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What is Charge Optimization and how can it complement existing Charge Capture activities to eliminate Revenue Integrity Black Holes?

Revenue leakage is a pervasive problem in the healthcare industry often forcing leaders to make difficult decisions. Unfortunately, identifying this lost opportunity is a challenge due to complexity in payer contracts, recurring CMS updates, system conversions, employee turnover, etc. Providers have responded to these challenges by forming Revenue Integrity Departments, investing in technology, and partnering with safety-net vendors. Despite these efforts, how does a Provider know if they’ve appropriately billed for all services performed, or if the charging methodology resulted in optimal reimbursement? How can a Provider feel assured there are no more revenue integrity black holes? In this edition of Insights, we will explain a new approach to identify additional charge capture opportunities, how it differs from traditional solutions and how it can generate supplemental revenue.

Background

Over the last decade there have been tremendous improvements in technology, including the ability to look at line item detail before a claim is billed to ensure claim accuracy and revenue integrity. Providers rely on pre-billing scrubbers for revenue assurance and a degree of confidence that they are properly billing for services performed. Some Providers go a step further partnering with charge capture safety-net vendors who specialize in auditing zero balance accounts after they have passed all Provider-based internal billing edits to identify revenue opportunity. Interestingly, charge capture vendors almost always recover additional revenue that Providers have missed, raising the question as to why these charge capture opportunities are not caught before the claims are billed and how much more is out there.

Billing scrubbers and charge capture tools are both claim-based solutions relying on subject matter experts to build rules to identify missed opportunity and avoid denials. Once developed, these rules are programed into sophisticated technology platforms enabling Providers and Vendors to review thousands of claims for potential missing or inappropriately coded charges. As accounts are flagged for potential opportunity, a certified coder performs an audit of the medical record for each individual account to confirm the opportunity. The combination of the Provider-based internal efforts and Vendor-based external safety-net efforts are considered an industry best practice and shield Providers from revenue leakage; however, these laser focused claim-based solutions have limitations and it is possible that a claim passes every edit and every rule and still has opportunity. Additionally, software driven solutions are typically not tailored to facility specific managed care contract reimbursement terms or specific nuances and caveats that may impact reimbursement.

Recently, a revenue enhancement solution has emerged providing additional protection against revenue leakage and supplements the preceding best practice model. It is called Charge Optimization and involves a more comprehensive look at charging pattern usage statistics compared to industry norms and other providers performing similar services, billing methodology (especially for operating room (OR) services), charge description master (CDM) setup and payer contract evaluation. This macro-level approach has started to gain interest among Providers experiencing unexplained revenue loss after a system conversation. Instead of looking for a needle in a haystack, Providers are saying “where’s my haystack?”. Today, many Providers are starting to combine the micro-level charge capture review with the macro-level charge optimization as companion solutions to identify revenue and eliminate black holes.

Challenges

Why is correctly coding and charging for the services performed so challenging, and why do black holes exist?

It starts with billing requirements, which is ultimately summarized on a single form called a UB-04. This form alone has 81 fields, many of which have multiple sub-categories literally creating an endless number of possibilities for error. Pre-billing scrubbers filter the information loaded in these 81 fields to catch these errors before claims are sent to the payers. Further complicating the billing process are unique payer billing requirements, which must be programmed into the pre-billing scrubbers to avoid rejections. These payer nuances must also be programmed into the CDM or have separate rules in the form of payer specific coding logic or overrides. While pre-billing scrubbers have charge capture capabilities, their primary focus is to bill a clean claim and prevent denials. As a result, it is possible to bill a clean claim with charge capture opportunities.

The critical link between service delivery and populating the UB-04 is the CDM, or the price book for the Hospital, which in many cases contains over 10,000 individual line items. Maintaining a Hospital CDM has many challenges including, but not limited to:

  • Do the prices reflect hospital policy and ensure charges are priced higher than the managed care fee schedules with lesser of language?
  • Is the CDM appropriately interfaced and mapped to other Hospital systems?
  • Does the CDM reflect the latest American Medical Association (AMA) coding and Center for Medicare Service (CMS) information?
  • Is pricing for non-interfaced supplies reflective of a mark-up of acquisition cost or is the facility at risk for defending charge setting methodology in the face of pricing transparency regulations?
  • Are the formulas that drive charges and unit reporting, such as pharmacy formulary conversion factors, accurate?

When you factor in other potential challenges that Providers face like employee turnover, system conversions, mergers and acquisitions, reorganization, outdated policies and procedures, lack of key performance indicators and other competing priorities, it becomes apparent why ensuring revenue integrity is so challenging.

Insights

The partnership of Providers and Vendors to ensure revenue integrity and identify revenue leakage areas via claim-based pre-billing edits and charge capture audits is considered a best practice model to identify black holes and increase revenue; however, the dynamic nature of healthcare reimbursement lends itself to imperfection and industry leaders are constantly adapting to ongoing challenges, thus the emergence of Charge Optimization.

Charge bundling is a great example of how Charge Optimization works. Historically, a radiology procedure and guidance were separately chargeable line items on a claim. Today, these separately chargeable line items have been replaced with a single CPT code that includes guidance and is reimbursed differently. If the new single CPT code isn’t priced appropriately, Providers risk revenue loss depending on their contracts. It is not likely that pre-billing scrubbers or charge capture rules would capture this opportunity, because the correct code is on the claim, it’s just underpriced. Lastly, you cannot go back retrospectively to rebill the claims impacted with a corrected price.

Another example of how Charge Optimization works is when an OR procedure is mapped to a low acuity level and charged based on OR time. The fee schedule reimbursement for the CPT coded may be higher than the charged amount exposing a Provider to revenue loss in contracts with lesser-of-charge language. Again, there is nothing wrong with the claim that is billed, so no billing edits or charge capture rules would ever flag this claim for an audit.

While analyzing data through the lens of a single claim is critical to avoiding revenue leakage, complimenting these efforts with a macro-level review can aid in eliminating black holes. The macro-level charge optimization approach identifies larger systemic problems that a charge capture rule may not identify. In contrast, micro-level charge capture approach is focused on missing or incorrectly coded charges at a claim level that a charge optimization review may not identify. Combined, this charge capture and optimization approach is the most comprehensive way to ensure revenue integrity and identify black holes.

Summary

Identifying new ways to eliminate revenue integrity black holes is an ongoing process, especially given today’s challenges and the downward pressure on reimbursement and increased scrutiny of charges and pricing transparency efforts. While leveraging technology to identify missed or incorrectly coded claims data has greatly diminished revenue leakage and aided in revenue recovery, supplementing these existing charge capture efforts with a macro-level charge optimization review ensures maximum protection against revenue loss. Combined, these companion solutions empower Providers to not only recover previous unbilled charges, but also address systemic problems and fix the root cause. Looking ahead, the value of having a well-coordinated and effective Charge Capture and Optimization program has never been more important.