How to Perform a Medical Coding Audit

Accuracy in medical coding plays a critical role in both financial performance and regulatory compliance for healthcare organizations. When codes fail to align with documentation, the outcome can include denied claims, compliance concerns, and delayed reimbursements. Conducting a thorough medical coding audit allows providers to spot errors early, reduce repeat mistakes, and receive appropriate payment for services rendered.

In this blog, we’ll walk through the essentials of auditing medical coding, from what to review and how to structure your audit to making the most of the results.

What Is a Medical Coding Audit and Why Is It Important?

A medical coding audit is a formal review of clinical documentation and medical codes to verify that services were billed accurately and in compliance with payer guidelines. Audits can be conducted internally by staff or externally by third-party experts.

Auditing plays a key role in maintaining an efficient revenue cycle. It helps practices identify trends in denials, ensure documentation supports coded services, and reduce the risk of penalties or repayments due to billing inaccuracies. The goal is not just to spot errors, but to improve coding accuracy, speed up reimbursements, and keep your organization in good standing with payers and regulators.

When Should You Conduct a Medical Coding Audit?

While many organizations conduct audits on a set schedule, there are also key indicators that it’s time for a deeper review.

Recommended Audit Frequency

Audits should be conducted quarterly or semi-annually as a best practice. High-volume practices or those with new staff, updated software, or frequent payer issues may benefit from monthly internal reviews to stay ahead of risk.

Triggers for an Audit

Outside of regular intervals, coding audits should be initiated if your practice experiences:

A spike in claim denials or rejections.
Increased scrutiny or requests from payers or regulators.
Staff turnover or onboarding of new coders or providers.
Implementation of a new EHR system or coding software.
Changes in payer contracts or documentation requirements.

Auditing during these transitions ensures that errors are caught before they impact revenue.

How to Audit Medical Coding: Step-by-Step Guide

A structured process is essential for uncovering issues and building trust in the results. Here’s how to conduct a thorough and effective audit.

Step 1: Define the Scope of Your Audit

Before you begin, define what the audit will cover:

A specific department or provider
Particular CPT/ICD-10 codes
A certain type of visit or procedure

Clarify your objectives, whether it’s reducing denials, measuring coder accuracy, or assessing documentation quality. Establishing clear goals helps prioritize where to dig deeper.

Step 2: Assemble the Right Audit Team

Your audit team should include individuals with strong coding knowledge and objectivity. Options include:

Internal QA staff familiar with your systems
Certified professional coders (CPCs) with external audit experience

It’s critical that auditors remain neutral and focused on accuracy, not blame. If your internal team lacks capacity or coding expertise, consider bringing in outside support.

Step 3: Select a Representative Sample of Claims

Choose a sample that reflects your organization’s actual claims mix. You may:

Randomly sample 5–10% of claims submitted over a certain period.
Target high-risk codes, providers, or payers.
Focus on specific categories such as E/M visits or surgical procedures.

Your sample should be statistically meaningful and reflective of your billing patterns.

Step 4: Review Documentation and Coding Line-by-Line

Next, compare each claim’s clinical documentation to the codes billed:

Does the documentation support the level of service billed?
Are diagnoses documented accurately and with appropriate specificity?
Are payer guidelines followed?

This is where attention to detail makes all the difference.

Step 5: Identify Errors, Omissions, and Patterns

As you review claims, look for:

Undercoding or upcoding
Use of outdated or incorrect codes
Unbundling of procedures that should be grouped
Missing documentation or unclear provider notes

Track patterns that could indicate training gaps, systemic workflow issues, or payer misunderstandings.

Step 6: Calculate Accuracy Rates and Financial Impact

Once your review is complete, tally the:

Coding accuracy rate (% of claims coded correctly)
Error types and frequency
Projected revenue impact of incorrect coding

Even a small error rate can lead to significant lost revenue or compliance risk over time.

Accurate coding starts with the right audit strategy. Explore how Horizon Healthcare’s auditing solutions can help you catch issues early and strengthen your revenue cycle.

Our Auditing Solutions

Common Mistakes Identified By Medical Coding Audits

Even skilled teams can fall into common pitfalls. Awareness of these issues helps prevent repeat mistakes.

Documentation Gaps

Lack of clear provider documentation, incomplete notes, or missing signatures are leading causes of denials and recoupments.

Incorrect Code Selection

Many denials occur due to the use of:

Outdated codes
Nonspecific ICD-10 diagnoses
Incorrect CPT or HCPCS code sets

Even one digit off can make a claim unpayable.

Modifier Misuse

Modifiers clarify billing details, but when used incorrectly, they can result in underpayment or denial. Missing a modifier—or applying it unnecessarily—can affect reimbursement.

Undercoding and Upcoding

Whether intentional or unintentional, coding at a lower or higher level than warranted can create major financial and compliance issues. Undercoding results in revenue loss, while upcoding may trigger audits and penalties.

What to Do With the Results: Reporting and Corrective Action

Audits are only effective if their findings are turned into action. Here’s how to do that.

Create a Clear, Actionable Audit Report

Your audit report should include:

A summary of key findings
Categorized errors by code type, provider, or issue
Recommendations for process improvements

Keep it clear and accessible for non-coders.

Educate Staff on Audit Findings

Use audit insights as a training opportunity. Host refresher sessions, one-on-one feedback reviews, or coding workshops based on common errors.

When coders understand where they went wrong—and how to do it right—they’re more likely to improve.

Implement Corrective and Preventive Measures

Act on the findings by:

Updating documentation templates
Creating coding checklists
Adjusting internal review workflows

Put systems in place to reduce the chances of repeated errors.

Monitor and Re-Audit

Auditing isn’t one-and-done. Schedule a follow-up audit to ensure corrective actions are working. Track whether error rates improve and refine your approach as needed.

Internal QA vs. External Medical Coding Audits

Both internal and external audits have value—knowing when and how to use them is key.

Pros of Internal Audits

Internal audits are:

Cost-effective and easy to conduct regularly
Performed by teams familiar with internal systems and workflows
Useful for ongoing monitoring and training

They’re ideal for day-to-day quality assurance.

Benefits of External Auditors

External audits offer:

Unbiased assessments and a fresh perspective
Insight into industry benchmarks and payer expectations
More thorough reviews for compliance checks or risk exposure

They’re best used periodically or when deeper insight is needed.

When to Use Each

For most organizations, a blended strategy works best. Use internal audits for regular QA and external audits quarterly or annually to catch what internal teams may miss.

Protect Reimbursement and Compliance With Horizon Healthcare

At Horizon Healthcare, we see medical coding audits as more than just a tool for catching mistakes—they’re a critical part of strengthening revenue integrity and staying compliant in a shifting healthcare landscape. Our tailored audit support helps providers reduce denials, improve documentation accuracy, and safeguard revenue through proven, proactive strategies.

Whether you need help managing internal audits or want expert external oversight, Horizon Healthcare delivers coding accuracy solutions designed to elevate your entire revenue cycle.