The Role of the Hospital Chargemaster in Revenue Cycle Management

WHAT IS A HOSPITAL CHARGEMASTER?

Hospitals, and to a lesser extent, physician practices, use the chargemaster to create a summary of charges and services. Hospital leaders also use chargemaster data to track service volume, costs, and revenue.

For each service, the chargemaster includes the following components:

• Item number that is assigned by the facility and unique to one service line item
• Current Procedural Terminology (CPT) or Healthcare Common Procedure Coding System (HCPCS) code
• Item description that translates the CPT or HCPCS into a short text description
• Revenue code
• Charge amount or fee assigned to service line item
• Alternative CPT/HCPCS code if codes overlap or additional codes are needed for a specific payer
• Numeric designation for a department
• General ledger number for accounting purposes

Each hospital determines its own chargemaster prices for the thousands of services its providers perform. Hospital chargemasters are not necessarily the amount patients or payers will pay. Hospitals use their chargemaster prices to negotiate reimbursement rates with private payers; the prices are usually significantly higher than the actual costs of care.

Although hospital price transparency regulations require hospitals to make their chargemaster prices publicly available, most insured patients pay the negotiated rate or a share of the total cost, depending on their insurance plan. Uninsured or self-pay patients may pay the chargemaster rate or negotiate a price directly with the hospital.

A 2023 Health Affairs study found that average cash prices and commercially negotiated rates were 64 percent and 58 percent of the chargemaster price for the same services at the same hospital and in the same service setting.

Setting chargemaster rates starts in the finance department, with the chief financial officer overseeing the general pricing process. Most hospitals also have chargemaster teams or coordinators who manage the process. Developing a team or relying on a single staff member depends on hospital resources.

The team typically includes a director of finance, controller or chargemaster director, and support staff, including chargemaster analysts and nurse auditors.

Chargemaster team or coordinator responsibilities should include gathering departmental reviews, deleting or replacing codes, assigning revenue codes, reviewing code changes and rates, identifying rates below Medicare rates, and educating other staff on pricing and billing processes.

The chargemaster team or coordinator should maintain open communication with clinicians to ensure the chargemaster contains all billable services and accurate prices. Clinicians are on the front lines of patient care and know what services are in high demand and which are rarely used.

Chargemaster teams should also partner with coders and billers to make sure clinical documentation and coding practices align with the chargemaster. Inadequate coding could result in missing charges and leaked revenue.

ENSURING HOSPITAL CHARGEMASTER MAINTENANCE

Hospital chargemaster maintenance is the primary responsibility of the designated team or coordinator. Maintenance is a continuous process that ensures all services are accurately charged, the hospital complies with government pricing regulations, and the organization receives accurate reimbursement.

Hospital chargemaster maintenance can be especially challenging as public and private payers continuously update or change coding and reimbursement rules. CMS updates Medicare prospective payment systems every year and can also modify the systems as needed.

While private payers usually follow in the federal agency’s footsteps with certain coding and reimbursement changes, each payer maintains its own rules.

Chargemaster coordinators must keep up with coding and reimbursement changes to ensure the hospital maximizes reimbursement, reduces claim denials for coding errors, and maintains an accurate chargemaster.

Hospitals should maintain their chargemaster lists by following the three C’s, according to the AAPC, formerly known as the American Academy of Professional Coders. The three C’s are correct, complete, compliant codes.

First, chargemaster coordinators should check that the correct codes are billed. Inaccuracies may exist between what is captured in the order entry system or EHR and what is being reported on the chargemaster. Common examples include:

• Missing or inaccurate modifiers for radiology, physical/occupational/speech therapy, and other procedures
• Assigning an unlisted HCPCS code when a specific code is available
• Missing HCPCS codes for separately paid drugs
• Assigning a deleted or non-billable code
• Assigning a CPT code when an HCPCS code is necessary for Medicare billing

Coordinators should work with providers and other coding staff to correct workflows leading to improper coding. To improve workflows, coordinators should verify that line-item descriptions match the CPT/HCPCS and revenue codes. They should change codes that do not represent the service provided. They may also add codes for items that should be reported with a CPT or HCPCS code and determine if modifiers are needed.

Second, hospitals should ensure there are complete code sets in the chargemaster to guarantee that hospital departments can capture the charges for all the services and items provided to their patients.

Without complete code sets, departments cannot charge for all the services rendered, resulting in missed payments. For example, providers may inadvertently exclude evaluation and management (E/M) level of care, observation, drug administration, and add-on codes. Another common error is failing to assign both codes for procedures that can be reported using multiple codes.

Coordinators can ensure departments have and understand their complete code sets and line items by:

• Understanding the services provided by the department
• Asking department staff if they provide services without charging for them or if they lack an appropriate code to use for reporting
• Reviewing new codes with staff to determine if additions to the chargemaster are necessary
• Verifying applicable codes are not already on the chargemaster
• Verifying that chargemaster and order entry line items accurately describe services rendered

The AAPC also recommended that hospitals review their chargemaster to maintain compliance with coding standards and federal, state, and commercial payer rules. Neglecting to adhere to government and payer rules can result in repayment to a payer after an inaccurate reimbursement.

To review code compliance, hospitals should also identify, change, or remove line items that should not be reported separately or are being reported inaccurately. For example, chargemaster coordinators should verify that commonly unbundled or separate procedure codes are appropriately used.

Hospitals must also ensure their chargemasters comply with the hospital price transparency regulations, which require facilities to publish their prices for healthcare services.

IMPROVING HEALTHCARE PRICE TRANSPARENCY THROUGH THE HOSPITAL CHARGEMASTER

Traditionally, hospitals have been able to develop their own pricing methodologies and keep their strategies secret from other healthcare stakeholders. However, as of January 1, 2021, hospitals must abide by the price transparency rule.

The regulation requires hospitals to make standard charges for all services public and accessible to consumers. Standard charges included the gross charge listed on a hospital’s chargemaster, discounted cash price, payer-specific negotiated charge, de-identified minimum negotiated charge, and de-identified maximum negotiated charge. Hospitals must display these charges in a single machine-readable digital file.

The rule also requires hospitals to display standard charges of at least 300 shoppable services in a consumer-friendly format. However, in place of this, hospitals can offer an online price estimator tool for as many of the 70 CMS-specified shoppable services the hospital offers and any additional shoppable services to reach 300 services.

CMS identifies non-compliant hospitals by evaluating complaints from the public, reviewing entities’ analyses of non-compliance, and conducting internal audits of hospital websites.

Non-compliant hospitals will receive a warning notice with instructions to correct the errors within 90 days. If a hospital does not comply after 90 days, CMS issues a corrective action plan (CAP) request, which hospitals must submit within 45 days.

Hospitals that do not complete the necessary steps to achieve compliance will receive a civil monetary penalty. Civil monetary penalties cannot exceed $300 per day for smaller hospitals with a bed count of 30 or fewer, $10 per bed per day for hospitals with between 31 and 500 beds, and $5,500 per day for hospitals with over 550 beds.

As rising healthcare costs plague consumers, increased price transparency from hospitals may help patients select more cost-effective services when they need care.

Hospital price transparency compliance is lagging, though. According to a report from PatientRightsAdvocate.org, only 36 percent of 2,000 hospitals fully complied with the rule as of July 2023.

As federal regulators work to improve price transparency compliance, hospitals should prioritize the accuracy of their chargemasters. The hospital chargemaster is at the heart of the revenue cycle and determines how much providers will receive for services rendered.

But to keep the revenue cycle heart pumping, hospitals should ensure they have a comprehensive maintenance strategy and team to quickly respond to healthcare price transparency and consumerism trends.