Understanding the CDM (Chargemaster): A Complete Guide

The Chargemaster (CDM — Charge Description Master) is a comprehensive list of all billable services, procedures, supplies, and medications provided by a healthcare facility. It serves as the pricing and billing backbone for hospitals and medical institutions, ensuring accurate and efficient claims submission to Medicare, Medicaid, and private insurance companies.

The CDM links directly to the 837I Institutional Claim Form, as it contains the procedure, revenue codes, and pricing details used when submitting hospital claims.

What is a Chargemaster (CDM)?

The Chargemaster (CDM) is a hospital’s itemized list of medical services and supplies used for billing and reimbursement. It includes:

• Procedure codes (HCPCS, CPT, ICD-10-PCS)
• Revenue codes
• Service descriptions
• Pricing details
• Billing rules

The CDM is used in institutional claims (837I) to map charges to the correct billing codes, ensuring compliance with payer rules and maximizing reimbursement.

Key Components of a CDM

1. Charge Code (CDM Code)

• A unique internal identifier assigned to each service, procedure, or item in the hospital’s billing system.

2. Procedure Codes (CPT, HCPCS, ICD-10-PCS)

• CPT (Current Procedural Terminology): Used for outpatient and physician services.
• HCPCS (Healthcare Common Procedure Coding System): Used for Medicare and Medicaid billing, including medical supplies and drugs.
• ICD-10-PCS (Procedure Coding System): Used for inpatient procedures in institutional claims (837I).

3. Revenue Codes

• Revenue Codes categorize charges for hospital and facility services.
• Each 837I claim must contain a revenue code to define the type of service provided.

Example:

• 0250 — Pharmacy
• 0450 — Emergency Room Services
• 0636 — Drugs Requiring Detailed Coding

4. Service Description

• The clinical description of the charge (e.g., “MRI Brain Scan with Contrast”).

5. Department

• Identifies the hospital department responsible for the charge (e.g., Radiology, Surgery, Pharmacy).

6. Pricing

• The hospital’s standard charge for the service or supply.
• May differ from payer-negotiated rates or self-pay pricing.

7. Modifiers

• CPT/HCPCS Modifiers adjust the billing of a procedure based on specific conditions.
• Example: Modifier 50 (Bilateral Procedure), Modifier 59 (Distinct Procedural Service).

8. Payer-Specific Rules

• Insurance payers (Medicare, Medicaid, private insurers) may require specific codes or pricing adjustments.

How the CDM Relates to 837I and 835 Transactions

The Chargemaster (CDM) plays a direct role in institutional claims (837I) and remittance advice (835).

1. CDM → 837I Institutional Claims

• The CDM assigns revenue codes, procedure codes, and pricing to services provided to a patient.
• This information is included in the 837I claim submission.

Example:

• A hospital inpatient surgery has the following CDM data:
• Charge Code: 500123
• CPT Code: 47562 (Laparoscopic Cholecystectomy)
• Revenue Code: 0360 (Operating Room Services)
• Hospital Charge: $12,500

This data is extracted from the CDM and included in the 837I claim sent to the payer.

2. 837I Submission → 835 Payment Processing

• The payer (Medicare, Medicaid, or private insurance) reviews the 837I claim, validates the charge codes, and determines reimbursement.
• The payer sends an 835 Remittance Advice, which includes:

1. Payment amount
2. Adjustments or denials
3. Revenue code matching
4. Modifiers impacting payment

• Hospitals compare the 835 payment data with the CDM pricing to track underpayments or denials.

How the CDM Differs from 837I and 837P

Why the CDM is Important for Hospitals

1. Ensures Accurate Billing

• Standardizes charges, procedure codes, and revenue codes for 837I claim submission.
• Helps prevent claim denials due to incorrect codes.

2. Supports Regulatory Compliance (CMS, Medicare, Medicaid)

• Ensures charges comply with HIPAA, CMS, and insurance payer rules.
• Meets price transparency requirements for hospitals.

3. Improves Revenue Cycle Management

• Tracks charges and payments across 837I and 835 transactions.
• Identifies underpayments or incorrect payer reimbursements.

4. Reduces Claim Denials

• Ensures procedure codes and revenue codes align with payer guidelines.
• Helps hospitals avoid billing errors and maximize reimbursement.

Example CDM Workflow in a Hospital Setting

Patient Receives Treatment A patient undergoes an MRI Brain Scan with Contrast at a hospital.

Charge Capture via CDM

The hospital’s CDM assigns the appropriate charge code, CPT code, and revenue code.

Example:

• CDM Charge Code: 400001
• CPT Code: 70553 (MRI Brain with Contrast)
• Revenue Code: 0611 (MRI Services)
• Charge: $2,500

Claim Submission via 837I

• The 837I claim is generated, including the charge details from the CDM.
• The claim is submitted to Medicare or private insurance.

Payment Processing via 835

• The insurance processes the 837I claim and sends back an 835 remittance file with payment details.
• The hospital compares the 835 payment to the CDM charge to check for underpayments or denials.

Conclusion

The Chargemaster (CDM) is the backbone of hospital billing. It ensures that all medical procedures, services, and supplies are correctly coded, priced, and mapped to revenue codes for 837I claim submissions.

By understanding how CDM, 837I, and 835 transactions interact, hospitals can:
✔️ Improve billing accuracy
✔️ Reduce claim denials
✔️ Optimize revenue cycle management
✔️ Ensure compliance with CMS and HIPAA regulations

CDM → 837I → 835: The foundation of institutional claim processing!