How Much Money Is Lost In Outpatient Labor and Delivery Services?

A lot of money is lost every year by failing to bill for services performed. For some hospitals, it is millions per year. How many providers are experiencing a revenue leakage problem for outpatient labor and delivery services? It's estimated at 80%. How many services go unbilled? What is the financial impact? In this edition of Insights, we will explain why hospitals are losing money and not billing for services performed, the potential financial impact, and possible solutions.
Simply stated, providers are unaware of revenue leakage problems. Effectively capturing and billing correctly for all services performed is a challenge, especially for services performed in the labor and delivery department. Why? Labor and delivery is a unique department with a mix of inpatient, outpatient, and emergency services when patients are diverted from the emergency department. Many providers are reimbursed a case rate per delivery, so it is very common to miss additional revenue opportunities associated with separately billable encounters. Lastly, the dependence on technology further contributes to this problem by creating a false understanding of labor and delivery reimbursement methodology.  
Identifying charge capture opportunity is nothing new, but how these missed charges translate into real dollars requires a thorough understanding of managed care payers. Simply capturing charges isn't enough; payers may prefer unique codes when submitting outpatient claims, or require specific revenue codes, etc. These billing requirements are usually not included in the contract language, creating a game of trial and error. Additionally, some of these unique billing nuances and requirements cannot be programmed into a charge master or billing system due to system limitations. While the UB-04 is standard, the data populated into the 80 fields on this billing form is far from standard. For example, CMS requires HCPC G0378 of observation, while many payers require 99218-99220 for observation patients seen < 8 hours. But hold on, if the patient is discharged the next calendar day, better throw in the 99217 too. Nope, we're not done, what about the patients seen > 8 hours, yes you guessed it, another set of codes 99234-99236. While just a small example, it illustrates some of the challenges that exist to simply get paid for services performed in the outpatient labor and delivery department.   

Another challenge is labor is considered an emergency medical condition under the Emergency Medical Treatment and Active Labor Act (EMTALA). By CMS definition, labor means the process of childbirth beginning with the latent or early phase of labor and continuing through the delivery of the placenta. A woman experiencing contractions is in true labor unless a physician, certified nurse-midwife, or other qualified medical person acting within his or her scope of practice as defined in hospital medical staff bylaws and State law, certifies that, after a reasonable time of observation, the woman is in false labor. It is very common for patients experiencing contractions to be directed from the Emergency Room to the Maternity floor. Aside from ensuring hospital polices exist to address this circumstance, it is equally important to document the services provided and ensure the option exists for the Hospital to appropriately bill for the services performed.

If identifying and capturing revenue leakage was easy, there wouldn't be problem. While many hospitals have organized revenue cycle teams and charge capture audits, the labor and delivery department is usually not one of the departments often investigated. Of all hospital departments, this is perhaps the only department without Medicare dominating the payer mix. In fact, it is very rare to have a Medicare patient receiving maternity services. Since most providers set up charge masters and billing edits based on Medicare guidelines, this may not be appropriate for managed care payers. Additionally, many of the packaged services under Medicare may not apply based on the managed care payer contracts.

From a pricing perspective, is there a hospital policy that addresses not only HCPC's, but CPT codes used by the facility? It is common for hospitals to have a pricing policy that is outdated and not followed. Often, these policies set charges at a percentage of Medicare reimbursement without regard to payer fee schedules, which often results in lost revenue due to lesser off contract language. Additionally, these policies rarely provide guidance when new services are added resulting in inappropriate procedure codes and pricing. In addition to inappropriate procedure codes and pricing, missing procedure codes and incorrect revenue codes are a very common problem.

Performing regular labor and delivery department charge capture audits may address some of the challenges outlined. Specifically, these audits should:


Based on audit findings, provide training and education to all parties involved in the coding and charging process, because the long term financial impact of including focusing on outpatient labor and delivery may contribute millions to future revenue growth.  
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Best Regards,
Rob Jones

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