Are you a master of charge capture? One healthcare organization lost more than $2 million annually because its chargemaster was out of date. In another, the radiation department system was not integrated to the hospital system, resulting in half the charges being erroneously dropped

Healthcare Financial Management, March, 2005 by Bruce Morgan, Jim Brown

Fiction? Hardly. Healthcare organizations can lose millions of dollars every year because charge capture is incomplete or data are not transferred correctly.

When the ambulatory payment classification system was implemented on Aug. 1, 2000, the categories of outpatient healthcare services transitioned from several hundred revenue codes to more than 12,000 clinical procedure terminology codes. Medicare's transition to a fee-based approach to outpatient payments firmly established the link between accurate coding and payment. Other payers have followed suit, dramatically affecting providers' revenue cycle operations.

As a result of this change, the "middle" segment of the revenue cycle--charge capture, the charge master, and strategic pricing--skyrocketed in importance. When properly managed, these functions can help minimize revenue cycle leak age, reduce back-end rework, and allow providers to capture all the revenue to which they are entitled. Unfortunately, many providers were not adequately prepared for the change to APCs, and have spent the past four years playing catch up. Although most organizations have addressed the coding requirements in the chargemaster, many have now recognized the need to extend revenue cycle education across the clinical spectrum--most important, to those documenting care at the point of service.

All segments of the revenue cycle, from scheduling and preregistration to account resolution and payment posting, play key roles in a provider's ability to accurately capture, bill, and receive payment for patient services. However, because the middle segment of the revenue cycle is particularly complex and relies on the accurate capture of services at the time of the clinical event, it can represent an area of significant, and often unrecognized, revenue leakage (see exhibit). Breakdowns can occur at multiple points and across so many different areas of responsibility that they may go unnoticed and result in lost revenue over an extended time period. Common problems include:

* Charge capture errors (human error associated with inconsistently capturing services eligible to be coded and billed)

* Gaps in system linkages (a lack of effective linkages between order entry chargemaster and billing systems)

* Incorrect claim detail (miscellaneous charges lacking detail on claim form payment)

* Clarifying the billable event (departmental staff lack understanding about what services are separately billable events)

Fortunately, the middle segment of the revenue cycle is also the area with the greatest potential to increase revenue recognition through improved processes and the application of new technologies. Providers are realizing that effective revenue cycle management is driven by educated and empowered staff, coupled with the use of cutting edge technologies.

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Importance of Charge Integrity Review

Considerable revenue leakage can occur when a service is rendered but the charge is not captured or properly coded. Since the advent of APCs, providers have been trying to get their arms around charge capture and its coding challenges, with varying degrees of success. Initially, many hospitals found that they were unprepared to deal with the procedural and technical complexities associated with charge capture, chargemaster, and medical records coding.

This was due, in part, to a historical orientation to inpatient care and cost-finding emphasis for outpatient services. Hospitals' focus was on cost capture, not charge capture, as that was how Medicare paid for services. Outpatient care and its associated billing functions were low priorities Plus, most organizations did not have the internal capabilities or resources to manage the change.

As providers began revising these massive chargemasters (large systems can have as many as 80,000 line items), they recognized that chargemasters had been designed around old payment methodologies. The implication? Some services, such as injections and infusions, had never been captured, so they were not resident in the charge master. Also, the practice of "bundled" charging, including all services and supplies in a single price, made it very difficult to understand what services were actually provided. The provider focus began to change to clinical cataloging and charge integrity reviews--that is, looking at all the sites where care (primarily outpatient) was being delivered, and determining how to capture and bill appropriately for that care.

Although very complex areas, such as the emergency department, pharmacy, clinics, and radiation/ontology, are obvious areas for regular charge integrity reviews, it is important that hospitals conduct a comprehensive review of their whole system, as there may be hidden issues and potential revenue nuggets in the most unsuspected places. To conduct the review effectively, a team comprising business office and medical records professionals should evaluate every site where clinical care is provided. Although a time-consuming and challenging process, especially as most hospital business offices are chronically understaffed, this is the most effective way to ensure all services are accurately captured.