How to Create a Custom Charge Master: A Step-by-Step Guide

A well-designed charge master (also called charge description master or CDM) is the foundation of accurate medical billing and revenue integrity. Follow this structured approach to build or optimize your facility’s charge master.

🔹 Phase 1: Data Collection & Assessment

1. Inventory Current Services

• List all billable items (procedures, supplies, medications)
• Include:
  • CPT/HCPCS codes
  • Revenue codes (for facilities)
  • NDC numbers for drugs

2. Gather Reference Pricing

• Medicare fee schedules (OPPS, MPFS)
• Commercial payer contracts
• State Medicaid rates
• GPO/wholesale costs for supplies

Tool: Use CMS’s Pricing Files

🔹 Phase 2: Charge Structure Design

3. Determine Pricing Methodology

4. Build Logical Hierarchies

• Group related items (e.g., “Lab – Chemistry”)
• Standardize naming conventions:

Bad: “Inj 1”
Good: “J3420 – Vitamin B12 Injection, 1000 mcg”

5. Configure Charge Rules

• Package pricing for common combinations
• Automatic modifiers (e.g., -LT/-RT for bilateral procedures)
• Drug waste calculations

🔹 Phase 3: System Implementation

6. EHR/PM System Mapping

• Match CDM items to:
  • Order catalogs
  • Documentation templates
  • Nursing flowsheets

7. Test Charge Capture

• Validate that:
  • Orders trigger correct charges
  • Units calculate properly
  • Modifiers apply automatically

Example Test Case:
Order for “CBC With Differential” → Verifies:
✔ CPT 85025 charges
✔ Correct lab location code
✔ No duplicate billing

🔹 Phase 4: Maintenance & Compliance

8. Update Schedule

9. Audit Protocols

• Random charge validation (5% sample monthly)
• Price variance analysis (unusually high/low charges)
• Missing charge reports

🔹 Pro Tips for Success

✔ Use charge master software (e.g., Craneware, Vitalware)
✔ Create version control with change logs
✔ Train ordering providers on charge implications