chargemaster consulting

health care finance leadership

For more information, please contact: 

T. T. Mitchell Consulting, Inc. 
P. O. Box 2514
Liverpool, NY 13090 
(315)622-5922 Office

The Importance Of The Charge Capture
/ Revenue Review Process

Why do hospitals and physicians have so many problems in capturing charges? On the surface, it sounds like it would be so easy to do. After all, these people know the work they did, and they want to get paid for what they do. If not them, then someone in the hospital should know what they did and how to capture that revenue, right?

It turns out that life, even for healthcare entities, just isn't like that. Some people have this misperception that hospitals are perfect, or are supposed to be perfect. That's not close to the case. After all, hospitals are run by people, and people aren't perfect. Processes aren't perfect, equipment isn't perfect, so things don't run perfectly all the time. And physicians aren't perfect either.

What's the issue here? The issue is that, unless a facility has someone specifically hired to review it, there's no one to regularly review the charge capture process. Let's think about it this way.

A hospital has many different ancillary (departments that create revenue) departments. Each one of those departments is stocked with personnel who went to school to get specifically trained on how to do something. If someone works in the lab, they got trained on how to work the equipment, how to measure out and store samples, how to read results, etc. What they weren't taught was how to capture charges; that has to be learned once they get into a hospital setting. And who teaches them that? Someone else who had to learn once they got into the hospital setting. And what often happens when someone is taught how to do something that isn't really their primary job? They learn one thing, one way, and that's it. They don't often ask further questions, so things start to stagnate.

Now, let's suppose that what they were taught was fairly accurate as far as the process goes. Then they'll at least know how to capture those charges that are on their charge sheet, or in their system. What happens when new charges are created by the AMA (American Medical Association) or CMS (Centers for Medicare and Medicaid Services)?

Many times, the people doing the actual work don't know that there are new charges, only that there are new procedures. They know that because physicians will request these tests be run, and the staff has been told that there are new tests that they will run. But they don't always put two and two together and realize that they're suddenly doing something that they can't charge for properly. So they'll do one of two things; they'll either not charge, or they'll pick something that's not legitimate, which is fraud; not good.

Now, maybe when they learn about these new items they should tell someone; however, more often than not, they either don't think about it much, or they're not quite sure who to tell. They believe it's either billing or medical records. Let's take a quick look at these two areas.

Billing, patient accounting, patient financial services; pick your term. They're responsible for making sure the bills go out, and most of their work is in trying to correct bills that come back unpaid for some reason. Billing doesn't always know much about charges, or how the charging process goes. They may know a little bit about CPT-4 (procedure) codes, ICD-9 (diagnosis) codes, or revenue codes, but only enough to try to get a claim paid. The billing department overall rarely keeps up on new charges and the like because they don't care; they're thinking that the departments are the ones doing it. For the most part, no one in the billing area knows anything about how to create new charges, or where they go in the computer system. They don't really care either; they have their own issues.

Medical records is in a similar position, only in a much different way. Medical records often knows where there are new procedures, but, for most outpatient services, they don't care because they don't usually code those services as far as procedure codes go. Medical records usually handles diagnosis coding across the board, but when it comes to procedures, they usually only know about those procedures they have to code on inpatient claims and surgery related claims, as those codes will have a significant impact on reimbursement. They don't keep up with the procedure codes for lab, radiology, physical therapy, etc, unless there's something really critical about those codes that have to go with other provided services.

The one department not mentioned here is IT or IS, Informational Technology or Informational Services, which many people just refer to as the "computer people". In many facilities, they're the ones who might add the charges onto the charge master, but they're the technical people. They don't come up with descriptions, prices, or codes; they only input them if necessary.

As for physicians, well, most of the time their charging process is fairly simple, but that's what gets them into trouble. Most physician billing has to do with what we refer to as visit charges, or office visits. These are fairly simple because they're based on time, and the categories are much simpler to deal with: is it a new or established patient; is it an inpatient or an outpatient; are you consulting or the primary physician.

It's when they have to bill for other services that problems start to occur; the same goes for nursing homes. In today's world, there are many services that physicians are billing for that they're really not allowed to bill for, and insurance companies are starting to take some of that money back. There are some services that are supposed to be billed along with other services that both physicians and hospitals miss; sometimes insurance companies will pay because they know they're getting off cheaply, and sometimes they'll just deny the claim and tell you that you didn't bill for everything, but may not tell you what was missed.

What can be done in helping hospitals and physicians take care of these issues? Let's talk only hospitals first. Any hospital that has more than 50 beds should have a charge master person of some sort on their staff. This person should be entrusted to keep the charge master up to date, reviewing all information that comes from all the insurance companies, and pass it along to all the ancillary departments affected by these changes. A good charge master person will increase your revenue and keep it at optimum performance, and hospitals will get as big a benefit from someone whose only job, or primary job, is working on the charge master, as they get from the people working in billing.

Now, if this person knows something about revenue and charge capture also, they're worth being paid more because this is your hospital's opportunity to work at optimum performance. Hospitals budget everything once a year. Hospitals also do a cost report for their major insurance payers each year. If your costs can reflect all the revenue that your hospital can possibly generate, you're likely going to get a higher percentage on your Medicare payments because more revenue helps reflect your costs better. Also, more revenue ends up meaning more cash; who doesn't want that?

When we talk about physicians, it's more critical to have someone to come in and review your revenue and billing processes, and less with charge masters, per se. This isn't a position that would benefit most physicians, but having a review of their revenue and receivables processes can only enhance their practices, especially as profit margins are decreasing and having a hard time keeping up with the rising costs of malpractice insurance, and the decreasing insurance reimbursements.

And just what do these positions, or reviews cost? You know what; it almost doesn't matter what it costs, because both entities are going to benefit more than the cost of either hiring a person or bringing in someone to do the review. I know some hospitals that are able to hire a charge master person for around $25,000 a year, and others who have to spend upwards of $100,000 or more a year for the same position. It depends on the size and location of the hospital.

The same goes for having a charge master or revenue/charge capture review. Depending on the size and the types of services offered by the hospital, a charge master review could cost anywhere from $10,000 to $50,000, sometimes more. Having someone come in to do a revenue review could cost anywhere from $25,000 to $500,000; those are large hospitals. Physicians will pay lower for reviews, around $5,000 to $15,000 for a review, based on the size and specialty of the practice.

What are the differences, and why can prices go to high? With a charge master review, usually someone reviews the charge master and the revenue report, comes in and meets with the departments just to ask some more questions and verify some other things, then produces a report of recommendations. That's pretty valuable, but only if the facility has someone to implement the changes, which doesn't always happen. Now, if the hospital asks the person who reviewed the charge master is requested to implement the changes, it will cost more.

The same sort of thing happens with a revenue review, only the process is much more comprehensive. With a revenue review, the charge master is a part of the process, but more emphasis is placed on the full charge capture process, which is where hospitals and physicians are missing more of their revenue. In a revenue review, the recommendations are usually the beginning of new processes that every department will begin to implement, or at least they and administration becomes aware of what needs to happen. They also get an idea of what kind of revenue might be getting overlooked. And, if a hospital or physician decides to ask the people doing the review to actually work with them over the course of weeks, months, or even a year, of course the costs will go up.

Benefits are dual. One is information. If your operation is doing well and the review proves that, then you know that there are other changes and ideas that have to be brought in to help make things better. If your operation isn't doing well, then the benefits aren't only informational, but revenue and cash both increase, and your operation starts looking much better, because it is.

Every hospital, physician's group, nursing home, or FQHC (federally qualified health center) we've ever been in have shown drastic growth in both revenue and reimbursement. For one physician's office, his cash increased almost 100% with a quick review of his charges. For every hospital we've worked with, revenue has increased at least 30%, and during our last assignment the hospital increased its daily revenue rate by more than 100%, which translated into a 35% increase in payments. On another project, we were able to increase their revenue to a point where the average over the course of the year would have been 60%, and that was with taking some charges away that were being improperly charged.

Having either charge master or revenue process reviews is imperative to the operation of your facility or practice, especially since averages show that many hospitals have reviews of this type only every 3 to 5 years; one facility I worked with hadn't had their charges reviewed for almost 7 years. Think about how much money was lost during that period, and how much possible fraud was committed, which will get you on the back end. The costs may sometimes look prohibitive, but who in business wouldn't pay upwards of 10% to increase by 50% or more? In this case, the costs might end up coming close to .5%, if that.

To me, this is a no-brainer. But sometimes, there are misperceptions and expectations that some facilities and physicians might have before following through on hiring a company to do this for them. Hopefully, decisions will be made that will, ultimately, be to the benefit of each.