How to Make Sense of Charting, Charging, Costing, Reimbursement, and Productivity—Fundamentals for Respiratory Therapists in Inpatient Settings

For many of us during our respiratory care training, we were taught to focus on clinical documentation, which remains the focus for the bedside Respiratory Therapist (RT).  However, we also know that there are important non-clinical aspects of documentation, including charging, billing, and reimbursement with ramifications that have changed over time and are sometimes hard to understand. So, what exactly do these terms mean and why are they important?   

Charting

The two primary purposes for charting are: 

 1) clinical documentation, and  

 2) charging.   

While we tend to focus on clinical charting as documenting the care we render and the patient’s response to our services, charting also provides information for financial purposes. The charting content is determined by each institution, but typically includes the service/procedure, medication(s) (if appropriate), modality/device, patient assessment and response to therapy, and the date/time rendered.   

It’s important to note that for an increasing number of RT departments, the third purpose of charting is to capture productivity. Productivity is an extensive subject in its own right that you can learn more about here.   

Charging

The charging element is done by the organization, who bills the payer (e.g. government, commercial insurer, patient). The charge for the inpatient stay is typically itemized so that the payer understands which services were provided. What’s important for the RT to understand is that the service s/he renders as an RT is part of the global hospital bill and that there is no direct payment to the RT department for their services. With a few exceptions, the charges are combined into the inpatient stay, Emergency Department visit, or outpatient visit and billed to the payer. Each hospital department creates and maintains a complete listing of all of their services, which is called the Charge Master or Charge Description Master. The complete hospital bill includes the services from each department (e.g. treatments, medications, lab tests, imaging studies, supplies etc.). Note that these services are for the hospital component, while the physician services are billed separately.  

Let’s take a patient receiving a pulmonary function test as an example. Here the RT department generates the documentation for the hospital to bill for the test. The physician bills separately for the interpretation of the test. This is the standard setup, with some exceptions for employed physicians who wouldn’t be billing separately.   

Costing our Services 

In simple terms, I think of the cost of our services being comprised of ‘staff and stuff’ consumed within the procedure and overhead costs.   

In terms of ‘staff’, it’s the labor cost to provide a specified procedure or service. I typically use the labor rate for the clinician and don’t include benefits, because benefit costs are not within the control of the RT leader. For example, if an RT being paid $28/hour performs a nebulizer treatment that requires 15 minutes, the labor cost is $9.00.   

 In terms of, ‘stuff’, it includes pharmacy (e.g. bronchodilator, diluent) and consumables (e.g. nebulizer, ABG syringe). Depreciation of capital equipment (e.g. ABG machine, mechanical ventilator) is important to financial operations, but since these devices are depreciated over years of service and the mechanism to purchase, rent, or lease varies, I suggest to note this but not include it when we examine the cost to provide a service. Let’s take a practical example of this that’s frequently discussed in our profession.   

An RT leader wants to examine the cost of delivering a bronchodilator treatment with a nebulizer versus an inhaler.  For the nebulizer treatment, it would include the cost of the bronchodilator, diluent, nebulizer cost/treatment (note:  SVN cost would be determined by its acquisition cost divided by number of treatments during the acute hospital stay), and RT labor.  For the inhaler, the cost would be the cost of the inhaler dose, valved holding chamber (VHC) (note:  acquisition cost divided by number of treatments during the acute hospital stay), and labor.  What we see with the SVN is that the largest cost is the RT labor due to the time to deliver the treatment ~ 15 minutes. Conversely, with the inhaler the largest cost is for the inhaler and VHC, since the time to deliver the doses is much shorter than with the SVN.   

As for overhead costs, these are the cost to operate the hospital that are ‘behind the scenes’.  These costs would include administrative costs, benefits, facility, operating expenses (e.g. HVAC), insurance, and others.  Since these costs are far more variable between organizations and outside the control of the RT leader, I suggest that we need to be knowledgeable of these costs but not include them in our costing of our services at the bedside. 

Reimbursement

Many of us started our careers at the time in which inpatient services were covered under a retrospective payment methodology. We were instructed to record every service to capture the charge and create the bill. This system, called Retrospective Payment, is still used for physician and outpatient stay billing, but as we’re focused on inpatient settings for the scope of this piece, I won’t go into detail here other than to say that under this system, there is incentive in providing more services because reimbursement is directly tied to the services provided.  

Most of these reimbursement methodologies were replaced, with a few exceptions, with the advent of the federal Prospective Payment System (PPS) for Medicare and later adopted by Medicaid and commercial insurers. Under a PPS system, the hospital receives reimbursement based upon the principal diagnosis documented by the physician as being the reason for the acute care admission. While more complex than this, the hospital knows what the reimbursement will be based upon the principal diagnosis.   

Let’s take the case of a COPD patient admitted to an acute care hospital. If we use $8,000 as the reimbursement for this COPD patient and $9,000 as the hospital’s cost for this admission, the hospital would lose $1,000. Conversely, if the hospital’s costs were $7,000, the hospital would net $1,000. Hence, the incentives for financial success are not to do more as it was with retrospective payment, but rather to provide high quality, evidence-based care that is cost effective.  

Productivity 

Perhaps the most used term for RT leaders today is ‘productivity’.  We hear it from our executive leaders, from consultants, and in our benchmarking of our operations with other similar RT departments.  While we use the term ‘productivity’, we are really addressing the issue of ‘efficiency’.  Productivity typically is used to assess the relationship between inputs and outputs.  For a vehicle, we use ‘miles per gallon’ as the measure of the efficiency of our vehicle and we are able to compare between vehicle’s efficiency by using this standard methodology (note:  For most of the world that uses the metric system, that would be ‘kilometers per liter’).  I cover this critical issue in far more detail in “How are Respiratory Care Department metrics selected?” and “How are Respiratory Care Department Productivity Systems Captured and Tracked?”   

What makes comparing vehicle efficiency easy to use between models is that the formula is standardized across the industry in miles/gallon and that is certainly not the case in healthcare.  As RT leaders, we understand that the only way we can properly measure productivity is by using appropriate numerators and denominators.  In our profession, the AARC provides this to us in the form of the AARC Uniform Reporting Manual (URM).  This is addressed in operational detail in “How are Respiratory Care Department metrics selected?”, “How are Respiratory Care Department Productivity Systems captured and tracked?”, and “What is benchmarking and how are performance metrics used for benchmarking in the context of RT Department Productivity?” with regard to valid and invalid metrics, but the essential element is that we compare total procedural time to the total RT worked clinical hours.  This productivity measure can be reported as Total Procedural Hours/Total RT Worked Clinical Hours or Total RT Worked Clinical Hours/Total Procedural Hours.  There’s no right or wrong formula to use, but it is important that the RT leader understand the formula used in her department because this will be used as an ongoing performance measure. 

Why does this matter? 

Regardless of the payment methodology, RTs need to document our services to demonstrate our value as providing high quality, patient-centric, safe, and cost-effective care.   

In short, RTs should focus on what I call the 5 Rs:  Right Care, Right Quality, Right Cost, Right Time, and Right Provider. By utilizing patient-focused respiratory care protocols (Right Care), and evidence-based medicine (Right Quality), providing services that add value beyond the acquisition cost (Right Cost), aligning services according to the most appropriate care venue (Right Time), and providing services documented as adding value by RTs (Right Provider), our profession will document and communicate the value of our services provided. 

Meet The Expert

Garry W. Kauffman, RRT, FAARC, MPA, FACHE

Garry W. Kauffman, RRT, FAARC, MPA, FACHE is a registered respiratory therapist with over 40 years of experience. Garry was selected for the AARC Fellow (FAARC) based upon his contributions to the profession at the national level.

Garry received his MPA from The Pennsylvania State University, and achieved the distinction of board certification in health care (FACHE) from the American College of Healthcare Executives.

Beginning his career as a bedside clinician, Garry has served in clinical, educational, and administrative roles in a variety of healthcare organizations and venues from short-term acute carehospitals, physician practice, ambulatory services, and long-term acute care hospitals. He formedKauffman Consulting, LLC and is the manager of this health care consulting company.

Garry is recognized for numerous journal publications, author/co-author of respiratory care textbook chapters, and as a frequent speaker at the state and national level. Garry has served his profession at the district, state, and national level where he has served in the AARC House of Delegates, AARC Board of Directors, and AARC President. Garry has served his profession in various volunteer roles as the AARC Chartered Affiliate Consultant; AARC Benchmarking Committee; AARC Advanced Practice RT Task Force; AARC Strategic Planning Committee, Respiratory Care author/reviewer; AARCTimes author/reviewer, AARC Uniform Reporting Manual, and ARCF Education Recognition Award Judge, among others.

Garry’s focus continues to be on communicating the value of respiratory care services delivered by Respiratory Therapists by connecting the science of respiratory care, documenting outcomes secondary to our services, and communicating our value to key stakeholders in the health care system.

Garry Kaufmann is a paid consultant of Vapotherm.