PAYOR SCRUTINY: CAN YOU DEFINE AND DEFEND YOUR HOSPITAL CHARGE STRUCTURES?

Many commercial payors have begun to scrutinize line item charges and disallow certain services, particularly on high-cost inpatient claims.  Respiratory and other services have largely been targeted. In order to appropriately capture your costs and receive proper reimbursement, especially for high-cost outlier cases, you must be able to defend your charging practices. It is important to have written policies that define your charge structure and delineate services inclusive in Room and Board, as well as those that are excluded and represented by a separate charge. Likewise, the same holds true for supply and device charging practices. Clear guidance should exist for items deemed routine versus those that are non-routine, patient specific and separately chargeable. The supply and device charging policies are pivotal in properly managing materials management and surgical or other interventional services.

Defining Room & Board/Standard of Care:

Medicare provides general guidelines on Room & Board.  These regulatory references have been in place for numerous years, yet most hospitals do not have a firm policy stating what actually is included in the standard Room & Board charge.

The following excerpt is from the Medicare Provider Reimbursement Manual Part 1 Chapter 22 Determination of Cost of Services to Beneficiaries where routine services and ancillary services are defined.

2202.6 Routine Services.–Inpatient routine services in a hospital or skilled nursing facility generally are those services included in by the provider in a daily service charge–sometimes referred to as the “room and board” charge. Routine services are composed of two board components; (l) general routine services, and (2) special care units (SCU’s), including coronary care units (CCU’s) and intensive care Units (ICU’s). Included in routine services are the regular room, dietary and nursing services, minor medical and surgical supplies, medical social services, psychiatric social services, and the use of certain equipment and facilities for which a separate charge is not customarily made.

2202.8 Ancillary Services.–Ancillary services in a hospital or SNF include laboratory, radiology, drugs, delivery room (including maternity labor room), operating room (including postanesthesia and postoperative recovery rooms), and therapy services (physical, speech, occupational). Ancillary services may also include other special items and services for which charges are customarily made in addition to a routine service charge.

Interestingly, respiratory services are not mentioned in either category, yet tend to be the main target of third-party payor audits. So what can a hospital do to combat payor scrutiny of their charging practices?

Bringing the right people to the table to craft a definitive policy for Room & Board services, as well as Supply Charging practices is a great starting point. Forming a multi-disciplinary team of key stakeholders that deliver daily care can help determine standard of care services and differentiate those that are outliers and more patient-specific based on the episode of care.

Depending on your hospital’s primary service mix, what is standard for one hospital may be more ancillary in nature for your facility, and vice versa.  Key questions to ask and consider in establishing charge structure policies, whether Room & Board or Supply based include the following:

• Is the service or item typically provided to the masses?
• Is the item commonly furnished and represented in floor stock?
• Is the service or item specifically ordered by a physician/non-physician practitioner?
• Is the service not usually provided to most patients; specialty item or specific care?
• Is the service or item medically necessary for a specific patient need?
• Is there clear documentation in the medical record associated with the service [e.g., results, reports, notes, implant tracking, device itemized list, etc.]
• What are your current charging practices associated with the item?

It is not always a black and white scenario. Careful consideration and reasonableness often need to be applied to grey areas.  However, having a defined policy can help your facility support and defend gross and net revenue that could otherwise be at risk.

If you need assistance in these endeavors, MedCom can facilitate these processes for you. Feel free to contact us or visit our homepage as linked below.

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