dollar not spent on care—or a dollar added to premiums. 

The problem is compounded when audit programs rely on outdated technology, fragmented data, or “black box” payment integrity partners who don’t share the rationale behind their findings. Without transparency, it’s harder to prevent future errors or build trust between stakeholders.

Are Your Medical Audits Actually Preventing Errors? 

Despite the investment, many audit programs fail to go deep enough. Too often, they focus on chasing familiar errors rather than identifying patterns, fixing root causes, or empowering provider improvement. 

To raise the bar, health plans must shift from a “recover what’s wrong” mindset to a “prevent what goes wrong” strategy:

• Analyze why errors happen, not just identify them
• Provide education and create feedback loops with providers 
• Refine edit logic based on current standards of care 
• Conduct audits at the point of maximum return on investment

When done right, audits don’t just recover dollars. They prevent the same dollars from being lost again.

Payment Accuracy is Everyone’s Business 

Medical auditing is more than just a financial tool—it’s a foundational mechanism for ensuring healthcare dollars are used appropriately, accurately and efficiently. 

Every stakeholder in the system has a role to play. And the sooner we treat payment accuracy as a shared responsibility, the more sustainable our healthcare system becomes.

Audit requires human expertise, supported by the right technology and resources. Is the “juice worth the squeeze?” Absolutely. When audits are done well, the payoff is measured not just in recovered dollars, but in a stronger, fairer, and more efficient healthcare system for all.