Chargemaster Maintenance: Guidelines for Managing your CDM and Staying Up to Date

Hospital pharmacies play a crucial role in ensuring that patients receive the appropriate medical care and treatment. One essential component of this is maintaining an accurate charge description master, also known as the chargemaster or CDM.

The chargemaster is a comprehensive list of all medical procedures, services, and supplies that a hospital offers, along with their corresponding charges. Inaccuracies in a chargemaster can result in overcharging or undercharging patients, leading to financial loss for the hospital or even legal consequences. Therefore, it is critical to have a proper maintenance system in place to ensure that the chargemaster is always up-to-date and accurate.

What is Chargemaster Maintenance?

The chargemaster is, in essence, a dictionary housed within a hospital or pharmacy’s electronic health record system that contains a combination of reference data to generate patient charges, including medications, services, supplies, and their subsequent prices. 

Effective chargemaster maintenance helps ensure that healthcare facilities are accurately and appropriately billing for their services, which can help to maximize revenue, avoid compliance issues, and improve patient satisfaction.

Outdated entries for any of these line items can result in lost revenue. So, frequent updates to the chargemaster are imperative. 

Keeping Your Chargemaster Up to Date

A regular review of CDM entries for medications is essential to maximize reimbursement and minimize chargebacks. Drug prices are increasing almost daily, along with regular inflation. If a healthcare provider isn’t updating their chargemaster with the latest and most accurate information, they could be missing out on reimbursements and leaving a significant amount of money on the table. 

Who is Responsible for Chargemaster Maintenance?

This may be one of the most important questions a healthcare entity can answer regarding CDM. Chargemaster maintenance often falls through the cracks because various departments – from pharmacy to finance – assume the responsibility lies with someone else. In addition, processes for making updates vary at different sites, which can lead to confusion and inaction.

Historically, the finance department maintains the CDM. Because it varies by site, it’s important to have governance via clear hospital policy and procedures, designating who is responsible in each department.

Utilizing Software 

To make things easier and more efficient, many healthcare services rely on specialized software or a formulary service vendor to update costs during chargemaster maintenance. These services calculate the costs based on the average wholesale price (AWP), which is easier for healthcare providers to use versus their actual acquisition costs (AAC).

While incredibly useful, these services still need to be manually overseen. For instance, there may be an occasion where the AWP is drastically different from what the healthcare system actually pays. If no one catches that, then the costs would be thrown off.

And once an update is received from a formulary service vendor, someone within the healthcare system – typically the IT department – will need to upload these changes to their internal programs. It doesn’t happen automatically. 

Key Areas to Review During Chargemaster Maintenance

Catalog Items with Obsolete NDCs

Many government entities like the Centers for Medicare and Medicaid Service require the National Drug Code (NDC) as part of the billing and claim process. Payors’ rules may vary, but most require an NDC to facilitate accurate payment of what was administered and billed.

An obsolete NDC can have an adverse effect on timely reimbursement, often causing part or all of the claim to be denied. While it is not uncommon to administer obsolete (non-expired) drugs, payors do deny payment of claims for this reason. In addition, if an NDC is obsolete, the system may not be able to do a drug interaction check, which could result in a contraindication that could harm a patient. 

Pharmacies should:

  • Review each of the obsolete NDCs.
  • Determine whether there is still unexpired stock with the obsolete NDC.
  • Identify if a replacement is available and if so, update the catalog to reflect the active NDC. 

Catalog Items with HCPCS to Review

The Healthcare Common Procedure Coding System (HCPCS) is used to report procedures, services, and equipment for reimbursement. These alphanumeric codes are updated by the Centers for Medicare and Medicaid Services on a quarterly basis.

Pharmacies should:

  • Review whether the codes are correct.
  • Review whether they match their software, formulary manager, and/or internal systems.
  • Update the values to reflect the correct pricing.

Catalog Items without a Valid Price Schedule

The price schedules set the cost basis, formula type, and markup for the drugs. If there is no price schedule, then the desired patient charge will not be correctly calculated.

Pharmacies should:

  • Review the item and apply the appropriate price schedule.
  • If no patient charge is needed, then utilize the No Charge schedule. 

Bill Codes (HCPCS) with Missing or Incorrect Multipliers (QCF)

The Quantity Conversion Factor (QCF) is applied to Pharmacy bill items to convert their quantity into a Medicare billing quantity when the charge is sent to the billing system. If the proper units are not reported, the claim may be denied, or the submission may be flagged as fraudulent.

Pharmacies should:

  • Accurately calculate the QCF.
  • Review any flagged factors, then update as needed. 

Guidelines for Chargemaster Maintenance Procedures

Because updating the chargemaster can easily fall through the cracks, clear procedures must be instituted so that the healthcare organization can maximize their reimbursement for all aspects of patient care. The following steps can be used as a guideline for any medication chargemaster maintenance plan:

  • When a patient-specific medication is dispensed, Pharmacy Department personnel should initiate a patient charge through the pharmacy information system (PIS) software.
  • Monthly updates should be performed with a formulary service vendor in order to maintain current prices and NDCs, and the PIS should be updated with current NDCs purchased from wholesalers.
  • An exception report of any discontinued or obsolete NDCs should also be generated and reviewed monthly, then sent to the finance department to be updated in the PIS.
  • AACs and/or AWPs of purchased medications compared to the drug costs in the PIS “cost” field should be evaluated and updated for proper charge calculations, patient billing, and revenue integrity.
  • Any ACC/AWP price changes should be updated monthly or as frequently as the PIS software can be updated per vendor protocols.
  • An exception report should be generated and compared to the “cost” field in the PIS to ensure accurate billing to third-party payors.
  • When the NDC, HCPCS drug codes (J-Code), and drug multipliers are updated and released from CMS (typically on a quarterly basis via their website), the files should be downloaded and compared against the existing NDC, J-Codes and multipliers in the PIS by the Pharmacy Department.
  • To ensure quality and integrity for specified outpatient medication reimbursement, outpatient charge-procedure billing codes should be evaluated for proper charge calculations, patient billing and revenue integrity, including accurate reimbursement from third-party payors.
  • The results of both comparison files should be submitted to the health system’s finance/billing/accounting department(s), which will be responsible for making the proper changes in the system to ensure accurate billing to third-party payors. 
  • These results should be shared with the Pharmacy Department to be able to track the results and address any changes that need to be made within the PIS or other pharmacy software.
  • Audits should be conducted by the pharmacy and billing team of random patient bills and targeted/high cost drugs to identify any variances or billing discrepancies. Any variances should be reported and worked on by the pharmacy department and billing team to identify and correct any changes.
  • The results/findings of the updates and comparisons should be recorded and trended by the pharmacy department on a dashboard. Any dashboard reports should be shared with the Quality and Compliance Committee based upon the reporting schedule.

Utilizing the Chargemaster to Improve Price Transparency

In the past, healthcare systems have typically created their own pricing models, which they kept private. However, as healthcare consumerism grows and patients demand more transparency around pricing, things are changing. 

Consumers are taking on more financial responsibility for their healthcare, which means they are shopping around for more cost-effective options. Healthcare systems must adjust to this trend and change how they calculate and share their chargemaster rates.

Organizations that refuse to be transparent about their pricing are risking losing patients to more competitively priced facilities. On the other hand, an organization that maintains accurate prices and openly shares its pricing models is more likely to build trust within the community and stand out among its competitors. 

If you need help keeping up with your chargemaster maintenance, reach out to speak with our team of experts.

About the Author

Justin Sotomayor, Pharm. D., Director of Project Services 

Dr. Justin Sotomayor joined CompleteRx in 2016 and is the Director of Project Services. In his role, Justin oversees the enhancement of current EHR solutions and the launch of new products and automation – such as MEDITECH, Epic and Cerner implementations, Pyxis and Omnicell conversions, revenue cycle, and backup solutions and processes for clients across the country. 

Justin previously served as Consulting Services Manager for CereCore and has over 17 years of experience in hospital pharmacy management and operations. With CereCore (formerly Parallon), Justin was responsible for managing a CPOE implementation team for the entire HCA Healthcare system (160+ hospitals). He also completed other clinical informatics initiatives and projects for hospitals and healthcare systems around the country.

Justin received his Pharm. D. from Palm Beach Atlantic University. He worked as a Clinical Pharmacist and preceptor in Emergency Medicine at Caromont Regional Medical Center outside of Charlotte, North Carolina before transitioning to clinical informatics.