1. Niedzwiecki, Marilyn Hart MBA, CPA, RN, CPC, CPC-H, CNOR

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The OR is often a major source of revenue for any healthcare organization, so nurse managers must understand the Charge Description Master (also called a chargemaster or CDM) and how it relates to the OR and the charge capture process.


Basic principles

Used by hospitals, the chargemaster is a computer file containing the facility's price list-the charges for procedures, supplies, diagnostic tests, and anything else that appears on a hospital bill. This file may contain thousands of items and is unique to each organization. Many regulations apply to billing and the chargemaster, but this article focuses on the basic knowledge valuable for OR staff.


Each item in the chargemaster file can have many fields (for an example, see Sample line items in a chargemaster). Basic fields are as follows:


* An item number


* An item or procedure description


* The revenue department (or cost center) that receives credit for the charge. This may be dynamically assigned in some billing systems.


* A four-digit uniform billing revenue code that represents a service, room and board accommodation, or a supply.1 Revenue codes, used for all hospital services, better define the charge to payors, and are the codes used on the hospital bill.


* An appropriate Current Procedural Terminology (CPT) or Healthcare Common Procedural Coding System (HCPCS) code, if applicable.


* The price associated with the line.



The charge structure and prices may vary from hospital to hospital. For example, one hospital may charge cases using a major and a minor charge based on time, others may use several different levels, and some may have a non-time-based charge system. No matter what charge structure is used, the chargemaster must be used as built and the bill must comply with coding and charging rules.

Figure. No caption a... - Click to enlarge in new windowFigure. No caption available.

Understanding supplies and implants

Chargemaster line items may be individually built for each item, or may be linked to another software module, such as a supply file. Open codes may be used in the OR to prevent delays in billing; this refers to a line in the chargemaster used for one-time items and rarely used implants or items that aren't built into the chargemaster. Open codes require someone to manually price the item and ensure that the correct HCPCS code is assigned.


Revenue codes must be used correctly when linking any system to the chargemaster or assigning items to the open codes, or inappropriate reimbursement or denial could occur. For example, the code category 027X might represent medical/surgical supplies and implants, with the last numeral of the code designating the specific type:


* 0270-general


* 0271-nonsterile supply


* 0272-sterile supply


* 0275-pacemaker


* 0276-intraocular lens


* 0278-other implants


* 0279-other supplies and devices.



Implants must be placed under the appropriate revenue code. Often the payor contracts will reimburse more for supplies or implants that are "carved-out" in the managed-care contracts. An example of a carve-out is per diem reimbursements with additional reimbursement for implants or expensive medications. Implants often are carved out for commercial payors not using diagnostic related group (DRG) reimbursement methodology.


HCPCS codes

Many supplies and implants don't have an HCPCS code; however, if they do, the codes should be listed in the chargemaster. The Centers for Medicare and Medicaid Services (CMS) requires these codes on specific cases and publishes a list annually (codes can be found on the CMS website).2 The most common code changes relate to pacemakers, defibrillators, and neurostimulators. If a hospital bill is sent out with a procedure on this list and no HCPCS code-for example, a CPT code for pacemaker implantation but no HCPCS code-the bill won't be accepted by the fiscal intermediary until it's corrected.3


Vendors are a good resource to use when purchasing items as they often have reimbursement departments that provide billing and coding recommendations. Best practices would include this discussion whenever purchasing new products. The recommendations should be reviewed with the chargemaster team and health information management (HIM).


Warranted implants or implants where some type of credit is given to the hospital require special handling. If the implant is warranted completely, the hospital must include the HCPCS code and a "token charge" of less than $1.01. The coding of the actual procedure is generally done by HIM, and warranted cases, either partial or full, require the addition of a modifier to the procedure for Medicare cases.4 Be sure all areas know how to handle and identify these cases.


Additional complexities

Note that HCPCS codes may have billing units associated with them. For items and supplies, this is usually "each," which is easy to incorporate and understand. However, a few items don't follow this methodology. One common example is the skin substitute Apligraf, HCPCS code Q4101 (billable per each square centimeter [cm2]), which is supplied as 44 cm2 of skin substitute. A very common error in the chargemaster is to charge this item as a unit of 1, or place it under a supply revenue code in lieu of a drug revenue code. Skin substitutes are often used in the OR (and other areas such as wound-care clinics) and should have a revenue code of 0636-Drugs requiring detailed coding. Because of the specific rules about using revenue codes, be sure that the correct code is used for supplies and medications; errors can cause denials and delays in payment or incorrect reimbursements.


For example, Q4101 is reimbursed by Medicare on an outpatient bill at a national rate of $32.10 per cm2.5 Suppose 44 cm2 of skin substitute are used; if it's billed as a unit of 1, the hospital will receive $32.10, instead of the correct amount of $1,412.

Table. Sample line i... - Click to enlarge in new windowTable. Sample line items in a chargemaster

Procedure and anesthesia charges

The main OR charge is often referred to as the level charge, and charged using the revenue code 0360-OR Services General. No specific guidelines or rules exist for setting up an organization's charge structure, which may be time based or flat rate. However, best-practice guidelines should be followed:


* Does your charging methodology accurately represent the resources used? Resources would include personnel, equipment, and any supplies that you have defined as bundled into the OR levels.


* Is your charge structure designed in a way that new procedures can be assigned a charge using the existing methodology?


* Do you have this information and methodology documented and understood by OR management and finance?



Generally, HIM assigns CPT codes to the OR charges. This is based on the operative report and ensures the CPT codes are accurately assigned. The range of surgical codes handled by HIM usually is represented in the CPT code range of 10000 to 69999, although it can vary by facility.


Ancillary departments will often charge by themselves when they perform services in the OR. An example is radiology, which posts its charges using a line in the chargemaster. The CPT codes for radiology are generally in the 70000 to 79999 range, and aren't coded by HIM.


Hospitals may outsource some OR services, such as intraoperative monitoring during complex spinal surgery. If these services have CPT codes not coded by HIM, the OR should build these charges and use them appropriately.


A hospital may also charge for anesthesia services using revenue code 0370-Anesthesia General. No CPT or HCPCS code is used for these charges.


By understanding the OR chargemaster, you can help ensure that services and supplies are charged appropriately.




1. Uniform Billing Editor. Ingenix; Salt Lake City, Utah. Chapter IV. Revenue Descriptions, Codes and Charges. August 2009. [Context Link]


2. Centers for Medicare and Medicaid Services. HCPCS Release Codes and Sets. [Context Link]


3. Centers for Medicare and Medicaid Services. Hospital Outpatient PPS. Device, Radiolabeled Products, and Procedure Edits. [Context Link]


4. Centers for Medicare and Medicaid Services. Hospital Outpatient PPS. OPPS Guidance. OPPS Billing for Replacement Devices FAQS. [Context Link]


5. Centers for Medicare and Medicaid Services. Hospital Outpatient PPS. Addendum A and Addendum B Updates. [Context Link]