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A Quick Look At
Hospital Supplies

Supplies are a big part of hospital charges for hospitals. The revenue codes for these charges range from 270 to 279. Most supplies don't have a HCPCS code associated with them (I'm assuming this audience knows what a HCPCS code is), but a great many do. These days, with the new payment methodology of Medicare and the "jumping on the bandwagon" of many HMOs, it becomes more crucial to try to make sure that not only are supply charges being captured properly, but that they're coded properly as well. Hospitals across the country are cheating themselves out of reimbursable dollars by incomplete and erroneous coding errors.

Unfortunately, there are two major problems with supply charges. One, though materials management is responsible for ordering supplies, it becomes apparent that most of the time they have no responsibility for coding any of these charges. Most of the directors of these departments have never heard the term HCPCS. This means that the department directors who use the supplies should be responsible for making sure these charges are coded properly. If you're at a normal facility, though, most of your department directors don't understand the concept of procedure codes as it is, so expecting them to know HCPCS codes also isn't realistic.

The second problem is that, as a patient accounting person, you probably have never seen most of the supplies that are on a charge master, and therefore have no idea what they're for. You also probably look at the descriptions of the charges on a detailed bill and they don't mean anything to you. Even if, because of the diagnosis code, you're able to determine the department a procedure was performed in, you may still have no idea exactly what an item may be. And it can be difficult to track down because you don't know who created the description, or when the description was created, and quite often you'll find that people are selecting items off a charge sheet because they were told those items are always used for a specific procedure.

It becomes the responsibility of the patient accounting director, unless your facility happens to have someone specifically dedicated to the charge master, to try to bring some semblance of order back into the process. It's your responsibility for a few reasons. One, you get all the changes in regulations from Medicare and all other insurance companies first; sometimes you're the only one who gets the changes. Two, you're the only one who knows what both a HCPCS and CPT-4 code is. Three, the ultimate responsibility of every patient accounting director is to increase the cash collected, even more than keeping receivables down, and you could be missing opportunities for more cash to come into your facility.

Below are some points to consider, as well as a quick primer. As I said earlier, if you have someone already responsible for the charge master, then you don't have to get into this as much. But you should still know and participate in the process because, ultimately, you will be the one someone will come to for clarification and explanation.

  1. Help to educate the department directors, especially materials management, on the concept of HCPCS. It's hard for anyone to help you if they don't know what you're talking about. Be sure to stress not only the extra cash that could come in, but the revenue they could be helping to generate for their departments. Supplies are usually the last thing most department directors think of when it comes to the charging process, and this may be a way to help them increase revenue.

  2. Give guidance towards setting a standard for what supplies are called. Some hospitals lead every supply charge with the name of the company they purchased the supplies from, especially if they order the same thing from different companies. Often, because they've done this, there's little room left for a legitimate description of the supply, because most hospital systems only allow a specific number of characters for descriptions. A supply should always include what it is; if it's some kind of catheter, make sure that word is listed. If it's a tube, make sure it's listed. It may not seem as important for low priced supplies, but it becomes critical for higher priced items where reimbursement might be substantial.

  3. Learn the revenue codes yourself. This is relatively easy, but making sure you understand the significance of these codes is essential:

    • 270 - Medical/Surgical supply, general description. It's best to have charges coded into a more detailed description than 270. For most insurances, charges coded as 270 will not be reimbursed.
    • 271 - Nonsterile supply.
    • 272 - Sterile supply.
    • 273 - Take Home supply. These are unbillable by hospitals to most insurance companies.
    • 274 - Prosthetic/Orthotic Devices. This code requires HCPCS codes. As of July 2003, implantable prosthetic/orthotic devices should be coded as 278 per Medicare regulation.
    • 275 - Pacemakers. This can include supplies that are related to the implantation of pacemakers also, not only the pacemakers themselves.
    • 276 - Intraocular Lens.
    • 277 - Take Home Oxygen. This is unbillable by hospitals.
    • 278 - Implants. There are now HCPCS codes for many implantable items, most of them L-codes.
    • 279 - Other supplies/devices. This is a catch all category, but should only be used for new and experimental items, not every day or common usage items.

    There are also supply items that should be listed under revenue codes 623X, and most of the time these charges are included within a specific departmental charge master:

    • 621 - Supplies incident to radiology
    • 622 - Supplies incident to other diagnostic services
    • 623 - Surgical dressings
    • 624 - FDA Investigational Devices

  4. Share all insurance directives you receive with both materials management and the department the directives are aimed at. Information is never any good if only one entity knows it.

  5. Stay away from "miscellaneous" supplies, or departmental created "kits", "sets", etc. If there are specific items that have their own codes included in a kit, it's in the facilities best interest to bill these items separately, especially if they have a HCPCS code that can be associated with it. If your facility is ever audited, the hospital must have the ability to detail exactly what made up one of these kits if it's not pre-purchased that way.

Dealing with supply charges isn't easy for patient accounting people; I know that as well as anyone else. But fearing these charges won't do you any good, especially because the possibility is strong that at some point you'll be involved in the process anyway. You don't need to know it all; just try to make yourself familiar with some of the nuances.

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