Why should I report every drug separately? Extra Money! 8/30/21

We often hear, “We don’t bill the contrast material separately. We know it’s a drug, but we include the cost in the charge for the procedure so we don’t have to keep updating the drug files” or “We only report HCPCS-coded drugs separately since we don’t get paid for the rest.”

There are good reasons to report ALL Drugs, biologicals and radiopharmaceuticals separately on claims:

1. CMS requires all separately payable drugs to be reported separately

2. CMS requests all drugs be reported separately so that they can properly allocate packaged costs when setting payment rates in the OPPS rule each year

3. Managed care payers often have “carve-out” payments for drugs reported in revenue code 636 (Drugs requiring detailed coding) when reported on both inpatient and outpatient claims

4. Outlier payments are calculated on all charges reported for inpatients and outpatients.

Since our focus is on revenue generation, let’s discuss more details for reasons #4 and #5.

1. Managed Care payers often have “carve-out” payments in revenue code 636

Commercial payers negotiate contracts that often contain “carve-out” payments for drugs that are reported in revenue code 636. These drugs must have a HCPCS code reported and the negotiated payment rate is based upon the charges aggregated in revenue code 636. This can apply to both outpatients (where HCPCS and revenue codes are reported), or inpatients (where the charges are aggregated into a single charge line for revenue code 636).  So in the scenario where contrast media is not reported separately, the commercial payer cannot recognize that contrast was administered, and therefore will not make the additional payment as specified in the contract. We’ve seen contracts that pay 50-100% of charges, so this can add up quickly! And don’t forget that many “new” drugs should be billed with C9399 with revenue code 636 until they are assigned a permanent HCPCS code! Check out our quarterly C9399 tool here.

2. Outlier payments on inpatients and outpatients

Outlier payments are calculated by CMS on both inpatient and outpatient claims and may be negotiated on commercial payer contracts. For CMS, “outlier payments” are calculated when the total charges on a claim exceed a standard threshold. 

1. For inpatient claims, Hospital-specific cost-to-charge ratios are applied to the covered charges for a case to determine whether the costs of the case exceed the fixed-loss outlier threshold. Payments for eligible cases are then made based on a marginal cost factor, which is a percentage of the costs above the threshold. The Proposed FY2022 IPPS Rule has proposed an outlier fixed-loss amount of $30,967. Outlier payments for any year are projected to be not less than 5 percent nor more than 6 percent of total operating payments plus outlier payments. For FY2022, the proposed target is 5.1 percent. By reporting all charges separately, it is more likely that all costs and charges are captured which can result in outlier payments.

2. For outpatient claims, the projected target for aggregate outlier payments is 1.0 percent of the aggregate total payment under the OPPS. For CY2022, the proposed hospital outlier threshold would be set to trigger outlier payments when a hospital’s cost exceeds 1.75 times the APC payment and exceeds the APC Payment amount plus $6100.

In addition, CMS recalculates outpatient payment rates for drugs every quarter and some drugs switch from being included as a “packaged payment” to being separately reimbursed. If you decide to only report drugs with separate payment, you have to keep up with payment changes every quarter. Isn’t it better to plan to report all drugs, biologicals and radiopharmaceuticals so that costs can appropriately be allocated and payments can be verified?

SHOUT-OUTS

1. Pharmacy IT teams should plan to create billing profiles for all drugs in use in a facility regardless of reimbursement status. Ideally, billing information should be completed prior to first use. If the timing of clinical administration pre-dates complete billing information, claims should be reviewed and re-billed if necessary.

2. Pharmacy and Revenue Integrity should ensure that all drugs are billed separately including those that may be currently “packaged payment” under Medicare. Quarterly changes in payment status make upkeep challenging if only certain drugs are billed rather than all.

3. Managed Care contracting Group should negotiate contracts with language for “carve-outs” for revenue code 636 for inpatient and outpatient claims and specify that HCPCS code C9399 is a valid code for new drugs eligible for C9399.

4. Ancillary departments such as Radiology, OR, Cath Lab, etc., should ensure that drugs, biologicals and radiopharmaceuticals are always separately reported on claims either captured with barcode medication administration or with manual charge input.

5. Revenue Cycle Management should periodically review claims to determine if outlier payments are appropriately paid, particularly when high-cost drugs are utilized.