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Self-administered drugs may cause trouble for outpatient departments

Hospital Pharmacy Regulation Report, November 1, 2005

Despite Part D benefit, hospitals must bill outpatients

Hospital outpatient departments are in for a rude shock on the first day of the new Medicare Part D prescription drug plan (PDP): patients complaining that their outpatient self-administered drugs aren't covered under the new benefit.

It's a serious operational and public relations issue and one that Valerie Rinkle, MPA, revenue cycle director for Asante Health System in Medford, OR, knows all too well. Rinkle has spent the past several months trying to warn the Centers for Medicare & Medicaid Services (CMS) and her local congressman about the impending problem as the January 1, 2006, deadline approaches, but to no avail.

"Hospitals should anticipate beneficiary phone calls with patient complaints," Rinkle says.

The issue: Self-administered drugs not covered

When patients under the new Part D benefit go to the hospital for an emergency room visit or outpatient surgery, they are usually not allowed to bring prescription drugs from home.

"It's typically viewed as [an unsafe] practice," Rinkle says. "The hospital doesn't know if the drug has been properly stored, and a hospital cannot use a drug if it's not in its labeled prescription bottle."

To offset this risk, hospitals will in most cases issue the same medications for a patient from its own stock in response to the physician orders. Medicare does not cover these outpatient self-administered drugs, and CMS mandates that hospitals bill patients for them as regular hospital charges.

"We try to tell patients that these drugs are noncovered when they're [outpatients], but there's no advance beneficiary notice or waiver requirement," Rinkle says. "It's a standard that [the patients are] not covered by Medicare."

The bill patients receive is almost always a simple statement that reads "pharmacy" or "prescription drugs"--whichever description the hospital chooses to put on the statement--as well as a quantity associated with the number of pills and a total dollar amount.

The problem is that on January 1, patients under the new Medicare PDP will be under the impression that their new drug plan will cover these medications, experts say. And that's not the case.

"Those drugs will be charged at a full hospital charge, and depending upon what the benefit structure is for the Part D benefit, there could be a sizable coinsurance obligation on the part of the beneficiaries," says Andrew Ruskin, an attorney with Vinson and Elkins in Washington, DC.

And patients have a right to be angry, Rinkle adds. Medicare is supposed to cover outpatient prescription drugs issued by hospitals under the new Part D plan. The January 28 Federal Register (p. 4268) says:

Part D pharmacy plans can choose to include hospital pharmacies in their networks. If a hospital pharmacy is in the network, then the self-administered drugs would be covered by that plan . . . Medicare is mandating that all Part D pharmacy plans guarantee out-of-network access to covered Part D drugs dispensed by hospital and other institution-based pharmacies when [the beneficiaries are patients].

"But that's all we know--we don't know how to help the beneficiary get that coverage from the [PDP]," says Rinkle.

Rinkle says most hospitals will assume that these drugs are an out-of-network benefit, which means that the beneficiary pays the hospital, then takes the invoice and sends it to the PDP to receive reimbursement.

But here's the catch: Most hospital invoices read simply "Pharmacy, unit of five, $15," for example, and without detail about the drugs themselves, the PDP won't reimburse them.

"We're not required to have detail," Rinkle says. "That puts the beneficiary in the middle. No one at CMS has addressed this."

Ruskin notes that hospitals might be tempted to waive charges for self-administered drugs but will not be able to do so. "They don't want to be accused of having created inducements that could cause trouble with the [Office of Inspector General]," he says.

Potential solutions burdensome

CMS may release additional guidance for hospitals between now and the January 1 start date of the new drug benefit. But Rinkle fears this forthcoming guidance may place added administrative burden on hospitals.

Possible fixes may include a requirement that hospital pharmacies put the national drug code on all patient statements. It could mean that hospitals must submit a separate itemized bill with more specific drug detail.

Or worse yet, CMS may require that hospitals register the PDP and submit the claim directly to it.

"That would be horrendous," Rinkle says. "That's adding another layer of insurance [to] your registration system."

Packaging a simple fix

Rinkle says the easiest and most practical fix CMS could make is to simply copy what it does under the Part A benefit of the Inpatient Prospective Payment System: Package the drugs. This would mean hospitals would receive no separate reimbursement for self-administered drugs, but Rinkle says it's a small price to pay for not creating upheaval in hospital outpatient billing departments.

"We would rather not get separate payment and not have to bill and go through any additional administrative burden than [make] us change what we do for the sake of billing the drug plan--particularly when the additional reimbursement is likely to be minimal and over-the-counter drugs are still not covered," she says.

Most importantly, Rinkle says packaging the drugs would also avoid placing beneficiaries in the middle.

"It would mean a loss of some degree of money, but that loss is much less than the cost of any possible administrative fixes," she says.

Unfortunately, CMS does not wield the authority to make such a change. It would have to ask Congress for a technical amendment to the statute. Thus, a quick fix doesn't appear to be coming.

"I'm hoping that between now and January 1, Medicare will have some answer," Rinkle says. "But it's so far down on people's radar screens. CMS is just trying to get the basic benefit up and running."

Beneficiaries might be able to put the issue on the CMS radar.

"There are so many implementation issues that have not been addressed yet, and this is one of them," Ruskin adds. "When you get enough beneficiary outrage, someone might step in and come up with a policy for coordinating benefits."

Tip: Develop a letter that prints out each time a Medicare outpatient registers at your facility. Disclose in the letter that the self-administered drugs won't be covered.

Rinkle recommends the letter state something to the effect of the following: "We're excited that you may have elected to enroll in the new Part D Medicare PDP. Please be aware that our hospital is still obligated to bill you directly for prescription and over-the-counter drugs administered to you during your visit to our hospital. You can file an out-of-network claim to your new PDP to be reimbursed for these drugs."

Include the toll-free telephone number for general Medicare PDP information at the bottom for patient questions. Be prepared to explain to patients that the amount they will be charged might be different from the same drugs dispensed by an in-network pharmacy, Ruskin says.