CDM File Management Challenges and Solutions to Create User-Driven Billing Solutions and Maximize Revenues

Introduction — Maximize Revenues and Increase Patient Satisfaction with a Well-Managed CDM File

A Charge Description Master (CDM) file is a comprehensive listing of items that can be billed to a patient or insurer by a healthcare provider. Its purpose is to develop an accurate summary of charges and services doctors and nurses provide during the course of patient care.

An urgent care clinic for instance may have a pretty simple CDM for each patient. But a large hospital often has many parts to its overall CDM file. Generally, each ancillary care department (e.g. maternity, ER, radiology, etc.) has its own CDM file and is responsible for creating and updating it. It's possible for one CDM file to contain over 100,000 specific items.

The CDM file contains a list of a provider's services and the cost of each along with a short description, unique reference number, UB-92 revenue code and the appropriate HCPCS, or Medicare code for each specific service.

The CDM file is also the primary vehicle for accurate billing and systems integration, helping to collect payments in a timely fashion and maintain operating revenues.

However, billing statements are often thought to be very confusing — trying to understand and reconcile a billing statement with an insurer's explanation of benefits (EOB) is frustrating for most patients. Even healthcare providers who excel throughout the care process can be lackluster at best when it comes to managing the billing process and collecting payments.

Effectively managing the CDM file is at the core of creating a user-friendly billing process and sustaining revenue integrity. The challenge then is to build a CDM file that achieves both regulatory compliance and user-friendliness — two approaches that have been viewed in the past as mutually exclusive, to the detriment of patient relations and payment collections.

Don't underestimate the impact the billing process has on patients' overall satisfaction with their healthcare experience — merely mentioning healthcare to most brings tall tales of endless roadblocks and confusion. If a provider's billing system is fraught with confusing terms, billing errors or excessive mark-ups (e.g. $10 for one aspirin) patient trust, public relations and even revenues will suffer.

Continue reading and discover the importance and value of effectively managing your CDM file along with a strategy to help meet the challenge of creating a CDM that improves the billing process and satisfies regulatory requirements at the same time.

First, explore the three factors that can affect how you manage your CDM in delivering user-driven patient billing solutions, which include: departmental units, regulatory requirements and contractual agreements.

Next, learn the role the CDM file plays in billing patients and collecting payments and learn improvements you can easily implement in each. After that, find out more about the CDM team and the people and policies your organization needs to properly manage the CDM to achieve the two goals outlined above.

Finally, learn the benefits a well-managed CDM system can bring your organization along with recommendations on chargemaster software and consulting solutions.

Three Factors that Affect the CDM and the Delivery of User-Driven Patient Billing Solutions

In order to develop a patient friendly billing system, you must first understand the factors that influence your organizational goals. Three factors that affect how you manage the charge description master file include:
1. Departmental units
2. Regulatory requirements
3. Contractual agreements

Departmental Units — Ground zero for healthcare delivery

Ancillary care departments are the primary source of critical operating revenues. They are responsible for setting prices in the CDM file for services their department performs, requiring careful review of a host of factors like the proportion of insured vs. uninsured patients. Price setting decisions must take into account the entire organization and involve multiple departments and reimbursement experts. But, decisions should not be imposed on other departments.

Prices for services in the CDM file are the primary sources for critical operating revenues for a hospital or clinic.

In some cases, a department may suggest bundling certain services into one CDM file rather than list say a band-aid or Tylenol individually. Before you bundle anything, though, be sure to verify that regulatory issues allow bundling.

Large healthcare providers with more departmental units encounter greater coordination challenges. Either way, each department needs a person appointed to lead reviews of the CDM items and services they provide in their unit. If departments have different pricing for the same thing, reimbursement and cost-reporting personnel need to be informed so a cost report adjustment can occur.

Meticulously documenting each patient and the care they receive must be a top priority of nurses and doctors. If an ancillary care department does not keep thorough records, information in the CDM file can quickly become obsolete and out of sync with other departments. This can wreak havoc on the billing and payment collection process.

Regulatory Considerations — effects Medicare and other
Federal/State Regulations have on the CDM file

Regulation of healthcare facilities by federal, state and local governments is there to protect patients' safety and privacy. Some of these regulations can affect the CDM file in negative ways if they are not closely monitored. Medicare regulations especially can have profound impacts on the CDM file.

Nostalgically referred to as a popular part of the "Great Society", Medicare and Medicaid was implemented in July, 1967 to provide healthcare to America's elderly, poorest and most vulnerable.

Simple cost was the Medicare program's original basis for payments to providers. Today, a complex web of regulations has grown along with the demand of Medicare and Medicaid that affects payments to providers. So much so, the Medicare Cost Report plays an important role in how your CDM file generates user-friendly billing statements and collects payment from Medicare patients.

The original intent of Medicare's cost report was to provide a cost-to-charge ratio for payments to providers. Making this work requires providers to have cost uniformity across all departments to prevent denials for claims, which not only delays payment collection but creates more uncertainty for patients.

The HCPCS code set, or the basis Medicare uses to pay hospitals and physicians, is yet another regulatory issue that affects CDM management. Medicare regularly updates items in the code. Not only do they add and remove items, the meaning of terms can change as well.

This in fact occurred on March 3, 2008 when Medicare published a revised definition of ABN, or Advance Beneficiary Notice, which is the process of notifying the beneficiary of coverage. Hospitals have successfully employed methods using the ABN to reduce write-offs. But, since that morning in March, institution of the ABN means a beneficiary is only informed of what Medicare will NOT cover.

Situations like this can be prohibitive to creating a user-friendly bill and effective payment collection regime if they are not closely monitored. Updating the CDM file to reflect these changes is especially important. Since Medicare serves the elderly, billing processes and statements need to be as simple as possible.

Other government funded programs to help the poor obtain medical care can impact management of the CDM file. Medicaid and the State Children's Health Insurance Program (SCHIP) are two such programs that are jointly funded by the federal government and each of the 50 states.

And with the prospect of major healthcare reforms this year or next, regulations surrounding Medicare, Medicaid and SCHIP are sure to change, having dramatic impacts on how you manage your CDM file.

Contractual agreements with insurance carriers

Contractual agreements with health insurance companies impose additional requirements on the CDM file. Often times, these contracts require the application of a contracted price list for services so additional software may be required to ensure items in the CDM correspond to the contractual price.

Providers must validate whether payments from insurers are made within contract terms — if not, they will run into difficulty in reconciling patient accounts receivable which does nothing but contribute to healthcare's negative stereotypes and reputation.

In addition to Medicare and government sponsored insurance regulations detailed in the last section, some states and localities have their own programs for providing health insurance and healthcare access to those that cannot afford it.

Massachusetts for example has a universal health insurance program that provides subsidies to people who cannot afford private insurance but do not qualify for Medicaid or SCHIP. Insurance companies offer different plans for these customers that need to be monitored and factored into your management of the CDM file.

Health services programs have also been employed by localities to provide preventive care to those without insurance. CHOICES is one such program in Alachua County, Florida that helps the working uninsured obtain care that if neglected, can result in costly ER visits and hospital admissions. This program forges partnerships with providers in the county and is funded through additional tax revenues all residents pay. Stay informed and monitor any changes like this in your area so you can make any needed changes in the CDM file.

Practical Management Needs Your Charge Description Master File Addresses

The CDM file is one of the driving, behind-the-scenes forces that helps deliver the everyday healthcare services many take for granted.
Three critical areas of healthcare delivery the CDM file affects includes:
1.Revenue management
2.Insurance billing
3.Patient billing statement(s)
Read on to see how these areas affect patient billing and payment collection along with areas of the CDM file you can examine to complete these tasks more efficiently.

CDM's role in Budget and Revenue Management

When developing a chargemaster hospital pricing model, one of the fundamental considerations is to ensure the organization has the funds to operate. Every year, this data is necessary to developing a budget so the particular department will have access to the resources it needs.

CDM file plays a critical role in developing an operating budget and ensuring the revenues are there to meet those needs.

The budget formulating process presents a golden opportunity for departments to review objectives and hospital pricing strategies. Consult with budget and reimbursement specialists and others to understand the implications insurance contracts and government regulation have on your department's operations.

Other "external" variables that affect the approach you use to mark-up services, manage revenues and develop a budget include: payer mix, volume of a service rendered, direct and indirect costs of delivering a service, fees associated with a service and market forces like local competitors' pricing.

Another area for improvement in terms of budgeting and revenues is pinpointing undercharges or missing charges and taking steps to reduce such errors. Studies have found these efforts reduce administrative burdens and provide better inventory management.

One trend hospitals and healthcare systems are using that is yielding impressive gains is establishing a vice president of revenue integrity position, a person in charge of maintaining the delicate balance between accurately charging for services and maximizing payment for care provided.

Insurance Billing — Improve accuracy and locate duplicate service errors

Dealing with insurance companies is too often a nightmare for patients. Making sure the CDM is in tune with these contractual arrangements with insurance companies is important to building a more user-friendly billing process and operating more effectively.

You can improve billing accuracy and determine how often duplicate service errors occur or if charges are missing by tracking the volume of patients by revenue in relation to the different health plans your facility accepts. Providers must document the entire scope of care each patient receives to ensure claims are paid in a timely fashion. If not, valuable time will be spent sorting out individual problems rather than addressing the underlying issue.

The National Billing Audit Guidelines recommends creating a chargemaster audit log for insurance claims subject to medical review. Not only does this improve billing processes, these logs will serve as a reference point for future contract negotiations with insurers.

Insurers also make changes in their payments to providers from time to time. They are generally made to bring provider's charges in line with customary charges. Examining whether these changes are warranted and determining whether CDM charges are out of line and why is very important. As a provider, you need to verify the insurance company is adhering to the terms of the contract.

Implementing a real-time process to validate a patient's deductible and co-payment obligations before delivering care is another important component that providers and insurers need to coordinate closely on. Having this information for patients during their visit improves communication about their obligations and reduces the need for extensive follow-up work, which lowers costs.

Patient Billing Statement — Analyze patient comments to improve billing process

Tracking and analyzing comments patients give is another necessary part of improving the billing process. Understanding the nature of complaints helps you plan for corrective actions. Some may have difficulty understanding terminology, so better explanation of or changing those terms may be necessary.

A common area patients find problematic is reconciling a hospital bill with their insurer's explanation of benefits (EOB). This presents another opportunity to improve the billing process in relation to deductibles, co-payments and non-covered items. Many patients need explanation of the difference between "non-covered" and "not medically necessary". Make sure they are aware and understand if something is not covered by their health plan before the service is rendered.

Be sure information like this is communicated to all departments in your organization that are involved in billing and collections. Those closest to the action will be able to identify potential corrections that can reduce the number of non-covered items on a patient's bill. Doing so will provide departments with a list of non-covered services they can share with patients in advance of their treatment.

The CDM Team — Who should be on it and what should they do?

Managing your charge description master file requires the participation of a diverse set of representatives for a well-coordinated team effort. Representatives from patient accounting, advocacy, financial services, financial reimbursement, contract management and various ancillary care departments must constantly review CDM policies and procedures in order to improve management and understanding of the CDM.

Managing the CDM requires a well-coordinated team effort involving all stakeholders and interested parties

Led by a senior manager, the CDM team must routinely review all new items and services that will be added to the CDM file and suggest changes to existing items using a change request form. When making changes, the CDM team should diagram the process flow, which involves following a checklist that requires entering and validating information.

The CDM team must ensure all staff receives training on making changes to the CDM. IT staff must be involved so the proper security measures are in place so unauthorized persons do not make unwarranted changes.

A "charge-audit" process should be established to ensure both new and planned charges are properly documented and reported. This audit not only examines the accuracy of a bill but helps prevent charges from being denied.

Overbilling, under billing, duplicate billing and patient insurance billing complaints need to be periodically reviewed by the CDM team. Regularly examining the readability of descriptions and whether more patient friendly descriptions should be used on billing statements is also an important step in developing user-driven patient billing solutions.

Simplifying and reducing the number of items in the CDM needs to be a goal of the team as well. This includes reviewing hospital policies on the minimum-charge threshold and whether it should apply to common low-cost items like aspirin, bandages, gauze, etc. Over charging for these items can quickly become a public relations disaster so to avoid this, rolling charges for everyday supplies into the basic service being provided is a good way to avoid these problems, which Medicare now allows.

Policies and procedures developed by the CDM team need to be easily accessible by all personnel in a binder, folder and online file. Content should be organized into sections that reflect key performance criteria. It also needs to include an organizational flowchart for managing the CDM process along with critical dates for maintenance and review.

The Benefits a Well-Managed CDM File and Process Brings your Organization

Effectively managing your CDM file brings many long term benefits that save costs and help meet organization goals.

First, a well-managed CDM file that meets BOTH regulatory requirements and patient billing needs provides not only a more efficient operation, but satisfied patients as well. Even when they are generally happy with the actual care they receive, patients often experience frustration when trying to understand their bills.

Making billing statements easier to understand pays long-term dividends. Developing a process that continually monitors and improves the billing process builds trust with patients and the community at large.

Relations with Medicare and private insurance providers will certainly be better with a well-managed CDM file. Having all your ducks are in a row will ensure contract negotiations end well for you.

The other tangible benefit of effectively managing the CDM file comes in terms of simple organizational effectiveness. Spotting errors, eliminating under charges and seeking out items and services that simply slip through the cracks will ensure maximum revenues are realized and patients receive accurate billing statements.