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Hospital drug billing already problematic under OPPS

Pharmacy Regulation Resource, November 2, 2005

Many hospitals already have considerable trouble charging and billing for drugs and biologicals. An analysis of Outpatient Prospective Payment System (OPPS) drug charge data in 2003 revealed there were cases of hospitals reporting drug charges that were less than their acquisition cost of the drug, says John Carlsen, MHA, a principal at Covance Market Access Services Inc. in Gaithersburg, MD.

Carlsen says the reasons for this are threefold:

  • The OPPS payment system is only five years old, as opposed to the diagnosis-related group (DRG) system (almost 23 years old), which means that some providers still might be getting used to coding and billing under the system.
  • As compared to the previous cost-based hospital outpatient reimbursement system, OPPS is more complex in terms of coding and billing, which may result in confusion among providers.
  • "Charge compression," where hospitals tend to mark up high-cost items (such as high-price drugs and biologicals) less than low-cost items, may distort the costs that Medicare derives from its OPPS charge data.

Most pharmacies are not coping well with the intricacies of OPPS, and much of the blame can be traced to poor software interface and incorrect charging from the charge description master (CDM), says Arlene Baril, MS, RHIA, vice president of HIM and software services for UASI in Cincinnati.

"When we do chargemaster review and auditing, we constantly find that their units of service are being charged incorrectly," says Baril. "They don't have correct HCPCS [Healthcare Common Procedure Coding System] set up, or they're billing pass-through drugs as general pharmacy [revenue code 0250], so they're not getting pass-through payment."

Most pharmacies use a separate system for dispensing their drugs, which is then interfaced through the various hospital systems. Baril says the process of ensuring that all billable and dispensed drugs are captured and charged appropriately is a struggle for most hospitals. 

Charging from the CDM is another common source of error in pharmacies. For example, a CDM coordinator will assign a particular J HCPCS code, but the charging or order entry staff may not realize that the J HCPCS code is per 1,000 units, and the dose dispensed was 5,000 units. "You have to adjust your units of service to five, or you'll get four [ambulatory payment classification] underpayments, if this was a pass-through drug," Baril says.

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