Chargemaster maintenance is key for healthcare revenue cycle success

Chargemaster maintenance is key for healthcare revenue cycle success

August 12, 2021
August 12, 2021

As a database of all information and prices connected to every component of the healthcare experience, the chargemaster is critical to the revenue cycle and plays a vital role in healthcare providers’ financial health. This blog post discusses the chargemaster and why regular maintenance of it is mandatory for healthcare organizations.

What is a chargemaster (CDM)?

A hospital's charge description master, also known as the chargemaster or CDM, is a database of all items used in patient care, including supplies, services, and drugs, and their associated prices. Used to charge patients, a typical chargemaster line item contains the information necessary for a patient's bill and for a claim to be paid. This data comprises a department or a cost center number, a charge item number and item description, coding that is HCPCS-related and CPT level two or three, revenue codes, and price. This information allows the patient to see everything connected to care received while in the hospital. The revenue generated from each line item taken from the chargemaster flows into the hospital's accounting system for cost and utilization purposes. In turn, aggregated cost accounting reports and other revenue information can be derived from the chargemaster itself. 

Common chargemaster challenges

Many healthcare systems experience ongoing challenges to the use of their chargemaster. These include:

  • Labor problems. Managing your chargemaster can be very labor-intensive. For many organizations, staff members are limited and also may wear many different hats. So, working on a chargemaster is typically not one’s only job. 
  • Compliance Issues. Every quarter organizations get information regarding coding updates that must be accurately displayed and communicated to the chargemaster team. But, if the chargemaster is not updated, it could create some payer denials and potential audit risks.
  • Price transparency. Price transparency rules were issued by the Federal government in 2020 and 2021. One of the key components recommended for price transparency is a patient estimation tool. If the chargemaster is not up to date, giving a patient an estimate of care can sometimes be a challenge for a healthcare system. 
  • Inaccurate or missing information. It is common for approximately 60% of items within the chargemaster to be either inaccurate or missing. Typically, these items are in supply, pharmacy, OR time, or room charge categories, which also are the primary revenue producing items within the chargemaster.

Why chargemaster maintenance is important

Chargemaster maintenance is an ongoing process to ensure that services, drugs, and supplies are accurately charged and compliant with Medicare and or payer regulations so that a healthcare entity receives appropriate reimbursement. The team members responsible for managing and maintaining the chargemaster need to have a thorough understanding of the chargemaster for accuracy, reimbursement, and reporting issues. Revenue producing departments should participate in maintaining the chargemaster for their particular areas to ensure that all codes and charges are current, and that they are really displaying what is provided to the patient, as well as that the organization is performing the services listed and using the drugs and supplies that flow to the patient's bill.
The chargemaster maintenance team should include:

  • Finance and billing—they are responsible for cost reporting and patient billing through the claim system. 
  • Compliance—avoiding audits is essential. 
  • The IT department—all internal systems must be connected and allow information to flow accurately, especially HIM from a coding perspective.

The necessity of ongoing CDM maintenance

New procedures, services, supplies, and drugs are constantly being introduced at every healthcare organization, as well as new doctors and procedures. The chargemaster must stay reflective of what's happening in the hospital itself, as well as incorporate quarterly CMS updates. The example of COVID-19 information constantly coming during the last year and a half demonstrates the other types of line items that could be affecting your chargemaster. The low margin finances of healthcare emphasize the necessity of correct coding and charging in order to maximize reimbursement for each charge code. To support their success, many organizations use online technologies to ensure that reimbursement information is readily available. A well-designed and maintained CDM is key for reporting healthcare statistics and can also improve staff productivity and morale, especially when it reduces claims and line item denials while minimizing reimbursement and audit risks. 

This blog post is based on the HealthStream webinar, Unlocking the secrets of the mid-revenue cycle: Defending your chargemaster, presented by nThrive’s Director of Revenue Cycle Solutions, Sherry Nardi. Learn more about HealthStream’s reimbursement and revenue cycle solutions.