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Winter 2020 - Integrated Care

Complying with Rules Ensures Reimbursement for Drugs

ALTHOUGH STEEPLY rising healthcare costs can be attributed to many complex interconnected factors, and with payment models continuing to evolve to cope with this cost burden, it is payers that often dictate reimbursement. In many cases, payers decide which expensive high-investment drugs will be reimbursed and under what circumstances.

For private insurance carriers and Medicare Advantage (MA) Parts B and D plans, the prior authorization (PA) process guides payment decisions. For traditional Medicare Part D plans, PA guides payment decisions as well. However, for traditional Medicare Part B plans, local coverage determinations (LCDs) and national coverage determinations (NCDs) guide payment decisions. Now, in the proposed 2020 outpatient prospective payment system rules, the Centers for Medicare and Medicaid Services (CMS) is considering PA for specific current procedural terminology codes covering five categories of hospital outpatient department services: blepharoplasty, botulinum toxin injections, panniculectomy, rhinoplasty and vein ablation. See Table for the similarities and differences between PAs and NCDs/LCDs.

Table of similarities and differences between PAs and NCDs/LCDs

For plans that require PA, providers must ask permission before drug administration to obtain payment. To date, however, Medicare uses the honor system to determine whether providers adhere to its requirements for specific drug use. For LCDs and NCDs, payment for drugs is determined after the fact by Medicare Administrative Contractors (MACs) representing CMS, and payment may be denied if the rules are not followed. As such, clinicians must understand which products are affected, how to document completely and thoroughly, and how to code correctly. Specifics for each affected drug are published on each MAC website at

The Medicare Coverage Database ( contains all NCDs and LCDs, local articles and proposed NCD decisions. It also includes several other types of national coverage policy-related documents, including national coverage analyses, coding analyses for labs, Medicare Evidence Development and Coverage Advisory Committee proceedings, and Medicare coverage guidance documents. Although clinicians are often outraged by the loss of control that comes with outside entities dictating payment terms that impact care, they must balance their need to be fiscally responsible with making decisions that may result in no payment. This is especially true since Medicare Advantage, which represents one-third of all Medicare patients, moved to step therapy with accompanying mandatory PAs on Jan. 1, 2019, for both Part B and Part D drugs.

NCDs, LCDs, PAs and ICD-10: Understanding the Vital Links

To ensure reimbursement, NCDs, LCDs and PAs require an ICD-10 code that supports use of the product in question. ICD-10 codes for LCDs and NCDs can be obtained from the provider’s MAC website, and the ICD-10 codes for PA can be obtained from payers. Providers should be sure ICD-10 codes documented in the chart support the codes the revenue cycle team is expected to apply. And, this information should be updated when new drugs are released, new payment decisions are made and ICD-10 code revisions are published. For optimal results, the clinical and technical staff should practice in a cross-functional manner with patient navigators to ensure compliance with expensive specialty drugs and biologicals. This means remembering to provide the required electronic health record (EHR) documentation before the drug order is written and before the drug is prepared and administered. Equally important is ensuring PAs remain a permanent part of the record in real time for auditing purposes. Consider three key points that can determine the path of an appropriate drug for a patient that results in success (payment) or failure (payment refused for lack of medical necessity):

1) Patient registration

  • Success: The payer data is available to the pharmacy at order entry.
  • Failure: The pharmacy doesn’t know the payer.

2) Computerized physician order entry (CPOE) file

  • Success: The PA/LCD/NCD information is included in the CPOE file.
  • Failure: Neither the provider nor the pharmacy is aware of the requirements, and the PA/LCD/NCD is not included in the CPOE file.

3) Physician order entry

  • Success: The physician is aware of the PA/LCD/NCD requirements, and EHR charting is thorough and complete for optimum ICD-10 code assignment.
  • Failure: The physician charts scantily, and the revenue cycle team assigns codes that don’t meet payer requirements.

Obstacles to Overcome

A dilemma often arises when a patient is treated for an off-label indication that is supported by the literature. While off-label treatment may be sufficient grounds for payment denial, it is possible denials can be overturned with the help of patient and billing assistance programs offered by pharmaceutical companies. Another helpful resource is the pharmacy’s familiarity with CMS-approved compendia, which can be used to support a billing claim for a pharmaceutical with a reimbursable Healthcare Common Procedure Coding System code used for an off-label indication.

Five drug compendia are identified as authoritative sources for the benefit of anti-cancer drugs. However, each MAC may have its own requirements for use, which can be found on its website. For instance, some may use evidentiary levels of efficacy discussed in these compendia to determine whether a drug may be covered for a given indication. CMS-approved authoritative compendia are listed in the CMS Internet Only Manual (IOM) Publication 100-02, Medicare Benefit Policy Manual, Chapter 15, Section 50.4.5 at

For all drugs, including anti-cancer drugs, and in the absence of any statutory, CMS or MAC exclusion of a drug or specific drug indication, MACs may recognize an indication to be medically accepted if the indication is:

  • FDA-approved for the drug at the FDA-published dose and frequency; or
  • Listed in one or more of the approved compendia with an appropriate level of evidence of efficacy; or
  • Recognized, following Medicare review of the peer-reviewed literature, as an appropriate treatment (the requester is expected to provide significant peer-reviewed full articles to the contractor for review) and the use is not listed as unsupported, not indicated or not recommended (or equivalent terms) in any of the compendia. Any such listing precludes reimbursement for the drug.

Financial Advocacy

Unfortunately, many facilities treat financial advocacy in a disjointed, understaffed fashion with no one area ultimately responsible and little documentation to support the entire effort across the continuum of care. This is a problem because the complexity of PAs, especially for oncology and other immunologic agents, has increased significantly. To gain better perspective, facilities need to determine whether what they are doing now is working or whether their denial rate is climbing. They must also determine if their systems are robust enough to withstand the addition of Medicare Advantage patients. Furthermore, their systems need to be up-to-date and timely, and EHR systems must be optimized to improve patient flow, reduce patient expense and increase assistance program enrollment.

To develop and strengthen the team, facilities can track write-offs and denials, many of which will be coded “no authorization” or “lack of medical necessity” despite the drug being a valid choice for a patient’s condition. It may not be that the choice of product was the problem, but rather how it was handled and/or documented in the EHR, resulting in an incomplete or faulty claim. By ensuring these problems don’t occur, both the patient and facility will benefit in measurable ways.

Resisting Change Not an Option

Is your facility flexible or rigid? Can it respond quickly to changing environments and new government mandates? Have you positioned your clinical and technical staff to practice in a cross-functional manner along with the rest of the financial advocacy team to ensure compliance? Rigid adherence to policies, practices and formularies will significantly impair facilities in the current rapidly changing healthcare environment.

Bonnie Kirschenbaum, MS, FASHP, FCSHP
Bonnie Kirschenbaum, MS, FASHP, FCSHP, is a freelance healthcare consultant with senior management experience in both the pharmaceutical industry and the pharmacy section of large corporate healthcare organizations and teaching hospitals. She has an interest in reimbursement issues and in using technology to solve them. Kirschenbaum is a recognized industry leader in forging effective alliances among hospitals, physicians, pharmaceutical companies and distributors and has written and spoken extensively in these areas.