Article Reference Code: NAMAS.09.19.2025
Translating Operative Reports into Audit Readiness
Written by: Toni Elhoms
Auditing surgical services is one of the most complex and high-stakes areas of healthcare compliance. Surgeries are typically high-dollar claims, ripe for coding errors, clinical documentation gaps, and regulatory scrutiny. One misstep can trigger denials, repayment demands, fraud allegations, or even False Claims Act exposure. To navigate this landscape, auditors and compliance professionals need a structured approach that blends technical coding knowledge with regulatory awareness.
Below are 5 steps to audit surgeries with precision and avoid compliance pitfalls:
Step 1 – Validate the Operative Report and Supporting Documentation
The operative report is the backbone of any surgical encounter! A thorough compliance audit begins by ensuring the surgeon’s clinical documentation supports the billable procedure(s). Key elements of the op report documentation include indication(s) for surgery (medical necessity must be clear – see CMS Internet-Only Manual (IOM) 100-08, Medicare Program Integrity Manual, Ch. 13), specific details of the surgical approach and technique (e.g. open vs. laparoscopic, laterality, number of levels, devices used, pathology), findings and outcome (what was found intraoperatively and how the patient tolerated the procedure), provider signatures and date (per 42 CFR § 482.24(c)(1), medical records must be properly authenticated).
Step 2 – Determine the Correct Billing Codes
After clinical documentation validation, the next step is to ensure accurate code assignment by applying the AMA CPT® guidelines for surgical code definitions and bundling rules, verifying National Correct Coding Initiative (NCCI) edits (CMS maintains these) to ensure billed codes aren’t unbundled improperly, assigning modifiers accurately like modifier 59 for distinct procedural services only when supported, and verifying device-dependent procedures (implants, grafts, etc.) should be linked to the correct HCPCS Level II codes.
Step 3 – Confirm Medical Necessity Against Applicable Medical Coverage Policies
Even if the procedure is documented and coded correctly, it must meet payer coverage requirements, which can include National Coverage Determinations (NCDs) and Local Coverage Determinations (LCDs) from Medicare Administrative Contractors (MACs), commercial payer medical policies (e.g., UHC, Cigna, BCBS often publish detailed criteria for surgical services), and Medicaid program manuals for state-specific requirements. Surgeries without clear, conservative treatment failures documented, or lacking required imaging/labs before prior-authorization are often the leading cause of pre- and post-payment denials.
Step 4 – Take a 360-Degree View of the Entire Surgical Encounter
A 360-degree view ensures you are not just checking the surgeon’s codes but evaluating the entire episode of care. Payers, RACs, and UPICs look holistically at claims — and compliance auditors who do the same will detect compliance risks earlier and build stronger compliance defenses. A surgical encounter includes pre-op, intra-op, and post-op services. Auditors should check global surgical package rules (see Medicare Claims Processing Manual, Ch. 12, §40) as certain services are bundled and cannot be billed separately. Auditors need to verify that post-op E/M visits are not billed during the global period unless they meet exceptions. Auditors must verify that anesthesia services were billed with the correct base units, time units, and modifiers (per ASA and payer anesthesia guidelines). The facility charges must also be audited to confirm revenue codes, CPT codes, ICD-10-PCS codes, device/implant reporting, etc. Skip this important step and you run the risk of double billing during global periods, billing for incidental services, or miscoding professional vs. facility coding.
Step 5 – Mitigate Compliance Risk with Ongoing Audit Strategies
Compliance audits should not be a one-off. Build compliance safeguards by developing a surgical audit checklist covering all elements outlined above. Benchmark surgeon coding patterns against physician peers to detect outliers. Educate physicians/providers with real tangible audit findings (i.e. op report details, modifier use, medical necessity documentation) and not theoretical concepts. Be sure to leverage compliance program standards outlined in the OIG Compliance Program Guidance for Hospitals and Physicians. Always escalate systemic issues like recurring coding errors, which may require self-disclosure under the CMS Voluntary Self-Referral Disclosure Protocol or OIG Self-Disclosure Protocol. Ignoring compliance audit results or failing to correct identified issues increases exposure to payer audits (RAC, MAC, UPIC) and possible FCA liability.
Surgical auditing is not just about identifying coding mistakes, but about seeing the full picture. A 360-degree audit evaluates clinical documentation, coding, medical necessity, facility charges, and post-operative care as one continuous story. When you connect the dots across every phase of a surgical encounter, you not only prevent denials and overpayments, but also strengthen your organization’s compliance posture against payer or enforcement scrutiny.
Toni Elhoms, CCS, CPC, CPMA, CRC, CEMA, AHIMA-Approved ICD-10-CM/PCS Trainer
Toni Elhoms is an internationally known speaker and recognized subject matter expert on medical practice management, coding, reimbursement, revenue cycle management, compliance, and fee analysis. She is the Founder and CEO of Alpha Coding Experts, LLC (ACE). She holds multiple credentials with the American Health Information Management Association (AHIMA), the American Academy of Professional Coders (AAPC), and the National Alliance of Medical Auditing Specialists (NAMAS). Ms. Elhoms’ expertise extends to both inpatient and outpatient coding, compliance, billing, and reimbursement. She has extensive medical coding, billing, and auditing experience in the following specialties: orthopedic surgery, spine surgery, neurosurgery, cardiology, interventional cardiology, general surgery, oncology, hematology, internal medicine, family practice, geriatrics, pediatrics, pain management, neurology, urology, hospital medicine, critical care, and other practice areas.
