Reimbursement FAQs

Billing for Waste

Ensuring a healthy revenue stream should be a priority for healthcare practitioners in light of the April 2 announcement that the 2 percent sequestration cut for all Medicare reimbursement will continue at least until 2015. Therefore, this column will focus on an area that may be overlooked: billing for wasted drugs.

Several years ago, Medicare created the ability to bill for expensive waste in the outpatient setting shortly after moving to the reimbursement concept of “billing units representing actual dose given” rather than the “whole vial” method of billing under the outpatient prospective payment system (OPPS). While Medicare doesn’t mandate billing for waste, it does make it possible to recoup some lost dollars under the OPPS rules. In fact, the Centers for Medicare and Medicaid (CMS) encourages scheduling patients so that drugs can be used efficiently. If the remainder of a single-dose vial must be discarded after being administered, the rules allow for reimbursement for the amount of the drug discarded, as well as the amount of the drug administered. (For the actual rule language, see CMS Publication 100-04, Chapter 17, Section 40 located at www.cms.gov/Regulationsand-Guidance/Guidance/Manuals/Downloads/clm104c17.pdf.) Each Medicare Administrative Contractor (MAC) may have certain requirements as well. Some require the use of modifiers and others do not, but in all cases, following the rules and having clear documentation is essential.

Low implementation of waste billing is often a result of a combination of factors, including knowledge gaps, perceived low return, perceived resource constraints (too much complex work for the resulting yield), lack of IT systems support for the required level of automation and documentation in the outpatient area, and business risk assessment (a fear that a change in billing might lead to scrutiny).

Regardless of the reason for low implementation, the decision not to bill for outpatient waste is hurting everyone — especially now that bundled payment models are in vogue. Bundled payment calculations are based on “big data,” including the history of payment for separately payable medications and biologicals, their drug administration costs and the payment for waste, as well as a myriad of nonseparately reimbursable products that are identified as being used. Not implementing waste billing (or to not bill for nonseparately reimbursable products) paints an inaccurately low picture of the true cost of medications that are included in the bundled payment.

Hints and How-to Guidelines for Waste Billing

Waste billing applies only to:

• outpatients
• Medicare (although some states also include this in Medicaid)
• drugs that Medicare actually pays for at a cost of more than $90 per day (in 2014)
• drugs that are listed on the quarterly average sales price (ASP) and not other classified CMS updates
• single-dose vials

In addition, healthcare practitioners can’t bill for overfill in vials. The quarterly ASP National Drug Code matched tables show exactly how many billing units are in each vial so that waste can be correctly calculated.

Each Medicare administrative contractor and fiscal intermediary (MAC/FI) determines how they want waste billed for and what kind of documentation they require (such as the use of the JW modifier to identify the drug amount discarded or not administered to any patient). Therefore, healthcare practitioners shouldn’t copy the way another bills for waste if they’re not in the same MAC/FI.

Sample Methods for Waste Billing

1) Determine which drugs/biologicals are targets for waste billing when used for Medicare outpatients. Start with a manageable “top-10” list.

These could include:

• only those in single-dose vials
• only those that cost more than $90 per day according to ASP reimbursement tables
• expensive chemotherapeutics, biologicals and new uses of products (such as the increased use of botulism antitoxin products in neurology and urology)

2) Create a new pharmacy drug master (PDM) description and corresponding charge description master (CDM) entry for each drug to indicate wasted product and to ensure that the billing units assigned to them match those assigned to the corresponding drug PDM and CDM listing. For instance:

• Drug A 100mg/ml — Billing Unit of 10mg
• Drug A 100mg/ml Waste — Billing Unit of 10mg

This isn’t much work because healthcare practitioners will likely have only a very few expensive products to handle.

3) At order entry time, determine if waste billing will apply (for instance, is this the only or the last Medicare patient that day who will be receiving the drug that comes in a single-dose vial?). If so, enter both the order for the drug, as well as a separate order for the waste.

4) Document the amount ordered, administered and discarded in the medical record. This can be done through computer entry that generates a documentation space on the electronic medical administration record, or it can be done manually.

HCPS Codes Can Change

For several years, Healthcare Common Procedure Coding System (HCPCS) codes assigned to drugs and biologicals most often used a generic description.¹ This changed somewhat abruptly with the advent of newer biologicals and biosimilars, which has resulted in the assignment of brand-specific HCPCS codes for some products. While many products have recently been assigned new HCPCS codes (see the previous Reimbursement FAQs column), two more drugs have recently been assigned new codes:

Granix (tbo-filgrastim) was approved as a new biologic product with its own labeled indications and not as a biosimilar. Effective Jan. 1, it has its own HCPCS code (J1446), and its own billing unit designation (5 mcg), as well as its own reimbursement rate and labeled indications. Using the HCPCS code, billing unit designation and applying the reimbursement rate for filgrastim is not appropriate if the prescribed drug is Granix. Continuing to use a miscellaneous code is not appropriate either and will result in zero reimbursement.

A new HCPCS code for Neupogen (filgrastim) was released Nov. 29, 2013, as part of the HCPCS code set updates that became effective Jan. 1. The new HCPCS code for Neupogen (injection, filgrastim, 1 mcg) is J1442. This new HCPCS code replaces both old Neupogen HCPCS codes of J1440 for 300 mcg and J1441 for 480 mcg. The new code has a billing unit designation of 1 mcg. It’s critical for healthcare practitioners to ensure billing unit conversion is working in their systems so that the dose administered is converted into billing units to be billed:

• Neupogen 300 mcg = 300/1 = 300 billing units of 1 mcg (the single-use vial)
• Neupogen 480 mcg = 480/1 = 480 billing units of 1 mcg (the prefilled syringe)

Key points to remember: Granix and Neupogen have unique labeled indications, unique HCPCS codes and unique billing units assigned to them. Healthcare practitioners should check their systems carefully to ensure that they’ve captured these Jan. 1 changes and cleanse their system of any and all miscellaneous codes being used for products with assigned HCPCS codes.

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Editor’s Note: The content of this column is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.