White Paper: Making Annual Chargemaster Services Affordable

January 2012


Medical Recovery Services

Founded in 2004, Medical Recovery Services is a Revenue Cycle firm dedicated to the financial viability of small, community and Critical Access hospitals. Solutions include Chargemaster Compliance/Revenue Management, Managed Care Contracting and Operational Support, Business Intelligence, Process Improvement, Business Office Redesign and Claim Audit and Recovery. Medical Recovery Services is based in Blue Springs, Missouri.

Costly Chargemaster Reviews Performed Every 3‐5 Years Will Allow Compliance Problems and Revenue Leakage

Every hospital understands the necessity of chargemaster reviews. However for small hospitals, the temptation to undergo the obligatory chargemaster review only every 3‐5 years is frequently driven by the general cost‐prohibitive nature of this service. Depending upon the organizational size and service line complexity, many consulting firms charge $50,000‐$500,000 to identify and correct expensive compliance problems and revenue leakage points.

The Medical Recovery Services Solution
The unique needs of small hospitals can be met through annual chargemaster reviews specifically designed to eliminate cost‐prohibitive project pricing, preserve cash flow through Interim Scheduled Payments and by providing ongoing personalized service as a reference source after project completion.

Benefits of an Annual Chargemaster Review
Performance of an annual chargemaster review will assure code compliance and appropriate relative pricing, mitigate revenue leakage and possibly even increase market share. In addition, Medical Recovery Services model reduces pressure on the budget committee and allows for ongoing interactive chargemaster service. Finally, confidence will be restored to pricing methodologies and rates.

Complications of An Extended Chargemaster Review Interval

What’s the Risk?
‐ Part 1 ‐


Non‐Compliant Billing Codes
For hospitals on the short end of the 3‐5 year time frame, consider calendar years 2010 through 2012:


Not all hospitals perform every service represented by these nearly 1,400 code changes. But every hospital does perform some of these services.

What’s the Risk?
‐ Part 2 ‐


Money Left on the Table
Code
Valid
Invalid
Comment
Payment
“12345”
2010
2011
Billing Invalid 2010 Code
$0
“54321”
N/A
New in 2011
Not Billing New 2011 Code
$0

Using the example above, code “12345” was valid in 2010 but consequently Invalidated in 2011. Billing this code will yield reimbursement of $0. Conversely, notice code “54321”, a newly‐created code in 2011 that could have been billed in 2011 but was never added to the chargemaster also yields $0 reimbursement.

More Money Left on the Table...
Also consider price‐setting practices. Are services priced adequately to cover cost? Do charges match the hospital’s price‐setting philosophy and strategy? Is pricing transparency discomforting? Are prices in line with the market or are anecdotal comments regarding your hospital being more or less expensive than others occurring with increased frequency?

Service Revenue
Code
Description
Units
Charge
Market
Variance
Revenue Leakage
70540
MRI orbit/face/neck w/o dye
51
$840
$1,293
$253
$23,103
70542
MRI orbit/face/neck w/dye
48
$781
$1,508
$727
$34,896
70543
MRI orbit/face/neck w/w/o dye
39
$1,018
$1,258
$240
$9,360
     
----------------------------------------------------------------------------------
           
Total: $67,359

In the above example, aggregate charges are running at 65% of the average local market level. This phenomenon of under‐pricing may be contributing to ongoing financial difficulty, as demonstrated within the Revenue Leakage column. On the contrary, over‐pricing may limit market share, when some simple adjustments might bring those patients back. Either way, via non‐compliant coding or faulty pricing, money ‐ potentially significant amounts ‐ will be left on the table.

Medical Recovery Services uniquely incorporates individual hospital contract rates and terms to provide net‐revenue level financial modeling of chargemaster changes. These prediction numbers are realistic and accurate.

Making Annual Chargemaster Reviews Affordable
The dichotomy between the benefit of a full annual chargemaster review with the cost‐prohibitive nature of performing that review is not lost. The Medical Recovery Services model offers the opportunity to obtain this high‐value service every year for a fraction of the standard industry cost rather than facilitating the need to reserve massive funding every 3 years or longer. The hospital could even expect to ultimately pay less over those three years than one major review in that same time period with less regard for a final, oppressive nvoice.

Payment flexibility is imperative. Offering 3, 5, or even 10 months of Scheduled Interim Payments will further protect essential cash flow while securing the valuable services every hospital requires.

The economies of scale and relatively low overhead offered by Medical Recovery Services present a significant investment return. This, compounded with the flexibility of Scheduled Interim Payments creates the “perfect storm”: an opportunity to bring the benefit of vital “big‐city” services to Main Street America. Because the local hospital is frequently one of ‐ if not the ‐ largest local employer in small‐to‐medium sized towns, this model allows even the smallest hospital the chance to maintain a presence within communities who truly value and take pride in their local healthcare facilities as well as their local economy.

Contact Medical Recovery Services to learn how to bring this crucial, valuable and cost‐effective service to your hospital.

Medical Recovery Services
1400 S 7 Highway, Suite C
Blue Springs, MO 64014
Phone: 816-229-4887
Fax: 816-229-4787
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