Don’t be “SAD”... An Alternative Way to Handle Self-Administered Drugs

Self-administered drugs (SAD) have been a long-standing controversy when administered in a hospital outpatient setting from the perspectives of a patient, frontline healthcare workers, and billing. “Why does my Tylenol cost $10 per tablet, but the 1,000 count bottle I have at home was purchased for $3?” This question is often difficult to answer and may lead to unintended operational consequences. 

SAD is defined as medication that is usually administered by the patient. 

• “Administered” refers to the physical process in which the drug enters the body. Oral, topical, suppositories, and others are typically considered medications that can be self administered by the patient. 
• “Usually” means more than 50 percent of the time for all Medicare beneficiaries who use the drug. 
• “By the patient” refers to the beneficiary themselves excluding caregivers, spouse, etc.

It is up to the Medicare Administrative Contractor (MAC) to make an individual determination on the classification of a SAD, the above definitions can be used to apply exclusions to other formulations. Intramuscular medications are presumed to be not self-administered while subcutaneous are presumed to be self-administered. However, when making this determination the MAC also considers if the drug is used for an acute condition making it less likely to be self-administered, and the frequency of the administration. If given once per month, the medication is less likely to be self-administered. Each MAC has listed injectable medications they have deemed to be self-administered and direct links can be found under our resource files. These MAC lists are updated at least annually, but can be updated more frequently. (Links on the resource page were updated 2/15/2021).

Drugs that appear to be self-administered drugs based upon route or frequency but are used as an integral part of a procedure or directly related to the procedure are billed to Medicare as a supply and packaged into the payment of the procedure. These drugs should not be billed separately to the beneficiary. Examples include: 

• Sedatives in a pre- or post-operative setting
• Ophthalmic drops
• Antibiotics 
• Topicals 
• Contrast media for diagnostic test
• Other medications that are administered immediately before, during or after a procedure

Billing for SAD may be further clarified by each individual MAC or commercial payers; however, Medicare Claims Processing Manual outlines “payment condition 1” representing items and services being billed that are statutorily excluded from Original Medicare. These services, including SADs, do not require any advance liability notices (i.e. ABN) and may be billed as non-covered on the Medicare claim. When a SAD is billed on the claim with other covered services, a GY modifier may be used to represent the noncovered line item. Medicare also accepts any National Uniform Billing Committee approved revenue codes.

It is fairly routine that patients will need a SAD during a hospital outpatient visit including observation status and emergency room visits. Markups in these settings are often much higher than what a patient can purchase the drugs for home use. Since Medicare does not cover SADs, this may leave the patient fully responsible for the full “$10 per Tylenol tablet”. It should be noted that these drugs are typically covered under the DRG payment when administered to a patient in inpatient status. 

Prior to 2015, it was required that a provider bill and make a good faith effort to collect their usual and customary charge for a SAD that are not covered under Medicare Part B due to potential implications of the Federal anti-kickback statute. The Office of Inspector General (OIG) recognized this concern and issued a statement that hospitals will not be subject to OIG administrative sanction if they discount or waive amounts that Medicare beneficiaries owe for noncovered SADs as long as the following is met:

• The policy only applies to discounts on, or waivers of, the amount the Medicare beneficiary owes for a noncovered SAD
• The policy must be uniformly applied to all Medicare beneficiaries
• Hospitals cannot market or advertise the discount/waiver
• Hospitals cannot claim the discount/waived amount as bad debt

Shout Outs!

1. Pharmacy teams should collaborate with the revenue cycle team to categorize or define each of the medications as a SAD. Particularly, when reviewing medications that are primarily given in advance of outpatient surgery (i.e. ophthalmic drops) and integral to a procedure such as a radiology procedure (e.g. oral contrast media).. 
2. Chargemaster/billing teams should evaluate to ensure when a SAD is used it is appropriately reflected in the correct revenue code with the GY modifier (if applicable) and represents a non-covered charge. 
3. Organizations should make a decision to discount or waive the usual and customary charge for SADs to the Medicare beneficiary. This should be consistently applied to all Medicare beneficiaries. 
4. Visit our resource page on Pharmacyrevenuecycle.com for more information regarding SADs including links to the MAC’s SAD lists. (Links updated 2/15/2021)