It’s no secret that inaccurate charge captures can have a dramatic impact on a hospital’s finances. Problems associated with undercharging are easy to understand; they keep hospitals from being paid sufficiently for the services they have provided.

Overcharging can affect revenue in other ways. If an organization is paid for a service that is not documented with an order, it may be perceived as receiving a benefit from funding it was not entitled to receive. This perception could become a non-compliance issue, which can be even more expensive. Overcharges must be reimbursed to the payer. If the payer is the government, the hospital may also have to pay fines, interest and penalties.

Additionally, overcharging may push additional hidden costs to the hospital, such as having employees spending time responding to auditors’ questions rather than their regular work commitments. The organization may also have to hire outside counsel and an outside auditor, causing costs to add up quickly.

In the regulatory audit results2 of a Missouri hospital released by the Department of Health and Human Service (HHS) Office of Inspector General (OIG), OIG discovered billing non-compliance in 46 of 253 claims, or approximately $414,000 in overpayments. Similarly, an audit3 of a Utah hospital revealed billing non-compliance in 49 of 232 claims, or approximately $173,000 in overpayments. On the basis of the sample results, the OIG often extrapolates an overpayment estimate for the audit period.

The Federal government expects to be repaid.

What generates charge capture errors?

So, how can you catch charge capture errors quickly? The answer is neither obvious nor simple because inaccurate charges happen for different reasons. From our experience, here are the main causes:

  • Computer glitches
    Computer errors can happen for many reasons. An improperly managed software installation or conversion can inadvertently duplicate charges. Hardware errors and electromagnetic interference can cause software to become corrupted, which can lead to misapplication of credits. Tiny programming errors can cause these types of problems, as well.

    The problem is that often, despite these issues, the system will generally appear to be functioning properly. If the issue continues over time, however, the source of the resulting charge capture problems can become increasingly difficult to trace and correct.
  • Insufficient or incorrect coding training
    Doctors and staff members are not sufficiently trained on medical coding intricacies. It is not enough to simply map a service to the right code. Some services actually encompass multiple medical codes. Others must be carved out of a flat rate (daily or procedural) payment and paid additionally.
  • Human error
    Any time that people are involved in a situation, there is potential for human error —especially in a busy emergency department (ED) where it may seem like millions of things are going on at once. For example, if the person responsible for recording charges does so in the middle of that busy ED, he or she might check off items that are expected — but that do not actually occur, which leads to an overcharge. Alternatively, he or she might forget to check a key item, which leads to an undercharge.

    In another scenario, two people may both enter the same charge, which creates duplicate charges. Or two people may each think that the other entered the charge, which results in no charge being entered at all. A nurse may note hanging an IV bag in the medical record — but never actually charge the patient. Likewise, while a standard set of services, support products and prescriptions may be placed on a patient’s chart, some may not actually be used every time. But if those items aren’t marked appropriately and/or removed, they will all appear on the bill.

    Any one of these problems may be small in the grand scheme of the hospital’s billing. However, with thousands of patients coming through the ED and other areas of the hospital, these problems can add up. The question remains: what can be done about it?
The benefits – and pitfalls – of automated audit systems

Most hospitals are able to recognize when they suspect a problem with charge capture accuracy. Many have purchased auditing systems designed to catch such issues — which can be a step in the right direction. Unfortunately, such systems are not foolproof and may lull hospitals into a false sense of security.

It is essential to remember that computer systems are only as good as their programming. They will only catch issues that match the rules programmed into the system. But can anyone be certain that every potential charge capture situation has been programmed into the system? Or that they have been programmed with 100% accuracy?

As sophisticated as many computer systems may be, they cannot replace the human ability to recognize an issue that is technically correct — but fundamentally flawed. A computer will identify and correct what it is told to identify. A human being can recognize connections between charges that may appear correct individually — but that make no sense together. Unless a knowledgeable human being audits the system, its accuracy remains in question. Mechanized results that are double-checked by a trained professional can reveal far more than the mechanized system alone.

Bottom line: In-depth charge capture audit services performed by knowledgeable, live professionals are the best way to improve charge capture and mitigate compliance risks.

What to look for in a regulatory auditing partner

An objective look at the costs of non-compliance and other charge capture issues makes it clear that the costs of investing in regulatory auditing services far outweigh the costs of the services themselves. If you’re not capturing charges – or worse, if you’re capturing inappropriate charges – you may be putting your hospital at risk. At the same time, an insufficient auditing service is unlikely to deliver a sufficient return on investment.

Powerful, human-powered regulatory auditing services are essential to discover and remedy both overcharge and undercharge issues before they become compliance problems. They are essential on the provider side of the transaction because every commercial and government payer invests in auditing services, too. Here are the top three attributes of a strong auditing services partner:

  1. A strong auditing services partner can help you identify financial issues as well as other, seemingly unrelated concerns. When McKesson auditors explore hospital documentation for errors, we may be looking for financial issues – but our deep, cross-functional knowledge enables us to also catch other potential problems, such as process or management gaps. We often help troubleshoot and solve problems that may be process-based or systemic, which a digital system would not be able to find.
  2. The right partner should be able to demonstrate clear familiarity with your existing data systems, including any automated auditing support software. There is little point in bringing in outside auditing services if one or more of your internal team members will be required to lead the auditor through every step of your computerized systems and processes.
  3. Your charge capture auditing services partner should respect the hospital staff’s own day-to-day responsibilities and be experienced enough to do its own job with limited-to-no hand holding.

With due diligence to this important element of your business performance, your hospital will be better positioned to manage the negative impact of charge capture errors of any kind.

McKesson Business Performance Services can help you address these challenges and improve profitability with revenue cycle management services designed to help hospitals maintain their focus on patient care. As an extension of your team, we have the resources and depth of experience you need to help strengthen the financial health and profitability of your whole organization.

1 “Revenue Cycle Management: A Life Cycle Approach for Performance Measurement and System Justification,” 2009-2010 HIMSS Financial Systems Revenue Cycle Task Force (Healthcare Information and Management Systems Society), March 2010
2“Medicare Compliance Review of Missouri Baptist Medical Center for 2011 and 2012,” Office of Inspector General, Office of Audit Services, Centers for Medicare and Medicaid, January 2015.
3“Medicare Compliance Review of Utah Valley Regional Medical Center for 2010 and 2011,” Office of Inspector General, Office of Audit Services, Centers for Medicare and Medicaid, January 2015.

Bess Ann

About the author

Bess Ann Bredemeyer is vice president, Compliance, at McKesson Business Performance Services. She has more than 25 years experience in optimizing revenue cycle operations for healthcare providers across the United States.