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How to Design a Hospital Charge Capture Audit

Articles

Disclaimer: This information was drawn from the webinar "Is Charge Capture Audit Really Necessary?". It was current at the time of its publishing and presentation via the web and is designed to provide accurate information in regard to the subject matter covered. It is not intended to take the place of either the written policies or regulations. We encourage you to review the specific regulations and other interpretive materials as necessary. All CPT® codes are trademarked by the American Medical Association (and all revenue codes are copyrighted by the American Hospital Association.)

Part 1: Charge Capture Foundations

Charge capture audit allows you to step outside the process in order to critically observe the process, recognize its defects, and improve it. Like hitting a baseball, charge capture combines both cognitive and physical tasks, so analysis for improvement requires an objective perspective. It’s almost impossible to gain mastery simply by trying harder. The complexity involved for charge capture makes achieving objectivity even more difficult, so our first step is to break this complexity down into distinct and unified parts.

Charge Capture: Basic Process Flow

The image above represents the individual components of a standard facility charge capture process workflow.

The blue boxes represent processes that have clinician involvement and documentation: registration and access, nursing care, physician services rendered, and any ancillary testing.

Before we begin to enter charges, there in the purple boxes of the diagram, all documentation for services rendered, supplies, and drugs must be present.

The hotspots for loss are in three distinct places in this workflow:

  • When care is being rendered and documented (the four blue boxes)
  • The charge-entry process (purple box 1)
  • When it’s processed through the CDM/chargemaster (purple box 2)

For any review, it’s important to look at all of the key areas of leakage in order to understand the complete story and solve the problem at its roots. This is a crucially important point, because too many revenue integrity practices rely on continuously “finding” lost revenue after the fact, rather than at time of error. Some vendors even charge differentially based on the amount of leakage found.

Needless to say, a process that is continuously discovering leaks isn’t doing everything for your facility's financial health that it ought to do. Make sure you’re finding the root source(s) of leaks, and yes, be ready to discover that they often have more than one or two contributory causes.

What Can You Charge For?

To get our foundations set properly, let’s begin with a quick review of the broad categories for things that can be billed. It’s a good idea to have a solid grasp of these categories, and to know where various charges belong within this simple construct.

There are five major categories that all charges align under:
  1. Procedures — most often 10,000 –69,999 CPT codes
  2. Services — lab, radiology, medical procedures and E & M: CPT 70,000 – 99,xxx
  3. Pharmacy — generally 250, 255, 636 – J codes and 637 revenue codes
  4. Supplies — typically, a HCPCS code or revenue code 27x
  5. Inpatient Room and Board — as designated by room type revenue code

Important note: For all of these, the CDM must contain a line item to charge for. Even with a proper CPT code on the claim, if it’s not linked properly to the chargemaster, you might miss revenue earned — especially for commercial payors.

Important note: For all of these, the CDM must contain a line item to charge for. Even with a proper CPT code on the claim, if it’s not linked properly to the chargemaster, you might miss revenue earned — especially for commercial payors.

Missing line items in the chargemaster is a stubborn problem that revenue integrity professionals encounter more regularly than you might think. Communication issues are often the root problem. A department may start up a new procedure or service and not be sufficiently prompt or clear with the CDM team. Communication can also be slow when service or equipment is discontinued, and if they remain on the CDM, this too can lead to problems.

Hospital Charge Capture Step-by-Step

When we look at charge capture from the high level, we see four basic avenues of action:

Documentation → Chargemaster → Charge Assignment → Reconciliation
  1. Documentation
  2. Chargemaster
  3. Assignment of Charges
  4. Charge Reconciliation

To understand the auditor’s perspective, let’s walk through each of these activities and briefly touch on current practice and “what’s at stake” in each phase.

Documentation

Proper documentation is the starting point for improving charge capture. It’s important to remember that the fundamental inputs for charge capture are recorded in the clinical environment. The Office of The Inspector General lays out the critical role of documentation in plain language:

Proper documentation, both in medical records and in claims, is important for three main reasons: to protect the programs, to protect your patients, and to protect the provider. If your records do not justify the items or services for which you billed, you may have to pay that money back.

Proper documentation is also an issue that appears in almost all healthcare litigation. For malpractice litigation, legal teams will have an auditor go through every single order and claim to make sure there’s documentation for all services. Litigation is how even simple errors can get more expensive. Say you forget to document that a splint was applied, and it’s not charged for – that’s a relatively small loss. But when the patient goes home and the splint is too tight and interferes with circulation — and the splint is not documented — an attorney can bring this forward as evidence in the litigation. This documentation error creates a large financial impact from what started as a small charge.

If we go back to our workflow diagram presented at the introduction, best practice is that all four blue boxes need to be complete before activity begins for charge entry, CDM, and billing. When documentation is occurring automatically via EMR templates, it’s crucial to ensure this documentation is connected to charges, otherwise there are two potential types of negative outcomes: documentation without charging, or charges without documentation.

The Chargemaster

The chargemaster is an inventory of all services, procedures, supplies, and pharmaceuticals that may be provided during patient care. It can be thought of as hard-coded to the extent that it may function to add charges and apply CPT/HCPCS codes to the claim. But most facilities will hard-code only those HCPCS that lack variability from patient to patient, such as aerosols, labs, x-rays, and the like.

Hard-coded charges assume that all documentation is present prior to charge entry — here again is where overcharges and charges without documentation can crop up.

The following guidance on CDMs also comes from the Office of Inspector General (OIG) Hospital Compliance Guidance:

"Charge Description Masters (CDMs) list all of a hospital’s charges for items and services and include the underlying procedure codes necessary to bill for those items and services. Outdated CDMs create significant compliance risk for hospitals. Because the Healthcare Common Procedure Coding System (HCPCS) codes and APCs are updated regularly, hospitals should pay particular attention to the task of updating the CDM to ensure the assignment of correct codes to outpatient claims. This should include timely updates, proper use of modifiers, and correct associations between procedure codes and revenue codes."

— OIG Supplemental Guidance Hospitals 2005

Unfortunately, despite the age of this advisory, the chargemaster remains a very common source of error for many of the reasons outlined in the OIG statement. The only observation we would add to this statement is that in-patient procedures and codes need just as much attention and care.

Assignment of Charges (and Things to Watch For)

There are three primary methods for charge capture in use today, and this variability in itself is one of the big reasons that reconciliation processes, and audits, are so important.

  1. Paper-based is the least advantageous of the three methods, but charge-slips and “downtime” or “catch-up” charging are still present in many facilities or departments.
  2. System charging is when order and documentation are not linked in real-time. This still leaves room for error and has the same weaknesses familiar in paper-based environments: forgetting to charge, wrong charge selection, and over- and undercharging among them. Additionally, this can be further impacted by PRN or part-time personnel who do not recall the full process between their days in the department.
  3. Documentation-driven charging is the new gold standard, whether through EMRs, informatics, or other systems. When a service, supply, procedure, or E/M is fully documented, a charge is assessed within the billing system based on the “completed” status of the documentation. This ensures charge capture compliance and accurate billing based on documentation within the record. Documentation-driven charging is especially well suited for CDM hardcoded charges.

The Value of Templates

Templates help ensure that all of the necessary information is present for HIM to produce the exact CPT/HCPCS code for the care given. Without templates, specifics of care (depth and location on a simple laceration for example) can get buried and missed in a lengthier narrative. Templates help make sure that the relevant charging information is always in the same place, making it harder to miss when recording, reviewing, and interpreting the information for charge entry.

Operating Room Charges

For the OR, picklists and preference cards are used to auto-charge, essentially “charging by exception.” That is, everything on the list charges except when noted otherwise. This is done to make charging easier, given the volume of supplies involved in many OR procedures. But the exceptions method is another key source of inaccurate charging. Materials often get charged even when another item was used instead, and it’s common for an entire kit to go unused, yet still be charged. According to Kaiser Health Network, this results in millions of dollars in cost to the facility, and if charged, cost to the patient.

Pharmacy: Watch for Billable Units

Quality and safety guidelines and dramatic increases in drug costs have combined to make pharmacy charge capture significantly better from a procedural point of view. Charges are made on dispensing from the pharmacy or administration by the caregiver, and frequently, both are required before charge entry is completed.

However, significant errors occur with disturbing frequency in the translation from dispensed and ordered units of service (units delivered or dispensed) to the billable units of service as describe by HCPCS. This is an area of concern in most chargemasters, and a common source of recovered charges for experienced auditors.

Charge Reconciliation

There are a host of good reasons for conducting both daily reconciliation and random reviews — and the reasons begin with our earlier topic regarding the variability of charge capture methods. It’s simply good financial hygiene to apply a standardized method of review in any facility that has different departments using different capture methods.

For daily reconciliation, you ideally want to have involvement from each performing department. If daily reconciliation isn’t enshrined in your policies and procedures with clear enforcement protocols, it tends to get lost in the shuffle, as patient care is always the priority. Daily reviews being shoved to the background is unfortunate, as they often help isolate environmental factors that can powerfully affect charge capture. A shift change, for example, is a very common source of errors and lost charges.

Random reviews are an elementary part of the auditing discipline, and typically revenue integrity personnel use this process to dive deeper into areas where problems are common, seem likely, or where examination hasn’t occurred recently.

Setting Up a Charge Capture Audit Plan

Real-time CDM software reviews using industry benchmarks, combined with daily charge capture reconciliation, create a continuous safety-net process. Software is typically used to perform the day-to-day processing, but audits are a necessary complement to get the full picture. Audits enable you to go in-depth to find root causes and appropriate (and lasting) methods of correction.

HFMA reports that 1-5% of facility income is lost to faults in charge capture. That’s 1 to 5% of the bottom line. HFMA also reports that most facilities talk about charge capture only once a month or less. And that’s exactly what’s leading to that volume of loss.

So what are the keys for setting up a solid audit plan? As our introductory workflow diagram indicated, initiating the process requires a high-level assessment of areas where audit will prove most fruitful. (This process is represented by the green diamonds in our workflow diagram.)

Here are a few other areas to prioritize for your audit:

  • High dollar claims
  • COVID-19 claims — many of these are getting “stuck” in scrubbers due to changes in billing guidance
  • Areas / claims that are frequently failing initial bill scrub.
  • High volume areas: radiology, cardiology, OR, ED
  • Areas where service charges aren’t covered completely without manual processes
  • Pharmacy and charged vs. billable unit discrepancies

Finally, look to both pre-bill and post-bill analyses to evaluate the areas where your efforts with audit will yield the best results.

Part 2: Building Your Hospital Charge Capture Audit Program

Auditing is not a one-size-fits-all exercise, but there are some key considerations to go through to ensure you get maximum return on the time and personnel you invest in this process. Below we discuss the various elements you'll want to consider as you build out your own auditing discipline.

The Audit Cycle

The clinical audit cycle process is the same, no matter what kind of audit is performed — billing, chart, financial, charge capture, compliance, etc. The key components of any audit cycle include:

  • Definitions — what is the objective of the audit?
  • Written standards, policies, procedures
  • Data elements
  • Specific review of the data elements against the written set of standards
  • Published findings illuminating discrepancies with published standards
  • Corrective action…and to complete the cycle,
  • Re-audit
5 Key Phases of the Charge Capture Audit Cycle

An audit cycle implemented for charge capture typically uses the “Five Steps.” It’s expected that every audit follows these steps, and if a step requires a change, it must be noted as a “variance” with the specifics described in a report. It bears repeating (and we will emphasize it again): too often, root causes get remediated, but a re-audit is never conducted. In countless cases, this results in the root cause reverting to its prior state.

It bears repeating (and we will emphasize it again): too often, root causes get remediated, but a re-audit is never conducted. In countless cases, this results in the root cause reverting to its prior state.

Phase 1: Setting the Standards

This step is straightforward. You design your methods and set forth exactly what your standards are for the specific charge capture practices you’re examining. Standards can be “point system policy” in ED, or charge capture process policy for clinical departments.

Phase 2: Measuring Current Practice

In step two, data is collected to measure the current process. There are several considerations to be made in this step of the audit cycle. You might ask questions like:

  • What would be the correct amount of records to review?
  • What if we are a facility with seasonal variability?
  • Is the audit for compliance, thus requiring statistical reliability and precision?
  • Are we trying to detect “patterns” of behavior?

You will also need to determine if your data selection will be made by software that can look at 100% of charges and claims — or will it be a manual selection. If your team does decide on manual selection, here’s a tip: the easiest method is the “nth selection” process for randomization and to ensure an adequate sample.

Phase 3: Comparison

The next part of the audit cycle is comparing your results against the standards. As an example, let’s say you’ve chosen the manual data selection process and are auditing Emergency Department (ED) Evaluation & Management (E/M) records with the point-system standard. You’d select random records (nth selection systematic sampling) and compare and re-score the documentation and final E/M level against the standard E/M scoring policy, and then note variances.

With software selection, you can rely on the fact that most charge capture audit software is based on solid coding and medical necessity rules, including diagnosis, CPT/HCPCS triggers, and targets — allowing the audit to encompass 100% of the universe of charges and claims.

This is truly the big advantage of using software. It consumes 100% of your charges and/or 837i claims data, ensuring even hard-to-find charge capture errors are accounted for on a daily basis. This is why software guided auditing has so quickly become the benchmark for the industry.

Phase 4: Change the Practice

Whether or not you need to change the practice or process in this step depends on the result of the audit. Negative or Null findings in the sample? Alright! Move ahead to Phase #5, re-audit.

Positive findings? Determine if there is an identified single aberrancy or multiple potential causes. Your goal is to get back to the root cause and remediate the errors.

Again, the facility’s goal is NOT to just continue to audit, finding the same error over and over. Audit should lead to fixed root causes, not by deploying quick fixes that will yield the same patterns at your next audit.

In order to fully remediate positive findings and/or patterns of behavior, most facilities employ Six Sigma teams. This is also why so many auditors are also Six Sigma certified.

Six Sigma: Why? Why? Why? Why? Why?

One of the most effective audit remediation techniques is the Six Sigma “5 Why” pattern. Here’s how it works: first write down the finding from the audit. Then, ask “why” that’s a finding and determine an answer. Then ask “why” is that answer occurring and repeat five times. Typically, a comprehensive cause analysis is achieved by the time you reach the end.

Here’s an example: You note that a joint implant device for a knee (C1776) is on the claim, but there’s no procedure on the claim for a knee joint replacement. Time for the first “why.”

WHY is C1776 on the claim?
Because it was charged by the OR from a preference card.

WHY was it charged if no procedure is documented?
Because nursing used a preference card on the wrong patient.

WHY was the wrong patient assigned a PIC list for a surgery they didn’t have?
Because they had the same last name as another patient on the schedule.

WHY did this error occur?
Because the nurse was between rooms as a circulator.

WHY can this happen when specific policies/procedures are in place?
Failure to use patient identification per policy — claim needs to be adjusted and the nurse needs retraining.

As we can see from analyzing this one error, well-answered “whys” can lead you to unexpected conclusions. You can also see how leaving “whys” unasked can lead to continuing (and various) problems.

Remediate the Issue

Once the root cause is found, it’s time to remediate the issue and put corrective action plans in place. Unfortunately, corrective actions frequently fail because staff shifts focus to the “next fire” and things revert back to the original state. It’s best practice to ensure the remediation is written down. Then phase 5, re-auditing, can be optimally effective.

Phase 5: Re-Audit

This is by far the most missed step. You should re-audit at regular intervals. A re-audit could be conducted every month for three months, and then every two months for example. The ultimate goal is to compare the record, to the charges, to the claim — and then remediate sooner rather than later if any portion is inaccurate. Remediation is best done pre-bill, or as quickly after billing as possible to avoid the cost of re-billing.

And that brings the audit cycle full circle. Establish standards, compare those standards to your data, formulate conclusions, adjust the process, and re-audit. Then repeat that entire loop.

Let's Review...

Check off the following list of steps for improved charge capture, and to reinforce success for your audit activity.

  • First, make sure the purview of your charge capture includes all documentation, charge entry, and chargemaster functions necessary to create a patient charge for any service, procedure, supply, drug, or patient room and board.
  • Manual or automatic, you must have a mechanism of some kind to create the documentation that will drive the charge activity appropriately. Since this activity takes place in the clinical environment, it’s a common source of issues.
  • Your CDM must be kept up to date and accurate — and odds are, this is an activity that’s not being addressed as regularly as it ought to be. Make sure you have well-documented and enforceable procedures for CDM maintenance.
  • Mapping between the ancillary system (lab, radiology, ED, pharmacy, supplies) must be accurate to ensure the item from the clinical system actually connects to the correct CDM item so an accurate charge is created.
  • Charge capture mechanisms (document-driven, paper, order entry system) must contain all possible charges, be kept current, and mapped to the correct CDM item.
  • Charge reconciliation by each department is a key process to ensure all charges are captured.

Auditing has two distinct methods:

  1. Real-time, 100% review of all charges looking for triggers through software with a revenue integrity team member reviewing the chart to make corrections
  2. Manually reviewing charges through a defined audit mechanism

Remember, with 1 –5% of the hospital's bottom line at risk, charge capture and consistent audits need to be an ongoing priority. Once a month spot checks or discussions leave reimbursement on the table.

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