Approaching New Payment Rules

ACCORDING TO AN annual survey of the American College of Healthcare Executives, financial challenges topped the 2018 list of the 10 most concerning issues for community hospital CEOs, with 57 percent of them voicing concern on high prices and insufficient reimbursement for medications.¹ The following summarizes the Centers for Medicare and Medicaid Services’ (CMS) outpatient prospective payment system (OPPS) and physician fee service (PFS) impact on drugs, as well as outlines changes some payers are making in response.

OPPS and PFS Impacts

CMS continues its focus on a patient-driven healthcare system with reimbursement across the patient episodic care journey rather than on single encounters in healthcare facilities. Three major themes in the OPPS and PFS payment rules stand out: 1) simplifying electronic health records requirements, reporting and regulations, 2) cutting costs and save money by saving patients money and reducing operating costs and 3) addressing the opioid crisis. The PFS rule, specifically, proposes telehealth/virtual care reimbursement, which offers many new opportunities.

Site-neutral payment, under which hospital clinic visits are reimbursed at the same rate as physician offices and other ambulatory facilities, has caused a flurry of complaints and legal activity. With clinic visits the most common service billed under OPPS, a decreased payment rate when provided at off-campus provider-based departments at 40 percent of OPPS rates, regardless of whether the provider-based department was grandfathered under Section 603 of the Bipartisan Budget Act of 2015, is anticipated to save $760 million. At the same time, as the average co-payment drops from $23 per visit to $9 per visit, patients save $150 million. And, while sequestration remains in effect and 2 percent is deducted from every CMS payment to facilities, these don’t reduce co-payments. Therefore, as facilities search for every opportunity to stabilize revenue and cut costs, pharmacies must understand drug payment rules and what steps to take to ensure payment. Additionally, making practice changes such as working with specialty pharmacy white bagging and negotiating with private insurers is essential.

Paying for Medicare Part B Drugs Under OPPS

Medicare Part B drugs, usually injectables, are administered in outpatient settings pursuant to physicians’ orders. CMS pays for Part B drugs in five different ways divided into two categories: 1) separately payable with line-item reimbursement, and 2) not separately payable without line item reimbursement because they’re paid as part of a bundle/package. Regardless of where a drug falls in these two categories, it’s essential to bill for each and every drug. CMS uses this documented claims information to set rates for future years and to compile data pools for analytic purposes. Any missing or erroneous data skews the accuracy of the pools and leads to faulty pathway development or decision-making.

Separately payable drugs include: 1) new drugs not yet assigned a unique healthcare common procedure coding system (HCPCS) code, 2) new passthrough drugs, biologicals and radiopharmaceuticals (status indicator [SI] G) and 3) specified covered outpatient drugs (SI K). Not separately payable drugs include: 4) lower-cost packaged products costing less than $125 per day (up from $120 per day in 2018) and 5) products used in policy packaged services, regardless of cost.

Payment for all packaged drugs, biologicals and radiopharmaceuticals is included in the services and procedures with which they are reported. These include all diagnostic radiopharmaceuticals; contrast agents; anesthesia drugs; implantable biologicals that are surgically inserted or implanted into the body through a surgical incision or natural orifice; drugs, biologicals and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure; and drugs and biologicals that function as supplies or implantable devices in a surgical procedure.

OPPS 2019 Payment for Unbundled Drugs

Transitional pass-through status for some drugs will expire in the quarter as close to three full years as possible after they were first covered by pass-through payment. The rule lists 60 drugs with new/continuing pass-through status (SI G) and 23 that lose pass-through payment status and move from SI G to SI K (separately payable) or SI N (items and services packaged into ambulatory payment classification [APC] rates).

In 2019, new drugs and biologicals will be paid at wholesaler acquisition cost (WAC) plus 3 percent (not WAC plus 6 percent) before average sales price (ASP) is available. If WAC is not available, CMS will pay 95 percent of average wholesale price (AWP). Once ASP is established, the rate reverts to ASP plus 6 percent. Provisions for reducing transitional passthrough payments for policy-packaged drugs, biologicals and radiopharmaceuticals to offset costs packaged into APC groups are being developed for diagnostics and skin substitutes and will be published by CMS as decisions are made.

Drugs, biologicals and therapeutic radiopharmaceuticals. These will continue to be paid at ASP plus 6 percent under the 2013 statutory default payment policy. However, while radiopharmaceutical manufacturers are not required to submit ASP, when they do so voluntarily, CMS uses it for a patient-ready dose. Otherwise, CMS bases payment on mean unit cost from its claims data.

Non-opioid pain management drugs. CMS is unpackaging and paying separately for the cost of non-opioid pain management drugs functioning as surgical supplies when used in the ambulatory surgery center (ASC) setting. Also, CMS will make an equitable payment adjustment in the form of an add-on payment for APCs that use an appropriate non-opioid pain management drug, device or service.

Biosimilar products. There are no proposed changes to the 2018 CMS revised payment policy for biosimilar products that established separate coding and a separate payment rate, even if they have the same biological reference product as another biosimilar product. All biosimilar biological products are eligible for pass-through status, not just the first biosimilar for a reference product. Biosimilar products purchased under the 340B drug pricing program are also subject to payment cuts.

Recommended Action Steps Using Addenda A and B

Addenda A and B are snapshots of HCPCS codes and their status indicators, APC groups and OPPS payment rates in effect at the beginning of each quarter. Updates to Addenda A and B are posted quarterly to the OPPS website.² To access the pharmacy products, sort the Excel table on the SI column and keep only the SI G, K and N line items. Then:

1) Ensure all drugs with SI G, K and N are billed regardless of whether they are separately payable to avoid them being stripped out before a claim is submitted.

2) Check the new/continuing passthrough products to identify any HCPCS code changes, then incorporate those into the pharmacy drug master and charge description master files. In addition, determine the correct file build for new pass-through drugs, and add waste billing, if applicable.

3) Prepare for changes in the list of waste billing drugs, and determine which of those on the current list have moved from K to N status, making them no longer eligible for waste billing.

What Changes Other Payers Are Making in 2019

Medicare Part C, also known as Medicare Advantage (MA), engages private health insurance plans to provide managed care to 20 million (one-third of all) beneficiaries. This year, these plans can negotiate Part B and Part D drug prices and implement step therapy, which can only be applied to new prescriptions for patients not actively receiving a given medication. MA plans are required to pass savings on to beneficiaries through rewards given as part of drug management care coordination that must be equivalent to greater than half the amount saved on average per participant and could be in the form of lower premiums.

Insurers also have many requirements related to drugs and their payment and, therefore, are big proponents of managed care. More than 48 million Americans, or approximately 80 percent of Medicaid patients, are enrolled in managed care. Since each state maintains its own Medicaid program, each will have unique complexities in its managed-care environment. Common tools used by managed care to control drug costs include restricted formularies, prior authorization, designated distributors such as specialty pharmacies, step therapy and utilization review, among others. And, each of these tools tends to go against the grain of traditional healthcare site practices.

Embracing a New School Approach

For billing to go smoothly and accurately, someone needs to be able to manage all aspects of specialty pharmacy drugs from beginning to end. Considerations for this assignment should be given to an oncology pharmacy navigator, immunotherapy navigator, specialty pharmacy navigator or even the entire outpatient/ambulatory clinical team. This functional oversight includes obtaining and maintaining authorizations, reviewing insurance benefits, verifying insurance is active for date of service, ensuring chemotherapy/immunotherapy/ specialty drug orders flow to the verification team, sending authorized order reminders to inform infusion charge nurses to schedule patients for treatment and generating reports of prior authorizations due to expire so new ones can be obtained. These tasks will require maintaining relationships with insurance, specialty pharmacy companies and 340B representatives, dealing with patient assistance co-pays, conducting foundation research, and tracking and managing physician responsibilities for prescriptions.

There are supply chain implications as well, with payer-mandated drug acquisitions and white bagging. Old-school thinking is refusing to follow the payer requests and buying product knowing there won’t be any reimbursement. New-school thinking embraces new concepts to accommodate patients and avoid nonreimbursable costs. This is especially important for facilities that offer specialty drugs, incorporate biosimilars and pride themselves on being progressive.