Go beyond the Chargemaster with Supply Materials Management


Procurement costs are one of the main categories of expenses for hospitals.

According to a Definitive health care item, which looked at the evolution of hospital medical and surgical supply costs, analyzed the average annual spending of US hospitals on supplies, including pharmaceuticals, in 2018, with supply chain spending accounting for around 33% of the total operating expenses of a hospital.

As a hospital offer costs continue to rise and as price transparency regulations increase consumers’ attention to fees, hospitals need to broaden their scope and conduct regular reviews of both their chargemaster and the entire their materials management system to improve revenue and reduce billing errors.

Impact of the supply master and manager relationship on compliance

Like pharmacy processes, hospitals also need to manage the link between the procurement master and the billing manager to code and bill medical supplies correctly. The materials management item file contains all of the supplies and merchandise purchased by the establishment, and it has many more rows than the account assignment file. For example, a single expense line can be applied to multiple items in the item repository. A full review is required to ensure compliance. The review should include the item file and confirm that the appropriate expense line (if applicable) and HCPCS are correctly assigned to the procurement item.

Establishing appropriate invoicing and reporting processes for supplies is a complex process. Many factors can affect the chargemaster, including physician preferences, supplier changes, contract changes, and the daily influx of new medical supplies.

In addition, there are only general guidelines available to hospitals on whether a medical supply is billable or not. The Centers for Medicare & Medicaid Services (CMS) provide only general guidelines on what constitutes a billable supply. CMS boards for supplies can be found in a variety of places and are not centralized. Therefore, it is very tedious to research what to bill and to bill for supplies correctly.

At the same time, procurement databases are not readily available to help hospitals determine whether a procurement item meets billable or non-billable guidelines. The appropriate HCPCS, if any, should often be found by contacting the supplier for each item. Despite this complexity, the supplier will have to justify that the invoiced supply meets the appropriate requirements if an audit takes place.

Minimize risk through automation

Hospitals that apply CMS guidelines incorrectly or inconsistently when reporting procurement charges risk increasing changes, denials and audits of claims, impacting revenue. The main purpose of reporting is to always stay compliant. Common problems encountered by hospitals include reporting items considered routine according to CMS guidelines, reporting an incorrect HCPCS, or reporting an HCPCS when it is not appropriate. Incorrect reporting including poor charge entry processes, missing invoice lines for all billable supplies, HCPCS assignment issues, and missing HCPCS can result in lost revenue.

It is not enough to review the chargemaster itself to reduce these impacts and ensure compliance. Hospitals should also ensure that the items in the main line of billable item management items are linked to the correct invoice line and that items that are considered non-billable do not have an associated invoice line for reporting. are correctly generated.

Most hospitals, however, do not have the staff or resources to perform a line-by-line review of procurement data. These files can contain 75,000 or more positions entered over many years by people with different points of view. Files of this size are difficult to audit and are often not kept retroactively as regulations change. An automated solution is the most efficient way to review the entire material management system item master record. A comprehensive tool can also help hospitals quickly determine if a product meets billing guidelines and provide the appropriate HCPCS, if applicable.

The path to success

It is essential for hospitals to perform an internal audit of procurement given the multidisciplinary responsibilities spanning clinicians, buyers, coding, billing, and patient financial services. These internal audits allow hospitals to improve their revenues and reduce the risk of billing errors. Complete and compliant billing for medical supplies requires communication and coordination across multiple departments, as no area has all the information it needs to be successful. Ultimately, establishing regular maintenance to review the procurement costs of major item supply lines will allow hospitals to maintain costs accurate and in line with the ever-changing and changing supply inventory. regulatory.

Debbie Emery is Senior Product Manager at Optum. She has expertise in the creation and maintenance of hospital charges, resolution edit claims related to billing practices, and RAC and postpayment defense audits. Previously Director of Revenue Assurance for a 38 hospital system, she helped develop and implement a corporate standard CDM, standardized billing practices, performed billing / medical necessity audits, and provided training system-wide.


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