Revenue Cycle

July OPPS update: Self-administered drugs

Medicare Update for CAHs, June 27, 2012

Last week, the Medicare Weekly Update provided an overview of the many significant updates and clarifications that were released in two transmittals that primarily focus on outpatient prospective payment (OPPS) issues – Medicare Claims Processing Manual 2483 and Medicare Benefit Policy Manual 157.

Within the Benefit Policy Manual is a new sectionthat was added for self-administered drugs (SADs) which will directly impact critical access hospitals (CAHs). Although it is not necessarily a change in CMS policy, it is intended to help facilities more easily identify drugs that may be considered “integral to” an outpatient procedure and function more as a supply where their payment is packaged into the payment for the procedure, explains Debbie Mackaman, RHIA, CHCO, regulatory specialist for HCPro, Inc.

“Since 2002, providers have been relying on Program Memorandum A-02-129 for guidance regarding what SADs are packaged supplies to treatment and procedures and therefore, cannot be billed to the patient in the outpatient setting,” she says. “The new section appears to be limiting coverage to drugs that are an integral component of a procedure or are directly related to it.”

CAHs need to be aware that the SAD regulations do apply to them and that CMS has not indicated that CAHs can disregard this rule. According to Program Memorandum A-02-129, “neither the OPPS nor other Medicare payment rules regulate the provision or billing by hospitals of non-covered drugs to Medicare beneficiaries. However, a hospital's decision not to bill the beneficiary for non-covered drugs potentially implicates other statutory and regulatory provisions, including the prohibition on inducements to beneficiaries, section 1128A(a)(5) of the Act, or the anti-kickback statute, section 1128B(b) of the Act.” 

Providers have struggled with this concept for years because how the drug is going to be billed (i.e. packaged under revenue code 0250 or billed to patient under revenue code 0637) may depend on where the patient is receiving the outpatient service.  A drug that is used in the emergency department for treatment may be considered a SAD where the same drug used for an outpatient surgery may be considered packaged into the procedure. Prior to this new section and as recently as an August 2011 Hospital Open Door Forum call, the CMS representative indicated that the list in A-02-129 is limited and the “overwhelming majority” of self-administered drugs are non-covered. At that time, the representative recommended comparing other items to the list to determine if they should be considered packaged supplies.

If providers have been relying on that list for guidance, they now need to be aware that CMS has changed the language regarding specific items and has added this information to the Medicare Benefit Policy Manual.

  • Eye drops that are related to eye procedures may have been classified as a SAD because the drops were considered to be integral to the procedure (i.e. a provider would not perform the procedure without them) has now been clarified further and “excludes” those drops that patients may use preoperatively and postoperatively. Providers may need to reconsider how they have classified eye drops in the past as some of those may now be considered SADs.
  • Local anesthetics such as marcaine or lidocaine have been deleted as part of the packaged section; however, providers should not consider these types of drugs as now being separately billable to the patient when the injection is part of the procedure itself (i.e. you would not normally repair a laceration in the ER without an anesthetic). The fact that CMS has removed the language does not by itself make the drug a SAD.
  • A fentanyl patch or oral pain medication such as hydrocodone given to an outpatient presenting with pain has been added to the section where the drug is not directly related and integral to a procedure and would not be considered a packaged supply (i.e. these could be separately billed to the patient because this would be part of the treatment and not part of a procedure).
  • The other addition to the separately billable section is where a laxative suppository for constipation is given while the patient waits to receive an unrelated X-ray. Keep in mind that if a laxative suppository is needed to perform x-ray, then it may be considered to part of the procedure itself and therefore packaged.

According to CMS, these examples may serve to guide hospitals in deciding which drugs are packaged supplies and may be billed under Part B by reporting coded and uncoded drugs with their charges under the revenue code associated with the cost center under which the hospital accumulates the costs for the drugs (i.e. revenue codes 0250, 0259 or 0636).  Although the new manual language may not seem to do much to clarify the CMS policy, it does provide an opportunity for hospitals to revisit this billing quandary to ensure compliance overall.

CAHS may find it difficult to comply with the SAD billing complexities due to providing outpatient services in small rural areas where strong community relationships are vital. Unfortunately, CMS has identified certain outpatient drugs that the patient is responsible to pay out-of-pocket for rather than the Medicare program paying them as a covered cost, says Mackaman.

“Keep in mind that if the drug has been identified as a  SAD that should be billed as non-covered under revenue code 0637 and is instead billed as covered under a revenue code 025X, the CAH is reimbursed under the usual cost based methodology which would result in an overpayment,” she says.

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