Be Prepared for Changes in Billing Discarded Drugs/ Biologicals

Christina Panos's picture

By Christina Panos, RHIA, CTR

Original post on 6/9/2016 updated on 6/10/2016 to reflect announced delay.

The Centers for Medicare and Medicaid Services (CMS) has maintained a long-standing policy that provides payment for the discarded portion of single-use vials/packages.  While coverage is not changing, the associated drug wastage billing requirements are about to change.

In recent years, CMS specified that the local Medicare Administrative Contractor (MAC) may require the use of the JW modifier to identify the unused portion of the drug/biological being billed, excluding drugs provided under the Competitive Acquisition Program (CAP).  Up until now, however, enforcement of this requirement had been at the discretion of the MAC, with some MACs communicating that the use of the JW modifier was optional. 

The Change

On April 29, 2016, CMS issued Transmittal 3508 (CR 9603) revising this requirement.  This transmittal was subsequently rescinded and replaced by Transmittal 3530 on May 24, 2016 updating supporting information only and further rescinded and replaced by Transmittal 3538 on June 9, 2016 to update the effective and implementation dates.  Effective January 1, 2017 (Implementation January 3, 2017), when billing for drug wastage, CMS will require the use of the JW modifier on claims to identify the unused portion of a single-use vial/package discarded.   As such, this requires the provider to bill a second line on the claim to report the discarded portion of a drug/biological with the JW modifier, separately from the administered portion of the drug/biological.  Furthermore, the medical record must document both the discarded amount as well as the amount of the drug/biological administered.  It should be noted that the JW modifier is not required when the administered dose is less than the billing unit and continues to exclude claims for CAP drugs.

Next Steps

Billing for drug wastage continues to remain an opportunity for facilities to be reimbursed for the discarded portion of a single-use vial/package; however, the change in reporting requirements can certainly present implementation challenges to organizations.  To prepare, organizations will need to:

  • Ensure that the clinical documentation includes both the administered portion of the drug/biological, as well as the discarded portion;
  • Define a mechanism to produce two lines on the claim for the drug/biological representing:
    • The administered portion, as well as,
    • The discarded portion with the JW modifier; and, 
  • Provide education to the pharmacy, administering and billing staff on reporting requirements and internal process modifications. 

While organizations may have anticipated this change it remains no small task.  In some organizations where systemic charging methodologies are utilized or where hybrid charging methodologies are utilized, this may require significant planning and process changes.  Planning and ongoing coordination efforts between the clinical, pharmacy and billing staff will be critical to comply with this change come January.

According to the recent CMS Hospital/Quality Initiative Open Door Forum, in addition to the delay, it was noted that additional written information and guidance may be forthcoming from CMS with regard to this change.  Therefore, be sure to watch your daily What’s New news alert for any related updates.