Designing and Maintaining an Effective Chargemaster - central repository of charges and associated coding information used to develop claims

Healthcare Financial Management, March, 2001 by Duane C. Abbey

The chargemaster is the central repository of charges and associated coding information used to develop claims. But this simple description belies the chargemaster's true complexity. The chargemaster's role in the coding process differs from department to department, and not all codes provided on a claim form are necessarily included in the chargemaster, as codes for complex services may need to be developed and reviewed by coding staff. In addition, with the rise of managed care, the chargemaster increasingly is being used to track utilization of supplies and services.

To ensure that the chargemaster performs all of its functions effectively, hospitals should appoint a chargemaster coordinator, supported by a chargemaster review team, to oversee the design and maintenance of the chargemaster. Important design issues that should be considered include the principle of "form follows function," static versus dynamic coding, how modifiers should be treated, how charges should be developed, how to incorporate physician fee schedules into the chargemaster, the interface between the chargemaster and cost reports, and how to include statistical information for tracking utilization.

The chargemaster has long been a critical element in the coding, billing, and payment process of hospitals and health systems. Under cost-based payment systems, and more recently under prospective payment systems, the chargemaster's primary function has been as the computerized repository of the charges and coding information that are used to develop claims. This function may be characterized largely as an external one because the coding information contained in the chargemaster is intended to be used by the payer, not the provider, to adjudicate the claims.

In recent years, however, the growth of managed care has made this external function of the chargemaster less relevant for many payment arrangements because many managed care plans--particularly those that specialize in capitation contracting--may not require claims, as such. Under such circumstances, the chargemasters internal function--that of providing a basic database of statistical information for categorization of services and tracking of resource utilization--has taken on added importance. For example, it may be possible to analyze the utilization of a particular supply, such as intraocular lenses, by frequency and payer (eg, Medicare, Medicaid, commercial), without consideration for pricing, because cost is the important factor for this use of the chargemaster.

Chargemaster Coordinator

To ensure that the chargemaster effectively fulfills both its internal and external functions, hospitals should appoint a chargemaster coordinator with responsibility for designing, monitoring, maintaining, and updating the chargemaster. This position requires broad knowledge and communications skill to work with people to facilitate change and ensure that the information contained in the chargemaster is reliable, consistent, and properly used in the billing process. An accurate chargemaster ensures that necessary information always is included on claim forms and that statistical information clearly represents the hospital's actual utilization.

The challenge of managing the chargemaster increases as hospitals expand their service offerings, become integrated delivery systems, and/or evolve into systems of hospitals with multiple chargemasters. Indeed, for all but the smallest hospitals, the chargemaster coordinator is a full-time position, and for hospital systems, chargemaster oversight may require a staff.

At the most basic level, the job of the chargemaster coordinator involves reacting to departmental requests to add new or modified line items to the chargemaster. Such requests typically are submitted on a standard form, which the chargemaster coordinator reviews to verify that the requested entry meets all requirements for inclusion in the chargemaster. Such requirements include application of correct CPT/HCPCS codes and revenue center codes (RCCs), an accurate description of the service or item, and verification that these three elements correlate.

The chargemaster coordinator also must be proactive, showing a significant amount of initiative to keep up-to-date on legal and regulatory factors that affect the chargemaster. These factors include changes or clarifications announced through HCFA transmittals, updates to the Medicare manuals and to payment systems of other third-party payers, and code changes under the various coding systems.

The chargemaster coordinator should routinely review the activities of each department of the hospital or health system to ensure that the activities are accurately accounted for in the chargemaster. When code changes occur, the coordinator should work with the affected departments to ensure that the changes are reflected both in their portion of the chargemaster and in their associated coding and billing processes.

The chargemaster coordinator also should work closely with cost-reporting staff to identify unusual aspects of the chargemaster, particularly with regard to the assignment of RCCs. For example, a payer might require that a certain type of surgical procedure be coded using an RCC that does not obviously relate to the procedure. The cost-reporting personnel need to know that charges may be accumulated for this surgical procedure under the required RCC.