The Continued Importance of Charting Supplies

If care is not documented in a medical record, did it occur? For payers, and for regulators, the answer is “no,” while for patients and members of a patient’s extended care team, it can be hard to tell what really happened. Some evidence suggests both that documentation errors and omissions may be frequent, as well as that they may frequently go undetected.

Supply and implant charting is a crucial part of the overall patient record and of revenue generation in most hospitals, and errors can have quality and reimbursement implications. Estimates vary, but the supply portion of total hospital expenses is around 15 percent on average. It may range up to 30-40 percent for quaternary care sites with high case mix index (CMI) numbers.

Surprisingly, supply and implant charting errors are rarely discussed in scholarly literature. Some researchers argue that statistical software packages filter out incomplete records from data sets by default, making it harder to notice charting omissions.

The gap between the number of significant or “chargeable” items acute care providers purchase and the number they document in patient charts is at least anecdotally widespread. Until recently, however, conflicting financial incentives (such as the need to cut labor costs and increase volume versus spending time ensuring record completeness) made closing that gap a lower priority for many organizations.

The global SARS-CoV2 pandemic, besides stretching providers to the brink of their capacities—and often beyond— also battered them financially. That turbulence continues, and in many locations it is compounded by demographic and market shifts that make funding the mission and planning for the future feel challenging at best.

In San Francisco, for example, the population shrank 7 percent in two years from March 2020. In 2019, the city hosted around 20 million visitors, and even approaching that level again could take years. Many downtown financial district offices that hosted commuters from around the nine-county Bay Area sit vacant.

In this situation, when a healthcare institution’s population base craters while case mixes change dramatically and suddenly, justifying all expenses and tracking supplies used in treatment becomes an existential imperative. This is not only because you need to get every bit of earned revenue into the bank to make payroll; it is also because historical usage patterns got tossed out the window, and you cannot forecast what to buy based on data from “the before times.” Some facilities also use gross patient charges for cost accounting, so charting supplies there can also be a way to estimate labor requirements.

Still, readers may wonder whether, in the age of the ACA, capitated care, and bundled payments, gross supply revenue could still generate much cash income.

In 2020, half of care payments in the US were still made on a fee-for-service basis. That percentage will certainly continue to shrink over time, but it suggests that investments in charting accuracy are still likely to generate some return.

How big is that financial incentive? According to an American Hospital Association (AHA) hospital survey, median hospital supply spend was $9.1 million in 2013. Hospital markup rates for supplies are notoriously variable, but industry surveys suggest a five-fold (500 percent) average markup is a reasonable estimation. At 14 hospitals where our team measured the gap between what was purchased and what was charted, the average percentage of items missed was above 28 percent. This represented 14 percent of potential gross revenue left unbilled.

If other hospitals have similar charting gaps to those we found, the median hospital may fail to chart and bill $6.4 million in gross revenue per year after mark-up. Far more could be missed at hospitals delivering more complex levels of care.

Readers may have noticed the phrase “gross revenue” above and thought, “We might only get pennies on the dollar for those charges.” Revenue Cycle departments use charge sensitivity formulas to estimate by DRG the percentage of a gross supply or implant charge a hospital might receive from payers. In hospitals we studied, charge sensitivity formulas suggest that gross supply charges convert to income of a rate between 5 percent and 13 percent, depending on whether the bills were for inpatient or outpatient services. Extrapolating again, the median hospital could be missing up to $800,000 in net income in a year, and this could be much larger for tertiary and quaternary centers.

Together with the quality implications of ensuring medical records are complete and include all significant supplies used and the forecasting benefits of having accurate usage data, complete charting can contribute to a hospital’s bottom line. During times of profound uncertainty, accurate supply charting is an even more essential tool for providers who need to understand how their “new normal” is evolving and how to shore up margins to support their healthcare delivery mission.