Don’t Let Money Go to Waste Learn to Bill Discarded Drugs Correctly

The Centers for Medicare & Medicaid Services (CMS) recently released Transmittal 1962 clarifying the use of modifier JW and how to bill Medicare for discarded drugs and biologicals. 1 According to CMS, hospitals are encouraged to schedule patients in such a way that drugs or biologicals are administered in an efficient yet, clinically appropriate manner. In order to minimize drug wastage, hospitals should schedule their patients requiring similar drugs or biologicals on the same day. This practice will allow hospitals to administer the unused portion of a single‐use vial or drug package to another patient when clinically appropriate. CMS acknowledges that there are circumstances where such arrangements cannot be made and unused drugs or biologicals must be discarded. In that case, CMS will pay for both the administered and discarded drug and biological if specific criteria are met.

Failure to comply with CMS billing regulations can result in improper payments and have a substantial financial impact on an organization. Hospitals can lose income due to wasted drugs. Moreover, CMS contractors such as the Recovery Audit Contractors are auditing drug doses and billing units, including billing practices for discarded drugs. Therefore, hospitals may need to pay penalties for potential overpayments. As a result, hospitals must ensure that their billing staff is aware of and fully understands CMS billing rules with respect to discarded drugs and biologicals.

A Refresher on Medicare’s Coverage Policy on Drugs Generally, Medicare covers drugs and biologicals administered during a Part A hospitalization or skilled nursing facility stay. Medicare also covers drugs that are furnished “incident to” a physician’s service if the drug is not usually self‐administered by the patient. According to the Benefits Improvement and Protection Act, Medicare will not pay for drugs that are self‐administered by a Medicare beneficiary.  Therefore, oral drugs, suppositories, and topical medications “are considered to be usually self administered by the patient” and thus, not covered by Medicare.  CMS will, however, pay for drugs that are “not usually self‐administered.” This can include drugs administered intramuscularly (e.g.  injection), intravenously (e.g. IV drip with antibiotic to treat an infection), or subcutaneously provided that the drug and administration route are medically reasonable and necessary. Therefore, if a drug is available in both oral and injectable forms, “the injectable form of the drug must be medically necessary and reasonable as compared to the oral form.”