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 One healthcare organization lost more than $2 million annually because its chargemaster was out of date.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

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Hospitals should establish a pricing methodology based on cost, or a markup on cost of services. One approach to accomplish this is resource based pricing. This involves comparing costs at the level of individual line items for services compared with existing prices, evaluating the markup on a departmental basis, and comparing that with the market. It also establishes a consistent, repeatable methodology for modifying prices on an ongoing basis. Although implementing a resource-based pricing methodology may initially result in repricing significant lines in the chargemaster, ongoing maintenance will be greatly simplified.

Most hospital organizations are now addressing pricing and costing in some fashion. Cost accounting systems have the ability to determine the true cost of a procedure better today than they did even two years ago. Hospitals are examining and using their cost accounting systems to produce reports that can more effectively cost their services, supplies, and procedures so they can be linked to the chargemaster and used as a basis for pricing.

Hospitals should focus on establishing a connection between pricing and costing of hospital services, including linking the chargemaster and the billing system to the supply item master and cost accounting system. By linking the requisition of supplies to the chargemaster and billing system, for example, a hospital connects three critical pieces of information: cost. price, and payment data. Technology is now available to establish such links, and hospitals need to make the investment to implement it.

Effective Management Yields Considerable Benefits

Providers that take charge of charge capture processes and effectively manage the middle segment of the revenue cycle can realize considerable short and long-term benefits, including:

* Enhanced compliance via consistent chargemaster coding for like services by 'all departments and hospitals, mirrored descriptions between charge capture systems and chargemaster, and a pricing strategy based on costs and target market position

* Net revenue improvement by charging for all appropriate services: accurate coding and reduced claims errors/denials; and pricing tied to market position targets and revenue optimization

* Increased efficiency by eliminating redundant resources capturing the same information

* Better management practices by increased training and education for the chargemaster team and increased revenue cycle coordination and support to clinical departments

* Better and more accurate cost and charge data, which is useful in managed care negotiations

* Empowered clinical staff by providing useful information to allow continuity in the revenue cycle

To recognize these benefits, providers need to take advantage of today's available technology while gaining support and buy in from clinicians on the front lines. It is this technology and clinical linkage that represents a marked change--and improvement--from historical practices.

AT A GLANCE