Health Information Management

Medicare payment could rise for innovative drugs

APCs Insider, September 27, 2003

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September 12, 2003
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Keith Siddel,
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HRM, Hospital Resource Management

Andrea Clark
Health Revenue Assurance Associates

Cheryl D'Amato,
director, health information management
HSS, Inc.

Julie Downey,
ambulatory coding coordinator, HIM
University Colorado Hospital

Carole Gammarino,

Julia R. Palmer
president, Health Information Management Division

Valerie Rinkle, MPA,
revenue cycle director
Asante Health System




Medicare payment could rise for innovative drugs

While Congress continues to hammer out the details of Medicare prescription drug legislation, it did come to an agreement to increase payments for more than 100 high-tech and expensive drugs or procedures used in the outpatient setting. The increase will not take effect unless the entire Medicare prescription drug coverage bill is passed.

The new agreement states that payments for OPPS-covered drugs could not fall below 88% of average wholesale price (AWP) in 2004 and 83% of AWP in 2005. In 2006, reimbursement rates would be established by a different methodology based on a study of actual hospital costs in acquiring, handling, and storing drugs and biologics for Medicare patients in the outpatient setting.

If the legislation passes, orphan drugs will be reimbursed on a reasonable cost basis, instead of on "functional equivalence." Recent CMS payment cuts for these medicines (when used in hospital outpatient centers) reduced the reimbursement by an average of 35%. In many cases, that brought the reimbursement well below the cost of the drug, making the use of innovative medicines unprofitable for most hospitals.

The "functional equivalence" classification allows CMS to reimburse a new drug at the same rate as an old one if both drugs work the same. For financial stability, most hospitals would choose to dispense the drug that it does not lose money on, posing a threat to patient access to innovative medicines.

The Biotechnology Industry Organization lobbied Congress aggressively for the change.

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TODAY'S TOPIC: CCI edits and the OCE

CORRECTION: Due to a formatting error, last week's answer was missing its last three lines. The editor regrets the error. Here is the complete answer.

Question: What Correct Coding Initiative (CCI) edits does the Outpatient Code Editor (OCE) contain? Does it remove certain edits, such as E/M visits? I realize CCI edits for the facility are always a version behind the professional. We have a claims editing system that edits based on CCI for facility v. OCE.

Answer: It is important that facilities use the OCE which contains the CCI edits. The CCI editor is only half the picture. Understanding the OCE will bring the picture into better focus.

The OCE currently incorporates 60 distinct edits under OPPS reimbursement methodology to identify claims issues for the provider. Many providers use claims scrubbers or APC groupers to identify problematic claims. The edits are resolved internally by designated personnel before the claims are submitted to the FI, enabling the provider to receive its entitled reimbursement.

Within the OCEs four edits are CCI edits. They are:

  • Edit 19-mutually exclusive procedure that is not allowed by CCI even if the appropriate modifier is present, resulting in line item rejection
  • Edit 20- component of a comprehensive procedure that is not allowed by CCI even if the appropriate modifier is present, resulting in line item rejection
  • Edit 39-mutually exclusive procedure that would be allowed by CCI if the appropriate modifier were present, resulting in line item rejection
  • Edit 40-component of a comprehensive procedure that would be allowed by CCI if the appropriate modifier were present, resulting in line item rejection

As you mentioned, the CCI edits in the OCE are always one version behind the CCI edits used for physician billing. For dates of service of July 1 through September 30, hospitals will be using version 9.1 and on October 1 until the end of the year they will use version 9.2.

All outpatient services identified by HCPCS codes will be subject to this editing process. E/M, Dermabond, mental health, and anesthesia services are the only exceptions.

For an editor (whether the OCE or a commercial product) to be effective, it must be applied to the claim after all the codes are assigned, including those from the chargemaster.

Go to the CMS Web site for more information on the differences between the CCI edits included in the OCE and those used for physician billing.


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Questions from readers are answered by a team of experts working in the APC area within the health care industry. Their answers are provided as advice. Readers should consult the federal regulations governing OPPS, related CMS sources, and with their local fiscal intermediary before making any decisions regarding the application of OPPS to their particular situations.

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