Hospital auditing: a complete guide for managers

Brazilian hospitals face a growing paradox: they deliver more services but receive proportionally less. The accepted denial rate in private healthcare jumped from 0.78% of gross revenue in 2021 to 1.96% in 2024, according to the Anahp Observatory 2025 (National Association of Private Hospitals). For a mid-sized hospital, that difference can mean millions of reais withheld every year.

Hospital auditing is the main mechanism for reversing this picture. When it is structured with smart processes, qualified professionals and the right technology, it protects revenue, reduces denial losses and ensures that every procedure performed is correctly billed and paid.

This guide was written for managers who want to understand how hospital auditing works, what its types and challenges are and how to use it as a lever for strong financial and operational results.

What hospital auditing is

Hospital auditing is the systematic process of verifying, analyzing and controlling the clinical, care and administrative information that makes up a patient’s claim. Its central goal is to ensure that the procedures recorded match what was actually performed and that the charge sent to the payer is correct, complete and compliant with contractual and regulatory rules.

Auditing works at the intersection of three areas: care, which generates the clinical records; billing, which turns those records into charges; and health plans, which review and authorize payment. Any failure in this chain, such as an incomplete entry in the medical record, an incorrect TUSS (Unified Terminology for Supplementary Health) code or an item billed without clinical support, opens the door to denials and lost revenue.

The work is done by physician auditors and nurse auditors, complementary profiles that cover the claim comprehensively. Each has a different focus:

Hospital auditing also contributes to quality of care by identifying inconsistencies in clinical records, encouraging standardized practices and generating data that feeds management indicators.

What are the types of hospital auditing

Hospital auditing is organized into different modalities, each with its own timing, goal and impact on the revenue cycle. Knowing these modalities is the first step in structuring an auditing model suited to the hospital’s size and care profile.

Concurrent audit

Concurrent audit takes place during the patient’s hospital stay, before discharge. The auditor follows the case in real time, checks the clinical records, verifies the materials and medications used and identifies discrepancies while they can still be corrected. Because it acts as events unfold, it is the modality with the greatest power to prevent denials.

Retrospective audit

Retrospective audit is done after the patient’s discharge, on the already closed claim. The auditor reviews the medical record, checks each item billed and verifies compliance with the payer’s rules before submission. It is the most common modality in Brazilian hospitals, but it calls for extra attention: errors identified at this stage can still be corrected, but the claim submission deadline puts pressure on the team.

Prospective audit

Prospective audit acts before the procedure, at the prior authorization stage. It assesses whether the request meets clinical and contractual guidelines, whether the codes requested are compatible with the diagnosis and whether there is a risk of the payer refusing it. Hospitals that invest in this modality significantly reduce denials for authorization issues, one of the main causes of lost revenue in the industry.

Internal audit and external audit

Internal audit is conducted by the hospital’s own professionals. Its focus is to identify process failures, standardize practices and protect revenue before claims are submitted.

External audit is performed by health plans on the claims they receive, to verify that what was billed matches what was contracted and authorized. Both modalities coexist in the revenue cycle: internal audit protects the hospital; external audit represents the payer’s assessment.

The table below summarizes the three main modalities by practical management criteria:

How hospital auditing works

Hospital auditing covers the entire life cycle of a claim, from patient admission to receipt of payment from the payer. Each stage of this flow is a control point, and failures at any of them compromise the final result.

Admission and opening the claim

The process begins at the front desk, with correct patient registration, identification of the health plan and eligibility verification. Errors at this stage, such as a wrong member ID number or unconfirmed coverage, create problems that drag on until the claim is closed. Concurrent audit can already act here, making sure the claim is opened with the correct information.

Clinical records and documentation

During the hospital stay, physicians and the nursing team record all procedures, materials and medications used in the medical record. The quality of these records is decisive for auditing: an incomplete or inconsistent medical record undermines the clinical justification for the charge and makes it easier for the payer to deny it.

The medical record is the main evidence in an audit. Without a record, there is no sustainable charge.

Coding and building the claim

After discharge, the billing department turns the clinical records into codes from the TUSS table or the CBHPM (Brazilian Hierarchical Classification of Medical Procedures), according to the contract with each payer. Coding errors, such as a wrong code, incompatible procedures or a missing item that was performed, are among the main causes of technical denials.

Internal audit of the claim

Once the claim is built, the internal auditor does a full review before submission. They check whether the items billed are supported by the medical record, whether the codes are correct, whether quantities are consistent with the length of stay and whether the payer’s contractual rules were followed. Discrepancies identified at this stage can still be corrected at no cost to the hospital.

Submission and external audit

The claim is sent to the payer in TISS format, the mandatory electronic standard defined by the ANS (Brazil’s National Supplementary Health Agency) for communication between providers and payers. The payer then conducts its own external audit and may accept, partially deny or fully deny each item on the claim.

Denial management and appeals

Denied items do not necessarily mean a permanent loss. The hospital can dispute the denial through an appeal, presenting the clinical documentation that supports the charge. The appeal success rate depends directly on the quality of the records and the organization of the internal audit process.

Main challenges in hospital auditing

Structuring hospital auditing means overcoming obstacles that go beyond the auditors’ technical skills. The challenges are largely procedural and organizational, and they directly affect the hospital’s ability to protect its revenue.

Claim volume and operational capacity

Mid-sized and large hospitals process hundreds of claims a month. Auditing each one with the necessary level of detail requires a team sized for the volume, with standardized processes that allow scale without losing quality. When the team is understaffed, auditing becomes selective out of necessity, and more complex or higher-value claims are left exposed to undetected errors.

Quality of clinical records

Auditing depends on what is documented. Incomplete medical records, generic nursing progress notes or the lack of clinical justification for high-cost procedures are frequent obstacles. The problem is not the auditor but the care team’s recording culture. Hospitals that invest in clinical documentation training get better audit results, because they build a more solid evidence base for each claim.

Fragmentation between auditing and billing

In many hospitals, auditing and billing operate as separate areas, with little exchange of information. The billing specialist codes based on what they can interpret from the medical record; the auditor reviews what the billing specialist delivered. When the two processes are not integrated, errors pile up along the flow and reach submission uncorrected. Integrating the two areas, with clear communication flows and shared responsibility for the claim, reduces rework and improves billing quality.

Complexity of contractual rules

Each payer has its own billing rules, reference tables, authorization criteria and submission deadlines. A hospital that serves ten different payers has to master ten distinct sets of rules. Without a system that organizes and updates these rules centrally, the risk of error rises and the audit team is overloaded with manual lookups and rework.

Lack of monitoring indicators

Without indicators, auditing operates in the dark. Hospitals that do not measure the denial rate by payer, by type of procedure or by care unit lose the ability to identify error patterns and act preventively. Systematic measurement turns auditing from a reactive function into a tool for continuous improvement.

How to structure hospital auditing

Structuring efficient hospital auditing requires defined processes, monitored indicators and integration between the areas that feed and use the claim information. The elements below form the foundation of an auditing model that delivers consistent results.

Map and standardize the claim flow

The first step is to document the path a claim takes, from admission to submission to the payer. This mapping reveals where errors concentrate, which stages have no defined owner and the bottlenecks that lengthen the billing cycle. With the flow mapped, it is possible to set clear protocols for each stage and assign responsibilities without ambiguity.

Define protocols by type of claim

Claims for medical, surgical, high-complexity and oncology stays have different characteristics and risks. Treating them all with the same generic protocol increases the chance of error. Hospitals with mature auditing set specific criteria for each type of claim: which items require mandatory checks, which documents must be in the medical record and which contractual rules apply to each payer.

Integrate auditing, billing and the care team

Claim quality starts with the clinical record, moves through billing’s coding and reaches the audit review. When the three areas operate in an integrated way, with defined communication flows and a shared culture of responsibility for the claim, errors are identified earlier and corrected at lower cost. Regular alignment meetings between auditors, billing specialists and care leaders are a simple practice with a direct impact on reducing denials.

Monitor performance indicators

The main indicators of efficient hospital auditing include:

• denial rate by payer;

• denial rate by type of procedure;

• percentage of claims adjusted in internal audit;

• average time the claim stays in the hospital;

• denial appeal success rate.

Monitoring these indicators systematically makes it possible to identify patterns, act preventively and demonstrate the financial value of auditing to management.

Invest in technology and automation

Claim volume, the complexity of contractual rules and the need for traceability make manual auditing increasingly limited. Systems that centralize each payer’s rules, automatically cross-check medical record data against billed items and flag discrepancies before submission reduce rework, increase audit coverage and free professionals for analyses that require clinical judgment. Technology does not replace the auditor: it expands what the auditor can do.

Hospital auditing and ANS regulation

Hospital auditing in Brazil developed in parallel with the structuring of private healthcare as a regulated industry. Understanding this regulatory context helps managers see why certain processes are mandatory, where the limits of each party’s role lie and where the hospital has legal grounds to dispute payer decisions.

The history of regulation

Before the ANS was created in 2000, the relationship between hospitals and health plans was largely informal. Each health plan set its own audit rules, denial criteria and payment deadlines, with no standardization or external oversight. This scenario created legal uncertainty for providers and hindered any attempt at predictable financial management.

Law No. 9,656/1998, which regulated health plans in Brazil, and the subsequent creation of the ANS by Law No. 9,961/2000 marked the start of a gradual standardization process. The ANS began setting rules for the relationship between payers and providers, including payment deadlines, denial criteria and transparency obligations.

ANS Normative Resolution No. 305/2012: TISS as the mandatory standard

The most direct regulatory milestone for hospital auditing is ANS Normative Resolution No. 305/2012, which established the TISS Standard as the mandatory format for electronic communication between providers and payers. The rule goes beyond the technical side of submission: it explicitly standardizes verification, request, authorization, billing, payment statements and denial appeals, as set out in its Article 3.

Before Normative Resolution No. 305/2012, each payer defined its own format for receiving claims, which made the audit process fragmented and dependent on constant adaptations by hospitals. The rule established a common language for the entire industry, reducing information asymmetry and creating the conditions for automation and systemic monitoring of exchanges between providers and payers.

The impact of TISS on auditing

Adopting the TISS standard had direct practical consequences for the hospital audit process. With a single submission format, it became easier to identify inconsistencies, cross-check clinical data against billed items and automate part of the review. The rule also prohibited payers from requesting paper copies of content already exchanged electronically, eliminating a practice that increased rework and bureaucracy for providers.

Hospitals that master the TISS specifications, keep their systems updated with each new version of the table and train their teams to fill in the fields correctly reduce submission errors and lower the risk of denials for technical inadequacy. Mastering the regulatory standard is therefore an integral part of efficient hospital auditing.

Auditing as an ally of hospital sustainability

Its strategic role goes beyond control and oversight: hospital auditing protects the revenue the hospital has already produced, ensuring that every procedure performed is correctly recorded, billed and paid.

Today’s landscape leaves no room for improvisation. With the accepted denial rate reaching 1.96% of gross revenue in 2024, according to the Anahp Observatory, and the average time to payment still above 68 days, hospitals that operate with weak or reactive auditing accumulate invisible losses that undermine their financial balance over time.

Technology and artificial intelligence have significantly expanded what an audit team can do. Systems that automatically cross-check medical record data against billed items, identify discrepancies before submission and organize each payer’s contractual rules let auditors focus their time and clinical judgment on the cases that truly require human review. The result is auditing with broader coverage, more traceability and less reliance on error-prone manual processes.

Hospitals that treat auditing as a strategic function, not just an operational one, build a solid foundation for the revenue cycle: fewer denials, shorter payment times, more standardized processes and more predictable financial management.

FAQ - frequently asked questions about hospital auditing

What is the difference between concurrent and retrospective audits?

Concurrent audit takes place during the patient’s hospital stay, before discharge, and makes it possible to correct discrepancies in real time. Retrospective audit is done after discharge, on the already closed claim, before submission to the payer. Concurrent audit has greater power to prevent denials; retrospective audit is more common but requires attention to the submission deadline.

Who can work as a hospital auditor?

Hospital auditing is carried out by licensed health professionals, mainly physicians and nurses with a specialization in auditing. The Federal Council of Medicine and the Federal Nursing Council define the specific duties of each profession. The two profiles work in a complementary way: the physician auditor focuses on clinical appropriateness and the nurse auditor on the compliance of nursing records and items.

How does hospital auditing reduce denials?

Auditing reduces denials by identifying, before the claim is submitted, inconsistencies between what was performed and what was billed. This includes coding errors, items not supported by the medical record, incompatible procedures and failure to follow the payer’s contractual rules. The earlier in the flow auditing acts, the lower the cost of correction and the smaller the revenue loss.

What happens when the audit identifies a discrepancy in the claim?

When identified in internal audit, the discrepancy is corrected before submission. If the payer has already issued the denial, the hospital can dispute it through an appeal, presenting the clinical documentation that supports the charge. The appeal success rate depends directly on the quality of the records and the organization of the audit process.

How do I know if my hospital needs to improve its audit process?

Some indicators signal weakness in the process: a denial rate above 2% of gross revenue, a high volume of claims returned for correction after submission, an average time to payment above 70 days and a low denial appeal success rate. The lack of systematic monitoring of these indicators is, in itself, a sign that the process needs attention.

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Raquel Baptista is a nurse who graduated from Universidade Nove de Julho and holds a graduate degree in Health Systems Auditing from Faveni, with experience in concurrent and retrospective hospital auditing. She has worked in inpatient care, ICU, oncology, the Surgical Center and OPME at institutions such as Centro Trasmontano, Hospital Leforte Liberdade and Hospital Christóvão da Gama. Today she is a Nurse Auditor Analyst at Rivio, focusing on auditing, processes and artificial intelligence applied to healthcare.