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Medical scheme profiling and forensic audits: How do you respond?


Peta-Anne Durrant is a qualified attorney and Director at Elsabe Klinck and Associates. She has vast experience in health sector law, civil and criminal litigation, corporate law, labour law and public interest matters.

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 including optometrists. These audits or reviews can be performed by either the medical scheme, their administrator or even a law or audit firm contracted by them. These reviews aim to identify possible irregularities with regards to the coding and billing with a practice.

The HPCSA has previously issued guidance on how these audits  or investigations should be addressed. This shows the importance of addressing these investigations from an ethics and legal point of view.  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. This media statement set out specifically the modus operandi of the medical schemes in conducting these investigations and the subsequent meetings with Service Providers. Mo­st important is that the HPCSA is of the view that any unprofessional conduct should 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 its peers, the practice uses a template style of billing, or there has been a member complaint. Every member complaint must be investigated by the Medical Scheme and the Service Provider should co-operate in the investigation. 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. This evidence will then be presented to the Service Provider in meetings held with the Medical Scheme.

Once the review or audit is performed the investigators will inform the practitioner by means of formal correspondence. This correspondence should not, for any reason, be ignored. It is sufficient to acknowledge receipt of the correspondence and indicate that you, as the Service Provider will be seeking advice on the audit.  Some Medical Schemes will immediately indicate the errors which the practitioner made, together with a demand for 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 the practitioner informing them 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 actual errors or irregularities may include treatment modalities, billing codes, billing modifiers, frequency of certain codes, ICD10 codes used and/or equipment used. It is imperative for the Service Provider to request further information relating to the alleged errors, including the data on which the investigation is based.  Part of the investigation can often include a request of proof that services were rendered or proof that equipment to perform clinical certain clinical tests is in fact owned by the Service Provider.

No meeting or exchange of correspondence should be entered into until the scheme administrators or forensic investigators have provided the practitioner with the exact allegations and the data on which the investigation was based. The practitioner must have the opportunity to compare this information with their 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 and if the matter concerns a professional coding system, a representative from the practitioner’s professional association.

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 consequences of signing any documentation and the fact that it might be deemed to be an admission of guilt.  In certain instances, the signing of an acknowledgement of debt can result in the Medical Scheme again auditing the same Service Provider on the same allegations. 

In conducting audits or reviews on practices the Medical Schemes are required to comply with certain provision of the Medical Schemes Act 131 of 2008. The provisions start 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 the opinion that an account, statement or claim is erroneous or unacceptable for payment, it must inform both the member and the relevant Service Provider within 30 days after receipt of such account. It must provide an opportunity for amendment and resubmission (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 Service Provider was not entitled to payment rests with the Medical Scheme.

Sections 59(2) of the Medical Schemes Act is also relevant with regard to audits and basically states that a Medical Scheme who receives an account or statement must make payment to the member or Service Provider within thirty days of receiving it. This means that a Medical Scheme cannot merely suspend payments to a practitioner pending the outcome of an investigation. Where a Medical Scheme notifies a Service Provider that they are terminating a direct payment relationship, then the Service Provider must request that members pay them directly and claim the account back from the Medical Scheme. Section 59 further states that a Medical Scheme may claim back amount paid to a Service Provider in bona fides, to which that Service Provider was not entitled to. It can also deduct from any future claims for any loss which has been sustained due to theft, fraud, negligence or any misconduct, which comes to the notice of the Medical Scheme.

If the matter is not resolved within the time constraints, or to the satisfaction of the Medical Scheme or Administrator, it may inform the Service Provider that direct payments will be stopped. This means the Service Provider would have to ask the patient to pay the practice after the service is rendered and that the patient can then claim back from the Medical Scheme. In some cases, the Medical Scheme may refuse to pay either the Service Provider or the patient. This is done to “mitigate the financial risk of the Medical Scheme”, but can be challenged. It may sometimes be done as a strategy to force a Service Provider to the negotiate a settlement of the investigation.

The interpretation of the above legal principles has been applied in a number of Council for Medical Schemes (CMS) cases. Where the CMS has ruled on more than one occasion with regards to the conduct of a Medical Scheme during these investigations, the following comments have been made:

  • the decision by a Medical Scheme to reverse payments is in contravention of the Medical Schemes Act (CMS 62501),
  • the decisions of a Medical Scheme to withhold claim payments without providing the Complainant with substantive evidence of the alleged irregularities is unlawful (CMS 62626)
  • the Medical Scheme acted unlawfully by penalising the Complainant without affording the opportunity to subject any evidence in its possession to scrutiny (CMS 62626)
  • The CMS was of the view that the Medical Scheme decided to forego a proper investigation and in turn bullied the Service Provider by withholding payment. (CMS62626)
  • the identification of irregular claims does not in itself serve as evidence, which could legitimately have triggered an investigation and suspension of payment under the Medical Scheme rules (7 July 2014, Advocate Ngalwana, Appeals Committee)


Any practitioner is entitled to be provided with all the 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, answered and dealt with in a free, fair and impartial manner.