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Medicare Part B drug billing revisited


It’s time to revisit billing for Medicare Part B drugs. A proposed demonstration project that every urologist should be aware of, a change in the “brown bag” rules since our last publication, and a continued loss of income by many offices are making the purchase and delivery of drugs less palatable for urology offices.


It’s time to revisit billing for Medicare Part B drugs. A proposed demonstration project that every urologist should be aware of, a change in the “brown bag” rules since our last publication, and a continued loss of income by many offices are making the purchase and delivery of drugs less palatable for urology offices.

Related: How to code for pelvic lymphadenectomy

We should also add to that list the increased number of high-priced drugs available to treat urologic problems. It is a conundrum created under a difficult pressure to increase the care provided to more people of Medicare age under a shrinking budget.

Average sales price changes

In a perfect world, we would assume that each of you have read the AUA Policy and Advocacy Brief article, “CMS New Payment Model Would Cut ASP for Part B Drugs” (March 15, 2016) and we could make a few comments and move on.

Since that may not be the case, we will summarize the key parts of the Centers for Medicare & Medicaid Services’ plan to change the way you’re paid for Part B drugs. The reason for the proposed project is the increased costs to the Medicare program for Part B drugs from $11 billion in 2007 to $22 billion in 2015. The purpose is to test whether the alternative drug payment designs discussed in this proposed rule will lead to a reduction in Medicare expenditures while preserving or enhancing the quality of care provided to Medicare beneficiaries.

Here are the proposed rules in summary:

Phase 1. This would begin in fall 2016 or soon thereafter. The program would run for 5 years. The proposed add-on payment would be average sales price (ASP)+2.5% and a flat fee drug payment of $16.80 plus a yearly cost-of-living increase. It would be implemented in selected different geographic areas; all physicians in those geographic areas would be required to participate. It is proposed to be budget neutral.

Phase 2. This would begin no earlier than January 2017. This phase would add value-based purchasing tools to phase 1 participants and a select group of ASP+6% users. These tools are currently employed by commercial health plans, pharmacy benefit managers, etc. The plan is to have both phase 1 and phase 2 implemented for the last 3 years of the 5-year project.

As you can imagine, there are additional variations, potential add-ons, requests for feedback, etc. (The proposed rule is 119 pages of federal jargon.)

Next: What does this mean for your practice?


The real question is: What does this mean for your practice? For once, it does not mean a guaranteed loss for all urologists. In fact, for the low-price Part B drugs, the change will provide an increase in income. The higher the price of the drug, the more significant the profit loss. The question is, will the losses exceed the gains? The break-even is calculated to be for drugs with an acquisition cost of $480. The effect on your practice will be determined by the mix of drugs you provide to your patients and your choices moving forward.

Read - T pellets: What are you allowed to charge?

How many urologists will change what they do? How will this affect patient care and compliance? Will this accomplish the goals identified by CMS? Due to the number of unanswered questions and the stated goals of the program, there is a significant push to block this plan by a number of specialties, including urology in the form of the AUA. The outcome is unknown at the time of writing of this article. Be prepared and stay tuned, and if you feel this is bad for urology and your practice, write your representative in Congress.

‘Brown bag’ changes

Brown bag rules have changed, or, at least they have been pushed in a new direction. “Brown bagging” is the name that has been give to the practice of having a patient acquire a drug via prescription that should be administered by a physician. The patient then brings the drug to the office and has the drug administered appropriately. Several medical directors are adamant that CMS has handed down an ultimatum that injection codes will not be paid unless accompanied by a charge for the drug injected. Noridian, one of the Medicare carriers, has noted the reimbursement change in a Local Coverage article, “Chemotherapy Administration” (last updated June 30, 2016).

Patients supplying their own drugs

The physician practice or hospital must incur a cost for the drug or biological which is then administered by the physician or by auxiliary personnel employed by the practice or hospital and under the physician's personal supervision.

Per the "incident to" guidelines explained above and in the Medicare Benefit Policy Manual, CMS Internet-Only Manual (IOM) Publication 100-02, Chapter 15, Sections 50 and 50.3 MBPM, providers are not allowed to instruct patients to purchase a drug themselves and bring it to the provider's office for administration. Claims that are billed with the chemotherapy administration codes 96401-96549 that do not have an associated drug in claim history, will deny. When the administration claim is processing, an allowed claim for the drug must be present, either on a prior claim or on the same claim as the administration. For further information on the rare circumstances where it may be appropriate to submit a claim for a drug administration where the provider has not incurred the expense for the drug, see the separate Noridian article "Patients Supplying Their Own Drugs"

The referred-to article can be found on the Noridian website (med.noridianmedicare.com) or in the CMS coverage database (www.cms.gov/medicare-coverage-database/; place article ID A55044 in search tab of coverage database). It states:

Donated or Free of Charge Patient Supplied Drug

To avoid a chemotherapy or other drug administration code denial, a drug code must be present on the same or prior claim. Include the below information in the appropriate CMS-1500 claim form Items or electronic equivalents.

  • Item 19: Enter ‘Drug Donated;’ Enter code description, strength and dosage - if billing a Not Otherwise Classified (NOC) HCPCS code

  • Item 24D: Enter drug (HCPCS) code

  • Item 28: Enter $0.01 for the billed amount.

This will allow the claim processing system to register the drug claim as being allowed which should allow the administration.

As mentioned, we were told that this was CMS policy and not just Noridian. However, we have not confirmed this with other carriers, nor have we seen this policy adopted by others.

The interpretation of the reference above to the MBPM chapter 15 paragraphs 50 and 50.3 are somewhat in conflict with paragraph 60.1 of the same document:

60.1 - Incident To Physician’s Professional Services

(Rev. 1, 10-01-03)


A - Commonly Furnished in Physicians’ Offices

For example, where a patient purchases a drug and the physician administers it; the cost of the drug is not covered. However, the administration of the drug, regardless of the source, is a service that represents an expense to the physician. Therefore, administration of the drug is payable if the drug would have been covered if the physician purchased it.

Also see - Open Payments: How urology measures up

We were also told that changes in the rules, which result in apparent conflict among Medicare rule sets, do not block the change from being implemented. Nevertheless, the conflict does exist; therefore, we would recommend you check with your carrier for their position on paying for injections without a charge for the drug. If you are in a region for which your carrier has adopted this policy, we encourage you to follow their rules; do not ask a patient to buy their own drugs and bring them to your office. However, if you’re requested to inject a drug that you did not buy, charge according to the process recommendations above, and be prepared to appeal.

Next: Watch your processes


Watch your processes

Last but not least, if you are going to administer the drug, you have to take precautionary steps to be sure that you get paid for the drug.

Read: What urologists need to know about APMs

When we are reviewing the payment history of a practice, there is nothing more painful for us to see than a high-priced drug, or a series of the high-priced drugs, that have not been paid and will not be paid because of a process error, noncompliance with payer rules, or timely filing. Don’t ever let that happen to you again!

Drugs, because of their cost and their marginal reimbursement, deserve extra precautionary steps to ensure compliance with all payer rules. We detailed in our article, “How to get paid for drugs administered in the office” (March 2014, page 32), the steps that should be taken to ensure compliance and payment. We will summarize the key points again.

Each drug dose should be tracked, independently, from scheduling until the money is in the bank. We suggest that you use a separate system to track all drugs. Many of you have used “LuproLink” for leuprolide (Lupron), or “AIMS” for triptorelin (Trelstar). AIMS has been upgraded and can be used to track all drugs.

The key functions that should be followed for each dose of each drug are summarized below (for more detail, please refer back to the original article):

  • insurance verification

  • preauthorization, etc.

  • collect co-pay from patients

  • track each payment as a separate line item

  • specifically check status on each claim.


The changes relative to drug reimbursement in Medicare add to a long list of issues that each practice struggles with in providing care to a growing patient population. Balancing appropriate patient care with the responsibility to your business is becoming more and more difficult. In the end, you will have to determine whether your practice can adapt to the business practices required to allow you to meet the needs of your patients, or if you will need to find a partner to help address patient care or change your model of participation with your payers altogether. We have helped many meet these changes and have watched many others initiate successful changes; unfortunately, we have seen far too many ignore the need for change and pay a significant price. There is no one-size-fits-all solution, but we are pleased to see that there are some very determined and creative urologists continuing to meet the needs of their patients while balancing the health of their business.

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The information in this column is designed to be authoritative, and every effort has been made to ensure its accuracy at the time it was written. However, readers are encouraged to check with their individual carrier or private payers for updates and to confirm that this information conforms to their specific rules.

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