Conducting a Healthcare Audit: 3 Best Practices

A healthcare audit is a systematic review of an organization's performance within a given area. Audits are often conducted to identify weaknesses and discrepancies. Through cyclical (sometimes ongoing) review of data, organizations can identify problematic processes before they result in fines, lawsuits, or patient harm.

Many organizations conduct internal audits as a form of proactive risk management. Internally driven audits can increase an organization's readiness for external audits — which, if not properly prepared for, can have devastating consequences. Some types of external audits are becoming more frequent and aggressive, making readiness key. One report showed external payer audit volumes doubling from 2023 to 2024, and increased rates continued throughout 2025.

Whether you're getting ready to perform an audit or looking for ways to make an existing process stronger, you may be wondering about the best way forward. In this guide, we'll discuss the different types of audits and why they're typically used, and give you three research-backed best practices to guide your process.

What Are Audits in Healthcare?

In the healthcare industry, an audit is a formal review process that scrutinizes compliance in a given area, such as clinical care, medical coding, or security. Audits are typically data-driven processes with a defined scope that compare real world actions and results to a set of standards.

Types of Audits in Healthcare

Audits can be classified in a variety of ways. They may be grouped according to the focus of the audit, such as:

• Clinical care
• Compliance
• Finances
• Medical coding
• Data security

The American Institute of Healthcare Compliance suggests classifying audits according to who conducts them. This divides healthcare organization audits into the following three groups:

Why Are Audits Important in Healthcare?

Audits are an important performance evaluation tool that can help healthcare organizations identify weaknesses. This is crucial for quality improvement efforts and reaching (and maintaining) regulatory standards. Audits can act as a magnifying glass, giving organizations a close look at how they're measuring up.

First- and second-party audits also serve the crucial function of helping healthcare institutions establish an audit-ready stance regarding federal and payer audits. Identifying areas of improvement ahead of time and taking steps to ensure compliance with industry regulations can help healthcare organizations avoid penalties and post-payment reversals (called "clawbacks").

Examples of Audits in Healthcare

Here are two examples of audits that can be performed in healthcare facilities:

Clinical care audit: An urgent care clinic employs a clinical nurse auditor to check patient charts on an ongoing basis to look for gaps and inconsistencies. This helps the clinical team generate high-integrity documentation that establishes medical necessity for the services provided, enhancing payer-audit readiness.

Financial audit: A Recovery Audit Contractor (RAC) reviews a hospital's documentation looking for upcoding, insufficient medical necessity, double-billing, and other erroneous or fraudulent practices, with the aim of recovering misspent federal funds.

Risks of Not Performing Healthcare Audits

Failing to conduct audits can lead to:

• Clinical and quality failures. Without audits, clinical teams may develop bad habits, even to the point of unintentionally causing patient harm (such as hospital-acquired infections).
• Financial risk. Unprepared organizations are more vulnerable to post-payment reversals ("clawbacks").
• Legal exposure. When poor billing practices are allowed to occur over and over without getting identified and remedied via an internal audit, this pattern may be viewed as fraud — whether it was intentional or not.

What Is an Audit Trail in Healthcare?

An audit trail is a record of a sequence of events or activities. A robust audit trail can contribute to healthcare audit defense by providing detailed, chronological (or time-stamped), tamper-resistant records. In healthcare, quality electronic health record (EHR) systems automatically produce this type of activity log.

3 Best Practices for Conducting a Healthcare Audit

Your leadership team may be interested in conducting an audit to check whether your billing practices meet payer standards, identify security risks, or improve the quality of care. Whatever your aim, your process will determine whether the audit produces the clarity you're after. Here are three best practices that will help you conduct an insightful and productive audit.

1. Focus on Areas of Risk Within Your Healthcare Organization

Planning and preparation are crucial to an effective audit. Plan your strategy by identifying the specific area of risk that your audit will address. This can be done by looking at past audits and reviewing your facility's key performance indicators (KPIs). You may also want to check the Office of Inspector General (OIG) Work Plan to learn the issues that federal auditors are targeting. The Program for Evaluating Payment Patterns Electronic Report (PEPPER) is another helpful resource that may help you identify billing patterns that could put your facility at risk.

2. Encourage a Collaboration Among the Auditor(s) and the Healthcare Team

Expert auditors have found that the most informative results are reached when there is trust and understanding between the auditor(s) and auditees. It's important to establish a team mindset from the launch of the audit onward. When conducted in this manner, the process can promote engagement on clinical teams and improve job satisfaction.

A failure to build trust and alignment among those involved in the audit can lead to communication breakdowns and an "us vs. them" mentality that hinders the progress of the audit. Research shows that team members may disengage with the audit (and find workarounds to simply appease the criteria) if they perceive a hierarchical, top-down approach.

Encourage cooperation from your clinical team by providing motivating reasons for the audit, such as:

• "This audit could help us shift our clinical interventions toward better alignment with current best practices."
• "The data we gather over the next several months will help us improve patient outcomes in [this particular way]."
• "The feedback from this process will help our team further develop our nursing practice."
• "We're aiming to meet accreditation expectations by [this date] and this audit will help us understand the next action steps we need to take."

3. Involve Specialists With Specific Healthcare Expertise

To get accurate and reliable results from your audit, you may need to include experts on your audit team. While a straightforward clinical audit (such as a handwashing audit) could be done as an add-on activity for a clinical team, the majority are complex and demand specialized, dedicated attention.

For example, medical coding audits require an understanding of the applicable payer guidelines paired with clinical knowledge. Audits conducted without adequate expert perspectives can generate erroneous data and misinterpretations that fail to identify true weaknesses. Proactive, internal audits can contribute to an overall healthcare audit defense strategy only when they generate accurate information to drive improvement.

Get More Support With Healthcare Compliance

Performing a proactive healthcare audit is a great way to identify vulnerabilities within your organization before they become problematic — and we know your efforts won't stop there. Reach your next compliance goal faster with support from our healthcare leadership resources and guides.