Jeffrey Wagner

Jeffrey Wagner, vice president, materials management, MidMichigan Health, clearly recognizes the value of linked databases but also acknowledges the potential costs to achieve it, perceived by his organization to involve "significant" resources. His hospital system maintains disparate systems and more than one CDM source, but still is one of a growing number of organizations maneuvering toward some degree of interoperability.

"The source of truth for supply prices should be the [materials management information system]," Wagner said. "In many organizations the disconnect between the price in the MMIS and the price in the CDM is pervasive. We are looking to address this issue."

Wagner further noted mixed results in their ongoing quest for interconnectivity.

"Standardization of the item master has been a focused initiative for several years and is humming along," he said. "The CDM has not had that focus."  

St. Louis-based Sisters of Mercy and Orlando (FL) Health represent two integrated delivery networks (IDNs) that have successfully plunged into IM-CDM connections.

Alex Zimmerman

Resource Optimization & Innovation (ROi) oversees Sisters of Mercy’s supply chain operations for its 29 hospitals spanning four states. In fact, ROi centralized the purchasing, accounts payables and revenue-cycle chargemaster operations, according to Alex Zimmerman, ROi’s director, supply chain information management.

ROi uses Lawson Software for its primary enterprise resource planning (ERP) system, which contains the item master, and Epic for its common electronic health record (EHR) platform, which is used for patient documentation and patient charging.

"The central department that manages charge codes updates each chargeable item in the Lawson item master with the respective EPIC EAP code," Zimmerman said. "This item master is then used to drive the EAP into Epic for patient charging." EAP stands for "Epic All Procedures," the procedure master file.

Robb Reddick, Orlando Health’s manager, revenue integrity, highlighted his organization’s numbering system, which works in conjunction with its group purchasing organization’s automated connection software.

"We utilize a 10-digit numbering methodology," Reddick explained. "The first four numbers represent a corporate department number. The 5^th digit represents an internal allocation and the last five digits represent the IM number."

Orlando Health uses the CrossWalk software bridge offered by MedAssets Inc.

Scott Gardner

"Our patented software allows for the continuous linking of item master to our best practice chargemaster catalog to assist our clients in maintaining accurate HCPCS, revenue codes and other compliance information," said Scott Gardner, product manager, MedAssets.

"With the increasing economic pressures in healthcare, hospital resources within materials management and revenue cycle staff are constantly being tasked to perform with a more limited and possibly less-skilled workforce," Gardner continued. "Providing a seamless technology-driven process for the accurate capture of supply items not only provides a more efficient workflow but also enables the staff to perform their daily roles more effectively and accurately.

Gardner further noted that because the majority of items added to item masters are implantables, "it is essential to have a fast and efficient way to rapidly capture and apply accurate chargemaster codes to these items. Use of miscellaneous charge codes to capture these implantables allows for loss of transparency, incorrect markups, inaccurate billing and revenue reimbursement loss," he added.

One strategy to smooth IM-CDM connections is to maintain them on shared databases. But that may not be possible.

Kenneth Cyr

"Almost always [the IM and CDM] exist in separate databases," said Kenneth Cyr, a former supply chain manager now serving as a product manager for software company Craneware Inc. "And that’s the problem. Each system was set up to meet that department’s specific needs. Unless there is some automated linkage between these two IT silos, charges will be lost, compliance will suffer, and people will waste an extraordinary amount of time manually – and imperfectly – doing work that computer systems should be doing for them."

At ROi, the EPIC EAP code is stored in the ERP system database with the item master, but that is not the code they use for operating room charges, according to Zimmerman. In fact, ROi maintains charge codes for OR charges exclusively in EPIC, so they’re in a separate database.

For non-OR charges, it’s advantageous to have one place to update the EAP codes and to centralize support and maintenance for all hospitals, said Steve Shockley, ROi’s director, supply chain shared services. But "it requires an interface to properly maintain and synchronize the two systems," he added.

On the flip side, keeping OR charges in a separate database offers each hospital facility the flexibility to update and add charge codes at will because each hospital has their own EPIC system, Shockley continued. But it generates a "duplicative work effort that is inherent through a decentralized process," he said. 

The CDM and IM are housed in separate databases at Orlando Health, too, according to Reddick. But that’s less an issue for them. Materials management handles the IM through its own system, while Reddick’s group uses MedAssets and CDM Master to manage the CDM. "To merge the two is only possible by utilizing MedAssets CrossWalk on a one-to-one relationship," he added.

Reddick can spot the pros and cons of the way they operate. "It allows the departments to be experts in what they do respectively," he noted. "Materials Management handles materials and we handle the CDM and pricing."

But they were concered about data integrity, he continued. "CDM is subject to the data input from the IM. Managing this with CrossWalk makes it easier to make sure the IM and CDM are in synch," he added.

Fortunately, both Sisters of Mercy and Orlando Health maintain common chargemasters and item masters across all their facilities.

"Reporting and revenue management work together from a supply chain perspective to manage patient charging," Shockley indicated. "Increased charge capture [means] increased revenue along with detailed product consumption for Medicare/Medicaid cost reporting." 

Reddick supports it, too, because "it ensures that an item that may reside in several departments in several different facilities is consistent and it allows us to implement and maintain a consistent and defensible pricing methodology." But he admitted that "the number of line items on your CDM can become very large."

Gardner contended that facilities within IDNs need that commonality among CDMs and IMs because it "allows the corporate supply and revenue teams to drive the standards for billing and reimbursement set forth in the guiding principles represented by the corporate governance committees. It removes the guesswork by the individual facilities of how supply items should and can be charged. It also allows for a more consistent process of managing supply vendor contracts for physician preference items.

"Once these processes are in place, having the tools and resources to manage, maintain and audit the linkages is essential in maintaining the goals established," he continued. "New supplies are constantly being developed, and having the corporate core processes intact will assist the entire revenue cycle team, working in conjunction with the materials team, to make sure that charge codes are built or updated to capture these new technology items."

These necessary linkages no longer are limited to medical/surgical supplies, Gardner indicated. In fact, a growing number of MedAssets customers want to apply the same methodology for pharmacy items.

"Historically, drugs and the accurate billing and reimbursement capture of them have been fairly elusive to the revenue cycle teams," he said. "For example, applying billing factors for specific NDC codes or drugs is crucial in accurately charging for pharmacy items. While on the surface, the application of billing factors should be simple for the revenue team, it is an area that creates a high degree of manual oversight by the revenue cycle teams." CrossWalk Pharmacy helps to bridge the gaps between the pharmacy formularies and the chargemaster, he added.

"Maintaining commonality between chargemaster and item master makes charge capture easier to track and increases consistency and transparency within an organization," said Mark Whitman, senior consultant, supply chain, Diagnostix Services, Amerinet Inc. "It may be very difficult and costly in larger organizations, but leads to more efficient value analysis and benchmarking, which ultimately assists organizations in identifying standardization opportunities, maximizing utilization options and identifying areas of possible margin improvement and revenue growth. With greater integration between the charge and item masters, the process will be more effective and efficient."

How frequently the separate or shared CDM and IM databases are updated may depend on the facility but one trend seems consistent.

"In a perfect world, daily via significant automation," Wagner noted. "As of right now, I would suggest monthly updates, if feasible, [but] at least quarterly."

Wagner’s not alone because Reddick agrees.

"Monthly at a minimum, weekly would be best," he concurred. "Currently both the IM and CDM are updated daily by their respective departments. To mirror the two an IM file is sent to MedAssets once a month and then we utilize CrossWalk to mirror the two databases with our current methodology and ensure the CDM is up-to-date, correct and true."

Added Gardner: "Databases should have technology overlays that allow them to be updated continuously. New drugs and implantable supplies are used daily, and it is not only necessary but essential to create a process to update these items in the databases while also evaluating and applying the appropriate compliance standards."

Because ROi adds items to and changes items in Sisters of Mercy’s IM every day the update frequency between the two systems must be daily or risk being out of synch, according to Zimmerman.

"Items must be set up with an EAP code before they can be used, which provides an even more compelling reason for daily updates," he added.

Zimmerman noted that this process really involves three separate efforts that must work together to provide efficiency. The purchasing department oversees the master item file team, the revenue cycle department oversees the chargemaster team, and the information technology department often assigns a data manager or team to oversee the interface logs for errors on the interface.

"Ideally, the process should involve continuous updating to avoid one system or process being out of line with the other one," Whitman advised. "Clearly, the stronger the link between these two systems, the easier it is to accomplish this objective. Even with a process that provides for continuous updating, an annual review is prudent to ensure that the appropriate relationships are established."

Cyr concurred but cautioned that facilities evaluate how extensive such efforts should be.

"The item master and chargemaster should be updated as soon as new items are added to the item master," he noted. "Because this is generally an ongoing process, the new item master should be synchronized to the chargemaster daily. This ensures that the chargemaster includes the financial information needed to efficiently capture optimal reimbursement.

"Warehouse transactions should also be synchronized daily," Cyr continued. "Although chargeable items are sometimes physically stored on the nursing unit for immediate access, many billable items are stored in inventory and are sent to the floors only as needed. Daily synchronization of the warehouse transfer file ensures timely capture of this activity.

"Purchase order information, on the other hand, should be synchronized less frequently, to ensure that the purchase order contains the most accurate receiving and pricing information," he indicated. "If purchase order (PO) transactions are downloaded too frequently, it is entirely possible that the information will change after the three-way match with accounts payable. For this reason, downloading the PO transaction information weekly will provide a more accurate representation of the quantity and unit costs of items received."

Hospital and supplier experts are mixed on simplifying the process to the point that you eliminate charges for low-cost commodity items or even all charges, which conceptually may obviate the need to link the CDM to the IM anyway.

"Certainly eliminating low-cost commodity items from a charge master is appropriate," Wagner argued. "Managing that would likely cost more than it’s worth in revenue capture. With the level of fixed reimbursement, eliminating charging for supplies overall is probably fine and would reduce a lot of valueless work.

"In the grand scheme of things," he continued, "we simply need to be able to drill down to the patient level and identify the products and procedures specifically used with the episode of care for that patient. It’s not so critical that the data collected is for an individual patient, but more so collectively the patients for specific procedure codes. We could then draw comparisons between facilities, physicians, care units, etc., and then we can start to delve into the cost differences in caring for patients whose costs deviate from the mean at a specific point even though they have the same procedural codes."

Gardner emphasized procedural costs over individual charging. "These items should be captured in the costs of the procedures and not separately charged," he noted. "This decreases the technical and resource overhead for managing these items across all of the internal databases and additionally allows for more effective utilization of staff to capture high cost supply and pharmacy items."

But Zimmerman remained skeptical. "We need to understand what it costs at the patient bedside for standard nursing care," he noted. "Introduction of new products and changes to our formularies can impact supply costs. If we can’t tell who is really using the supplies on which patients we cannot measure usage and monitor compliance as well. 

"Recently we implemented a point-of-use system called Optiflex that allows for the scanning of bar codes on medical/surgical products and assigning use of these products direct to patients," Zimmerman indicated. "This system provides better recognition of product consumption, improved inventory management practices and more accurate patient charging. We believe point-of-use systems like the one we selected is a growing trend for providers today, which illustrates the commitment healthcare organizations have to better recognize all costs in the supply chain, not just the ones that carry charges."

Reddick was even more insistent. "I challenge anybody to eliminate all charges regarding the IM and CDM and not reflect your costs of doing business," he said. "Regardless of your charging entry point, you need the IM-CDM relationship to know where your costs are and to ensure you are charging consistently and that you can also defend it."

Yet both Cyr and Whitman wonder if the debate carries any substance or weight.

"Efforts to uncouple items from the chargemaster are generally born from the twin realizations that relatively few items are independently reimbursable and that manually linking the item master to the chargemaster is time-consuming and frustrating, though automation solutions like Craneware’s Supplies ChargeLink significantly facilitate this process," said Cyr.

"Given that healthcare organizations are constantly looking for more efficient ways to manage finite resources, it is easy to see why a hospital might gravitate to this approach," he continued. "It hopes to eliminate what is thought to be ineffectual effort and to reallocate its resources to more productive activities. Although this appears to be a reasonable short-term strategy, it undermines the organization’s ability to quantify item utilization – and thereby eliminates the ability to petition regulatory agencies for appropriate rate increases."

CDM-IM links continue to be important, regardless of philosophy changes in the handling of low-cost items, Whitman noted.

"It is still important to have a mechanism to link higher cost and other chosen products between charge and item management sides," Whitman urged. "A link to product usage allows for more effective management of cost accounting processes.