The topic in discussion is supplies and devices which is going to be analyzed from the viewpoint of a chargemaster coordinator trying to maintain a chargemaster. This becomes a very troublesome issue in supplies because many supplies should be in the chargemaster, what section should they be in, let alone what we should charge for them, and we will not be discussing pricing today at all. There are not many compliance complications only a few as supplies have a bunch of convoluted rules and regulations. As by understanding the concepts will enable you to be your own chargemaster or chargemasters, and make decisions about what you want to do with supplies, devices, etc. However, in some cases, you don't have much choice and in some cases, you do.

The first thing you need is to get multiple resources saying the same thing, and sometimes that's a little bit hard, even if you're just delimiting yourself to the Medicare program. It can be difficult to get, say, three independent resources to say the same thing about a specific question. The challenges here as a chargemaster coordinator is that number one you want to have a practical chargemaster. It means that chargemasters that have tens of thousands of line items that can be related to supplies. It also includes the line items maintenance and also the issue of same supply item listed several different places within the chargemaster. It will also be discussed that of charging versus billing. It is a sorted concept and here is a slight distinction between simply charging for an item, and then billing more

There are some ground rules that you must follow like written policy procedures. Whenever you make decisions, you need to keep some things in mind such as the need to denote a place a memo to the infamous file for compliance purposes, the reason of the decision taken, and also explain the process in which you are working along with it also explain the gain of doing the same. There are cases in which you have the latitude to make decisions and other cases, you probably won't. In other words, you inherited this chargemaster, and making changes to it becomes a bit of a problem. Now, are primarily Medicare issues, but whatever Medicare does, other third-party payers seem to follow, as well. So, if you understand and follow the various rules and regulations as provided by Medicare,

you're probably going to be okay. At the very bottom, or towards the bottom at least, Medicare concepts extend to pharmaceutical drug administration equipment. What we're saying here, and you'll see this in the federal registers, every once in a while CMS will say, "Well, this drug item should be treated as a supply." There's no question about that, you still have to put in the chargemaster as a drug, but it falls under the somewhat nebulous rules and regulations relating to supplies. The way in which we do and do not bill for supplies, etc., so watch yourself there. Biologicals, sometimes are considered to be supplies for billing purposes, so be aware of that.

Establishing policies and procedures in this area are indeed difficult. The payment systems out there, particularly the medicare payment systems, PPS and IPPS tend to bundle things together. That provides us with to remove a bunch of supplies from the chargemaster, but we have to be very careful because you probably have some private third-party payers that pay you a percentage of what you charge. If you suddenly start removing supply items from the chargemaster, you're going to reduce your overall charge structure. I'll call it revenue. It's not a good term, but that's what we usually refer to it as. You'll reduce your revenue, therefore, for those particular private third-party payer contracts, the percentage of the charges contracts, you'll lose money almost immediately. So, proceed with great caution.

You will be alluded a couple of times today to cost report and cost to charge ratio. Let's segregate the relationship of the cost report to the chargemaster and, of course, we have to charge for these things. This becomes again an issue as mainly, one that's devoted to establishing charges. The transmittals that go along with the outpatient prospective payments system, or APCs, or for that matter, the transmittals that go along with the inpatient prospective payment system. Every once in a while, they will discuss the supply categorization issue. Usually, it's some special topic, such as treating biologicals as supply items.

Here's a quote from a federal register, this is from CMS, alright. It's about a third of the way down, a fourth of the way on slide number six. "Supplies can be anything that is not equipment." That's pretty broad, and we'll have an exercise at the very end about relative to equipment. "And include not only minor, inexpensive, or commodity-type items but also include a wide range of products used in the hospital outpatient setting." This was a federal register devoted to APCs. "Including certain implantable medical devices, drugs, biologicals or radiopharmaceuticals."

They're not really saying that drugs or biologicals are supplies. They mean that we treat them as supplies for coding and billing purposes. But again, this definition is pretty broad. An example will help you better understand as, during cataract surgery, almost all hospitals do cataract surgery, there are certain eye drops that are administered to the patient. Eye drops are self-administrable, at least in theory. Therefore, they should be charged to the patient, right? Or you may have a policy where you don't charge for them at all. Technically, these are self-administrable. However, these drops are considered an integral part. The drops are treated as if they were supplies. In other words, we're going to charge for the eye drops. There will probably be a line item, we'll probably stick them under revenue code 250 for drugs in general. It is not that important as to whether we do or not because these things are being considered as supply items. This is a part of what makes this so difficult. We're dealing with a wide range of things as you should be charging for all supply items, period.

You can find quotes in the federal register where CMS tells us that we should be charging for everything, including solve supply items. The way in which you decide, as a chargemaster coordinator, to charge for these items will vary. You have some latitude, you'll have to make some decisions. The supplies and devices tend to fall into one of four categories. In which number one is that the supply items are charged separately. That is, there's a line item in the chargemaster for the given item or device that they charge. Within that, we have another subdivision. This one's a little bit tougher. That subdivision is that, if we have a CPT or, more likely, an HCPCS code, then the line item is not only being separately charged, it's separately billed, separately reported. There's a difference between the word "separate" or the phrase "separately charging" versus "separately billing" or what seems to be equivalent, "separately reporting."

This is a tough concept and something that we had to glean from rather obtuse guidance from CMS. You may have a line item in the chargemaster. That line item may or may not have an HCPCS code. The HCPCS code may or may not be in the chargemaster itself. It may get a test at a later time. It's unlikely, but that could occur. That's category number one, separately charging and, within that, separately billing/reporting. Secondly, the supply items may be used with a limited number of other line items in the chargemaster, and the supply items charges are bundled on an average basis into the other line items. The HCPCS can be charged separately if you can separately bill for locums but you may make the decision that, instead of charging or billing separately for them, that you're going to roll up the charges into the associated procedures. When you make this decision, be sure you document it. There should be a note in the record that you decided to do this, how you adjusted the charges for the line items into which you roll the locums, etc. You may have a limited number of line items where you want, on an average basis, to roll the supply items.

Thirdly, the supply items or items may be an integral part. Given procedure and thus are bundled into the charges or the procedures. Again, whether you decide to have a separate line item or not is up to you, but if it's an integral part, you may decide not to have a separate line item. You may simply bundle the charge back into that given line item.

Fourthly, the supply items are routine or non-ancillary. That word "ancillary," if you read the federal register, if you look at the Medicare manuals carefully, particularly when you get into the cost report, you're going to see that word, "ancillary." These are the routine supply edits. You're not allowed to charge for them at all, at least not separately. What we do is we "bundle them" into the general overhead.

There are four choices as you can either separately charge and, within that separately bill and report, or you may decide to roll up the charges for a given supply item into a limited number of other line items, or you may determine that the supply item is an integral part and, therefore, you roll up the charge into the associated procedure or item, or you don't charge for it at all separately. You have to make some decisions. This is why we have chargemaster coordinators out there working diligently to decide what to do. The concepts are not straightforward at all, particularly the difference between separately charging and a subset of that, separately billing/reporting. The separately reporting implies that there's an HCPCS, maybe a CTE code, but at least an HCPCS code associated with the line item.

Remember, according to Medicare, supplies can be anything that's not equipment. That raises the question, are you allowed to bill for equipment? Let's do this in the outpatient setting because DRGs have a capital component. ABCs does not. Are we allowed to charge, bill, for equipment? The answer is there's nothing that prevents you from doing that. The way you're going to set up your chargemaster, how you're going to do your surgical charging is up to you. You may or may not want to base that upon the equipment that is used or available. We're basically out of time. We're actually one minute over.

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