Healthcare Chargemaster: Strengthen Your Pricing Foundation to Optimize Revenue

During the COVID-19 pandemic, public health officials had to act fast to decrease mortality. 

Government agencies and providers turned to chargemaster data to identify how different drugs and treatments impacted patient response and outcomes. The subsequent insights led them to the anti-viral drugs, monoclonal antibodies, and immunomodulators that saved millions of lives. 

As indispensable as the healthcare chargemaster is, the sheer volume and complexity involved make it challenging to maintain. 

New procedures, services, supplies, and drugs are constantly being introduced, requiring frequent updates. Further, given its complexity, managing the chargemaster is labor-intensive, an unfortunate quality during a healthcare labor shortage. Given these challenges, it’s common for many chargemaster items to be either inaccurate or missing. When they are, billing becomes chaotic and revenue leaks. 

To keep optimizing the revenue cycle, healthcare organizations should ensure their chargemaster is in top shape. Use this people-process-technology framework to optimize your chargemaster and improve revenue. 

What is the healthcare chargemaster (CDM)?

A healthcare chargemaster is a comprehensive database maintained by hospitals and larger healthcare organizations that contains all billable items and services provided to patients. Also known as the charge description master or CDM, it lists procedures, medications, supplies, and other healthcare services, along with their associated prices and codes. A critical tool in healthcare finance it bridges the gap between service delivery and financial management.

Where large physician groups and hospitals rely on the chargemaster, small practices typically do not maintain formal chargemasters. Instead, they use simpler fee schedules or price lists for their services.

Each entry in the chargemaster is assigned a unique identifier code, a detailed description, and a set price. While these prices are often higher than actual costs or negotiated rates, they serve as the starting point for billing patients and negotiating reimbursement with insurance companies and other payers. 

The chargemaster plays a crucial role in generating patient bills, creating insurance claims, tracking service volumes, and analyzing revenue. It typically contains thousands of items, reflecting the complexity of modern healthcare delivery. The federal government now mandates that chargemaster prices be publicly available in the United States. 

At the same time, chargemasters are not necessarily the amount patients or payers will pay. Providers use their chargemaster prices – based on the expenses they incur to deliver the services – to negotiate reimbursement rates with private payers. Chargemaster prices are usually significantly higher than the actual costs of care.

Chargemaster maintenance is an ongoing process that requires clear workflows and a team to manage it.  

How proper healthcare chargemaster maintenance impacts revenue

More than a box-checking chore, chargemaster maintenance pays off. It contributes to an organization's revenue in several key ways:

• Accurate billing and coding:  Denials remain a top concern for healthcare CFOs and revenue cycle executives. When an error arises from a chargemaster issue under your control and prompts the denial, the resulting revenue loss is even more frustrating. Accurate coding and billing reduce errors that could lead to claim denials or underpayment.
• Optimized reimbursement: Too many healthcare organizations go a year or more before they update their chargemasters, leaving themselves open to “lesser of” clauses. The payer has access to your chargemaster. If the rate for a service there is $250 but the rate you negotiated and wrote into the payer contract is $350, they are within their rights to pay the “lesser of” or $250. Many healthcare organizations lose revenue unnecessarily due to this clause.
• Regulatory compliance: Regular updates help maintain compliance with Medicare, Medicaid, and other regulatory requirements, avoiding potential penalties or payment recoupments.
• Improved revenue capture: A well-maintained chargemaster helps ensure that all billable services are properly grouped and charged. This oversight helps minimize missed charges, a common issue stemming from clinician failure to add all services and which can amount to 1% of revenue according to HFMA. 
• Reduced claim denials: Accurate coding and pricing in the chargemaster lead to fewer claim denials, improving first-time clean claim rates, accelerating payment collections, and improving cash flow.
• Support for price transparency: An updated chargemaster enables hospitals to provide accurate pricing information to patients in the patient estimate – a list of service charges now mandated for self-pay and uninsured patients. 
• Enhanced payer negotiations: When determined according to competitive analysis, pricing data in the chargemaster supports more effective contract negotiations with insurance companies, potentially leading to better reimbursement rates.
• Data integrity for financial analysis and insight: A well-maintained chargemaster provides reliable data for financial reporting, cost analysis, and strategic decision-making.
• Streamlined revenue cycle: Proper chargemaster maintenance contributes to a more efficient overall revenue cycle, from charge capture to final payment.
• Adaptation to industry changes: Regular updates allow healthcare organizations to quickly incorporate new services, procedures, and regulatory changes, ensuring continued revenue optimization.

By consistently maintaining and updating the chargemaster, healthcare organizations can protect their revenue streams, improve financial performance, and ensure compliance with evolving industry standards and regulations.

Healthcare chargemaster people, process and technology

People: the healthcare chargemaster team

Having several individuals on the chargemaster maintenance team ensures the checks and balances that improve accuracy. The chargemaster maintenance team should comprise key stakeholders from various departments:

• Finance and revenue cycle: This group or individual works on accurate cost reporting and patient billing through the claim system. They help maintain financial integrity and optimize reimbursement.
• Compliance and legal: These team members or individuals mitigate regulatory risks and ensure adherence to healthcare laws and regulations. Their expertise helps prevent compliance issues that could lead to audits or penalties.
• Information Technology (IT): The IT department is essential for integrating and maintaining the various internal systems that interact with the chargemaster. They ensure seamless data flow and system interoperability, particularly in connecting health information management (HIM) systems for accurate coding and documentation.

Remember to include a brief chargemaster discussion in every revenue cycle meeting as well, dedicating at least 10 minutes to address updates, deletions, and issues.

Consider educating staff, including physicians, on CMS regulations, coding updates, and regulatory changes affecting the chargemaster. By including these cross-functional representatives, the chargemaster maintenance team can address financial, compliance, and technical aspects, leading to a more comprehensive and accurate chargemaster.

Chargemaster meeting frequency

Experts in revenue cycle management recommend that chargemaster teams meet regularly and frequently. Many suggest weekly or bi-weekly meetings, with monthly gatherings considered the minimum to stay on top of updates and changes. 

On a broader scale, departments should conduct quarterly reviews of their full chargemaster, aligning with the quarterly updates to coding and regulatory guidelines. 

Additionally, a comprehensive internal review should take place annually, allowing for a thorough examination of all chargemaster components. 

To complement these internal efforts, experts recommend engaging external auditors for a full review every 2-3 years.

Beyond these structured reviews, chargemaster teams should engage in ongoing monitoring of industry changes and internal processes, being prepared to meet and make updates immediately when new services, procedures, or regulatory changes occur. Establishing a regular schedule for chargemaster team meetings helps ensure consistency and prevents updates from being overlooked. 

Process: what to cover in an initial chargemaster review

National Association of Healthcare Revenue Integrity Advisory (NAHRI) board member John D. Settlemyer, MBA, MHA, CPC, CHRI, recommends tackling these topics in your chargemaster meetings:

• Annual and ongoing process for CPT/HCPCS updates: Regularly update the chargemaster with new and revised CPT/HCPCS codes to ensure accurate coding and billing. This typically involves an annual update plus ongoing changes throughout the year.
• Operational workflow and approval: Establish a defined process for making changes to the chargemaster, including who can request changes and who must approve them before implementation. HFMA recommends a three-step process of process review, analysis, and review and revision. 
• Audit trail: Maintain a record of all changes made to the chargemaster, including what was changed, when, and by whom. This supports accountability and helps track the history of chargemaster entries.
• Ongoing and annual price changes: Regularly review and adjust prices in the chargemaster, both on an ongoing basis and during annual reviews, to ensure they align with costs, market rates, and strategic goals.
• Archiving: Retaining historical chargemaster data for reference and compliance purposes, allowing organizations to look back at past pricing and coding information.
• Managed care payer policies: Incorporate payer-specific requirements and policies into the chargemaster to ensure accurate billing and reimbursement for different insurance contracts.
• Modifier management: Oversight of the appropriate use of modifiers in the chargemaster to ensure accurate coding and billing for services that require additional specificity.
• Partnership with operational departments and billing operations: Collaborate with various hospital departments to ensure the chargemaster accurately reflects the services provided and supports efficient billing processes.

Critical areas for chargemaster updates

While the above are important concepts, keep these issues in mind as well: 

1. Regulatory compliance

Ensure the chargemaster adheres to current healthcare regulations and guidelines.

Best practices:

• Regularly monitor updates from CMS, AMA, and other regulatory bodies
• Implement quarterly reviews to incorporate coding changes
• Establish a process for immediate updates when new regulations are released
• Conduct annual comprehensive compliance audits

2. Coding accuracy 

Maintain up-to-date and correct CPT, HCPCS, and ICD-10 codes in the chargemaster.

Best practices:

• Implement a system for quarterly code updates
• Involve certified coders in the review process
• Use coding software to validate code accuracy
• Conduct regular audits to identify and correct coding errors

3. Pricing strategy:

Ensure prices in the chargemaster are competitive, compliant, and reflective of costs.

Best practices:

• Conduct annual pricing reviews
• Analyze market rates and competitor pricing
• Ensure prices align with payer contracts
• Implement a process for immediate price updates for new services or supplies

4. New services and procedures

Adding new items to the chargemaster as the organization introduces new services or procedures.

Best practices:

• Establish a clear process for departments to request new chargemaster entries
• Involve clinical departments in describing new services
• Ensure proper coding and pricing for new items
• Implement a review process before adding new items to the chargemaster

5. Departmental collaboration

Ensure all relevant departments contribute to chargemaster updates. A well-designed and maintained CDM can improve staff productivity and morale, especially when it reduces claims and line item denials. 

Best practices:

• Form a multidisciplinary chargemaster review committee
• Hold regular meetings with representatives from finance, coding, compliance, and clinical departments
• Establish clear communication channels for updates and changes

6. Technology integration

Ensure the chargemaster integrates properly with other hospital systems.

Best practices:

• Regularly test integration between the chargemaster and billing systems
• Implement automated processes for updates where possible
• Ensure IT department involvement in major chargemaster changes

7. Audit trail and documentation

Maintain records of all chargemaster changes for compliance and tracking purposes.

Best practices:

• Implement a system that timestamps all chargemaster changes
• Require documentation for the reason behind each change
• Regularly archive versions of the chargemaster
• Establish a clear approval process for all changes

With these best practices, healthcare organizations can maintain an accurate, compliant, and effective chargemaster that supports optimal revenue cycle management.

The technology: automation in chargemaster management

From specialized maintenance software to integration with existing healthcare systems and the emergence of AI-driven solutions, technology has revolutionized how healthcare organizations manage their chargemasters and prices.

Modern chargemaster management lets you leverage innovations to optimize revenue cycle processes, cut manual labor costs, and ensure regulatory compliance.

Often part of your contract management software, chargemaster features carry out these tasks:

• automate code updates to ensure compliance with the latest CPT, HCPCS, and ICD-10 changes. 
• monitor compliance with built-in regulatory checks.
• document version control and audit trails for all pricing changes.
• establish customizable workflows for review and approval processes.
• use reporting and analytics capabilities to identify pricing anomalies and opportunities.

Make sure your chargemaster software solution can also do the following:

• find discrepancies between chargemasters and contracts.
• correct chargemaster rates when they are lower than contracted rates. This feature limits your “lesser of” clause revenue losses mentioned above. 
• identify which codes, payers, and locations are triggering reimbursement below contracted rates. 
• provide guidance in optimizing your chargemaster.   
• identify underpayments from payers by comparing payments against the terms of payer contracts. 
• identify the sources and types of denials that an organization receives. 

Take a quick, self-guided tour through a powerful contract performance and chargemaster optimization recovery tool:

Chargemaster integration with existing systems

Modern chargemaster systems integrate with electronic health record (EHR) and revenue cycle management (RCM) systems so that you can leverage:

• real-time synchronization of pricing data across all systems
• improved charge capture accuracy by linking clinical documentation to appropriate charge codes
• streamlined billing processes, reducing errors and accelerating reimbursement
• enhanced data analytics capabilities by combining clinical, financial, and operational data

Of course, successful integration requires careful planning and collaboration between IT, finance, and clinical departments to ensure data consistency and system interoperability.

Unleashing AI and machine learning for pricing optimization

Today, artificial intelligence (AI) enables complex pricing strategies. Keep in mind that the AI in healthcare today is traditional AI, which means that it operates on machine learning, natural language processing, and optical character recognition. The only places where generative AI (ChatGPT-like creation of new assets) impacts healthcare is in generating prior authorization letters, the transcription of doctor’s notes, and some organization chat platforms. Read about the difference between traditional and generative AI in RCM here. 

The AI referred to in healthcare RCM  chargemaster software solutions involves: 

Predictive analytics where traditional AI models can analyze historical data to forecast the impact of price changes on revenue and patient volumes.

Competitive pricing analysis where ML algorithms can continuously monitor competitor prices and market trends to suggest optimal pricing strategies.

Anomaly detection which allows AI to identify unusual pricing patterns or potential compliance issues that may require human review.

Data analysis: Leveraging data analytics and benchmarking can improve chargemaster accuracy and competitiveness.  Perform automated audits and identify pricing anomalies.

By leveraging these advanced technologies via software solutions, healthcare organizations can maintain more accurate and competitive chargemasters, ultimately improving their financial performance and ensuring regulatory compliance.

Synergize healthcare chargemaster optimization and contract management: a one-two punch to leaking revenue

Plugging revenue leakage incrementally via strategic and consistent chargemaster clean-up and maintenance adds up. Often, chargemaster clean-up features come in your contract management software. It only makes sense. Both draw from pricing, payer reimbursement, and government regulation data. May as well get two complex, time-consuming tasks covered at once. 

MD Clarity’s RevFind contract management tool automatically identifies instances where "lesser of" clauses in payer contracts are activated, potentially resulting in reimbursement below expected rates. This information guides chargemaster teams in making strategic updates to ensure fair compensation. By pinpointing specific codes and payers that consistently trigger these clauses, healthcare organizations can address a significant source of revenue leakage. This data-driven approach allows for targeted chargemaster adjustments, optimizing reimbursement while maintaining compliance with contractual obligations.

But that’s not the only place RevFind plugs leaks.  

This software also automatically compares actual payments received against the agreed-upon rates in payer contracts. It quickly identifies and alerts staff to any discrepancies, whether overpayments or underpayments. The system achieves these recoveries by digitizing and analyzing all contracts, making it easy to search terms and fees. Beyond individual payment issues, it also reveals broader payment trends, identifies the most and least favorable payers, and provides timely alerts for contract renewal deadlines. This comprehensive approach helps physician groups and management services organizations (MSOs) optimize their revenue cycle management.

To help you keep even more of your revenue, RevFind’s contract modeling features show revenue cycle leaders how much revenue they’ll win or lose if proposed payer changes are accepted. When you enter the rates and terms you prefer, you can model your own changes to see how they impact contract performance. 

Schedule a demo to watch RevFind hunt down your lesser of clauses, uncover your underpayments, and spin up revenue impacts of unlimited rate and term changes. 

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