Category Archives: Forecasting

AI and Audits

Medicare audits growing rapidly. Artificial intelligence is being used to replace medical judgment. Cost of audits dropping rapidly. Health care providers forced to allocate ever-increasing amount of resources to audits.


Edward M. Roche, Ph.D., J.D. — Barraclough NY LLC

Part III — Artificial Intelligence and the Audit-Free Future

In Part I of this series, we discussed the exploding number of Medicare claims and the inability of the current appeals regime to handle the workload.  We also reviewed how special computer algorithms are being used to down-code Diagnosis-Related Group (DRG) claims, and argued that these actions are not really “audits” because artificial intelligence (AI) algorithms using statistical comparison are being substituted for medical judgment.

In Part II we examined the emerging arguments being made in “algorithm law”, but suggested that this area of litigation will need to be developed further, and the type of experts needed in the appeals hearings will change dramatically, because they will need to be familiar with artificial intelligence (AI).

In this closing part of the series, we will examine scenarios for the future. But in looking at the future, we must make a few reasonable assumptions.

The number of audits will continue to increase, and one reason for this is that due to automation the cost of audits is dropping rapidly.
The ability of the appeals system (re-determination; reconsideration; Administrative Law Judge; Medicare Appeals Council) will remain under pressure to handle the litigation workload.

The quality of audits, which most agree is very poor, will not improve, primarily because there is no incentive for the RACs do do so.

Health care providers will be forced to allocate an ever-increasing amount of their already scarce resources to dealing with audits.

Given these assumptions, there are a number of scenarios that seem reasonable ten to fifteen years hence.

Future Scenario One

More of the same. The system will continue as it is, but will simply become worse for the health care provider. The burden of audits (uncertainty, claw-backs and litigation expenses) will continue to grow. Health care will become a sector that few will wish to enter into as a career. More providers will become bankrupt.

Future Scenario Two

Change in appeals procedures. CMS already recognizes the backlog problem in appeals and has started to take action. In these proposals, there is little discussion aimed at re-thinking the overall auditing process. The primary change is in improving the capacity of CMS to handle the litigation.

There are many variations of Scenarios One and Two. But lets take a look at the future using an “out of the box” approach.

Future “Out of the Box” Scenario Three

In this scenario, algorithms using artificial intelligence continue to be used, but the provider’s medical information system will be designed to intervene before the claims billing stage. Here is the logic: If it is possible to find a different coding solution looking backwards, as current auditing approaches now do, then it should be possible to apply the same algorithms to prevent bad claims from being filed in the first place.

The optimum solution would be to replace the auditing system, and instead insert the artificial intelligence algorithms between the health care provider and the government.  Instead of being brought in after the fact, these algorithms will be injected into the space between the provider and the claims system beforehand. (See Figure) The AI system would simply stand as a front end for claims processing. It would correct deficient claims and prompt for additional information as needed.


The standing algorithm could be standardized across the United States, and as we know, today’s technology allows constant updating to the algorithm software, much like computer security updates today are pushed out from vendors.

And what would happen to the RACs? We don’t want these poor people to lose their jobs. They would transition into working for the health care providers and operating the algorithm engines. In so doing, they would focus on making sure that the AI reflects sound medical judgment, and not merely the desire to extract as much money as possible out of the hide of the provider, which is the case now.

This would eliminate the need for auditing altogether, and end this scourge of litigation and chaos that sits on the shoulders of the provider. Perhaps this type of solution might be considered by public policy makers and perhaps CMS needs to think about a more intensive R&D program. Carpe Diem — the future is there for the taking.

Note: Prior to entering law, Dr. Roche served as the Chief Research Officer of the Research Board (Gartner Group), and Chief Scientist of the Concours Group, both leading IT consulting and research organizations.

This article was originally published in RACmonitor.