4 Key Considerations for CDM Harmonization in CAHs

Among the most vital steps Critical Access Hospitals (CAHs) can take to improve their revenue cycle management are to closely examine their Chargemaster (CDM) and develop policies that have a positive impact on cost reporting, revenue cycle processes, and costs to consumers.

Stroudwater works with rural CAHs across the country to take these critical actions and achieve CDM harmonization. Our team is currently engaged in a project with a Rural and Community Hospital that is preparing to open the first ever CAH in the county. The hospital operates out of two clinic locations without any overnight capacity. We started this project by looking at the current clinic chargemaster to identify inconsistencies or other issues, and we discovered two codes for the same procedure with different prices, 20 invalid codes, and 86 codes below the Medicare fee schedule.

Consistency in the chargemaster is crucial. Here are four key factors to consider when evaluating your hospital’s CDM harmonization:

  1. Verify that you have an accurate representation of your hospital services.

When assessing your chargemaster, first make sure that it has been developed and monitored by departmental revenue cycle teams.  These departmental teams should comprise leaders from both the clinical and the revenue cycle areas.

The goal is for each CPT to represent the most accurate code defining the services performed. Item numbers within your CDM should be unique to one line and ideally contain the department and procedure code information. Item descriptions should contain the most pertinent information to identify the service and distinguish it from similar services — for example, immediately noting whether it was an MRI with contrast or without. The revenue code assignment should be the most appropriate code for the service as represented in the cost report. Payers are becoming more astute and ensuring that the appropriate revenue code is assigned to each test being performed.  Without this assignment, claims will be denied for Revenue Code/CPT Code mismatch.

  1. Know if you are going to use Method 1 or Method 2 billing.

Understand the differences between the two methods of billing for facility and professional services and how this will affect your overall revenue cycle management.

Method 1 Billing

  • Hospital bills for facility services on a UB-04 claim form
  • Physician bills for professional services on HCFA1500 claim form
  • Payment for outpatient CAH services is:
    • 101% of reasonable cost
    • Less applicable Part B deductible and coinsurance amounts
  • Payments for professional services based on:
    • Fee schedule
    • Billed charge
    • Other fees, as would apply if the services had been furnished in a hospital outpatient department

Method 2 Billing

  • Hospital bills for facility and professional services on a single UB-04 claim
  • Physician reassigns their billing rights to the CAH in writing
  • Payment for outpatient CAH services is:
    • 101% of reasonable cost
    • Less applicable Part B deductible and coinsurance amounts
  • Payment for professional services is:
    • 115% of Physician Fee Schedule
    • Less applicable deductible and coinsurance
  1. Understand the Medicare beneficiary and community impact.

Your hospital’s pricing strategy should take into consideration deductible and coinsurance costs to Medicare beneficiaries—how co-pays are calculated, the difference in the co-pay amounts at a physician practice vs. at a CAH, and how the differences can lead to a greater community impact.

The deductible and coinsurance cost to Medicare beneficiaries is 20% of CHARGES for outpatient services, except for lab services. If the charge structure isn’t closely monitored, pricing can lead to a significant burden of cost for Medicare beneficiaries.

At an acute care hospital or physician practice, the coinsurance is calculated as 20% of Medicare fee schedules, which can be much less than CAH coinsurance. Higher co-pays shift the burden of payment from Medicare to patients, which causes a greater cost to collect to the facility and a higher chance of bad debt.

  1. Create pricing standardization.

As required by CMS, hospitals must publish rates for patients to know the cost of a service before receiving care. Follow these four steps to build a transparent, standardized pricing structure:

  • Establish a policy that is consistent regardless of department or patient indicator
  • Recognize that Medicare fee schedules are used as industry benchmarks to establish pricing. Facility rates do not need to match companion professional fees.
  • Document exceptions. Not all payers act like Medicare, and non-covered items should be priced consistently.
  • Understand that pricing transparency leads to greater community awareness about the cost of services.

Contact Stroudwater to learn more about improving your revenue cycle management and CDM harmonization.