Using CMS and NAHRI resources to address charge denials

Wednesday, April 7, 2021

It’s an all-to-frequent occurrence: A commercial payer denies charges for “unbundling” or “not separately chargeable.” With numerous accounts affected and revenue integrity staff hitting a dead end trying to resolve the issue, it may be tempting to simply accept the payer’s determination and write off the loss. But before you throw in the towel, take another look at the Provider Reimbursement Manual—and HIPAA.

Medicare guidance may not be the first place revenue integrity professionals turn to when dealing with a commercial payer, but in some cases it’s baked into payer contracts. Most payer contracts stipulate that the provider organization participate in Medicare—and by extension that the organization follow Medicare’s cost reporting and charge structure guidelines as outlined in the Provider Reimbursement Manual.

In addition, both provider and payer organizations are legally required to comply with HIPAA, including HIPAA’s Administrative Simplification provisions. This part of the law establishes transaction sets for electronic transactions such as claims and charges listed on claims.

If you’ve established that your charge structure and reporting practices are compliant with Medicare and HIPAA, you have a solid case for successfully appealing these denials. NAHRI members may access the Sample Payer Charge Denial Letter to use as a template when drafting appeal letters. The Sample Payer Charge Denial Letter was written by NAHRI Advisory Board member Valerie A. Rinkle, MPA, CHRI, president of Valorize Consulting.

Revenue integrity professionals may not always realize that commercial payers are required to follow HIPAA Administrative Simplification requirements or be aware of the extent to which their contracts depend on Medicare compliance, Rinkle says. This is a serious blind spot, leaving organizations at risk for losing appropriate revenue and running afoul of HIPAA and Medicare compliance.

“Hospitals and payers need to understand the requirements for and definition of charges and how this relates to Administrative Simplification requirements,” she says.

For example, hospital charges for point of care laboratory tests must meet the CPT® code set definition of a diagnostic laboratory test—meaning they’re ordered by a treating clinician, performed using FDA-approved technology that meets the CPT definition, resulted to the ordering clinician, and used by the clinician in management of the patient, Rinkle says. Hospitals are required to report diagnostic laboratory charges according to the National Uniform Billing Committee (NUBC) revenue code requirements. Failing to report the charge is akin to a violation of the code set rules, she explains. If the payer insists that the hospital not report the charge that would be a serious compliance risk for both organizations.

Payers are increasing the rate at which they deny charges for unbundling, according to Rinkle. If revenue integrity professionals spot a pattern emerging with a particular payer, they may need to reach out to their colleagues in the payer contracting and legal departments to develop a global strategy that goes beyond a claim-by-claim appeal, she adds.

However, the payer contracting and legal departments sometimes advise against further appeals, arguing that it’s best not to rock the boat. Revenue integrity professionals can counter that argument by pointing out that accepting these denials will only cause them to increase, eroding the value of the contract terms and relationships the payer contracting and legal departments are concerned about, Rinkle explains.

Use a proactive, collaborative strategy to address concerns with payers, Rinkle advises. Rely on references and resources, such as the Sample Payer Charge Denial Letter, to explain your concerns to payers. Emphasize that your organization is contractually bound to abide by Medicare’s cost reporting and charge structure guidelines as outlined in the Provider Reimbursement Manual, and that, as HIPAA-covered entities, provider and the payer organizations must abide by HIPAA’s electronic claim transaction set rules. However, if the problem persists and the payer is unwilling to comply, it may be necessary to take further action.

“It is important to discuss with the payer’s provider representative and show examples from the official code set maintenance organizations like the AMA or NUBC,” Rinkle says. “Next, if the payer will not make meaningful changes, a formal complaint can be filed through CMS who is tasked by law to enforce the standards. CMS will investigate and request a corrective action plan if it is a violation.”

Tips for validating charge structures and charging compliance

Revenue integrity professionals should take a pattern of charge denials as a cue to review their own organization’s charge structure and charging policies. NAHRI offers a number of resources on correct charging practices. NAHRI members can also discuss chargemaster and charging questions on the NAHRI Forums. And, of course, a good understanding of the Provider Reimbursement Manual and HIPAA transaction code sets are a must, Rinkle says.

“If the hospital has not had a chargemaster and claim review in a few years, an external review may be warranted,” she says.

Rinkle also suggests that revenue integrity professionals turn to the following resources for more information on ensuring chargemaster and charge capture compliance:

  • 2009 Inpatient Prospective Payment System (IPPS) final rule
    On p. 48464–48466, CMS discusses charging nursing services in addition to room rates. The discussion focuses on blood administration services but is applicable to other necessary services and unique charges in addition to the room rate. “If an item is not specifically enumerated as a routine item or service in Section 2202.6, or an ancillary item or service in Section 2202.8, then the rules in Section 2203 of the PRM-I apply. This section requires that if the common or established practice of providers of the same class in the same State should be followed. If there is no common or established classification of an item or service as routine or ancillary among providers of the same class in the same State, a provider’s customary charging practice is recognized so long as it is consistently followed for all patients and does not result in an inequitable apportionment of cost to the program,” CMS said.
    Hospitals cannot learn or solicit what other hospitals do to understand what the “common or established practice of providers of the same class” are because that’s governed by anti-trust laws, Rinkle points out. Only the Medicare contractor has the authority to do that, which is why the 2009 IPPS final rule refers to the individual hospital’s “customary charging practice.”
  • Transmittal 2877 (February 7, 2014) and Transmittal 3106 (November 6, 2014)
    These transmittals address separately chargeable services and CMS’ expectations for hospital charging policies. In Transmittal 3106, CMS says, “Many nursing services provided by the floor nurse (such as IV infusions and injections, blood administration, and nebulizer treatments, etc.) may or may not have a separate charge established depending upon the classification of an item or service as routine or ancillary among providers of the same class in the same State. Some provider’s customary charging practice has established separate charges for these services following the PRM–1 instructions, however, in order for a provider’s customary charging practice to be recognized it must be consistently followed for all patients and this must not result in an inequitable apportionment of cost to the program. If the PRM–1 instructions have not been followed, a provider cannot bill these services as separate charges. Additionally, it is important that the charges for service rendered and documentation meet the definition of the HCPCS in order to separately bill.”



Addressing inappropriate charge denials is critical to protect revenue—and eliminate potentially costly compliance risks. By following Medicare and HIPAA requirements for charge structure and charges, revenue integrity professionals can ensure their organizations stay in the clear.