All hospitals deserve to be paid for the services they provide.
As every chief financial officer (CFO) knows, that doesn’t always happen.
Full and partial denials are unmistakable causes of missed revenue. There’s another common, but often hidden, reason why many hospitals fail to receive full payment—revenue leakage from insufficient charge capture practices.
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What Is Poor Charge Capture?
Hospitals of all sizes suffer from revenue leakage due to systemic failures in charge capture. Often challenged by manual workflows and legacy electronic health record (EHR) systems, small and rural hospitals are especially vulnerable to these revenue leaks.
Poor charge capture occurs when the clinical care provided to a patient is not accurately or completely represented on the patient bill. Mistakes in charge capture include everything from unbilled procedures to undercoding.
Examples include:
- Documentation omissions: A service, supply or medication was provided, but not properly documented on the patient chart, perhaps lacking appropriate details such as the severity of the condition, and therefore cannot be billed.
- Missed charges: A service, supply or medication was provided and documented but not recorded in the billing system.
- Incorrect coding/modifiers: An incorrect code is assigned to a service, supply or medication or a modifier is omitted, resulting in an underpayment or an outright denial.
- Late charge entries: Charges are entered into the billing system days or even weeks after the patient has been discharged and the claim has already been transmitted to the payor. This may require the hospital to issue a corrected claim, or the hospital might simply write off the charge.
The more challenging aspect of charge capture errors is that they often go undetected until an audit is conducted, often months after the hospital should have secured the revenue.
What Is the Financial Impact of Poor Charge Capture Process?
Accurate charge capture is fundamental to revenue integrity. A poor charge
capture process essentially gives away services that payors have contractually agreed to cover.
In the grand scheme of healthcare costs, some charge capture mistakes may represent “small change”—less than $100. But when multiplied by thousands of misses, this small change can quickly turn into a big bundle of lost revenue.
For small and rural hospitals, charge capture losses can add up to hundreds of thousands of dollars annually—representing a significant portion of a hospital’s budget. These losses are becoming increasingly difficult for small and rural hospitals to absorb.
According to the Healthcare Financial Management Association (HFMA), hospitals lose an estimated 1% to 5% of their net revenue to charge capture failures. A 1% error rate can cause millions in lost revenue, based on the hospital size and volume.
Small/Rural Hospitals (Under $100M revenue) losses can range from $500,000 to $1.5 million annually.
Medium Hospitals ($100M to $500M revenue) losses typically range from $1 million to $5 million annually.
Large Health Systems (Over $500M revenue) losses can exceed $5 million to $22 million annually.
How Do Charge Capture Failures Happen?
Charge capture mistakes primarily result from a breakdown within three fundamental areas: human limitations, flawed processes and inadequate technology. Mistakes mean that high-value services and supplies never appear on the patient’s claim—as if they never happened.
Manual entry: Mistakes can happen all too frequently in the stressful and often chaotic environment of healthcare delivery. The care team might make a typo and enter a wrong quantity or miss a charge on the patient chart. For instance, a nurse might enter “1” instead of “10” for an expensive medication or fail to document a costly device.
Staff training: Updates to medical coding regulations happen regularly and can be difficult to track or fully understand if coders are not adequately trained. A coder who is unaware of a coding change may miss entering a modifier, which might mean a denied charge altogether.
Miscommunication: Clinicians, coders and billing staff work in silos and may not adequately relay information to each other during patient chart and claims hand-offs. A surgeon who fails to make a note of an unplanned service during a procedure means the coder can’t assign codes to the claim for that service.
Technology: Clinical and financial systems may not properly interface, meaning data will not sufficiently transfer from clinical to financial systems. This can happen, for example, when an update is made to the EHR but not to the billing system.
How Can Poor Charge Capture Processes Be Addressed?
The challenge with missed charges is that unlike revenue that is lost due to a denial issued by a payor in response to a claim, revenue lost due to charge capture mistakes often goes undetected.
The issue is compounded for small and rural hospitals, whose staff are often overburdened and time challenged, meaning detecting poor charge capture is often not a priority.
Healthcare financial leaders can take measures to seal the gaps that are causing revenue to leak from the hospital. Working with a partner on these measures can shorten the journey to revenue recovery.
Leading practices to address poor charge capture include:
- Conduct a charge capture audit: The first step in preventing revenue loss is understanding the current state of charge capture performance within the hospital’s revenue cycle. An audit of the charge capture process will uncover root causes of errors and identify opportunities for improvement.
- Leverage technology: Using an automated solution to audit the quality of coding in patient claims can be invaluable to surfacing the problem. Tools that target specific types of coding will do a better job of assessing quality vs. those that perform a more general audit of all codes simultaneously.
- Provide feedback and training to staff: Identifying where mistakes are occurring is one benefit of conducting a charge capture audit. Another is being able to provide feedback on the performance of the charge capture and coding teams to improve knowledge and development. Coders should also receive individualized training—the more specific to their needs, the better chance that overall coding will improve.
- Review the chargemaster: An outdated chargemaster can be a source of charge capture errors. Regular review of the chargemaster with clinical, billing and compliance teams, in addition to being aware of regulatory changes, all help to ensure accurate charge capture.
- Consider outsourcing the coding function: Turning over inpatient and outpatient coding work or a backlog of claims to outside expertise can ease the burden on in-house staff and eliminate the ongoing challenge of recruiting specialized talent. Outsourcing can be a permanent solution or a temporary option for attaining coding expertise tailored to individual hospital needs.
Why Should CFOs Focus on Charge Capture?
Optimizing revenue doesn’t necessarily mean increasing volume—which can be a non-starter in small markets with shrinking populations. Identifying and preventing gaps in charge capture practices preserve revenue expectations, enabling small and rural hospitals to maintain valuable services.
Accurate charge capture also reduces compliance risk and helps to ensure healthcare clinical and financial data are accurate, allowing for better strategic and financial planning.
Revenue integrity is critical to combatting today’s constant financial pressures. Integrating specialized expertise with the right tools can ensure effective charge capture, an essential requirement in protecting margins and securing a more stable future.
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