One of the most often overlooked parts of the revenue cycle in practices, medical supply company, hospital owned physician groups and ASC’s is the auditing of a charge master. The charge master is a list of your top procedure codes, along with your billed charges (retail rates that are paid out of network) and the site of service.
The reasons for auditing your charge master, at least once every six months, is that charge masters are used in two key parts of the revenue cycle and, therefore, affect your revenue in multiple ways. First, charge masters are used, routinely, in payer contracts to determine your payments on claims. That is, your billed charges are compared to your contracted rates for each procedure and, if the billed charge is less than the contracted rate on a particular service, you will be paid the billed charges. Whatever you do, don’t pop the champagne cork when you do an audit and find out you are being paid at 100% of billed charges! Instead, raise your charges well above any of your payer contracted rates to avoid this problem.
Second, your cash based book of business is affected by your charge master. Today it is common for medical providers, including practices, ASC’s, ancillary providers and supply companies to offer as much as a 20% discount off billed charges to patients who pay cash. More often than not, these patients have an out of network payment as part of their benefit plan with a payer and the patient is required to make up the difference. Our recommended best practices is to collect your billed charges, less discounts from these patients and let them handle the out of network reimbursements with the payers directly. This will save you both administration time and headaches. In any event, if your charge master is set too low, you also run the risk of being paid less than UCR (Usual and Customary Rates) for your services. In the absence of specific guidance from an accounting professional who will also consider the tax consequences and write offs, our guidance is that a charge master should be set in the range of 225% – 300% of a current year’s Medicare rates. This will insure that you get reasonable value for your services and will insure that you avoid the “lesser of” problem and will likely result in a reasonable range of write offs.
Figure 1, below, demonstrates good charge master hygiene. This snap shot was taken from the billed charges modeler in HealthcentsRevolution® Software. The model parameters are set to detect the lesser billed charges vs. contracted rates and an out of network volume of 5% of this payer is assumed. Further, we have chosen a UCR Threshold of 250% of Medicare for each CPT code as our desired billed charged. The output of this model shows us which codes have a billed charge less than the contracted rates (flagged in red in the right hand column) and which codes that have a Medicare rate are set below 250% of current year Medicare. We can see a block of E and M and pathology codes, in the middle of this chart that are set below 250% of Medicare currently. The advice provided in Figure 1 is the recommended billed charge (in red) and the upside revenue (in green). Also, just below the model parameters, the total possible upside revenue, assuming no change to volume of services provided, and changing all codes to 250% of current year Medicare that are below 250% to this threshold is $14,993.
In summary, whether your use a tool like RevolutionSoftware or spreadsheets or even a cocktail napkin, it is important to audit your charge master on a regular basis to detect both the lesser of issue and to make sure that you maximize your out of network revenue as well.
For more information and for help with your payer contracts, contact Steve Selbst, author and CEO / Co-Owner, Healthcents Inc. at 831-455-2174 or firstname.lastname@example.org. Steve’s profile is at www.healthcents.com/steve and the Healthcents Company Website is at http://www.healthcents.com.