Under the Medicare OPPS, hospitals must report all HCPCS codes and charges for separately payable drugs in addition to reporting applicable drug administration codes. Drugs are billed in multiples of the dosage specified in the HCPCS code long descriptor.

Hospitals are "strongly encouraged" by CMS to report charges for all drugs, biologicals, and radiopharmaceuticals, regardless of whether the items are paid for separately or packaged, using the correct HCPCS codes for them. Hospitals billing for these products must make certain that reported units of service corresponding to the reported HCPCS codes are consistent with the quantities of a drug, biological, or radiopharmaceutical that were used in the care of the patient.

Billing System Errors

We continually work with providers who have been forced to pay back significant dollars to Medicare because audits identified billing errors such as improper HCPCS coding and/or incorrect units. In these instances, medical records typically indicate that a patient did receive medication as ordered by the physician, but inconsistent management of the billing system causes errors that directly impact final payment. Section 9343(g) of the Omnibus Budget Reconciliation Act of 1986, P.L. No. 99-509, requires hospitals to report claims for outpatient services using HCPCS codes.

CMS's "Medicare Claims Processing Manual," Pub. No.1 00-04, chapter 4, section 20.4, states: "The definition of service units ... is the number of times the service or procedure being reported was performed." In addition, chapter 1, section 80.3.2.2, of the manual states "in order to be processed correctly and promptly, a bill must be completed accurately."

In other cases, payments are recouped because of incomplete physicians' orders or incomplete evidence documenting the administration of medication. Title 42 CFR, §482.24 (c) (2) (vi) requires that all records must document, as appropriate, "all practitioners' orders, nursing notes, reports of treatment (and) medication records." Even with all the recent news and reports of overpayments, hospitals continue to expose themselves to payment risks because they fail to ensure that:

• HCPCS codes and billing units are accurate
• All physician orders are complete with respect to dates, dosage and duration
• Medical records contain complete and specific evidence of the administration of all medications
• Final payment amounts are reconciled with expected payment amounts

RAC audits have targeted the drug Neulasta (HCPCs code J2505) for potential overpayments. Other drugs that likely will be of interest include Epogen, Oxaliplatin and any number of high-cost, high-volume biologics and chemotherapy drugs.

The primary reason that payments are at risk is because of the payment process, and the fact that you will be paid "something" every time you submit a payable HCPCS code on the claim. The hidden danger is that one does not know if that "something" is, in fact, what you expect to be paid.

One way to understand your potential risk is to institute what is called a "payment reconciliation audit."

Many hospitals review coding and documentation, but in our experience, very few actively audit and reconcile payments in the manner we will describe here.  We suggest that hospitals audit the top 10 drugs dispensed to Medicare beneficiaries on an outpatient basis. Review a sample of accounts to verify that the drugs dispensed correspond to the HCPCS codes and that the units billed correspond to the HCPCS billable units. In addition, review the dosages prescribed and the dosages given and verify that payments received equals payments expected. Here's how this might work:

Step 1:

Select ten (10) high-cost/high-volume outpatient drugs, based on your service offering, that have been administered to Medicare beneficiaries within the last 90 days. Examples of high cost/high volume outpatient drugs include: chemotherapy drugs, biologic response modifiers, broad-spectrum antibiotics, thrombolytic therapy drugs, and ESAs (erythropoiesis stimulating agents).

Step 2:

Select one (1) outpatient Medicare claim for each of the selected drugs - (make sure the claim has been submitted and paid for a Medicare outpatient within the last 90 days).