Charging for inpatient ancillary procedures and supplies has always been confusing. “CMS provides very little guidance ... Its theory is that it’s up to the provider to figure it out,” says Kimberly Anderwood Hoy, JC, CPC, director of Medicare and compliance at HCPro, Inc., in Danvers, Mass.
The Provider Reimbursement Manual, sections 2203 and 2202.4 states that facilities must:
- Have an established charge structure
- Apply that structure uniformly across all settings for each patient and payer
- Use charges that reasonably and consistently relate to the cost of services
The rest is simply up to the provider, says Hoy.
Why do inpatient charges matter so much?
CMS uses charges as a proxy for cost. The agency then uses these costs to determine DRG payment rates in the PPS system. Essentially, accurate charges equal more accurate DRG payments.
Though it’s certainly no easy task, distinguishing between ancillary and routine services is crucial when it comes to complaint charging.
In its Provider Reimbursement Manual, section 2202.6, CMS defines “routine” services as a facility’s room and board charge. This charge includes:
- Regular room, dietary, and nursing services
- Minor medical and surgical supplies
- Medical social services
- Psychiatric social services
- Use of certain equipment and facilities for which a separate charge is not customarily made
Many charge description masters (CDM) include a charge for room and board only, says William L. Malm, ND, RN, CMAS, senior data products manager at Craneware in Atlanta. This is a stark contrast to the “a la carte” format of most outpatient charge description masters (CDM) in which each individual service and/or supply is listed separately.
This inconsistency across settings doesn’t comply with Medicare regulations, says Malm. “In my mind, if you have a charge on the outpatient side, you should have a requisite charge that is identical on the inpatient side,” he says. “To be compliant with charge rules and regulations-and to not put your facility at risk of over- or undercharging-all bedside supplies and procedures need proper documentation. This is also an important part of determining the actual cost of care.”
Section 2202.8 of the manual defines “ancillary” services as:
- Laboratory
- Radiology
- Drugs
- Delivery room (including maternity labor room)
- OR (including postanesthesia and postoperative recovery rooms)
- Therapy services (physical, speech, and occupational)
These services may also include special items or services for which charges are customarily made in addition to a routine service charge.
The FY 2009 IPPS final rule states that providers in the same state should follow similar charging practices. The rule states:
If there is no common or established classification of an item or service as routine or ancillary among providers of the same class in the same state, a provider’s customary charging practice is recognized so long as it is consistently followed for all patients and does not result in an inequitable apportionment of cost to the program.
The problem is that hospitals sometimes include a multitude of services in their room rates (i.e., as routine charges), says Hoy. This happens because it’s either easier to do so operationally or because many hospitals incorrectly believe that they aren’t allowed to charge separately for certain items or services.
“What I find is that payers will sometimes say with quite a bit of authority that you can’t bill for that or that can’t be billed separately,” says Hoy. “They’ll deny services … what they’re really doing is denying those costs that were really incurred by the facility.”
This in turn leads to incorrect DRG payment rates, says Hoy. “It’s no secret that some of our DRGs are really, really ‘off’ in terms of what they pay us,” she adds. In some cases, reimbursement for a device-dependent procedure is actually less than the cost of the device itself. Implantation of a cardiac resynchronization therapy defibrillator is one example.
Consistency is key. “Many of our nursing ancillary and bedside procedures are all charged separately to outpatients,” says Hoy. “Then when it comes to an inpatient, we bundle them into our room rate. We really are being a little inconsistent about how we’re billing and charging between inpatients and outpatients.”
For example, hospitals may want to consider separate inpatient charges for blood transfusions and certain nursing services, such as:
- Debridements
- Cardioversions
- PICC line insertion
- Foley inserts
- Thoracentesis
- Paracentesis
- Incision and drainage
- Lumbar puncture
- Central line insertion
- Bone marrow aspiration
Special qualifications aren’t a prerequisite of separately charged procedures. In other words, hospitals can separately charge a PICC line insertion, for example, even when a nurse without special qualifications performs it, says Hoy. If a procedure is within a practitioner’s scope of practice under state law, then a payer can’t dictate whether a hospital can separately charge for the procedure, she adds.
Charging inpatient supplies also poses a dilemma. In section 2203.2 of its Provider Reimbursement Manual, CMS provides the following criteria for routine supplies:
- Not identifiable to a patient
- Not generally provided to most patients
- Not reusable
- Represents a cost for each preparation
- Is complex medical equipment
However, these criteria pertain to skilled nursing facilities (SNF) only, says Hoy. Section 2203.1 provides additional stipulations, but again, they technically only pertain to SNFs, not acute care facilities.
These stipulations state that routine supplies include:
- Patient gowns
- Paper tissues
- Water pitchers
- Bedpans
- Deodorants
- Mouthwash
They also include items stocked at nursing stations or on the floor in gross supply and that are distributed or used individually in small quantities (e.g., alcohol, cotton balls, aspirin, or Band-Aids).
Even though the criteria apply only to SNFs, “there are things that we can take from these criteria that are very instructive,” says Hoy.
For example, supplies that are identifiable to a patient are easier for auditors to audit because they can confirm based on documentation that it was used separately. If a supply is generally provided to most patients, it’s easier to include it in the room and board rate.
“Our charge should really relate to a cost of care,” Hoy says. “If it’s not really a cost of care because it’s reusable, then it’s going to be difficult to assign some sort of charge to that.”
The SNF criteria do provide a commonsense approach to charging and accounting for resources, says Malm. Maintaining individual charges in the CDM for all chargeable inpatient supply items could require significant time and resources, he adds.
However, there are exceptions for which hospitals may want to make case-by-case decisions, says Hoy. For example, even though bandages may be generally considered routine, a bandage used for wound VAC is expensive and patient-specific. Therefore, hospitals may want to assign a separate charge for it.
Other hospitals may use a low-dollar threshold for charging inpatient supplies, says Malm. For example, a hospital may choose to bundle all items under $5 into the procedure charge. For a laceration repair, this might include gauze ($0.10), a Band-Aid ($0.10), and an Ace wrap ($3.00). Bundling these items into the procedure charge for the laceration would increase the charge by $3.20.
Striking a balance is essential, says Malm. “The more charge items you have in the CDM, the greater the risk for charge capture loss,” he says. “Is the nurse in the OR looking to charge the Band-Aid and forgets to charge the $100 specialty item?”
First and foremost, focus on documentation. “Once a charge goes in, it’s automatically forgotten,” says Malm. “On audit, if the documentation is not present, then it’s a false charge.”
Detailed nursing documentation must justify separate charges for services and supplies. Nursing buy-in is essential. EMR templates and order sets may mitigate documentation insufficiencies, he adds.
Developing a policy is the most important aspect of maintaining compliant charging practices, says Hoy. A team approach works most effectively. This team should include revenue integrity, the chargemaster coordinator, finance, third-party contracting, billing/coding department, and affected clinical areas.
The policy must clearly describe what the room and board rate will encompass versus the procedures and supplies for which the facility will charge separately. “If you don’t have this, a commercial payer or even Medicare may say that you’re double-dipping,” says Malm, adding that the room and board rate cannot include items or services for which the facility is charging separately.
Those who perform the task of charging must fully understand and be able to implement the policy correctly. Auditing is crucial, says Malm. “The obligation to internally audit your claims is paramount. You have to always audit whatever you do,” he says.
The content in this article was originally presented during HCPro’s audio conference “Charging for Ancillary Bedside Procedures and Supplies in 2013: What You Need to Know.” This article was originally published in the June 2013 issue ofBriefings on Coding Compliance Strategies.