Changes afoot for chargemaster

With more people paying attention to healthcare pricing, IT companies are changing their approach to chargemaster tools
By Mike Miliard
12:00 AM

In recent months, "chargemaster" - like "compromise," or "mud" - has become a dirty word.
Ever since "Bitter Pill," Steven Brill's mammoth 24,000-word cover story in TIME magazine this March put the spotlight on this shadowy reference tool - a voluminous file that dictates the cost of the services and medicines and hardware a hospital provides - the public has become aware in a way it hadn't been before that the prices paid by healthcare consumers often have very little logic to them.
Most hospitals "treat it as if it were an eccentric uncle living in the attic," Brill wrote in TIME. "I soon found that they have good reason to hope that outsiders pay no attention to the chargemaster or the process that produces it. For there seems to be no process, no rationale, behind the core document that is the basis for hundreds of billions of dollars in health care bills."
Lately, some people have been thinking about the ways healthcare prices are formulated and communicated.
Notably, Health and Human Services Secretary Kathleen Sebelius unlocked a huge trove of data this past May that that laid bare the chargemaster list prices of hospitals nationwide (she did the same for outpatient prices in June). When seen next to much-lower negotiated prices paid by Medicare, the numbers could be infuriating.
"We're a great believer that unlocking that data (and) turning it over to those who know how to formulate that data for policymakers and providers is the best possible thing to do," said Sebelius in June.
As the price list comes under closer scrutiny, some vendors are starting to rethink they way they design their chargemaster tools.
On June 10, for instance, Yakima, Wash.-based VitalWare and St. Paul, Minn.-based Panacea Healthcare Solutions announced a partnership to develop what they describe as "intelligent, defensible chargemasters."
When asked just what that means, VitalWare CEO Kerry Martin said, "When we talk about intelligence, we talk about using your cost data as much as possible to help you determine prices."
Take a knee replacement, for instance. "I'll bet you the range of knee replacements go from $1,500 or $2,000, clear up to $8,000," says Martin. "The physicians is making that choice based on his relationship with that salesperson from Stryker, or he's making it based on his comfort level with a particular product, even though there may be newer technology on the marketplace?"
Problematically, the CFO has no say, for the most part, in determining knee replacement A, which covers this, or knee replacement B, which costs this, or knee replacement C, which is out of the park, and if I used it on a Medicare patient I'm not even going to get reimbursed the cost of that device - let alone the cost of the room and my nurses, etc."
As government, the media and consumers all start paying more attention to what healthcare costs, CFOs are under increasing pressure to justify what they charge. VitalWare and Panacea will integrate two technologies - VitalWare's CDM Navigator and Panacea's Strategic Pricing Suite - to help enable them to ensure more accurate chargemaster coding and compliance and also defend and document their pricing.
"At both the federal and state levels, hospital pricing and the hospital chargemaster are under a microscope, and there will be increasing pressure for transparent hospital pricing," said Fred Stodolak, CEO of Panacea Healthcare Solutions, in a statement
Another company touting innovations on this front is Atlanta-based Craneware, which recently introduced workflow enhancements to its Chargemaster Toolkit software.
Just one error in the chargemaster can cost a hospital big bucks in lost revenue, of course, and there's always the danger of fraud investigations as CMS auditors increase scrutiny.
As complication and risk increase, Craneware officials say the changes in its technology can help hospitals improve communication and control, allowing configuration to meet specific needs of specific hospitals.
"Change in the chargemaster is inevitable, the key is how efficiently you achieve those changes," said Keith Neilson, Craneware CEO, in a statement noting that the new developments "help hospital organizations have the flexibility to accommodate workflow that mirrors their hospital's policies while staying abreast of the complexities in the market."
Also in June, Chicago-based Holliday & Associates announced that its Web-based ChargeAssist technology, which offers chargemaster auditing, pricing, change management capabilities and more, gained "Peer Reviewed by HFMA" designation.
"Receiving this designation comes at a time when renewed attention to the chargemaster is an operational objective all healthcare providers are realizing," said Rosemary Holliday, principal and partner of Holliday & Associates, in a statement.
"One reason I think it's important now to take a different approach (to chargemaster) is because the consumer is involved," says VitalWare's Martin. "The consumer doesn't understand: When you go to Wal-Mart and pick something off the shelf that's $12.99, you bring it to the cash register and guess what, it's $12.99.
"One of the things we're trying to do is make sure the hospitals are, as much as possible, using a cost methodology. Rather than, 'I'm going to increase my prices 5 percent a year, because I know the insurance companies are going to negotiate with me like this.'
"Hospitals should have to get their arms around using cost as a mechanism, going to the payers and saying, 'Look, you're going to cover my costs, plus X percent mark-up,'" he adds. "Use that methodology, rather than just jacking your prices by X percent and then negotiating the reimbursement out of that."