What Is a Chargemaster and What Do Hospital Administrators Need to Know About It?

A medical worker documents a service contained in a chargemaster

A hospital chargemaster is a comprehensive list of a hospital's products, procedures, and services. Everything from prescription drugs to supplies for diagnostic tests has a unique price listing in the chargemaster, making it a go-to document for hospital administrators such as CFOs, clinical documentation improvement specialists, and revenue directors.

Chargemaster usage dates back to the mid-20th century. At that time, fee-for-service (FFS) health insurance plans, which allow patients to direct their medical care by choosing physicians and facilities and paying a portion of the billed total, had just emerged in the U.S. healthcare system. The chargemaster originally served as something akin to an FFS dictionary, with an entry for virtually anything billable under that economic model of healthcare.

Over time, FFS itself has evolved and been challenged by alternatives like value-based care (VBR). Chargemasters built for FFS have changed accordingly, and they remain fixtures of the modern hospital revenue cycle. A standard chargemaster is a large electronic file containing multiple elements for each entry. These attributes usually include:

  • The charge for a single unit of the service in question
  • A Current Procedural Terminology (CPT) code; CPT is the official medical code set of the American Medical Association
  • Potentially, a Healthcare Common Practice Coding System (HCPCS) code; HCPCS is based on CPT
  • Alternative CPT and HCPCS codes if needed, e.g. one corresponding only to specific payers
  • A revenue code associated with the charge
  • Flag(s) indicating if the entry is scheduled for deletion, active or inactive
  • An internal reference number within the ledger for accounting purposes

As a hospital administrator, the chargemaster will be central to your responsibilities. It is a centralized repository of proprietary information, one that remains valuable even as the traditional FFS paradigm loses ground to VBR alternatives. Let's take a closer look at how the chargemaster guides an administrator's work.

Chargemasters in Practice: How Hospitals Create, Maintain and Use These Documents

Perhaps the most important fact to know about chargemaster listings is that their rates do not necessarily reflect the true costs of healthcare. In fact, the creation of chargemaster data originates not with medical professionals but with finance departments, whose primary goals are managing the hospital revenue cycle ― including the pivotal negotiations with payers such as private insurance plans.

Chargemaster rates serve as baselines when negotiating the rates at which these payers will reimburse hospitals, which is why they're often much higher than actual costs. A Health Affairs study found that in 2013, the typical hospital with 50 or more beds marked up the costs contained in its chargemaster more than fourfold. Some services such as CT scans have charge-to-cost ratios of almost 30, while others like routine inpatient procedures are much lower at only 1.8.

Insured patients do not normally pay chargemaster rates, since their payer reimburses at the negotiated rate and passes on any co-pays and below-deductible responsibilities. For hospitals, an accurate and up-to-date chargemaster is the backbone of this type of revenue flow, as well as an important record for purposes of public reporting and compliance. An unreliable chargemaster will lead to revenue leakage, legal liabilities, and even confusing and high charges for patients themselves. It's possible to lose millions annually to chargemaster-related issues, according to revenue cycle firm nThrive.

To mitigate such risks, today's hospitals often have entire teams dedicated to chargemaster management. These individuals, including controllers and analysts who support C-level executives like the CFO and CIO, work with medical professionals to collect information on what services and products are in use, how popular they are, and if they're slated for discontinuation or other modification. Chargemaster teams also navigate complex issues such as aligning codes with those from the International Classification of Diseases, Tenth Division, usually referred to as the ICD-10, and looking for inaccuracies in charge-to-cost ratios for Medicare services.

Careers in Chargemaster Management and How The GW Healthcare MBA Supports Them

Many vital day-to-day activities of the healthcare system occur outside of doctor's offices and emergency rooms, on projects such as revenue cycle management and chargemaster maintenance. You can be at the heart of these operations by becoming a hospital administrator, with the added advantages of having a Healthcare Management MBA (HCMBA) from the George Washington University (GW).

The HCMBA track revolves around a set of core courses providing a comprehensive background in the financial aspects of healthcare, including topics germane to chargemaster management. Students will take courses in financial and managerial accounting, operations management, business ethics and public policy, and data analysis, all of which cultivate the skills necessary for becoming an effective healthcare executive.

Plus, the HCMBA program is highly customizable, with many qualifying electives that allow you to build expertise in domains such as regulatory affairs and clinical research. The flexibility in course selection complements the HCMBA's fully online structure, which is ideal for working medical professionals who want to advance their educational attainments and open up new career prospects.

The end result of the HCMBA program is a valuable credential reflecting expertise at the intersection of healthcare and management ― in other words, the mastery necessary for succeeding in hospital administration. The U.S. Bureau of Labor Statistics (BLS) has projected a strong outlook for hospital administration careers. It estimates 20 percent growth in medical and health service managers from 2016 to 2026, which is more than double the rate for all occupations. Salary is also competitive and above the national median, at a 2017 median of $98,350 per year.

With a Healthcare MBA, you have plenty of viable options. The degree track is designed to be accessible for both experienced and aspiring healthcare executives, meaning that no matter where you are in your current healthcare career, you can tailor the HCMBA curriculum to your specific goals. To learn more, visit the Program Details page today, or return to the main program page where you can answer a few questions to receive a free copy of our brochure.

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