Drug Reimbursement: Working with Payers

IN A DIGITAL AGE, drug reimbursement hinges on a variety of issues such as site of care, drug affordability, the addition of newly approved drugs, including biosimilars, and single-dose packaging.

Site-of-Care Considerations

Site-of-care considerations are high on the list when working to meet patient needs and mitigate costs. Patients may have preferences about where they want to receive treatment, but reimbursement challenges, including co-pays and payer mandates, can influence the site-of-care decision because each site has its own payer relationships and requirements.

There are many site-of-care options for infusion drugs such as hospital outpatient infusion centers, pharmacy infusion suites and the home, among others. The cost of using each of these options is dramatically different, with the hospital outpatient infusion center at the top of the list. And, facilities often justify an add-on facility fee to support care for patients with complex medical conditions.

Regardless of a patient’s condition, the care received or the facility used, reimbursement requirements are payer-driven, and contracts could be government, commercial, fee-for-service, managed care or value-based. Peculiarities facilities need to consider to manage these differences include compliance and data integrity; clinical documentation; pharmacy and therapeutics (P&T) committee involvement; electronic health record build; charge master build and maintenance; coding and billing with a claims clearinghouse; denials avoidance teams; revenue integrity and underpayment teams; and finance relationships. Site-neutral payment (paying the same amount for a service, medication, treatment, etc., regardless of where a patient is treated) plays a role as well.

Drug Affordability

Let’s not forget the financial impact on patients. Medicare beneficiaries covered under Part B usually are responsible for a 20 percent co-pay. This co-pay may be an out-of-pocket expense for patients, or it may be covered by co-insurance that patients also carry. And, because these co-pay rates are not affected by the site of care, the more expensive the site, the larger co-pay burden patients bear. 

In 2024, the physician fee schedule (PFS) payment rates for drug administration services generally decreased across the board. The percentage decrease (relative to 2023) ranges from -2.53 percent to -36.91 percent for physician services performed in the facility setting and from 3.95 percent to -22.94 percent in the non-facility (freestanding office) setting. These decreases are primarily due to the decrease in the conversion factor for 2024. 

The Health Care Price Transparency Act of 2023 (H.R. 5378) requires off-campus outpatient hospital departments to use separate and unique provider identifiers for billing Medicare and to be reimbursed for clinician-administered drugs at the same level as the Medicare PFS (site-neutral payments). This will be phased in for health professional shortage areas, rural areas and cancer hospitals. H.R. 5378 also calls for off-campus grandfathered drug administration services (those that are assigned to designated ambulatory payment classification groups as yet undefined) to be cut starting in 2025. 

Adding Biosimilar Products in 2024

Patent expirations have led to the approval of an astounding number of biosimilar products for 14 reference branded products. And, many key payers have announced strategies for covering these new drug products, including biosimilars, which can apply to both Medicare Part B products paid under the 2024 OPPS, Medicare Advantage and private insurance. 

But, new biosimilar products present a complicated scenario for facilities concerning payer decisions. These decisions may differ from what facilities believe is the best-case scenario for patients and the practice. Indeed, it can be a tussle between decisions payers are making and the facilities’ strategies for implementation. However, remember that payment under OPPS is the biosimilar average sales price (ASP) plus 8 percent of the reference biological’s ASP for the first five years. 

The U.S. Food and Drug Administration (FDA), through the Center for Drug Evaluation and Research Division of Drug Information, is trying to help by creating educational materials for patients, caregivers and healthcare providers to help share information and improve awareness and understanding of biosimilars, which can be located at www.fda.gov/drugs/biosimilars/multimedia-education-materials-biosimilars.

Action Items for Newly Approved Drugs

When deciding whether a facility’s P&T committee should consider any newly FDA-approved drugs, the following steps can help:

1) Work alongside pharmacy purchasing to determine which products to use.

2) Use the quarterly ASP tables crosswalk file to identify the correct billing and payment code for each applicable product: www.cms.gov/medicare/payment/all-fee-service-providers/medicare-part-b-drug-average-sales-price/asp-pricing-files.

3) Consider the complexity and nuanced nature of the differences between each product and limitations of approved indications.

4) Be aware of payer limitations and prior authorization requirements.

5) Use the provider data management (PDM)/charge description master (CDM) systems using the applicable healthcare common procedure coding system (HCPCS) code to add each drug product purchased.

6) Create computerized provider order entries (CPOEs) that reflect these decisions.

7) Remember: The order entry must be for the actual product that is being purchased.

Keep in mind there may be situations in which using the new drugs is warranted while this rather lengthy and laborious process plays out. In such cases, the following steps must be taken in conjunction with the revenue cycle and IT/informatics team, and completed before any new drug is used in the facility: 

1) Add the product to the drug dictionary/PDM used be the facility’s IT system.

2) Add the product to the CDM with the newly assigned HCPCS code, and link it to the PDM (if a separate step is required).

3) Ensure the assigned billing unit is correct and the crosswalk tables converting dose given into billing units is functional.

4) Create a CPOE entry for the product, including supporting documentation for prior authorizations or other payer requirements.

Assuming all of this is done prior to the use of drugs, the order entry should automatically trigger a chain reaction allowing the drugs to be prepared, administered, charted and passed on to the revenue cycle with the appropriate documentation needed to garner payment. The conversion of dose to billing units will also flag any possible waste that may or may not be submitted for payment with the appropriate modifiers (JW versus JZ) attached.

Reimbursement for Discarded Drugs from Single-Dose Packaging

The Infrastructure Investment and Jobs Act of 2021 requires manufacturers to provide a refund to the Centers for Medicare and Medicaid Services for certain discarded amounts from a refundable single-dose container or single-use package drug. The data to determine this refund comes directly from the claims submitted for wasted/discarded portions of the drug. Rigorously adhering to the Part B JW and JZ modifier policy is essential to effectively identify and monitor billing and payment for discarded/wasted amounts of drugs.