13 May Simple Truth of the Charge Code Master

There has been a lot of articles and attention as of late in regards to the variation in hospital charge code masters. There was a great graphic in the New York Times that allows one to click and drill down to anyplace in the U.S. to see what hospitals are charging Medicare (CMS) and the reimbursement paid to the facility.
From this point you have the ability to see the hospitals in that given area, can click on the specific hospital, and then see what is billed to CMS for a majority of the most common procedures. It shows the number of cases performed at the facility, average amount billed to CMS, where it compares to other facilities across the U.S., and the average amount that CMS will reimburse to the facility.
With that said, the question becomes why is there so much variation, and how do hospitals and systems develop the “charge code master.”
I have had the privilege of working on several charge code masters over the years, and so this is based on my own experience and within the processes of the multiple organizations I worked for in the past. There are many ways to do this, but this will at least provide some additional insight.
Let’s say there is a new procedure that is going to be performed within the organization. We will call it ACME. The first thing that was historically done was to find out how much CMS will reimburse the facility for the ACME procedure. We discover that for every ACME procedure the facility performs that CMS will pay the facility $2000.00
Some organizations will end the process here and just multiply the CMS reimbursement by a factor of 2-3X. The charge code master will be set to $4000-$6000 per ACME procedure, and this is what patients and insurances will see on the bill.
There are other organizations that also realize that the commercial or private payers (think United Health, Blue Cross-Blue Shield, Aetna, etc) will reimburse the hospital more than just 2-3x more the CMS rate. If that is the case, they may decide to set the price for the ACME procedure to be at their highest reimbursed amount, or they may decide to multiply it by a factor of 1.5-3x more.
Why? Well the charge code master is also what is used when a hospital or facility begins negotiations with commercial or private payers for contracts and how they will be reimbursed. Hence, the higher the charge on the charge code master, potentially the higher that the reimbursement can be negotiated.
Other facilities have begun to take into consideration the cost it takes to perform the ACME procedure and build their charge code masters accordingly. For instance, the number of supplies, the room, the number of people and time it takes to complete the procedure, and other such details. In doing this, they can then do two things: 1. continue to improve the process and in doing so, will 2. help to drive down the cost to perform the procedure. This allows a hospital or facility to generate better quality and to improve their own profit margin.
However, patients end up losing because they are the ones that have to pay their co-pays, their deductibles, their portion of 80/20, or perhaps the entire bill if they are under or uninsured.
There is not a lot of real science that goes into most charge code masters.
However, as consumerism begins to move into the healthcare arena and the price of procedures at hospitals in close geographical areas become more transparent, along with the transparency of their performance (how well they do the procedure) it will cause organizations to drive prices down, and improve their quality.
At least this is the hope.
As always, you can feel free to contact me at: CANCERGEEK@GMAIL.COM
~CancerGeek