Medicare Part B Drug Payment in Hospital Outpatient Setting to be ASP+5% in 2011

November 6, 2010 – The Centers for Medicare and Medicaid Services (CMS) has released an advance copy of the final rule outlining changes to the Hospital Outpatient Prospective Payment System (OPPS) for 2011. The final rule  is scheduled to be published in the November 24, 2010 Federal Register.

Changes that will impact Medicare Part B drug coverage in the hospital outpatient setting next year include the following:

·       Increased Payment for Non-Pass-Through Drugs (SCODs). CMS will increase the reimbursement rate for drugs that are not eligible for transitional pass-through payment (also known as Specified Covered Outpatient Drugs, or SCODs) from the current rate of Average Sales Price (ASP) + 4% to ASP + 5% in 2011. The percentage paid above ASP in the outpatient setting is intended to compensate hospitals for associated overhead and related expenses, such as pharmacy services and handling costs.

The final ASP + 5% payment rate is 1% less than the rate originally proposed for 2011 (ASP + 6%), due to updates  in the data used to calculate pharmacy services and overhead costs in the hospital setting that became available to CMS after the proposed rule was issued.

CMS develops ASP-based reimbursement in the hospital setting using a method that relies heavily on claims data submitted by hospitals, which is often incomplete or submitted by the hospitals in formats that CMS cannot use in its drug price and pharmacy overhead estimates. (ASP-based reimbursement for hospitals is derived from a formula that is entirely different from the formula CMS uses to calculate ASP-based drug reimbursement for physicians.) To establish 2011 drug reimbursement rates, CMS used hospital claims data from calendar year 2009. CMS continues to encourage (but does not require) hospitals to report drugs provided in the outpatient setting under Revenue Code 0636, along with specific HCPCS codes and accurate HCPCS billing units. Improved detail and accuracy in hospital claims data, which can only be achieved by hospitals’ voluntary cooperation in using HCPCS in this manner, will assist CMS in compiling better data about hospital drug costs in future years.

·       Transitional Pass-Through Drugs. Pass-through drugs (a relatively small category of newer drugs) will continue to be paid at ASP + 6%, which is unchanged from 2010. The ASP + 6% rate will continue to give pass-through drugs a potential competitive reimbursement advantage over other drugs (the SCODS discussed above), which will be paid at ASP + 5% in 2011.

Drugs approved by CMS for pass-through status are eligible for pass-through payment for two to three years. In 2011, eighteen drugs or biologicals will reach the end of their pass-through period and convert to ASP + 5% reimbursement as SCODs, while 42 drugs will have new or continuing pass-through status and will be reimbursed at ASP + 6%. New drugs that are FDA approved for marketing and complete the CMS pass-through application process may be added to the pass-through list each quarter under timelines established by CMS.

·       Packaged Drug Threshold. In 2011, CMS will package payment for drugs,biologicals and therapeutic radiopharmaceuticals that cost less than $70 per day with payment for other items and services provided on the same day. (The threshold in 2010 is $65.) With certain exceptions, drugs with costs that exceed this threshold are eligible for separate payment.

CMS assessed the applicability of the $70 threshold for each drug using ASP data from the second quarter of 2010 in conjunction with data submitted by hospitals on claims during calendar year 2009.

·       Diagnostic Radiopharmaceuticals and Contrast Agents. Payment for all of these products that are not approved for pass-through will continue to be packaged with payment for the nuclear scan or other associated procedure, even when their cost exceeds the $70-per-day packaging threshold discussed above. (Products approved for pass-through will continue to be eligible for separate payment.)

 In addition, payment for the scan or other procedure will continue to be denied if the radiopharmaceutical or contrast agent is not also reported on the same claim.

CMS recognizes that a problem occurs when a hospital receives a radiopharmaceutical or contrast agent free or at full credit from the manufacturer. Currently, if a hospital does not report the “free” product, payment for the associated scan or other procedure is denied. However, there is not a standard process in place for hospitals to report “free” goods. To overcome this dilemma, CMS will allow hospitals to report the “free” product using modifier –FB (which signifies that an item was provided without cost to the provider) and a charge of less than $1.01. (Modifier –FB is typically used by DME providers, but will also be accepted from hospitals in these circumstances.) The Medicare contractors will be instructed to recognize this modifier/charge combination as an indication of free product and to make payment for the related scan or procedure at a price adjusted to remove payment for the “free” radiopharmaceutical or contrast agent from the packaged rate.

·       Therapeutic Radiopharmaceuticals. These products will continue to be paid at the same rate as other non-pass-through drugs and biologicals (ASP + 6% in 2011) as long as the manufacturer reports ASP data to CMS. If ASP data is not reported, CMS will use hospital mean unit data to derive an allowable.

·       Clotting Factors. Clotting factors will continue to be paid at ASP + 6% plus a furnishing fee of $0.176 per unit.

The final rule contains an extensive discussion of these and other reimbursement issues unrelated to drug payment that will impact hospitals in 2011. Although scheduled for an November 24, 2010 3 publication date, the advance copy can be viewed now at http://www.ofr.gov/inspection.aspx.

CMS is now accepting electronic, mailed, and hand-delivered comments on this final rule. The comment period will close at 5 pm EST on January 3, 2011. ●

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