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Business Applications. Chapter 20: Billing and Reimbursement. Learning Outcomes. Explain principles of billing & reimbursement Define common pricing benchmarks List various payers of pharmaceuticals & pharmacy services Describe differences in reimbursement processes - PowerPoint PPT Presentation
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Chapter 20: Billing and Reimbursement
Learning OutcomesExplain principles of billing & reimbursementDefine common pricing benchmarksList various payers of pharmaceuticals &
pharmacy services Describe differences in reimbursement
processes Describe information needed for 3rd party
claimUse knowledge to identify reason for rejected
claim
Key TermsAdjudication averageManufacturer price (AMP)Average sales price (ASP)Average wholesale price (AWP)Coinsurance Copayment Cost sharing Coverage gap
Key TermsDeductible Diagnosis related group (DRG)Dispensing feeFederal upper limit (FUL)Fee for service Formulary Healthcare common procedure coding
system (HCPCS)
Key TermsIndemnity Institutional patient assistance programs
(IPAPs)Maximum allowable cost (MAC)Network Patient assistance programs (PAPs)Pharmacy benefit manager (PBM)Premium Prior authorization
Key TermsProspective paymentQuantity limitsRetrospective paymentRevenueStep therapyThird-party payerWholesale acquisition cost (WAC)
Pharmacy Accounting BasicsMargin = Amount paid by patient–acquisition
cost of drugsNet Profit = Total revenue – total expenses Total revenue must exceed total expensesSignificant changes in reimbursement for drugs
affects pharmacy profitsPharmacy technicians
knowledge of reimbursement is significant role
Reimbursement BasicsBased on many factors including:
practice setting type of drug who is paying for drugs
Prospective paymentall costs associated with treating conditiondeliver drugs at or below predetermined rate
Retrospective, or fee for servicedrugs are dispensed & later reimbursedpredetermined formula in contract between
pharmacy & 3rd party payer (insurance company or PBM)
3rd Party Contract FormulaIngredient cost
benchmark (several options in later slide)Dispensing fee
covers costs of dispensing prescriptionCopayment aka “copay”
cost-sharing amount paid by patient or customerPharmacy profitReimbursement > costs to dispense
prescriptionreimbursement= (ingredient cost + dispensing fee) –
copayment
Cost TermsAverage wholesale price (AWP)
commonly used benchmark created in 1960savailable from MediSpan & First Databank
Known as “sticker price” AWP usually set at 20–25% above wholesale
acquisition cost (WAC)
Cost TermsWholesale acquisition cost (WAC)
set by each manufacturer“list price” manufacturer sells to wholesaler
Does not include discounts or price concessionsIf AWP is basis for reimbursement, formula is
usually AWP less some percentageIf WAC is basis, formula is usually WAC plus
small percentageNeither AWP nor WAC represent actual cost of
drugs
Cost TermsNew benchmarks Average sales price (ASP)
based on manufacturer-reported selling price data
includes volume discounts & price concessionsAverage manufacturer price (AMP)
average price paid to manufacturers by wholesalers
includes discounts & other price concessions
DRABudget Deficit Reduction Act of 2005 (DRA)
requires AMP to calculate federal upper limit for drugs paid through Medicaid
FUL=funds from feds to state Medicaid programs Patient Protection & Affordable Care Act of
2010 AMP was established as 175% of ASPReimbursement formula for generic product
different than for brand productBrands reimbursed based on AWP or WAC
MACMaximum allowable cost
based on cost of lowest available generic equivalent
Used by insurance companies & MedicaidPresents challenge to pharmacies
not publishedwidely variable among insurance companies
Payment2008 Stats:
private insurance paid for 42% Medicare and Medicaid paid for 37%consumers paid 21%
Cash price is “usual & customary price”3rd party contracts may pay which ever price
is lowercontract formula priceusual & customary price
PAPsPatient assistance programs (PAPs)
low-income patients who lack prescription drug coverage and meet certain criteria
Criteria for PAPs are widely variabledetermined by individual drug companiesmostly proprietary drugs in PAPs patient is required to complete application
Drug company sends drug to licensed pharmacist or physician on patient’s behalf
IPAPsInstitutional patient assistance programsMedications are provided to institutionInstitution verifies patient meets established
criteriaPharmacies receive “replacement” product Pharmacy technicians play important role
340B340B drug pricing program covered entities:
federal qualified health centers (FQHCs)disproportionate share hospitals (DSH)state-owned AIDS drug assistance programs
Drastically reduced drug prices to eligible patients
Administered by The Office of Pharmacy Affairswithin Health Resources and Services
Administration
Private InsuranceMost common purchasers of private
insuranceemployerslabor unionstrust fundsprofessional associationsindividuals
Private InsuranceManaged care (based on network of
providers)lower cost than indemnitymust use network providers
Indemnity (non network- based coverage)more expensivemore choices of physicians & hospitals
PBMsPharmacy Benefit Managers
administer pharmacy benefits for private or public 3rd party payers
aka plan sponsorsMajor PBMs
CVS CaremarkMedcoExpress ScriptsWalgreens Health InitiativesWellpoint Pharmacy Management
PBMsSponsor pays PBM fee
Fee covers total cost of pharmacy benefitPBM administers pharmacy benefit under
direction of sponsorPBM manages benefit so cost of prescriptions
does not exceed amount of money paid to PBM by sponsor
Formulary cornerstone of PBM activitiesPreferred & nonpreferred
may charge different copays or copay tiers
PBMsPrior authorization
requires prescriber to receive preapproval from PBM
used for newer drugsStep therapy
must try & fail on recognized first-line drug before expensive second-line drug is covered
PBMsQuantity limits
amount of drug or total days of therapyphysician or pharmacist may request an override
of any restrictions PBM places on therapyAdministering benefit is balancing act
managing costs providing quality service & value
Mail order90-day supplyreduced copayment
Specialty ServicesHigh-cost drugs
newer biotechnology drugsIncludes
special delivery of medication to beneficiary’s home
free nursing visits to help train patient24-hour hotline for beneficiary to call
pharmacist PBMs provide complex & valuable service
Processing 3rd Party ScriptsPrescription drug benefit identification (ID) cardNecessary information to file claim on ID card:
BM (Any PBM) or drug benefit providertelephone number for PBM customer service employer member name member ID number participant’s name BIN # (000012) bank identification number
Processing 3rd Party RxPrescription & 3rd party info entered into
computerPBM either accepts or rejects claim
codes standard across all prescription benefit plans
“Missing or Invalid Patient ID” “Prior authorization required”“Pharmacy not contracted with plan on date of
service” “Refill too soon” “Missing or invalid quantity prescribed”
Public PayersMedicare is largest public payerMedicaid Department of Veterans AffairsDepartment of DefenseIndian Health Service
Medicare Serves Cover:Elderly
qualify for Medicare at 65 years of ageDisabledPeople with end-stage renal disease (ESRD)Amyotrophic lateral sclerosis (ALS)-Lou
Gehrig disease
4 Parts to Medicare:Part A (hospital insurance)Part B (medical insurance)Part C (Medicare Advantage plans)Part D (prescription drug coverage)
Medicare Part APart A (hospital insurance)
inpatient care (hospitals, skilled nursing facilities )
hospice carehome health carepre-paid through payroll taxes processed by fiscal intermediarydiagnosis-related group (DRG) is basis for
reimbursementDRG=set rate paid for procedure based on cost
& intensity
Medicare Part BOptional medical insuranceCovers:
outpatient physician & hospital servicesclinical laboratory servicesDMEPOS- acronym for:
durable medical equipment prosthetics orthotics supplies
Medicare Part BMay cover medical services that Part A does not
coverRequires active enrollmentCostsmonthly premiumannual deductiblecoinsurance
Medicare Part BCovers some preventative services &
specialty medspneumococcal vaccines cancer screenings (cervical, breast, colorectal,
prostate)immunosuppressive drugs erythropoietin stimulating agents for home
dialysis patientsoral anticancer drugsoral antiemetic drugs
Medicare Part BMedicare Part B payment
does not always pay 100% for Part B covered items
payment category determines amount Medicare pays.
pays percentage of approved amount after deductible has been met
patient pays remaining portion-known as coinsurance (& premium, deductible)
Medicare Part B Coinsurance may be submitted to secondary
insurer if patient has coveragePart B claims are processed by local
Medicare carrier DMEPOS items are processed by DME
Medicare administrative contractors (DME MACs)
Claims must be filed within 1 year orMedicare reduces allowed amount by 10% for
payable claims
Medicare Part CMedicare Advantage Plan combines Part A &
BBenefits provided by Medicare-approved
private insurance companiesOften include prescription drug benefits
Medicare Advantage Prescription Drug plans (MAPDs)
Therefore, Part C beneficiaries should not enroll in Part D prescription drug plan
5 Types of Part C PlansHealth maintenance organizations (HMOs)Preferred provider organizations (PPOs)Medical savings account plansPrivate fee-for-service plansMedicare special needs plans
Costs of Medicare Part CBeneficiaries pay
premiumsdeductiblescopaymentscoinsurance
Medicare Advantage Plans charge 1 combined premium for Part A & B
benefits & prescription drug coverage (if included in plan)
Medicare Part DFederal prescription drug program paid for
byCenters for Medicare and Medicaid Services
(CMS) individual premiums
Part of Medicare Prescription Drug, Improvement, & Modernization Act of 2003
Voluntary insurance benefitoutpatient prescription drugs
Must enroll in Medicare Part D
Medicare Part DPrescription drug plans administered by PBMsEach plan varies in terms of cost & drugs
covered4 enrollment & plan change opportunities:
beneficiary turns 65 & is eligible for Medicarebeneficiary receives Medicare as result of
disabilityfrom November 15-December 31 of any year
open enrollment periodwhen beneficiary qualifies for Extra Help
Medicare Part DLate enrollment penalty
monthly charge of 1% of national base beneficiary premium (calculated by CMS) for every month that beneficiary does not join Part D plan
Creditable coveragecoverage that is at least as good as Standard
Medicare Drug Benefitcan be from current or former employer, union,
Veterans Administration, Department of Defense, or Federal Employees Health Benefits Program
Medicare Part DCustomers –contact employee benefits
manager or CMS (1-800-MEDICARE or www.medicare.gov) for questions about joining Medicare Part D
Costsmonthly premiumannual deductibleeither coinsurance or copayments for each
prescription
Medicare Part D GapCoverage gap- “donut hole” No coverage period
occurs after initial coverage limitmust pay all costs for prescriptions
Catastrophic coverage threshold ends gapGap considered “deductible in the middle”
Medicare Part DBeneficiaries receive notice in October
outlines how plan will change for following year can keep plan or switch during open enrollment
Special populations can receive Extra Helpaka Low-income Subsidyautomatic enrollment if
already receive full Medicaid benefits referred to as “dual eligibles”
Medical Savings Programs (MSP) Supplemental Security Income (SSI)
Medicare Part DExtra Help not used to capacity>2 million people eligible but have not
appliedDrug formularies for Medicare Part D
vary from plan to planplans must cover at least 2 drugs in each
therapeutic category
Medicare Part D Formularies6 protected categories must include almost
all drugs1.Antipsychotics2.Antidepressants 3.Antiepileptics 4.Immunosuppressants5.Cancer drugs6.HIV/AIDS drugs
Medicare Part D FormulariesSome classes not required to be covered by
Medicare Part Dover-the-counter drugsbenzodiazepinesbarbituratesdrugs for weight loss or weight gaindrugs for erectile dysfunction
Medicaid plan may cover some drugs that are not covered by Medicare Part D
Medicare Part D FormulariesIf Prior Authorization Required
Medicare Part D covers 1-time 30-day supply allows time for physician to complete
paperwork necessary for prior authorizationIf drug not on formulary
beneficiary/prescriber can request exception to formulary
if not granted by Part D plan, beneficiary can submit an appeal
Medicare Part D Prescriptions Similar to other 3rd Party National Provider Identifier (NPI)
or non-NPI prescriber ID can be submitted Prescription ID card from Part D plan
or pharmacy can submit an eligibility query online
E1 transaction returns “4Rx data” RxBIN, RxPCN, RxGrp, RxID, 800 phone # of Part D
plan
MedicaidJointly funded by federal & state governments
wide variation in Medicaid coverage from state to state
Covers 3 main groups of low-income Americansparents & childrenelderlydisabled
Federal poverty limits (FPL) May qualify for Medicaid if medical expenses
exceed certain threshold = “spend down”
Dual EligiblesMedicaid recipients who qualify for Medicare
are known as “dual eligible” Medicare is usually considered primary payerMedicaid can supplement Medicare benefits by
providing coverage for benefits not be covered by Medicare
providing assistance with copayments for prescriptions
Medicaid is “safety net” or payer of last resort
MedicaidStates must cover minimum set of Medicaid
benefits for eligible patientsProvide coverage for prescription drugs
prescribed by licensed physiciandispensed by licensed pharmacistmedication must be recorded on written
prescriptionall prescriptions must be electronically prescribed
or written/printed on “tamper resistant” paperneed for med must be supported in medical record
MedicaidPharmacies sign contract with state Medicaid
agencyObligates provider to accept payment Medicaid
provides as payment in fullMost prescriptions have low or zero copaymentsCertain categories of eligible patients are
exempt from cost sharingchildrenpregnant womennursing home residents
MedicaidBy law, Medicaid recipients may not be
denied services based on their inability to pay assigned cost sharing
When Medicaid patient is unable to pay for copayments for prescription drugs, pharmacy reimbursement is reduced
Other Public PayersDepartment of Veterans AffairsDepartment of DefenseIndian Health ServiceAll veterans of active military service (Army,
Navy, Air Force, Marines, and Coast Guard) are potentially eligible for health benefits from Department of Veterans Affairs (VA)eligibility is not just for veterans who served in
active combatbeneficiaries usually pay copays
Other Public PayersVA prescription benefit is considered
creditableit is at least as good as Medicare Part Dcan opt out of Medicare Part D & do not incur
late enrollment penalty as long as they continue their VA pharmacy benefits
VA uses a national drug formularyprescriptions & refills are available at VA
pharmacies or mail order facilities
Other Public PayersTRICARE
health benefit program from Department of Defense
Active military personnel, retirees, & their families are eligible for TRICARE
TRICARE retail & mail-order prescription benefit is administered by Express Scripts
based on national TRICARE formularyprescription coverage is considered creditable
with Medicare Part D
Other Public PayersThe Indian Health Service (IHS)
provides comprehensive federal health care delivery system American Indian tribes Alaska Native tribes
Billing for Drugs & ServicesBilling procedures for
inpatient hospitaloutpatient hospitals, clinics, & physician officesoutpatient community settings
Each setting-different billing requirements & reimbursement methods
Inpatient Hospital SettingPrimary Methods of payment
per diemprospective payment
Drug costs included in DRGDRG assigned when patient admittedSteps to determine PPS payment on CMS
Website: http://www.cms.hhs.gov/AcuteInpatientPPS
Inpatient Hospital SettingPer diem & prospective paymentDrug costs are included in DRGsProspective payment system (PPS)
classifies hospital cases based primarily on type of patient diagnoses procedures complications comorbidities resources used
Outpatient Hospitals & ClinicsDrugs may be part of procedure or paid
separatelyMost drugs given in these settings are fee-for-
servicefee-for-service formula is based on AWP
Medicare Part B hospital outpatient services paid perOutpatient Prospective Payment System (OPPS)
Some drugs are bundled into ambulatory payment classification (APC)
APCAmbulatory Payment ClassificationPredetermined outpatient payment
categoriessimilar to inpatient DRGs
Drugs with costs > $60 per administration have separate APCspayment=average sale price + 5% (ASP +
5%)< $60 are bundled into APC payment
HCPCS CodesHealth Care Common Procedure Coding
System codeService units are pre-determined billing
increments that may be unrelated to package sizeinfliximab (Remicade) injection
HCPCS code of J1745 billed & reimbursed in increments of 10 mg
HCPCS CodesHCPCS federal coding system consists of 3
levels:Level I-Current Procedural Terminology codes
(CPT)Level II-National Alpha-Numeric codes (CMS)
standardized coding system used to identify products, supplies, services not
included in CPT codesLevel III-Local Alpha-Numeric codes
local Medicare carriers
J-codesHCPCS codes for drugs = J-codes
J-codes subset of Level II code set Identify specific drugs“J-code” refers to code that often begins with
J HCPCS drug codes may begin with other letters
such as C or Q Codes beginning with C or Q are often temporary
codes
OPPSOutpatient Prospective Payment System
(OPPS)based on pre-determined payment rates HCPCS code is assigned an OPPS status
indicatoridentifies whether product or service is packaged
or separately payableMedicare OPPS Addendum B
lists products’ HCPCS codesstatus indicatorsfees
Claim Submission-Key ElementsBeneficiary name & Health Insurance Claim NumberDate of serviceHCPCS codesCommon Procedural Terminology (CPT) codesInternational Classification of Diseases codes
ICD-9 codes also known as Diagnosis codesClinical ModifiersNational Drug Code (NDC)Units of Service (Quantity expressed in service units
or billing increments)Place of service
Community Pharmacy SettingDrug claims adjudication process involves
these steps:submitting appropriate informationdetermining eligibility, coverage, paymentcommunicating reimbursementsettling claim
National Council of Prescription Drug Programs (NCPDP)develops standards for information processing
for pharmacy services sector of health care industry
NCPDP SystemAllows communication of claims between
pharmacy providerspharmacy benefit managersthird-party payersinsurance carriers at point-of-service
Enables pharmacies to obtain immediate response verify eligibilitydetermine formulary coverage statusconfirm quantity limits & copay amountssubmit claimsreceive payment information
Prescription ProcessingKey billing elements include:
Prescription Processor BIN (bank identification number)PCN (processor control number)Pharmacy Provider Information NPI (National Provider Identification)NCPDP or NABPEligibility (specific to each patient)Member Name & Identification NumberGroup Number
Key Billing Elements Relationship (Plan Member, Spouse, Dependent)Prescription InformationDate of prescription (date was written and each fill)NDC Directions for useQuantity dispensedDays SupplyDispense as Written (DAW) or Product SubstitutionPhysician Signature NPI number DEA number when required
Online Ajudication InformationEligibility informationSpecific coverage (formulary vs. non-
formulary items)Prompts for prior approval Copayment amounts“Refill too soon”“Exceeds quantity limits or days supply” Denials when item not covered
Audits by 3rd Partys & PaybackFollowing 3rd party audit, pharmacies may have to pay
back Pay backs caused by:
incorrect information dates, drugs, strengths, or directions incorrect days supply (# ordered & directions should match)
overbilled quantity (an amount > the quantity written)incomplete information
no quantity indicated “Use as directed” sig not ok: must be able to calculate days
supply patient name & unique identifier date of prescription
DAW Codes0 No product selection1 Physician DAW: substitution not allowed by provider2 Patient DAW: substitution allowed; patient request2 Pharmacist DAW Brand: substitution per RPh3 Generic not in stock: substitution allowed 4 Brand sold at Generic Price: substitution allowed 5 Override 6 Brand Mandated by Law: substitution not allowed7 Generic Not Available: substitution allowed 8 Other