Bonnie Kirschenbaum, MS, FASHP
“Reimbursement Matters” is a tool for maintaining your health system’s fiscal health. Please email the author at with suggestions on reimbursement issues that you would like to see covered.

As health care reform moves forward, all pharmacists need to understand how payment mechanisms for outpatient services are determined.

Why not just leave this task to your billing and coding team or to some administrative person in your department? One compelling factor is the system that the Centers for Medicare & Medicaid Services (CMS) uses to determine payments. CMS bases its policies primarily on how your staff decides to choose and use a medication—and the degree to which your staff accurately documents those treatment decisions. Moreover, new payment mechanisms are built on a platform of data from previous years. So if your systems and records are less than stellar, you’ll be contributing to a new program that underestimates true costs of care.

For these reasons, it should be clear that reimbursement issues are everyone’s responsibility. So let’s look at 2013 and see if we can find opportunities to improve your involvement in your hospital or health system’s reimbursement practices. In this article, we’ll focus on the recently released outpatient prospective payment system (OPPS) rules that cover the medical benefit that applies to Part B drugs used by Medicare patients and that often serve as a base for decisions made by other payors (​fdsys/​pkg/​FR-2012-11-15/​pdf/​2012-26902.pdf). (The rules won’t cover Part D medications handled under the Pharmacy Benefit, nor do they apply to self-administered drugs.)

First, it is important to understand exactly who can be deemed an outpatient. Basically, an outpatient is anyone who is not admitted to the facility as an inpatient, regardless of where in the facility the person is being treated. This includes the emergency room, the operating room for ambulatory surgery patients, ancillary treatment areas such as the gastrointestinal lab, catheterization lab, radiology, outpatient clinics or the infusion center. (Sound familiar? These sites are some of the same places covered by 340B pricing in eligible facilities.)

The next step is to understand the correct type of codes to use. In a world of electronic transactions, there are two types of codes—those assigned to products, known as health care common procedure coding system (HCPCS) codes, and those used for services (current procedural terminology, or CPT codes). Both types are used to transmit the details of the patient visit to the payor. Using the wrong codes or relying on miscellaneous codes results in little to no payment and may trigger an audit; hence the need for accuracy in all of your coding efforts.

Here’s a particularly important caveat to keep in mind: Although most HCPCS codes are listed generically, a few are unique to the brand name, including IVIG products, as well as these examples:

  • Q2048 – Doxil brand of liposomal doxorubicin (billing unit 10 mg): Effective July 1, 2012
  • Q2049 – Lipodox brand of liposomal doxorubicin (billing unit 10 mg): Effective July 1, 2012
  • J7315 – Mitosol brand of mitomycin ophthalmic: Effective Jan. 1, 2013

The CMS Approach To Reimbursement

CMS pays for Part B drugs in one of four ways (Figure). CMS recognizes that new drugs coming to market are very expensive and if they choose to cover them, reimbursement is slightly higher for these “pass-through” drugs for two to three years, as shown in the two left columns. Mainstream products that are separately payable are in the third column and those that have been on the market for some time and may be generically available fall into the fourth column. (In tha latter group, the products are often low-cost items and are thus bundled into the patient visit rather than being separately reimbursed.)

Additionally, two different sets of rules determine payment rates for drugs used in a hospital facility and those in a physician office setting. Although both are based on average sales price (ASP), the mark-up has differed over the years that the model has been in place. This year marks the first time that the payment rates will be identical in both care settings and paid at ASP plus 6%—a 2% increase over 2012 for hospital outpatient medications. ASP is the average selling price of manufacturers’ sales of all U.S. purchases for each national drug code (NDC) for one calendar quarter, divided by the total number of units sold in that quarter. It excludes nominal pricing and Medicaid “best price,” and for 2013 continues to exclude 340B pricing. It also includes volume and prompt pay discounts, free goods, chargebacks and rebates. It is updated quarterly, so be sure to get on the distribution list (​McrPartBDrugAvgSalesPrice/​01a172012ASPFiles.asp).

Table 1. A Sampling of Drugs & Biologicals for Which Pass-Through Status Expired Dec. 31, 2012 (abbreviated to drugs only)
CY2013 HCPCS CY 2013 Long Descriptor CY 2013 SI CY 2013 APC
C9275 Injection, hexaminolevulinate hydrochloride, 100 mg, per study dose N N/A
J0221 Injection, alglucosidase alfa (Lumizyme), 1 mg K 1413
J0588 Injection, incobotulinumtoxin A, 1 unit K 9278
J0597 Inject, C–1 Esterase inhibitor (human) Berinert 10 units K 9269
J0775 Injection, collagenase clostridium histolyticum, 0.01 mg K 1340
J0840 Inject, Crotalidae polyvalent immune fab (ovine), up to 1 g K 9274
J0897 Injection, denosumab, 1 mg K 9272
J1290 Injection, ecallantide, 1 mg K 9263
J1557 Injection, immune globulin (Gammaplex), intravenous, non-lyophilized (e.g., liquid), 500 mg K 9270
J1741 Injection, ibuprofen, 100 mg (code change from C9279) N N/A
J3095 Injection, telavancin, 10 mg K 9258
J3262 Injection, tocilizumab, 1 mg K 9624
J3357 Injection, ustekinumab, 1 mg K 9261
APC, ambulatory payment classification; CY, calendar year; HCPCS, health care common procedure coding system
Table 2. A Sampling of Drugs and Biologicals With Pass-Through Status in CY 2013 (abbreviated to drugs only)
CY2012 HCPCS Code CY2013 HCPCS Code CY 2012 Long Descriptor final CY 2013 SI final CY 2013 APC
C9285 C9285 Lidocaine 70 mg/tetracaine 70 mg, per patch G 9285
C9286 J0485 Injection, belatacept, 1 mg G 9286
C9287 J9042 Injection, brentuximab vedotin, 1 mg G 9287
C9288 J0716 Injection, centruroides (scorpion) immune f(ab)2 (Equine), 1 vial G 9288
C9289 J9019 Injection, asparaginase Erwinia chrysanthemi, 1,000 IU G 9289
C9290 C9290 Injection, bupivicaine liposome, 1 mg G 9290
C9292 C9292 Injection, pertuzumab, 10 mg G 9292
C9293 C9293 Injection, glucarpidase, 10 units G 9293
N/A C9294 Injection, taliglucerase alfa, 100 units G 9294
N/A C9295 Injection, carfilzomib, 1 mg G 9295
N/A C9296 Injection, ?ziv-aflibercept, 1 mg G 9296
J0131 J0131 Injection, acetaminophen, 10 mg G 9283
APC , ambulatory payment classification; CY, calendar year; HCPCS, health care common procedure coding system

A Few More Important Details

The four columns in the Figure outline several key reimbursement points that need to be heeded:

Pay attention to pass-through status. CMS carefully determines which drugs are deserving of pass-though status, changes this list at least annually and adds to it during the year as new products come to market. Newly released products may have temporary HCPCS codes (usually starting with C) that change to permanent codes (usually starting with J). Look closely at Federal Register Tables (excerpted in Tables 1 and 2) to see the changes effective Jan. 1, 2013 and ensure that these updates have been made to the drug master files on your pharmacy’s computer system and to the hospital’s charge description master. Don’t leave this very important step to someone else to take care of!

Figure. OPPS 2013: Drugs and Biologicals Paid in One of Four Ways.
ASP, average sales price; AWP, average wholesale price; HCPCS, health care common procedure coding system; OPPS, outpatient prospective payment system; WAC, wholesale acquisition cost
Use billing units correctly. CMS reimburses for the actual doses of the drug administered, not for the whole vial of the drug. The concept of using billing units was introduced several years ago and there’s little tolerance for facilities that haven’t yet figured out how to implement the simple mathematical requirements. Essentially every Part B drug that CMS pays for has a billing unit assigned to it (listed in the quarterly ASP tables) Divide the dose administered by the billing unit assigned to get the number of billing units that can be billed for and round up to the next whole billing unit as needed. If you bill for too few units, you’re underpaid. If you bill for too many you’re overpaid and in either case will fail an audit. Example: Drug A comes in a 1,000-mg vial and has a 100-mg billing unit. If the dose is 600-mg, bill for six billing units of 100 mg. If the dose is 650 mg, bill for seven billing units of 100 mg.


Bill for drug waste. This is possible if certain conditions are met. Ask yourself the following four questions and proceed to billing for waste only if the answers to all four questions are “yes,” following the guidelines set up by the Medicare Administrative Contractor (MAC) range you’re in:

Q: Is the drug being used for a Medicare patient being treated in an outpatient area?

Q: Am I using a single-dose vial of the drug?

Q: Does the product have a HCPCS code?

Q: Does the dose fall into the pass-through or separately payable category (not the <$80 per day bundle noted in the Figure)?

Bundled payments. This payment strategy comes into play with drugs that cost (determined by ASP) less than $80 per day, an increase from $75 in 2012. These are not separately reimbursable but instead are bundled into the payment the facility receives for the patient visit. CMS assumes that the facility finance team can tease out which portion of the bundle goes to which department within the facility. How are you getting your part of the bundle? Equally important, are you actually reporting the use of these products even though they are not separately reimbursable? If not, you are short-changing the amount that the bundle payment is worth. Worse still, you’re losing the drug administration fee for the product because these fees are paid only when the product is billed for as well.

Drug Administration Fees. This vital part of reimbursement experienced a rise in all 2013 fees except one. Check out the fee tables to ensure that you’re using the correct CPT codes and that you’ve set up documentation mechanisms either electronically or manually to ensure that all necessary data is being captured. Also, make sure that your pharmacy department is being paid for drug preparation and handling. (Again, those payments need to be teased out of the drug administration fee bundle.)

More Tasks To Tackle

Here’s a few additional reimbursement-related tasks that you or someone in your department should be championing: regular charge master reviews; periodic audits of patient bills/claims; development of printed order sheets; embedding billing information in computerized prescriber order entry systems; reviewing claim denials/write-offs; participating in pre-RAC (recovery audit contractor) or RAC audits and appeals; and commenting on proposed CMS rules.

Good luck with meeting these reimbursement challenges in 2013 and beyond!