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Medical scheme profiling and forensic audits: What does this mean?

It is becoming increasingly prevalent, that many medical schemes, in an effort to limit financial risk, are now performing either a “review” of a practice’s profile or a forensic audit on the practices of numerous practitioners. These audits or reviews can be performed by either the medical scheme, their administrator or even a law or audit firm contracted by them.

The HPCSA recently issued a Guidance on scheme forensic investigations, which shows the importance of this matter from an ethics and health law perspective. The Guidance further sets out how to contact the HPCSA for advice on various matters. The HPCSA has been aware of forensic audits being performed by medical schemes since 2010, when they issued a media statement with regards to the manner in which schemes conduct themselves during these audits. Mo­st important is that the HPCSA is of the view that any unprofessional conduct must be reported to it, in terms of section 16 of the Medical Schemes Act and section 41 of the Health Professions Act. Corruption must be reported in terms of the Prevention and Combatting of Corrupt Practices Act.

A practitioner may become the subject matter of a forensic investigation if the practice is identified as an outlier to their peers, the practice uses a template style of billing to bill for services rendered or there has been a member complaint. Service providers must also be aware that often probes or dummy patients will be sent into the practice with an instruction to obtain evidence to confirm any irregularities identified by the medical scheme. Occasionally, the medical scheme will contact the members or the staff in the practice to enquire about irregularities.

Once the review or audit is performed the investigators will inform practitioners by means of formal correspondence that a review or audit has been performed on their practices. With some medical schemes, they will immediately indicate the errors, which the scheme believes the practitioner has made, together with demanding a sum of money attached to such errors. This can also include the suspension of payments to the practice. With other medical schemes, correspondence will be sent to a practitioner, informing him that billing anomalies have been identified and that the practitioner is required to schedule a meeting with the medical scheme within 7 days of receiving the letter.  The alleged errors or irregularities may include treatment modalities, billing codes and billing modifiers, frequency of certain codes, ICD10 codes used and/or equipment used.

An investigation might have taken a long time before the practitioner is even made aware of it. The scheme or administrator may not always state that they are working for the forensic unit, or are investigating the practice. In some cases, they may also ask to see copies of patient records, proof that the practitioner owns certain equipment, ask whether a patient or group of patients have visited the practitioner, or were there for a certain time, etc.

No meeting or exchange of correspondence should be entered into until such a time as the scheme administrators or forensic investigators have provided the practitioner of the exact allegations and the data on which the investigation was based on. The practitioner must have the opportunity to compare this information to his records.

It is further advisable, that at any meeting with the scheme or administrator, the practitioner is represented by a third party,such as a legal consultant. If the matter concerns a professional coding system, a representative from the practitioner’s professional association should be in attendance. It is important that practitioners do not sign any documents, such as an acknowledgement of debt, just to make the matter go away. The practitioner must be sure of the long-term effects of signing any documentation and the fact that it might be deemed to be an admission of guilt.

In conducting audits or reviews on practices the medical schemes are required to comply with certain provisions of the Medical Schemes Act 131 of 2008. It starts with regulation 6 of the General Regulations, 1999, to the Medical Schemes Act. Regulation 6 makes it clear, that if a medical scheme is of theopinion that an account, statement or claim is erroneous or unacceptable for payment, it must inform both the member and the relevant health care provider within 30 days after receipt of such an account. The medical scheme must provide an opportunity for amendment and re-submission (within 60 days after it was returned). In the event that a medical scheme does not follow the process above Regulation 6 clearly states that the onus of proving the healthcare provider was not entitled to payment rests with the medical scheme.

Sections 59(2) of the Medical Schemes Act is also relevantwith regards to audits and basically states that a medical scheme who receives an account or statement must make payment of that account or statement to the member or service provider within 30 days of receiving it (This means that a medical scheme cannot merely suspend payments to a practitioner pending the outcome of an investigation). Section 59 further states, that a scheme may claim back amount paid to a service provider in bona fides to which that service provider was not entitled or can deduct from any future claims for any loss which has been sustained by the scheme due to theft, fraud, negligence or any misconduct which comes to the notice of the medical scheme.

 Furthermore, the common law principles of administrative justice (i.e. fairness in procedure and substance) are applicable to these actions where there is a power imbalance between the individual and an entity whose decisions could affect the rights or legitimate expectations of an individual, and where quasi-judicial processes are followed.

 If the matter is not resolved within the time constraints, or to the satisfaction of the scheme, or administrator, they may inform the practitioner that he will no longer be paid directly. This means the practitioner would have to ask the patient to pay after the service was rendered and that the patient can then claim back from the scheme. In some cases, the scheme may refuse to pay either the provider or the patient. This is done to “mitigate their financial risk”, but can be challenged. It may sometimes be done as a strategy to force a provider to the negotiation table.

The interpretation of the above legal principles has been applied in a number of CMS cases. Two of these cases are significant:

In case number 59899 the CMS ruled that the scheme is “liable to fund all the claims for services rendered by the complainants (i.e. the practitioner) in the event that it does not have any proof of the said allegations and in the event, that the said conduct or offence was not reported to the relevant authority for further investigations and recommendations”.

In case number 54518 the CMS found that the scheme’s forensic unit did not provide “data reflective of a proper and thorough forensic audit, but rather provided them with raw data resulting in the complainant auditing their own practice on behalf of the administrator”. The CMS also confirmed that “whilst the scheme is within its rights to recover money due to it, what is due is not an average or ‘benchmark’ amount”. This means that each amount owed must be proved to be due to the scheme, and therefore, have been billed in error, fraudulently or unprofessionally.


Any practitioner is entitled to be provided with all information, which relates to any allegations of wrong doing to a sufficient level of detail to allow the practitioner to review and respond to the allegations. The practitioner is also entitled to be heard and to have any allegations levied against the practitioner answered and dealt with in a free, fair and impartial manner.