The ACA has succeeded in changing the national conversation about health care despite not achieving its stated goals. The ACA’s purposeful shift in paradigm from Fee-for-Service (FFS) to value (patient outcomes) is underway, albeit at a slower pace than predicted.

Some have advocated abandoning the charge master altogether, saying it is no longer relevant since most reimbursement is fixed. We know this ignores the reality that thousands of individual charges and thus the hospital’s revenue stream are dependent on the hospital’s charge description master (CDM). In addition, the CDM still serves as a basis for reimbursement from countless third party payers and self-pays. Plus, the CDM remains the denominator in the reimbursement formula for certain services and certain types of providers.

Those of us inside health care like to think we know how to solve many of its challenges and problems, but the most difficult task will be changing the culture of health care, including the patient process and how to get paid for services.  There are many different stakeholders and a variety of positions on how to meet the 21st century health care needs of an aging population.

Almost ten years ago the industry buzzed about the need for greater transparency in pricing as part of a coming emphasis on consumerism. The other side of that coin naturally is defensibility of pricing. Individual CEO’s and some states have pursued greater pricing transparency with vigor, yet achieving overall pricing transparency is still a work in progress.

Hospital leaders are focused on a plethora of new initiatives designed to improve ‘process’ and the quality and effectiveness of services despite the given of decreased reimbursement for those services. These include:

• Improving patient engagement to ensure brand loyalty and improve patient satisfaction
• Managing brand by engaging patients via social media and texting
• Employing Clinical Documentation Initiatives to ensure coding is optimum and avoid denials
• Recruiting more physician specialists to build-out services and hone physician alignment
• Growing IT capability to collect more data and make sense of it (BI)
• Identifying frequent fliers to the ER and crafting individual pre-emptive plans of treatment to reduce ER visits and overall costs of treatment
• Doing a better job of collecting co-pays at the front end before service
• Working Revenue Cycle Management at each patient touch point to generate more net dollars
• Keeping score per Contract and pursuing Denials
• Working with payers to develop potential win-win reimbursement programs based on improving patient outcomes (value)
• Raising more charitable contributions through a variety of programs and fundraising events
• Considering a partner to ensure the hospital’s viability when value-based reimbursement replaces FFS as the reimbursement paradigm

Learning how to deliver services more economically is a must, and here’s where the charge master fits.

Geometric-thinking hospital leaders know an effective charge master must take into consideration several things, not the least of which is current third party reimbursement levels and the cost-to-charge ratio. Moving forward with a charge master that has more than 50% contractual allowances sets-up a potential negative for the hospital in its effort to win new patients since published industry sources compare charges, not actual prices a provider will accept. Also, it begins to lose effectiveness in its true purpose of generating net revenue for the hospital provider.

As a result, the new focus is to make the charge master relevant again, starting with making it rational. This entails recognizing third party reimbursement levels and the hospital’s cost-to-charge ratio.

A rational charge master has a defensibility component in it as you would expect that is acuity-based and competition-driven to ensure charges are defensible and as transparent as possible.

Positioning is a word often used in business when referring to branding, marketing, and communications.  It is more important than ever for hospitals to position themselves in their market for maximum success, efficiency, and growth by brand and service line.

We create a competitor market analysis of charges by service line (and setting) to determine where our client hospital is in its market at the moment. This includes detail by MS-DRG and APC for a number of hospital services. Our market analysis is market-factored with a bench-marking element.

We use our algorithm to model any number of different pricing scenarios based on the hospital’s desired market position, strategic goals, revenue needs, and its strength of brand for each service line. Reducing charges without a detailed analysis of its potential impact is not an option, especially in the new era of declining reimbursement.

The continued need for revenue growth is paramount, especially since CMS has implemented several initiatives to bend the cost curve for senior’s health care. Our charge master strategies ensure hospitals can right-size charges to grow revenues and take advantage of brand strength by specific service line.

Our review of hundreds of hospital charge masters and historical patient charge data has enabled us to build an extensive database that is helpful when bench-marking, yet we know from our experience that each charge master is unique because each hospital’s market, payer mix, and brand and service line strengths, are different.

This is why we use our algorithm to produce a detailed analysis with a budgetary forecast on he potential impact of various charge adjustments. We know budget challenges today are greater than at any previous time and likely will grow as value begins to replace FFS as the reimbursement paradigm.

As a result, the charge master is actually more relevant to your bottom line. Our process is straightforward, streamlined, and effective, plus we create an initial assessment and in-depth analysis of your patient charges and revenue before we enter into an Agreement.