Revenue Integrity — Taking Charge of Your Chargemaster

Updated on November 6, 2023

“Revenue integrity” has attained buzzword status, but not long ago, the term didn’t exist. The concept, however, is longstanding. It means being properly reimbursed for patient care while remaining compliant with all applicable laws and regulations.

These efforts involve ongoing evaluations to make sure a healthcare organization’s internal processes and controls are supporting correct, compliant billing procedures to hasten payment and avoid denials. They’re meant to protect and strengthen hospitals by eliminating revenue leakage and compliance risks.

The buzzword took hold in recent years, as hospitals have been barraged by financial pressures including inflation, lower reimbursement rates and fierce competition for labor. In decades past, a certain amount of revenue leakage might have gone unnoticed, but today, many hospitals have thin or nonexistent margins and must collect every dollar owed for services rendered. Roughly half of U.S. hospitals are actually losing money according to the American Hospital Association. Perhaps that’s why 70 percent of hospitals surveyed by the National Association of Healthcare Revenue Integrity had dedicated staff to such efforts as of 2019, and 61 percent of hospitals had revenue integrity departments.

At smaller hospitals, where employees wear many hats, it may not be feasible to have a fully staffed department. But for community and rural hospitals, revenue integrity efforts are nevertheless critical to their sustainability. With such tight margins, they cannot afford inefficiencies in any of the processes related to the revenue cycle. While an evaluation of revenue integrity analyzes many functions, from charge capture process reviews to coding accuracy audits, hospitals can benefit by also focusing on chargemaster compliance. After all, the chargemaster is like the revenue cycle’s nerve center — the node that generates all the descriptions, codes and modifiers that appear on a hospital bill. And each of these data points must be correct or payment will be delayed or denied.

It All Starts with a Single Step

A chargemaster review is a logical starting point for building a compliant culture, but this first step swiftly becomes a long-term process.

The chargemaster, of course, is more than just a list of a hospital’s procedures, services and goods and their respective prices. It’s a massive database in a table format that lives inside the billing system. A small hospital’s chargemaster might have about 5,000 line items, whereas a large hospital can have upwards of 100,000. These items make up the rows of the table. The columns account for federally required data entries like universal item codes, item descriptions, modifiers, revenue codes, prices and more.

The challenge for healthcare organizations is that the codes and field requirements change frequently. New and updated universal codes that hospitals use to bill for services and procedures (CPT codes, established by the American Medical Association) as well as for supplies and drugs (HCPCS codes, established by the Centers for Medicare & Medicaid Services) take effect annually and quarterly, respectively. The annual updates have, on average, 300 to 400 code changes, many of which the chargemaster must reflect in order to process payments correctly for the affected services.

Although coding changes are difficult to keep up with, they’re anticipated. Other regulatory changes requiring chargemaster updates or process adjustments can be unexpected. This past summer, for example, a CMS regulation went into effect requiring hospitals to input a “modifier” entry for all applicable drugs in the event that the entire vial was used.

The Journey Never Ends

Because of the size, complexity and changeability of the database, a chargemaster review is a very intense, very comprehensive process. Every cell on that table gets scrutinized — for each and every department.

Hospitals can carry out the review internally, and there’s software available that can help guide them to identify incorrect data elements. Or, hospitals can engage a third-party service provider like CHC Consulting to conduct a comprehensive and interactive chargemaster review.

During and after a chargemaster review, the number of changes needed to bring billing into compliance will probably be overwhelming or perhaps gratifying, but the important thing to understand is that the process is never “done.” Chargemaster maintenance is an ongoing process, and it’s recommended that thorough (line-by-line) chargemaster reviews take place every two to three years, while basic updates are recommended on an ongoing basis, and at least quarterly as codes change. Nonpayment is not the only potential consequence of a faulty chargemaster. Failing an external chargemaster audit can result in penalties and retroactive takebacks of previous payments.

While the focus here has been on chargemaster review, that’s just one aspect of revenue integrity. CHC Consulting recommends that price reviews be conducted annually, and coding audits quarterly. Hospital clients are also advised not to lose sight of the big picture while focusing on the details. After all, a hospital can freshen its chargemaster every day, but without efficient charge-capture and billing processes in place, a pristine chargemaster can’t bring about revenue integrity.

The ultimate objective of revenue integrity is to make sure every aspect of the revenue cycle is functioning together in the most efficient way.

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Beth Kim

Beth Kim is Vice President of Revenue Integrity for Community Hospital Corporation.