# CMS Manual System Department of Health & Human Services (DHHS)



## Pub 100

- 04 Medicare Claims Processing Centers for Medicare & Medicaid Services (CMS)

Transmittal 23 68 Date: December 15 , 2011



### Change Request 7397



### NOTE: Transmittal 2312 dated September 23 , 2011, is being rescinded and replaced

with Transmittal 2368, dated December 15 , 2011 to change the effective and
implementation dates to January 1, 2013. All other material remains the same.

SUBJECT: Pharmacy Billing for Drugs Provided "Incident To" a P hysician Service This CR rescinds and fully replaces CR 7109.

I. SUMMARY OF CHANGES: This Change Request (CR) clarifies policy with respect to restrictions on pharmacy billing for drugs provided incident to a physician service. This CR also clarifies po licy for the local determination of payment limits for drugs that are not nationally determined.

EFFECTIVE DATE: January 1, 2013 IMPLEMENTATION DATE: January 1, 2013

Disclaimer for manual changes only: The revision date and transmittal number apply only to red italicized material. Any other material was previously published and remains unchanged. However, if this revision contains a table of contents, you will receive the new/revised information only, and not the entire table of

contents.

II. CHANGES I N MANUAL INSTRUCTIONS: (N/A if manual is not updated) R=REVISED, N=NEW, D=DELETED

- Only One Per Row.

R/N/D CHAPTER / SECTION / SUBSECTION / TITLE

R 17/10/Payment Rules for Drugs and Biologicals

R 17/20.1.3/Exceptions to Average Sales Price (ASP) Payment Methodology

III. FUNDING: For Fiscal Intermediaries (FIs), Regional Home Health Intermediaries (RHHIs) and/or Carriers: No additional funding will be provided by CMS; Contractor activities are to be carried out within their operating budgets.

For Me dicare Administrative Contractors (MACs): The Medicare Administrative Contractor is hereby advised that this constitutes technical direction as defined in your contract. CMS does not construe this as a change to the MAC Statement of Work. The contractor isnot obligated to incur costs in excess of the amounts allotted in your contract unless and until specifically authorized by the Contracting Officer. If the contractor considers anything provided, as described above, to be outside the current scope of work , the contractor shall withhold performance on the part(s) in question and immediately notify the Contracting Officer, in writing or by e

- mail, and request formal directions regarding continued performance requirements.

IV. ATTACHMENTS:

Business Requir ements

Manual Instruction

*Unless otherwise specified, the effective date is the date of service.

## Attachment

- Business Requirements

Pub. 100

- 04 Transmittal: 23 68 Date: December 15 , 2011 Change Request: 7 397



### NOTE: Transmittal 2312 dated September 23 , 2011, is being re scinded and replaced with

Transmittal 2368 , dated December 15 , 2011 to change the e ffective and implementation

dates to January 1, 201 3

. Al l other material remain s the same.

SUBJECT : Pharmacy Billing for Drugs Provided “Incident to” a Physician’s Service

. ( This CR rescinds and fully replaces CR 7109. )

Effective Date : January 1 , 20 1 3

Implementation Date : January 1, 201 3

I. GENERAL INFORMATION

A. Background :

This Change Request (CR) clarifies policy with respect to restrictions on pharmacy bill ing for drugs or biologicals furnished “incident to” a physician’s service. This CR also clarifies policy for the local determination of payment limits for drug s that are not nationally determined

.

B. Policy:

Pharmacies may bill Medicare Part B for certain classes of drugs including: immunosuppressive drugs, oral

anti

- emetic drugs , or al anti

- cancer drugs, and drugs self

- administered through any piece of Durable Medicare Equipment . Claims for these drugs are generally submitted to the Durable Medical Equipment Medicare Administrative Contractor (DME MAC). In the rare situation whe re a pharmacy dispenses a drug that will be administered through implanted DME and a physician’s service will not be utilized to fill the pump with the drug, the claim is submitted to the A/B MAC or carrier (See Medicare Claims Processing Manual, Publicati on 100

- 04, Chapter 20, section 10 ). T he DME MAC , A/B MAC, or carrier will make payment for these drugs, when deemed to be covered and reasonable and necessary, to the pharmacy. All bills submitted to the DME

MAC , A/B MAC, or carrier must be submitted on an assigned basis by the pharmacy. ( See Medicare Claims Processing Manual, Pub lication 100

- 04, Chapter 17, s ection 50.B

. )

Pharmacies , Suppliers and Providers may not bill Medicare Part B for drugs dispensed directly to a beneficiar y for administration “in cident to” a physician service , such as refilling an implanted drug pump

. These claims must be denied. ( See Medicare Claims Processing Manual, Pub lication 100

- 04, Chapter 17, s ection 50.B and Medicare Benefit Policy Manual, Pub lication 100

- 02, Chapter 15, sections 50.3

. )

Pharmacies may not bill Medicare Part B for drugs furnished to a physician for administr ation to a Medicare beneficiary. When t hese drugs are administered in the physician’s office to a beneficiary, the only way these drugs can be billed to Medicare is if the physician purchases the drugs from the pharmacy. In this case, the drugs are being administered “incident to” a physician’s service and pharmacies may not bill Medicare Part B under the “incident to” provision

. (See Medicare Benefi t Policy Manual, Pub lication 100

- 02, Chapter 15,

s ection s 50.3 and 60.1

. )

The payment limits for drugs and biologicals that are not included in the ASP Medicare Part B Drug Pricing File or Not Otherwise Classified ( NOC) Pricing File, are based on the publ ished Wholesale Acquisition Cost(WAC) or invoice pricing, except under OPPS where the payment allowance limit is 95 percent of the published

AWP. In determining the payment limit based on WAC, the payment limit is 106 percent of the lesser of the

lowest

- p riced brand or median generic WAC. (See Medicare Claims Processing Manual, Pub lication 100

- 04, Chapter 17, section 20.1.3

. )

II. BUSINESS REQUIREMENTS TABLE

Use“ Shall" to denote a mandatory requirement

Number Requirement Responsibility (place an “X” in each applicable column)

A

/

B

M

A

C D

M

E

M

A

C F

I C

A

R

R

I

E

R R

H

H

I Shared

System

Maintainers OTH

ER

F

I

S

S M

C

S V

M

S C

W

F

7 397 .1 Medicare contractors shall continue to follow the policies as clarified in the Medicare Claims Processing Manual, Publication 100

- 04, Chapter 1 7

, s ection 10

, when processing claims for Medicare covered drugs

. X X X X X

7 397. 1.1 Medicare contractors shall deny claims from pharmacies for drugs that are furnished “incident to” physician services. X X X

7 397 .1.2 Medicare c arriers or A/B MACs shall reject claims from ph armacies for self

- administered immunosuppressive drugs

, self

- administered drugs administered through non

- implanted durable medical equipment , or self

- administered anti

- cancer or anti

emetic drugs. X X

7 397 .1.3 Medicare DME

- MACs shall continue to process claims from pharmacies for self

- administered immunosuppressive drugs, self

- administered drugs administered through non

- implanted durable medical equipment

, and self

- administered anti

- cancer or anti

emet ic drugs according to current policies. X

7 397 .1.4 Medicare A/B MACs or carriers shall continue to process claims from pharmacies for self

- administered drugs administered through implanted durable medical equipment according to current policies. X X

7 397 .2 Medicare contractors shall continue to follow the policies as clarified in the Medicare Claims Processing Manual, Publication 100

- 04, Chapter 17, s ection

20.1.3

, when determining local payment limits. X X X X X

7 397

. 3 Medicare con tractors shall not search their files to either retract payment for claims already paid or to retroactively pay claims. However, contractors shall adjust claims brought to their attention. X X XIII. PROVIDER EDUCATION TABLE

Number Requirement R esponsibility (place an “X” in each applicable column)

A

/

B

M

A

C D

M

E

M

A

C F

I C

A

R

R

I

E

R R

H

H

I Shared

System

Maintainers OTH

ER

F

I

S

S M

C

S V

M

S C

W

F

7397.4 A provider education article related to this instruction

will be available at http://www.cms.hhs.gov/MLNMattersArticles/ shortly

after the CR is released. You will receive notification of

the article release via the established "MLN Matters"

listse rv. Contractors shall post this article, or a direct link to this article, on their Web site and include information about it in a listserv message within one week of the availability of the provider education article. In addition, the provider education article shall be included in your next regularly scheduled bulletin. Contractors are free to supplement MLN Matters articles with localized information that would benefit their provider community in billing and administering the Medicare program correctly

. X X X X X

IV. SUPPORTING INFORMATION

Section A: F or any recommendations and supporting information asso ciated with listed requirements

, use the box below: N/A

Use "Should" to denote a recommendation.

X

- Ref Requirement

Number Recommendation s or other supporting information:

Section B : For all other recommendations and supporting information, use this space : N/A

V. CONTACTS

Pre

- Implementation Contact(s): anne

- e

- tayloe.hauswald@c ms.hhs.gov , 410

- 786

- 4546

Post

- Implementation Contact(s): Contact your Contracting Officer’s Technical Representative (COTR) or Contractor Manager, as applicable.VI. FUNDING

Section A: For F iscal Intermediaries (FIs)

, Regional Home Health Intermediar ies (RHHIs), and/or

Carri ers :

No additional funding will be provided by CMS; contractor activities are to b e carried out within their operating budgets.

Section B: For Medicare Administrative Contractors (MAC s )

The Medicare Administrative C ontractor is h ereby advised that this constitutes technical direction as defined in your contract. CMS do es not construe this as a chang e to the MAC Statement of W ork. The contractor is not obligated to incur costs in excess of the amounts allot t ed in your contract unle ss and until specifically authorized by the Contracting Officer. If the contractor considers anything provided, as described above, to be outside the current scope of work, the contractor shall withhold performance on the part(s) in question and

immediatel y notify the Contracting Officer, in writing or by e

- mail, and request formal directions regarding continued performance requirements.

## Claims Processing Manual
Chapter 17

- Drugs and Biologicals

10

- Payment Rules for Drugs and Biologicals
( Rev .2368

, Issued : 12

- 15

- 11 ; Effective: 01

- 0 1

- 1 3 ; Implementation: 01

- 0 1

- 1 3 )

Drugs for inpatient hospital and inpatient skilled nursing facility (SNF ) beneficiaries are included in the respective prospective payment system (PPS) rates, except for hemophilia clotting factors for hospital inpatients under Part A.

All hospital outpatient drugs are excluded from SDP because the payment allowance for such drugs is determined by a different methodology. Non pass

- through drugs with estimated per day costs less than or equal to the applicable drug packaging threshold that are furnished to hospital outpatients are packaged under the outpatient prospective paym ent system (OPPS). Their costs are recognized and included but paid as part of the ambulatory payment classification (APC) group payment for the service with which they ar e billed. Non pass

- through drugs with estimated per day costs greater than the applic able drug packaging threshold are paid separately.

Drugs that are granted “pass through” payment status are required by law to be paid at either the amount paid under the physi cian fee schedule, or, if the drug is included in the Part B drug competitive acquisition program (CAP), at the Part B drug CAP rate. Drugs that have pass

- through status may have coinsurance amounts that are less than 20 percent of the OPPS payment amount. This is because

pass

- through payment amounts, by law, are not subject to coin surance. CMS considers the amount of the pass

- through drug payment rate that exceeds the otherwise applicable OPPS payment rate to be the pass

- through payment amount. Thus, in situations where the

pass

- through payment rate exceeds the otherwise applicable OPPS payment rate, the coinsurance is based on a portion of the total drug payment rate, not the full payment rate.

Hospitals must report all appropriate HCPCS codes and charges for separately payable drugs, in addition to reporting the appl icable drug a dministration codes. Hospitals should also report the HCPCS codes and charges for drugs that are packaged into payments for the corresponding drug administration or other separately payable services. Historical hospital cost data may assist with fut ure

pay ment packaging decisions for such drugs. Drugs are billed in multiples of the dosage specified in the HCPCS code long descrip tor. If the drug dose used in the care of a patient is not a multiple of the HCPCS code dosage descriptor, the provider rounds to t he next highest unit based on the HCPCS long descriptor for the code in order to report the dose provided.If the full dosage provided is less than the dosage for the HCPCS code descriptor specifying the minimum dosage for the drug, the provider reports one unit of the HCPCS code for the minimum dosage amount.

OPPS Pricer includes a table of drugs and prices and provides the contractor with the appropriate prices.

Section 90 relates specifically to billing for hospital outpatients. The remainder of th is chapter relates to procedures for pricing and paying DME recipients, and to beneficiaries

who receive drugs under special benefits such as pneumococcal, flu and hepatitis vaccines; clotting factors, immunosuppressiv e therapy, self administered cancer and anti emetic drugs, and drugs incident to physicians ‟ services.

The Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 defines a Specified Covered Outpatient Drug (SCOD) as a covered outpatient drug for which a separate APC has been established and that is either a radiopharmaceu tical agent, or a drug or biological for which payment was made on a pass

- through basis on or before December 31, 2002. Payment for SCODs is set, by law, at the average acquisition cost. Under the OPPS, a single payment is made for SCODs that represents pa yment for both the acquisition cost of the drug and any associated pharmacy overhead or nuclear medicine handling costs.

Drugs or biologicals must meet the coverage requirements in Chapter 15 of the Medicare Benefit Policy Manual. Additionally, f or end

s tage renal disease (ESRD) patients, see the Medicare Benefit Policy Manual, Chapter 11. For ESRD patient billing for drugs an d claims processing, see Chapter 8 of this manual.

The following chart describes the general payment provisions for drugs.

### Table

- Drug Payment Methodology

Key to the following Table:

NOTE S :
DME MACs do not process claims for blood clotting factors. Unless noted otherwise, claims for these drugs are submitted to the local MAC †

- Drugs & biologicals outside the composite rate a nd /or ESRD PPS are paid as described in 2 below. Those inside the composite rate and /or ESRD PPS are paid as described in 1

. (ESRD PPS effective January 1, 2011)

1

- Included in PPS rate, or other provider

- type all inclusive encounter rate

2

- Price take n from CMS drug/biological pricing file effective o n the specific date of service

3

- Based on r easonable cost (101% reasonable cost in CAH)

4

- Lower of cost or 95% AWP paid for drug in addition to PPS rate, or in addition to reasonable cost if excluded f rom PPS

5

- OPPS

- APC, whether pass

- thru drug or not

6

- Cannot furnish as that “provider” type

7

- May not bill DME

- MAC or MAC for drugs furnished i ncident

- to a physicians’ servic e 8

- Payment made at the time of cost settlement

A

- Bills are submitted to the DME MAC

++ Except in the State of Washington, where CMS permits the ESRD Facility to bill for immunosuppressive drugs due to the unique State assistance to the beneficiary provided only via the ESRD Facility

.

Provider/Drug Hepatitis B

Vaccine Pneumococcal

& Influenza

Vaccines Hemophilia Clotting

Factors Immuno

- Suppressive Erythropoie sis Stimulating Agents (E SA’s ) Self Admin

Anti

- Cancer

Anti

- Emetic for cancer

treatment Other Drugs

Hospital Inpatient (IP) A

- Prospective Payment System (IPPS) 3 3 2 1 1 1 1

Hospital IP A

- not IPPS 3 3 3 3 3 3 3 Hospital Outpatient Prospective Payment System (OPPS) 3 3 3 5 (30 day supply) 5 5 5

Skilled Nursing Facility (SNF) IP 3 3 1 1 1 1 1

SNF OP or IP B 3 3 3 3 6 6 6 End Stage Renal Disease (ESRD) Facility 2 2 6 6 ++ 1 or 2† 6 1 or 2†
Comprehensive Outpatient Rehabilitation Facility (CORF)/ Outpatient Rehabilitation Facility (ORF) 2 2 6 6 6 6 6

Community Mental Health Center (CMHC) 6 6 6 6 6 6 6 Rural Health Clinical (RHC)/Federally 1 8 5 5 5 5 5Qualified Health Clinic (FQHC)

- hospital

based
RHC/FQHC

- independent 1 8 6 6 6 6 6 Home Health Agencies (HHA) 3 3 6 6 6 6 6 ( except for osteoporosis) Hospice 6 6 6 6 1 1 1
Physicians 2 2 2 2 2 2 2 Pharmacy 2 2 2

, 7 2

, A 2 2, A 2

, 7 Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Supplier 2 2 2 2 2 2 2

Critical Access Hospital (CAH) IP or OP

Method I or II 3 3 3 3 3 3 3

N OTE S : Independent and provider

- based RHCs and FQHCs generally do not bill for pneumococcal/influenza vaccines , except when the only service involved is the
administration of the vaccine. Instead, RHCs/FQHCs are generally paid for pneumococcal/influenza va ccines at cost settlement via the Medicare cost report.

Hepatitis B vaccine payment is bundled into the encounter rate for both Independent and provider

- based RHCs and FQHCs

.

Influenza, pneumococcal , and Hepatitis B vaccine s are paid on a reasonable cost basis in a hospital outpatient department. Neither d eductible nor coinsurance apply.

HHAs cannot bill for vaccines, except on TOB 34X, since vaccines are not part of the HH benefit and cannot be paid under HH P PS.

Influenza, PPV, and Hepatitis B vacci nes are paid once for the vaccine and once for the administration of the vaccine. The provider or supplier (including physician) must enter each of the HCPCS on separate lines of the claim.

A Part B blood clotting factor claim from a Part B supplier is p rocessed by the Local Part B Carrier.

A Part A blood clotting factor claim from a Part A provider, including a hospital

- based hemophilia center, is processed by the hospital’s Medicare contractor.

### 20.1.3

– Exceptions to Average Sales Price (ASP) Paymen t Methodology
( Rev.2368 , Issued: 12

- 15

- 11 ; Effective: 01

- 0 1

- 1 3 ; Implementation: 01

- 0 1

- 1 3 )

The payment allowance limits for blood and blood products (other than blood clotting factors) that are not paid on a reasonable charge or prospective payment basis, are determined in the same manner the payment allowance limits were determined on October 1, 2003. Specifically, the payment allowance limits for blood and blood products are 95 percent of the average wholesale price (AWP) as reflected in the published co mpendia. The payment allowance limits will be updated on a quarterly basis. Blood and blood products furnished in the hospital outpatient department are paid under OPPS at the amount specified for the Ambulatory Payment Classification (APC) to which the pr oduct is assigned.

The payment allowance limits for infusion drugs furnished through a covered item of durable medical equipment on or after January 1, 2005, will continue to be 95 percent of the AWP reflected in the published compendia as of October 1, 2003, unless the drug is compounded or the drug is furnished incident to a professional service. The payment allowance limits for infusion drugs furnished through a covered item of durable medical equipment that were not listed in the published compendia a s of October 1, 2003, (i.e., new drugs) are 95 percent of the first published AWP unless the drug is compounded or the drug is furnished incident to a professional service.

The payment allowance limits for influenza, Pneumococcal and Hepatitis B vaccines are 95 percent of the AWP as reflected in the published compendia except where the vaccine is furnished in a hospital outpatient department. Where the vaccine is administered in the hospital outpatient department, the vaccine is paid at reasonable cost. C MS will supply contractors with the payment allowance limits annually to be effective on September 1 of each year. Contractors will be notified of the availability of this file via a Recurring Update Notification.

The payment allowance limits for drugs a nd biologicals that are not included in the ASP Medicare Part B Drug Pricing File or Not Otherwise Classified (NOC) Pricing File, other than new drugs that are produced or distributed under a new drug application (or other application) approved by the Food and Drug Administration, are based on the published Wholesale Acquisition Cost (WAC) or invoice pricing, except under OPPS where the payment allowance limit is 95 percent of the published AWP. In determining the payment limit based on WAC, the

contractors follow the methodology specified in Publication . 100

- 04, Chapter 17, Drugs and Biologicals, for calculating the AWP, but substitute WAC for AWP. The payment limit is 106 percent of the lesser of the lowest

- priced brand or median generic WAC.

Carriers, D ME MACs, and A/B MACs shall develop payment allowance limits for covered drugs when CMS does not supply the payment allowance limit on the ASP drug pricing file. At

the contractors ‟ discretion, contractors may contact CMS to obtain payment limits for drugs not included in the quarterly ASP or NOC files or otherwise made available by CMS on the CMS Web site. If the payment limit is available from CMS, contractors will substitute CMS

- provided payment limits for pricing based on WAC or invoice pricing. CMS will provide the paymentlimits either directly to the requesting contractor or via posting an MS Excel file on the CMS

Web site.

The payment allowance limits for new drugs and biol ogicals that are produced or distributed under a new drug application (or other new application) approved by the Food and Drug Administration, and that are not included in the ASP Medicare Part B Drug Pricing File or Not Otherwise Classified (NOC) Pricing File, are based on 106 percent of the WAC, or invoice pricing if the WAC is not published, except under OPPS where the payment allowance limit is 95 percent of the published AWP. This policy applies only to new drugs that were first sold on or

after Januar y 1, 2005. At the contractors ‟ discretion, contractors may contact CMS to obtain payment limits for new drugs not included in the quarterly ASP or NOC files or otherwise made available by CMS on the CMS Web site. If the payment limit is available from CMS, contractors

will substitute CMS

- provided payment limits for pricing based on WAC or invoice pricing. CMS will provide the payment limits either directly to the requesting contractor or via posting an MS

Excel file on the CMS Web site.

The payment allowance limits for radiopharmaceu ticals are not subject to ASP. Carriers should
determine payment limits for radiopharmaceuticals based on the methodology in place as of
November 2003 in the case of radiopharmaceuticals furnished in other than the hospital
outpatient department. R efer to Chapter 17, §90.2 of the manual regarding radiopharmaceuticals
furnished in the hospital outpatient department.