Establishing the Objective/Scope of the Field and In-House

50.1 – Establishing the Objective/Scope of the Field and In-House Audits (Rev. 107, Issued: 09-22-06; Effective: 10-01-06; Implementation: 10-02-06) Once you make a decision to perform an in-house or field audit on a given cost report by considering the Medicare priorities (see §§40ff of this chapter), use the results of the desk review (see §20.2.F of this chapter), and your empirical knowledge of the provider to define the audit’s objectives and the scope and methodology to achieve those objectives. The objectives are what the audit is to accomplish. They identify the audit subjects and performance aspects to be included, as well as the potential finding and reporting elements that the auditors expect. Scope is the boundary of the audit. It addresses such things as the depth of review of the issues/areas selected for audit. The methodology comprises the work in data gathering and in analytical methods auditors will use to achieve the objectives. Auditors should design the methodology to provide sufficient, competent, and relevant evidence to achieve the objectives of the audit. Methodology includes not only the nature of the auditor’s procedures, but also their extent (for example, sample size). The desk review process and your knowledge of the provider help you to determine the issues/areas to be addressed for each audit. (See §20.2.F of this chapter.) If budget limitations or other factors prevent you from including all the exceptions in the scope of the audit for that cost report, rank the exceptions based on their significance. Significance generally relates to the Medicare dollar impact if the provider reports the issue/area incorrectly. This dollar impact should be estimated using appropriate factors (e.g., expense amount, Medicare utilization, number of residents and associated per-FTE- resident amount, number of beds for indirect medical education) that pertain to the computation of the Medicare payment for that exception. If this cannot be accomplished, use the total Medicare dollar payment for the issue/area (e.g., amount of graduate medical education (GME) payment). Significance can also pertain to a present or future risk if the issue is not investigated. Use this ranking to determine which exceptions can be eliminated from the scope if it is not possible to audit them all. Exclude issues/areas starting from the issue ranked the lowest until you reach the level of audit resources that you can devote to this specific audit. You must document and support the decision to not audit these issues/areas in your separate desk review working papers. However, if in your professional judgment, all the issues/areas are significant, consider adjusting your audit plan (see §40ff of this chapter) by deferring or canceling other audit work (i.e., audits of other providers) of a lesser urgency. If there is no work of lesser urgency, seek guidance from your RO. Be specific in documenting the issues/areas that you do scope for audit. For example, instead of listing “bad debts” as the area to be audited, specify that you intend to review the “collection effort” and “120-day rule” only, if this is the case. Draft the audit program as outlined in §50.2 below to determine the extent of review to be performed on each issue scoped for further review.