Drug Reimbursement and the Bottom Line: Update 2009

Anne Jarrett, MS, RPhATJ Consulting, LLC

www.drugreimbursement.org

Disclaimer

I have no relationships with any commercial interests related to my presentation.

A Real Fairy Tale

A long, long time ago, no one had to worry about the bottom line. Money was plentiful across the land. Drugs were cheaper. We got paid based on AWP.Everyone lived happily ever after.

Inpatient?

Outpatient?OPD?

M.D. owned?

OPPS?IPPS?

NOC?

SCOD?

Rev Code?

HCPCS II ?

Pass –thru?

SI?

ASP?CDM?

Dialysis?

FI?

CF?ICD-9?

DRG?

APC?

UOM? PAL?

Med A?Med B?

Med C?

Med D?

Add B

Packaged?Self adm?

Medicaid?

MS?

SS? IMS?

UB-92?

CMS-1500?

2nd payer?

Carrier? Outlier?

Objectives

• 2009 IPPS and OPPS

• The bottom line

• Why you should care

• Specific knowledge and use

• Key relationships and data

True or False?• No drug administered to a Medicare

inpatient is separately reimbursed.

• Medical coders look at the drugs patients receive while in the hospital.

• No MS-DRGs mention drugs.

• There are no HCPCS codes that are useful in quality measurement.

True or False?

• Day hospital patients are inpatients and covered by Medicare A.

• Physician owned clinics/offices use HCPCS codes and fiscal intermediaries.

• In-house dialysis centers and hospitals share a Medicare number.

Objectives

• 2009 IPPS and OPPS

• The bottom line

• Why you should care

• Specific knowledge and use

• Key relationships and data

2009 Final RulesInpatientProspective Payment System (IPPS)

IPPS 2009

• 3.6% in national standardized rates

• High-cost outlier threshold to $20,185

• Final 2 year transition to MS-DRGs

• Will not reimburse hospital to which a pt. has been transferred for tPA if given at transferring hospital

IPPS 2009 (con.)

• Additional quality measures

• Never events, present on admission(POA), readmission rates

• Will continue to reimburse separately for blood clotting factor products when given for approved indications

Value Based Purchasing

• Align payment with quality of care across settings

• Never events

• Present on admission (POA)

• Readmissions

• Repeat visits

2009 Final Rules Outpatient Prospective Payment System(OPPS)

OPPS 2009

• ASP + 4% for separately payable, non-pass-through drugs

• ASP + 6% for pass-through drugs

• Pass-through drug list updated

• ASP + 6% for physician offices

• No more pre-administration fee for IVIG

OPPS 2009 (con.)• Packaging threshold = $60.00

• Drug administration’s APC structure decreased from 6 to 5 APCs

• CMS decided against separating drugs & biologicals into 2 cost centers (high and low) to reflect overhead costs

ASP + 2%?• CMS calculated ASP + 2% to be

“actual”cost of drugs & biologicals

• Includes acquisition plus pharmacy overhead costs

• 6% 5% 4%

• Future rate?

Objectives

2009 IPPS and OPPS

• The bottom line

• Why you should care

• Specific knowledge and use

• Key relationships and data

The Bottom Line Equation

Drug prices & usage

+ = Reimbursement

________________ REVENUE

Novation’s National Economic Impact Survey 2009

• Current and future impacts over next 12 months

• 60% of responding hospitals have already been impacted

• 47% foresee staff cuts

Novation’s National Economic Impact Survey (con.)

• 73% have seen costs due to meeting patient safety standards

• 84% plan to spending with 49% anticipating a 6-10% reduction

• 44% will product utilization

Health Leaders Media Industry Survey 2009

• 70% of hospital CEOs concerned that reimbursement cuts will have a “strongly negative effect”

• # 1 wish? “Find a solution to reimbursement cuts.”

American Hospital Association Study

• “Report of the Economic Crisis: Initial Impact on Hospitals”

• January 2009

• 736 CEOs responded

AHA Study Results• 59% of hospitals plan on cutting

administrative costs

• 53% Reducing staff

• 27% Reducing services

• 12% Divesting assets

• 8% Considering merger

• 21% Other

Thomson Reuters Study• “Impact of recession on hospitals”

3/2/09

• Median profit margin of U.S. hospitals has declined to ZERO

• Balance sheets of over 400 hospitals nationwide

• Included all sizes and types of hospitals

Out of money experience

BAILOUT

Example A- Epo• Audit performed on reimbursement of

erythropoietin (epo) given in the hospital outpatient department over four months.

• Performed by Patient Financial Services, Pharmacy and Compliance

• Successful reimbursement rate for Medicare patients = 30%

• Estimated loss of revenue = $100,000 annualized to $300,000

per year

Why Was Revenue Lost? Audit showed*:

50% charged as NESRD when ESRD

25% lacked a lab report

25% charged with wrong billing units

10% charged with expired HCPCS codes

15% charged under incorrect Medicare provider number

*Some bills had multiple errors

*

Example B-Remicade

Infliximab (Remicade®) 100mg vial

• Usual dose = 100mg

• 1 billing unit = 10mg ($55.85)

• If bill for 1 (vial) $55.85

• If bill for 10 billing units $558.50

• Conversion factor = 10

Example C- Botox

• Patients in non-hospital owned pediatric clinic administered Botox

• Clinic ordered Botox from hospital pharmacy

• Hospital pharmacy charged patients for drug

• Hospital gave away thousands of dollars of free drug

Example D - Blood Factor Products

• Hemophilia patient covered by Medicare suffered a fall at his home

• In ICU in a coma for 3 months

• Administered $1.7 million of Factor VIIa

• Hospital did not realize eligibility of reimbursement for inpatients

BFPs (con.)

• Filed an adjustment claim with Medicare

• The hospital made a couple of million dollars that would have been written off.

Objectives

• 2009 IPPS and OPPS update

• The bottom line

• Why you should care

• Specific knowledge and use

• Key relationships and data

Would you like fries with that?

Objectives

2009 IPPS and OPPS

• The bottom line

• Why you should care

• Specific knowledge and use

• Key relationships and data

Don’t kid yourself. You’re just a deer in the headlights..

Knowledge

Can you answer these questions?

• Can we?

• Will we?

• How much can we?

• Did we?

…..get reimbursed for drug X?

Pt. Location

Payer DrugHCPCsCode

BillingUnit

ICD-9codes

Rev.Code

StatusInd.

The Decks

Flow Of Drug Through Purchasing, Billing, I.S. To Inventory Valuation

Have to know (Hospital)• Fiscal intermediary/carrier/MAC

• Medicare/Medicare numbers

• Information Services (all applicable computer programs)

• Payer mix

• Contracts

• Key players

Have to Know (Pharmacy)• Budget

• Acquisition costs

• Purchasing /GPO contracts/ Wholesaler substitutions

• Information/billing system/staff

• Responsibility reports

Contracts

• Per diem

• Charges -%

• Carve outs

• Specialty drugs

Have to Know Where to Find

• Drug /administration payment rates

• HCPCs codes

• ICD-9 codes

• MS-DRGs/APCs

• Specific patient information

• Changes

The Ivana Moore Money Health System

You can’t get reimbursed without it.

GOOD► 1/2010THRU

Trans Desc Ins Ch Bill Bill Rev PriceCode Cov In CD1 CD2 CD

ChargeMaster

• Who is the master of your chargemaster? Has “make or break” effects on revenue capture- could spell disaster

• Multiple chargemasters?

• Hospital chargemaster

Coverage

• International Classification of Diseases,

ninth edition (ICD-9 diagnosis codes)

• Approved indications for drugs

• Local Coverage Determinations (LCD)

• National Coverage Determinations (NCD)

• Pre-approval

• Medical necessity

Pegfilgrastim- LCD (Palmetto GBA)

• ICD-9 codes that support medical necessity:– 205.00 Acute ALL w/o remission– 205.01 Acute ALL w/ remission– 205.10 Chronic ALL w/o remission– 205.11 Chronic CLL w/ remission– 238.7 Neoplasm of uncertain behavior of other

lymphatic and hematopoietic tissues– 288.0 Agranulocytosis– V42.9 Unspecified organ or tissue replaced by

transplant– V59.8 Donors of specified organs or tissue– V66.2 Convalescence following chemo– V66.5 Convalescence following other treatment

Other Payers & Coverage

Did you know?• Medical coders do not look at drugs

when looking through an inpatient’s chart?

• Day hospital pts are considered to be outpatients?

• In-house dialysis units have a separate Medicare number?

Did you know?

• MS-DRGs mention drugs?

• HCPCS codes for quality measures?

• Different drug reimbursement given in hospital outpatient departments, physician owned clinics & ASCs?

Did you know?

• Medicare will reimburse hospitals separately for blood factor products given to hemophilia patients? (Specific ICD-9 diagnosis codes required)

• Med D has and will continue to affect hospitals?

MS-DRGs That Mention Drugs• Acute ischemic stroke with use of

thrombolytic agent

• Craniotomy with major device implant or acute complex CNS principal diagnosis with MCC or chemotherapeutic implant (Gliadel® wafers)

HCPCS Codes for Quality Measurement involving drugs

Does your hospital use them?

Example:

G8006 – Acute myocardial infarction

(AMI) patient received Aspirin at

arrival

Quality Measure HCPCS Codes (con.)

• G8006- AMI pt recd aspirin at arrival

• G8012- Pneum pt recv antibiotic 4h

• G8027- HF pt not elig for Bblocker

• G8214- Clini not doc order VTE

Hospital Outpatient Departmentsversus Physician Owned Clinics

• Claim forms

• Addendum B

• Part B Average Sales Price

• HCPCS codes

• Fiscal intermediary

• Carrier

Ambulatory Surgical Centers

• In 2008, CMS started OPPS-like payment

• 65% of OPPS reimbursement rate

• Added 790 ASC procedures

• In 2009, CMS added 30 surgical procedures payable in ASC settings

How Has MED D Affected Hospitals?

• Manufacturers’ Medication Assistance Programs

• Former program patients can’t afford their co-pays, don’t take meds (e.g transplant meds after 3 years)

• Re-admissions and E.D. visits • Donut hole by July

Resources?

• Fiscal intermediary, carrier, MAC

• Medicare website

http://www.cms.hhs.gov

Finding the needle is easy. Finding the right haystack? Impossible!

FUTILITY

Have to Think About• Appropriate use

• Collaborative guidelines

• Replacement programs

• Charge for wastage?

• Patient Assistance Program

• LOS and outpatient drug affordability

Pharmaceutical Reimbursement Specialist

• Do you have a pharmaceutical reimbursement specialist?

• If you have a business person on staff, does he or she “speak” pharmacy ?

Watch For

• Drug reps distributing information to M.D.s about off-label/ new drug use

• GPO contracts

• Wholesaler substitution

• “Gray market”use

• New drugs without a HCPCS code

Readmissions and E.D.Visits

• Annals of Internal Medicine, 2/3/2009:

“Pharmacists follow up helps cut hospital readmissions and E.R. use by 30% at a Boston hospital”

• Patient Assistance Programs

• Replacement programs

• Cost of drug vs. cost of admission

Rounding Doses

• “Minor decrease in calculated doses result in substantial cost savings without more risk to patients” Oxaliplatin (Eloxatin)

• $17,905/year stage III advanced colorectal CA

• $25,876 for stage IV

• Wastage avoided

(Presented @ GI Cancer Symposium (ASCO), January 19, 2009)

Specialty Pharmacies & Exclusivity

• Some payers restrict certain high cost drugs to specialty pharmacies

• In contract—get involved!

• Some manufacturers grant exclusivity of purchasing to certain entities

Objectives

• 2009 IPPS and OPPS update

• The bottom line

• Why you should care

• Specific knowledge and use

• Key relationships and data

PUT THE PUZZLE TOGETHER

PHARMACY

MEDICALCODINGBILLING

INFORMATIONSERVICES

PHYSICIANS

REIMBURSEMENTACCOUNTING

PERSISTANCE

Go ahead. Give yourself permission to be irritating.

In the Know

– Finance department– Reimbursement accounting– Billing and Collections– Social work– Medicare/Medicaid– Contracting– CFO– Compliance

Challenges CFOs Face• MS-DRGs

• Charge to cost based

• Medicare Recovery Audit Contractor RACs Audits

• ICD-10-CM

• Pay for performance

• Consumer directed health care

Data• Information systems

• Payer mix

• Co-pay collection rate

• Contracts

• Reimbursement rate

• Indigent and charity care

Need to Know• Negotiated carve-outs

• Top MS-DRGs/APCs by dollar

• Outlier payments

• Benchmarks

• Cost to charge ratio

• Base payment

Stay ahead of the train

Finally you see the light at the end of the tunnel. It’s a train coming down the tracks.

Keep Up

• Make yourself aware of all the numerous changes in a timely manner

The only thing that stays constant is change.

The Future?

Healthcare Reform

This is your government

This is your Government on drugs

Government Efficiency

You can’t afford not to buy it !

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