Healthcare Execs, Do You Know What’s in Your Chargemaster?

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By Pamela J. Gallagher

A hospital’s charge description master (CDM), or chargemaster, is often referred to as the “heart” of the healthcare revenue cycle. It includes codes for every procedure, material used, medication, and service that a healthcare organization provides its patients. It is the structure that drives the hospital, and is the starting point for billing patients and insurers and complying with public reporting.  A typical health care system chargemaster may contain 15,000 to 25,000 entries, according to Becker’s Hospital Review.  

Neglecting your chargemaster can lead to inaccurate billing, regulatory risks, claim issues with payers, and low patient satisfaction scores, all of which affect your healthcare organization’s revenue.  Your hospital can’t afford to overlook this essential piece of its operations.  Ongoing evaluation of your chargemaster with an eye toward increased calls for pricing transparency in the healthcare industry is the key to maintaining a chargemaster that will serve your organization, as well as its payers and patients.

Ongoing maintenance

With so many diverse components in a chargemaster, it can be extremely difficult to set up correctly.  Failing to update any of the components can result in negative outcomes for your healthcare organization.  Often, when hospitals add new items to their chargemaster, they simply copy existing charges. However, this can be problematic because the new charges may not have the same requirements (e.g. CPT codes, modifiers, revenue code, or pricing) as the item being copied. Care should be taken to make sure the new charges are set up correctly. 

Periodically, a hospital’s chargemaster needs updating due to mandated changes and as the needs, including costs, of the organization change. The chargemaster is not something that can be set up once and be done. There has to be regular updating and reviews to ensure compliance.

Healthcare finance execs should form a team including internal employees and external experts in coding, for example, to regularly evaluate their chargemaster. Together, the team should assign or replace codes, track rates, maintain communication with clinicians, and train other staff on how to use the chargemaster optimally.  

Moving toward transparency

Patients, as well as state and federal governments, are calling for increased transparency from healthcare providers. These transparency requirements will increase the attention on the chargemaster and should drive reviews by healthcare organizations.

However, since the chargemaster is a listing of charges and not what is paid by insured consumers, these lists are misleading. For example, a recent Health Affairs study showed that the average hospital with over 50 beds had a charge-to-cost ratio of 4.32, meaning that hospitals charged $432 when the service actually cost $100, according to Revcycle.  Furthermore, unless a patient is familiar with the endless abbreviations and acronyms included in a chargemaster, what seems like a “peek behind the curtain” ultimately will be unhelpful for patients who want to compare the cost of care across multiples healthcare organizations.  

Comprehensive reviews and updates and ensuring that pricing is aligned with chargemaster pricing policies will help.  Additionally, gaining access to other organizations’ chargemasters to see how similar hospitals align will help hospitals stay competitive. 

As chargemasters shift from proprietary information to public knowledge, it is more essential than ever for your healthcare organization to prioritize ongoing maintenance and evaluation of its chargemaster.  

Pamela J. Gallagher is a senior healthcare finance executive with 20 years of experience balancing the reality of finance with the delivery of excellent patient care. As a consultant she instills financial discipline, streamlines processes to maximize revenue, and reduces expenses for immediate improvements and long-term results.  She writes on healthcare, finance, and technology at gallaghersresulting.com.

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