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Summer 2023 - Vaccines

Tips for Operating on Razor-Thin Margins

Healthcare providers across the nation have marked well more than a year of consecutive negative margins as they experience the effects of higher expenses.

Healthcare providers across the nation have marked well more than a year of consecutive negative margins as they experience the effects of higher expenses. Many currently risk closing without some type of legislative support or other financial lifeline. When examining budgets, the direction often given is to concentrate on driving down expenses for drug costs and reducing personnel and other overhead. Yet, at the same time, providers often neglect to highlight their potential for a tremendous revenue contribution or even bring this to the attention of the C-suite. It’s a simple concept: Every budget has an expense side and a revenue side. One could argue that if expenses (e.g., personnel) were driven down precipitously and revenue opportunities were ignored, providers would not have met their potential for mitigating those negative margins.

Payer Tools and Tactics

Of course, payers hold the keys to payments, and denials for submitted claims are rampant. From the payers’ perspective, they must appropriately plan and manage benefit coverage for the many expensive high-investment drugs in the pipeline. This includes specialty drugs, biologics, immunotherapy products and biosimilars. The tools/tactics they use include prior authorization, bundled payments, moving drug products out of the medical and into the pharmacy benefit, mandating treatment pathways and closed formularies, stipulating site of care, and even creating “payvider” risk-sharing collaborations between payers and providers.

But, there’s a difference between the prospective approach of denials prevention and denials management, which often is the fruitless, time- and resource-consuming quest to overturn the denial and collect revenue. Prevention hinges on telling the patient’s story completely and accurately with appropriate documentation that is codable. This hinges on proving the medical necessity of both the service and the treatment. The outpatient/ambulatory environment is ripe with opportunities to do this in the infusion clinic, oncology clinic and other areas that dispense biologics and immunotherapy products.

Working in tandem with the revenue cycle team, facilities are responsible for knowing the payers and their requirements; understanding site-of-care stipulations; completing prior authorizations (PAs); understanding local and national coverage determination requirements; following mandated step therapy; confirming ICD-10 code matches; and ensuring electronic health record and coding accuracy. Failure of any one of these multiple steps results in payment denial!

Moving forward, Congress is reforming the PA process and is considering mandating real-time prior authorization decisions, among other approaches. Whether or not these reductions will apply to specialty pharmaceuticals, including biologics and biosimilars, remains to be seen.

On April 5, the Centers for Medicare and Medicaid Services finalized the Prior Authorization Rule to help ensure beneficiaries in both Medicare Advantage (MA) and traditional Medicare programs receive access to the same medically necessary care. MA plans must comply with national and local coverage determinatons (NCDs and LCDs) and the general coverage/benefit of traditional Medicare regulations. But, coverage criteria has not been fully established: MA may create internal coverage criteria based on publicly available current evidence in widely used treatment guidelines or clinical literature. In full transparency, MA plans must explicitly state circumstances when they may apply internal coverage criteria. Streamlining PA requirements is designed to ensure continuity of care and reduce disruption for beneficiaries. As part of a coordinated care plan, PAs can be used only to confirm the diagnoses or other medical criteria and/or ensure an item or service is medically necessary. Plans must provide a minimum 90-day transition period if enrollees currently undergoing treatment switch MA plans (new plans can’t require PA). The PA request of approval for a course of treatment must be valid for as long as medically reasonable and necessary to avoid disruptions in care in accordance with applicable coverage criteria, the patient’s medical history and the treating provider’s recommendation. The MA plan also must establish a Utilization Management Committee, review policies annually and ensure consistency with traditional Medicare NCDs/LCDs.

At the same time, payers are altering their approach, with some reducing the number of required authorizations. Each payer handles PAs differently, and many are accused of using this delay/refusal tactic strictly as a financial measure. It’s frustrating for healthcare providers and deleterious to patients, especially if the nature of the illness is life-threatening. It also can be seen as a control issue. Who’s making the decision about appropriate treatment: the provider or the payer?

Site of care can enter into reimbursement as well. For instance, a claim can be approved for drug A if given in a free-standing nonhospital-based location to decrease the cost and not pay up-charging facility fees. On the other hand, a claim can be denied for drug A if given in an inpatient setting or even a hospital-based infusion center.

Being aware of who the payer is before proceeding forward with providing the drug or biologic is a key step. Indeed, knowing who the primary and secondary payers are, as well as their requirements for payment, is essential to ensuring a complete clean claim can be submitted.

There are four different types of medical necessity:

1) Medical necessity for the service itself (The patient has a diagnosed cancer and would like to be treated at the facility; does the payer coverage include the facility for that diagnosis?)

2) Medical necessity for the status (This includes inpatient vs. outpatient and initial and continuing therapy)

3) Medical necessity for the setting (Has the payer mandated site of care and, if so, is the facility authorized? If site of care mandates a free-standing center, a hospital-based infusion center will not likely be paid.)

4) Medical necessity for the product (If a payer mandates PA, how is this confirmed before the patient arrives for treatment?)

Whomever is responsible for handling each of these types of medical necessity must have the appropriate skill levels. And, that person must know each patient’s specific medical benefit plan.

Self-Administered Drugs

Each Medicare Administrative Contractor (MAC) publishes its own self-administered drug (SAD) exclusion list. Providers must be aware of what products are on the list and how those products are to be used, documented and accounted for.

SADs excluded from payment are those administered by patients to themselves; they don’t include administration by spouses, nursing aides, allied health professionals or physicians. A rare exception may include payment for an oral anticancer drug or an antiemetic given with chemotherapy treatments.

While each MAC makes its own list, many follow standard CMS listings and definitions, including:

Route of administration

  • Drugs delivered intravenously are presumed to be not usually self-administered.
  • Drugs injected intramuscularly are presumed to be not usually self-administered, although depth and nature of the drug may be considered.
  • Drugs administered subcutaneously are considered to be usually self-administered.

Status of the condition

  • Status of the condition
  • Acute: any condition that the expected course of treatment is less than two weeks
  • Chronic: any condition that requires treatment for more than two weeks

Frequency of administration

  • Infrequent injections: drugs given monthly or less than once per month
  • Frequent injections: drugs given one or more times per week or more than once per month

Route-of-administration modifiers are now required by some MACs. The JA and JB modifiers apply to drugs that have multiple routes of administration but only one HCPCS Level II code (J or Q). The JA modifier applies to intravenous administration of drugs and the JB modifier applies to subcutaneous administration. Payment for subcutaneously administered drugs on the SAD list will be denied, as will claims for drugs on the list that are billed without the modifiers.

Providers should search the SAD list on their MAC’s website and develop a protocol for handling medications that will not be paid for, rather than letting them be a trigger for a denied claim.


  1. Centers for Medicare and Medicaid Services. 2024 Medicare Advantage and Part D Final Rule (CMS-4201-F), April 5, 2023. Accessed at
  2. Centers for Medicare and Medicaid Services. CMS IOM Publication 100-02, Medicare Benefit Policy Manual, Chapter 15, Sections 50.5.3 and 50.5.4. Accessed at
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.