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Spring 2024 Issue

Maintaining the Chargemaster
By Susan Chapman, MA, MFA, PGYT
For The Record
Vol. 36 No. 2 P. 18

The Importance of Efficient Charge Description Master Maintenance and Reconciliation

The charge description master, or CDM, is vital to the revenue cycle, serving as the central comprehensive file of a hospital’s chargeable items. It includes such entries as diagnostic tests, procedures, supplies, prescription drugs, and fees for equipment and room use. According to the AACP,

“Every patient revenue dollar that flows through an organization is generated through this file. Hospitals that take great care to ensure their CDM is correct are able to optimize their revenue cycle for enhanced patient experience and improved financial sustainability.”1

Price Transparency for Patients
Despite the CDM’s importance, the information it contains, while invaluable for patients who want to make informed choices regarding their health care, until recently, has not been readily available or usable for the average health care consumer. For instance, a study published by the Pioneer Institute during the COVID-19 pandemic found that at the state level, “most of the 50 states continue to suffer from weak laws regarding price transparency. … Fully 33 states placed in the lowest of the three broad analytic tiers on the strength of their state health care transparency laws.”2 The three top states—Alaska, Massachusetts, and Minnesota—“placed in the highest tier, which requires both providers and insurance carriers to supply price information that reflects, to the greatest degree possible, the amount a consumer would have to pay for a medical procedure.”2

In a move to benefit patients, the consumer-focused No Surprises Act was enacted in December 2020 for those with private health care insurance coverage. The No Surprises Act is meant “to address certain instances of surprise billing,” including “unexpectedly high medical bills when they are unknowingly or unavoidably treated by an out-of-network (OON) provider, facility, or provider of air ambulance services.”3 Under this law, an OON provider cannot charge a higher price “than the patient’s in-network cost sharing requirement based on the Recognized Amount for nonair ambulance items and services.”3 The law also offers a pathway for dispute resolution in some cases.3

Patients who are uninsured or choose not to use health insurance for a particular service can obtain a good faith estimate of their expected costs before their visit and may be able to dispute charges if they disagree with them.4

CMS has also made the information contained in the CDM more transparent and available for those seeking care with the Hospital Price Transparency rule. This rule went into effect on January 1, 2021, and requires hospitals across the United States to make their standard charges public, including the CDM’s gross charges, discounted prices for cash payments, and prices negotiated between a facility and payers. That information must be available in two ways, in both machine-readable and consumer-friendly formats.5

According to CMS, “Health plan price transparency helps consumers know the cost of a covered item or service before receiving care. As of July 1, 2022, most group health plans and issuers of group or individual health insurance are posting pricing information for covered items and services. … The next requirements went into effect starting on January 1, 2023, providing additional access to pricing information and enhancing consumers’ ability to shop for the health care that best meet their needs.”6

In January 2024, hospitals were further required to have a machine-readable file (MRF) in a .txt format available on the website they selected to host their pricing information, which must include the hospital’s identifying and contact information. The facility also must make available links to the MRF and source page, and a link on its homepage to the page that hosts the MRF.7

More requirements go into effect on July 1, 2024, with hospitals needing to encode “all standard charge file information in the MRFs” and add a good-faith statement regarding the information’s comprehensiveness and accuracy.7 In addition, at that time, more information “will be required for ‘payer-specific negotiated charge[s]’ indicated in dollars by January 1, 2025.7 On that date, hospitals must also post medications’ measurement types and their respective units.7

Failure to comply with this rule can lead to consequences for an organization. “CMS has the authority to monitor hospital compliance … by evaluating complaints made by individuals or entities to CMS, reviewing individuals’ or entities’ analysis of noncompliance, and auditing hospitals’ websites.”5 The more a facility is out of compliance, the higher that organization is prioritized.

If CMS finds that a hospital is noncompliant with any or multiple requirements, it “may provide a warning notice to the hospital, request a corrective action plan (CAP) from the hospital if its noncompliance constitutes a material violation of one or more requirements, and may assess on a hospital a civil monetary penalty, and publicize the penalty on a CMS website, should the hospital fail to respond to CMS’ request to submit, or comply with the requirements, of a CAP.”5

The monetary consequences for failing to comply with the Hospital Price Transparency Rule could be substantial. “CMS set a maximum CMP [civil money penalty] of $300/day that applies to smaller hospitals with a bed count of 30 or fewer, a maximum CMP of $10/bed/day for hospitals with a bed count of 31 up to and including 550 beds, and a maximum CMP of $5,500/day for hospitals with greater than 550 beds. Under this approach, for a full calendar year of noncompliance, the minimum total penalty amount would be $109,500 per hospital, and the maximum total penalty amount would be $2,007,500 per hospital.”8

In addition, when a CDM is set up incorrectly or is not properly maintained, a health care organization stands to lose millions of dollars in revenue. According to a 2023 analysis, “The nation’s hospitals and health systems are caught in a vice [sic] of declining cash reserves and rising reimbursement delays and denials from health care payers.”9

The Importance of CDM Reconciliation
Careful attention to the CDM has always been important. However, it has become even more critical due to increased scrutiny because of the new regulations and hospitals’ narrowing profit margins.

“Whether you’re going in for a simple office visit, or you’re an inpatient for several months, particularly for the latter, there is a huge amount of cost associated with those patients,” explains Dana Finnegan, director of market strategy at MDaudit. “Hypothetically, a patient with a long inpatient stay for a serious illness is seeing several different doctors from different specialties, receiving a number of medications, and having multiple procedures. The doctors are consulting with one another because of the severity of the patient’s condition. This creates a huge cost that gets translated and sent out on a claim, and everything that happens is included on the health care bill in the form of units and charges. The challenge for the CDM is there needs to be a way to capture all of that efficiently without overburdening doctors, nurses, and other staff. Unless the hospital has the right billing system to capture all of what transpired, the risk is that you’re doing all of this, but the system isn’t accurately capturing all of it. If that isn’t being charged out accurately, the hospital won’t take in the revenue they need to cover the cost of caring for that patient and generate a profit. And if a hospital overcharges and has a history of overcharging, that relates to being overpaid by the insurance company. That could be considered either a mistake or fraud. At that point the hospital will have the payers requesting that the money be sent back within 30 days.”

The proliferation of the EHR has changed the way providers and staff are able to document patient stays. “The EHR has become very impactful at allowing those involved in a patient’s care to document a person’s stay. Compared to the old days when things were not tracked electronically, the process is much more efficient,” Finnegan continues. “Now, there is software that can capture everything that was done by everybody involved in that patient’s care, from the pharmacy to how long the lights were on. Everything is captured in the system, and those outputs go out on a bill directly to the insurance company. In a perfect world, that is how it would all work, and it would all be accurate.”

Comparing what should be billed to a payer or patient and what is actually billed is called reconciling the CDM. Finnegan notes that while billing systems have come a long way, there are always errors that arise throughout the billing process. Errors can be critical, especially as they pertain to undercharging because profit margins for health care facilities are so slim. “There is always a chance that someone did not enter a procedure or medication, or that software didn’t pick something up due to a technical glitch. Nothing is foolproof, and because of that lack of perfection with billing systems and human error, there has to be a reconciliation process that makes sense,” Finnegan says.

Auditing software can often be the most efficient way to monitor and reconcile the CDM, especially in large organizations. “It’s someone’s job in the organization to reconcile and monitor the CDM, and it’s a very hard job. For any large—or even small—hospital, they’re monitoring the charges for many patients every day, and that obviously can’t be done with just a calculator,” Finnegan states. “Auditing software helps you be productive and efficient in pulling all of that data together. Nowadays, it’s almost impossible to go through this process without technology.”

Such software does not check every record because there is not enough bandwidth to go through that process for every patient. Instead, today’s auditing software allows CDM analysts and their teams to perform retrospective and prospective audits of the CDM. Finnegan explains, “A retrospective audit is done after the bill has been sent. In that type of audit, the staff looks at a random sampling of 10, 20, 30, or more records, whatever the facility’s compliance program mandates. For instance, an analyst may pull 20 patient records of those people who had an inpatient stay of longer than 10 days and do a reconciliation of those 20 patients. If the results are good, maybe 19 of the records look perfect, but one is a little off, that’s good. However, if they get a 50% error rate, the analyst or team will want to do a bigger analysis, not of every patient, but larger than the original sample they pulled. The goal is to minimize errors and maximize the reimbursement that organization is due for the cost of that patient while also not overcharging.”

Best Practices for Maintaining and Reconciling the CDM
Because maintaining and reconciling the CDM is critical for health care organizations, implementing best practices can be helpful. Many experts suggest having a written protocol in place that provides all the details of how to maintain the CDM, including the names of those who can approve changes. It’s also recommended to monitor the CDM, establish systems and guidelines for how best to update it and how often to do so, and implement an education plan so that all stakeholders understand changes to the CDM and any regulations that could impact it.10 Regular updates are also necessary to ensure the CDM reflects current codes and prices. Equally important is removing old information. Along with regular updates, regular audits, as Finnegan advises, are critical.

Shift Toward Artificial Intelligence (AI)
A recent study showed that “two-thirds of health care facilities and health systems are using AI to assist their revenue cycle.”11 CDM maintenance is one area in which AI-based products are becoming more common.11

AI is able to use past trends to predict future claim denials, essentially using retrospective information to help prevent potential issues. It can also provide information beneficial to patients as they seek care that can meet their financial needs. An article in the Journal of AHIMA reported that this forward-looking form of AI “affords the opportunity to review and correct claims prebill. Using AI to create dashboards to track denials by type or payer can provide insight to help reduce recurring denials and improve workflows and education as needed. Self-pay patients can benefit from AI by integrating financial assistance technology that checks for any financial aid the patient might qualify for, as well as being used in price transparency.”11

“There is definitely a shift toward AI in the revenue-cycle space,” Finnegan offers. “Our software is able to learn, and it’s becoming smarter. Through conversational AI, there are ways to ask questions and receive immediate responses that can then help prevent discrepancies, allowing them to bill more compliantly and recognize positive cash flows.

Focusing on Patient Care
Because the CDM is central to the revenue cycle, its efficient management not only influences a facility’s bottom line, but it also affects patients. When hospitals have effective systems in place that address the CDM and revenue cycle, providers are able to optimize their workflows, address any bottlenecks or obstacles, make decisions based on accurate data, and ultimately improve patient care and satisfaction.

— Susan Chapman, MA, MFA, PGYT, is a Los Angeles–based freelance writer and editor.


1. Gilbert R. Charge description master: use it to optimize revenue. AAPC website. https://www.aapc.com/blog/44984-charge-description-master-use-it-to-optimize-revenue/. Published December 2, 2018.

2. National study finds most states lack healthcare price transparency laws. Pioneer Institute website. https://pioneerinstitute.org/transparency/national-study-finds-most-states-lack-healthcare-price-transparency-laws/. Published May 7, 2020.

3. U.S. Department of Health & Human Services Office of the Assistant Secretary for Planning and Evaluation. Evaluation of the ompact of the No Surprises Act on health care market outcomes: baseline trends and framework for analysis – first annual report. https://aspe.hhs.gov/sites/default/files/documents/48b874b63796dc6a68a783cf079ba42a/aspe-no-surprises-act-rtc.pdf. Published July 6, 2023.

4. Centers for Medicare & Medicaid Services Center for Consumer Information & Insurance Oversight. The No Surprises Act’s good faith estimates and patient-provider dispute resolution requirements. https://www.cms.gov/files/document/gfe-and-ppdr-requirements-slides.pdf

5. Hospital price transparency enforcement updates. Centers for Medicare & Medicaid Services website. https://www.cms.gov/newsroom/fact-sheets/hospital-price-transparency-enforcement-updates. Published April 26, 2023.

6. Health plan price transparency. Centers for Medicare & Medicaid Services website. https://www.cms.gov/priorities/key-initiatives/healthplan-price-transparency. Updated September 6, 2023.

7. Casper-Schulte V. Where the Federal Hospital Price Transparency Rule stands at the start of 2024. Digital Healthcare Law website. https://digitalhealthcare.law/2024/01/10/where-the-federal-hospital-price-transparency-rule-stands-at-the-start-of-2024/. Published January 10, 2024.

8. Hospital price transparency frequently asked questions. Centers for Medicare & Medicaid Services website. https://www.cms.gov/files/document/hospital-price-transparency-frequently-asked-questions.pdf. Updated June 27, 2023.

9. Payerchin R. Reimbursement delays and denials hurt hospital finances. Medical Economics. November 17, 2023. https://www.medicaleconomics.com/view/reimbursement-delays-and-denials-hurt-hospital-finances

10. Five best practices for chargemaster maintenance. HealthStream website. https://www.healthstream.com/resource/blog/five-best-practices-for-chargemaster-maintenance. Published August 18, 2021.

11. Montroy T, Rakes G. What is AI, and how can it benefit the healthcare revenue cycle? Journal of AHIMA. February 14, 2023. https://journal.ahima.org/page/what-is-ai-and-how-can-it-benefit-the-healthcare-revenue-cycle