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Isaac Smith Isaac Smith, | Updated on Jun 20, 2023

Wound care providers can use this medical billing roadmap to improve their clinical documentation and comply with medical necessity and payer coverage policy requirements by using evidence-based clinical practice guidelines.

In-house medical billing audits can evaluate payer policies and guidelines and federal and state law compliance, identify billing errors, implement corrective action, and identify provider education needs. A risk-based focused audit examines areas with the greatest financial and reputational impact or the greatest likelihood of error. Thus, a medical billing audit often includes an audit of the top 10 denial codes, denials related to the highest reimbursed services (skin grafts, hyperbaric oxygen therapy), and/or denials related to the most commonly performed services (negative-pressure wound therapy, debridement). The auditor can also use the provider's case mix to identify medical necessity denials based on payer criteria.

Audit types

Retrospective or prospective audits exist. To identify miscoded diagnoses and procedure codes, a retrospective audit examines claims denials only. The audit compares the explanation of benefits to the underlying claims and patient charts to check coding accuracy, clinical documentation, and medical necessity. Prospective audits review claims before submission to avoid rejection and denial. Providers can assess code overuse.

Retrospective Audit

A provider's denial rates would be determined by a retrospective medical auditor and compared to the annual Comprehensive Error Rate Testing denial rate from the Department of Health and Human Services (HHS). The Comprehensive Error Rate Testing denial rate measures a provider's performance by calculating a national improper payment rate from all Medicare Fee for Service claims processed during the reported period.

Auditors also trended the provider's denial rates to see if they've increased. Providers with a high rate of denials may be subject to prepayment and postpayment medical reviews as part of a Targeted Probe and Educate (TPE) audit. TPE audits providers and billers with high error rates. Historical data, provider denials, utilization, statistical, and reimbursement data are used to identify audited providers. The government identifies doctors with high error rates using retrospective audits. Retrospective audits in your practice can improve coding accuracy and prevent TPE audits and prepayment/post payment reviews.

Prospective Audit

In a prospective audit, the auditor would calculate utilization rates and compare them to CMS public data sets. Higher utilization rates than a provider's peers could lead to prepayment medical reviews or post payment reviews. The False Claims Act intent requirement may be met if billing errors have persisted for a long time.

CMS, the OIG, and Medicare contractors have repeatedly warned of fraud and abuse in wound care. The OIG expressed concern that wound care center debridement claims were not medically necessary in its 2005 to 2007 and 2017 Work Plans. The HHS Office of Audit Services reviewed 120 hyperbaric oxygen therapy claims paid by a Medicare Administrative Contractor (Wisconsin Physician Services) over two years in a 2018 OIG HHS audit. After extrapolating fraudulent claims to all claims, the OIG estimated wound care centers received $42.3 million in fraudulent payments. The government found that 85% of the 120 claims reviewed were not eligible for payment. Several qui tam actions were settled for wound care upcoding and noncovered service claims.

Audits of provider denial rates and utilization reveal billing and coding flaws and areas at risk of upcoding or over utilization. Corrective action plans and provider education can address revenue cycle management and provider education gaps found in internal audits. A billing auditor will test the accuracy and completeness of the International Classification of Diseases, Tenth Revision assignment, modifier use, code descriptions, documentation, alignment of charting with coding (i.e., the provider's coding compared to charted information), local coverage determinations (LCDs) and national coverage determinations (NCDs), commercial payer policies, and accurate.

Chart documentation adequacy

Commercial payer and Medicare medical necessity requirements require sufficient documentation. Charts must:

  • Prove conservative treatment failed
  • Follow LCD/NCD and payer policies. These policies define the medical necessity standard.
  • Record provider thoughts. All treatment plans should explain why a particular modality was chosen, what treatment options were considered, and the benefits of those modalities. Physicians should also record the number and complexity of problems addressed at each visit and the risk of complications, morbidity, or mortality from patient management decisions. The treatment plan requires such detail.
  • Identify the wound type: chronic wound (diabetic ulcer, arteriosclerotic ulcer, venous ulcer), traumatic wound (disruption of the surgical wound), a surgical complication of graft and flaps (delayed healing, failed or compromised graft or flap), or amputation complication.
  • Provide wound measurements at assessment and reassessment, wound descriptions (eg, consistency and quantity of drainage, color, odor), periwound skin condition and appearance, and infection status.
  • Record all diagnostic testing, nutrition, and tobacco cessation counseling, and results. All diagnostic tests support therapy continuation.
  • Conservatism fails
  • A wound's nonhealing status and duration are not enough. Medicare defines a "failed response" as a wound that has increased in size or depth, shown no change in baseline size or depth, or shown no signs of improvement or likelihood of improvement (eg, granulation, epithelialization, or progress toward closing) despite conservative therapy and patient counseling. Care reimbursement requires proof that conservative therapy failed after a certain period.

Medical Need

The patient assessment and treatment plan must list all diagnoses managed during a visit to prove medical necessity. Include whether the patient's condition is stable, improving, or worsening, when diagnostic tests are ordered, and the rationale for ordering the tests and specific therapeutic treatments for an established diagnosis. Evidence-based clinical practice guidance underpins commercial payer and Medicare LCD/NCD requirements. Each wound care modality has Medicare or commercial payer medical necessity requirements. Each wound care treatment must be assessed for payer requirements because payer policies vary.

Coding accuracy and treatment alignment

Coding reviews focus on whether the provider coded correctly and specifically. Accuracy requires selecting diagnosis codes by wound type, correct sequencing, and modifier use. If providers can identify the wound care focus, they will likely code diagnoses correctly and choose the right codes for active treatment or aftercare. Aftercare for an uncomplicated surgical wound should be coded. If the condition continues, write it down as a code. If the wound is complicated, such as an amputation, abdominal or sternal surgical wound dehiscence, or infected postoperative wound, this would be coded as an initial encounter for a condition being actively treated. Incisional separation, infection, dehiscence, drainage, or flap or graft failure indicate a complication. Code any viral or bacterial infection found in lab tests. Surgical wound infections require specific diagnosis codes.

Diabetic foot ulcer codes and orders vary. Diabetic ulcer coding is difficult. The term "diabetic peripheral angiopathy" refers to both vascular and arterial disease in the periphery. Whether the diabetic ulcer is venous stasis or neuropathic refines the coding. Comorbidities associated with diabetes and other ulcers should be coded because they may increase the merit-based incentive payment system score for treatments.

Coding all wounds complicates the assignment of accurate International Classification of Diseases, Tenth Revision, and Clinical Modification codes. The provider must choose a diagnosis code for each wound, its anatomic location, and laterality if there are multiple wounds. They should be coded separately according to the therapeutic treatment provided, with a modifier to distinguish the services.

CMS Wound Care And Hyperbaric Medicine Quality Measures

For FY 2023, CMS approved nine wound care quality measures:

  • CDR2 Diabetic foot ulcers
  • CDR6 Venous leg ulcer healing
  • CDR8 Diabetic foot ulcer hyperbaric oxygen therapy.
  • USWR22 Wound and ulcer patients reported nutritional assessment and intervention.
  • USWR26 Hyperbaric oxygen therapy patients reported late-effect radiation symptoms
  • USWR29 Adequate diabetic foot ulcer offloading each visit
  • USWR30 Noninvasive arterial assessment for lower extremity wound and ulcer healing potential.
  • USWR31 Non-lower extremity pressure ulcer healing or closure
  • USWR32 Adequate venous leg ulcer compression each visit

Quality measures reported to CMS under a merit-based incentive payment system will be captured by adequate chart documentation. Charting comorbidities is essential for risk stratification and healing rate reporting.

Coding-Reimbursement Completeness: Benefits Of Coding Comorbidities

Comorbidities may boost Medicare Advantage Plan reimbursements, so code them. Medicare Advantage Plans risk-adjust payments. Comorbidities affect three CMS Hierarchical condition categories reimbursement factors. The risk adjustment factor is adjusted upward if the patient uses more resources than the average patient, the demographic score (age, sex, disability) is included in the calculation, and an additional amount is added if the interaction of two or more chronic diseases would cost more than each condition individually. Medicare Advantage claims could be reimbursed by coding comorbidities actively treated.


Providers can prove medical necessity by complying with Medicare and commercial payer policies on therapies and clinical efficacy. Although wound care is a high-risk area for fraud and abuse, following evidence-based practices and medical necessity requirements for clinical documentation should protect clinicians from payment reviews and government action. Provider charting audits can identify undertrained providers and correct billing and coding errors.


  • Billing and coding: Wound Care & Debridement – provided by a therapist, physician, NPP or as incident-to services. Centers for Medicare & Medicaid Services. (n.d.). Retrieved from 
  • CMS public data sets. Centers for Medicare & Medicaid Services Data. (n.d.). Retrieved from 
  • Hyperbaric oxygen therapy (HBO) services - provider reimbursement in compliance with Federal Regulations. (2018, December 17). Retrieved March 30, 2023, from 
  • Office of Inspector General | Government oversight | U.S. department of ... (n.d.). Retrieved from 
  • World Health Organization. (n.d.). International Classification of Diseases (ICD). World Health Organization. Retrieved from 
  • Jeffrey D. Lehrman, D. P. M. (2021, October 29). Diabetic foot ulcer coding - diabetes awareness month. Intellicure. Retrieved March 30, 2023, from 
  • Stockl, L. (2022, September 13). HCC 101: What you need to know about hierarchical condition categories. IMO. Retrieved from 
  • AAFP. Hierarchical Condition Category Coding. Retrieved from

About the Authors

Isaac Smith,
Isaac is a highly accomplished healthcare professional with over 13 years of experience in healthcare administration, medical billing and coding, and compliance. He holds several AAPC specialty certifications and has a bachelor’s degree in Health Administration. He worked previously at a large multi-physician family care and occupational health practice with two locations in northwestern PA and now works for Medcare in the ICD-10 Editorial department to write articles about medical coding. He enjoys sharing his knowledge and experience as a certified PMCC instructor. He has authored many articles for healthcare publications and has been a featured speaker at workshops and coding conferences across the country.
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