Knowledge Base Article

Almost everyone reading this newsletter works in the field of healthcare. But even those of us in healthcare often take for granted the amazing advancements in medicine over the last few centuries. Last fall I visited Yorktown, one of the major cities involved in America’s fight for independence (for fellow history buffs, I highly recommend visiting there). Do you realize that during the Revolutionary War almost three times the number of Americans died from disease as were killed in war? Historians believe around 17,000 deaths occurred from disease compared to 6,800 casualties from battle. Modern medicine involves a variety of things that are put into or onto bodies to heal or improve health. Part 2 of our discussion of the January 2016 OPPS Update looks at Medicare’s latest rules for devices, drugs, biologicals, and blood products.

Devices

The key to understanding the rules for Medicare payment for devices is to know that payment for most devices is bundled into the payment for the associated procedure. Medicare does pay for the device – the payment is just part of the procedure payment. In order to be able to adjust payments when a device is separately reimbursed (pass-through payments) or when the hospital incurs no cost or reduced cost for the device (device credits), Medicare calculates the percentage of each APC that is attributable to the cost of the device. This is known as the device-offset amount.

Certain categories of devices are eligible for transitional pass-through payments for 2-3 years. Effective January 1, 2016, HCPCS code C1822, Generator, neurostimulator (implantable), high frequency, with rechargeable battery and charging system, is being added as a pass-through device. There are a number of considerations related to this new pass-through device.

• Pass-through devices, including C1822, are assigned a status indicator of “H.” This means that the device is reimbursed based on cost. Medicare calculates the payment amount by applying your hospital’s cost-to-charge ratio to the device charge on the claim.
• HCPCS C1822 should always be reported with CPT code 63685 (Insertion or replacement of spinal neurostimulator pulse generator or receiver, direct or inductive coupling) which is assigned to APC 5464.
• Medicare will deduct the device-offset amount for this APC from the pass-through payment amount for the device when HCPCS C1822 is reported.
• The description of HCPCS code C1820 was changed to differentiate it from the C1822. C1820 is Generator, neurostimulator (implantable), non-high frequency, with rechargeable battery and charging system. C1820 is non-high frequency whereas C1822 is high-frequency.

The 2016 APC off-set file can be found at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment.html .

Another important aspect of understanding device payments is to know that device-intensive APCs are those APCs with a device-offset amount greater than 40%. Over 40% of the APC payment is “payment” for the device. Beginning in 2016, Medicare will make an additional payment adjustment for device-intensive APCs when the procedure is discontinued prior to the administration of anesthesia (reported with modifier -73). Modifier 73 is appended to surgical procedures for which anesthesia is planned, but the procedure is terminated after the patient is prepared and taken to the room where the procedure is to be performed, but prior to the administration of anesthesia. Modifier 73 reduces the procedure payment by 50%. Effective January 1, 2016, the device off-set amount will be deducted from the APC payment and then the 50% reduction will be applied.

Also for 2016, all procedures assigned to a device-intensive APC will require a device code to be present on the claim. Table 42 in the 2016 OPPS Final Rule lists the device-intensive APCs.

Corneal Tissue

In 2016, Medicare will only pay separately for the procurement or acquisition of corneal tissue when it is used in a corneal transplant procedure. Hospitals should only report HCPCS code V2785 (Processing, preserving and transporting corneal tissue) when corneal tissue is used in a corneal transplant procedure described by one of the following CPT codes:

• 65710 (Keratoplasty (corneal transplant); anterior lamellar);
• 65730 (Keratoplasty (corneal transplant); penetrating (except in aphakia or pseudophakia));
• 65750 (Keratoplasty (corneal transplant); penetrating (in aphakia));
• 65755 (Keratoplasty (corneal transplant); penetrating (in pseudophakia));
• 65756 (Keratoplasty (corneal transplant); endothelial);
• 65765 (Keratophakia);
• 65767 (Epikeratoplasty); and
• Any successor code or new code describing a new type of corneal transplant procedure that uses eye banked corneal tissue.

Blood Products

There are three new blood product codes for 2016 for pathogen-reduced blood products – that is blood products treated to eliminate certain pathogens and reduce the risk of transfusion-associated infections, such as those treated with Amotosalen and UVA light. The new codes are:

‍Drugs

Like devices, payments for drugs have special rules under OPPS. Payment for drugs below a threshold per-day cost ($100 for 2016) is packaged; drugs exceeding this threshold are separately reimbursed at average sales price (ASP) + 6%, which provides payment for both the acquisition cost and pharmacy overhead costs associated with the drug, biological or therapeutic radiopharmaceutical. Pass-through drugs, biologicals and radiopharmaceuticals are also paid at ASP+6%.  The January 2016 OPPS Update article lists a number of new and revised drug HCPCS codes plus other information concerning drug payments.

• See the article for the complete lists – Table 7 for new drug codes, Table 8 for changed codes or revised descriptions, and Table 9 for Corrected Effective Dates for Certain Vaccine Codes.
• For the new codes, remember that Status Indicator
• G is a pass-through drug,
• K is a separately paid non-pass-through drug/biological,
• E is not paid by Medicare for outpatients, and
• N is a packaged drug.
• For changed codes and descriptions, pay close attention to the units in the old and new descriptors, for example
• 2015 - C9443, Injection, dalbavancin, 10 mg; 2016 - J0875, Injection, dalbavancin, 5 mg
• 2015 - J1446, Injection, tbo-filgrastim, 5 micrograms; 2016 - J1447, Injection, tbo-filgrastim, 1 microgram
• 2015 - J7506, Prednisone, oral, per 5mg; 2016 - J7512, Prednisone, immediate release or delayed release, oral, 1 mg
• Biosimilars are paid the ASP of the biosimilar(s) described by the HCPCS code + 6% of the ASP of the reference product. Only the first eligible biosimilar biological product to a reference product will be eligible for pass-through status; subsequent biosimilars to a reference product will not meet the newness criterion.
• New FDA approved drugs, biologicals, and therapeutic radiopharmaceuticals without an assigned HCPCS code should be billed with HCPCS code C9399. New diagnostic radiopharmaceuticals and contrast materials are not to be reported with C9399. Until they are granted pass-through status and a new C code is assigned, report new diagnostic radiopharms with the appropriate HCPCS code:
• A4641 (Radiopharmaceutical, diagnostic, not otherwise classified),
• A9599 (Radiopharmaceutical, diagnostic, for beta-amyloid positron emission tomography (PET) imaging, per study dose), or
• J3490 (Unclassified drugs) (applicable to all new diagnostic radiopharmaceuticals used in non-beta-amyloid PET imaging)
• Report new contrast materials with HCPCS code:
• A9698 (Non-radioactive contrast imaging material, not otherwise classified, per study) or
• A9700 (Supply of injectable contrast material for use in echocardiography, per study

Skin substitute products that do not qualify for pass-through status are also packaged. Payment is packaged into the payment for the associated skin substitute application procedure. The skin substitute products are divided into two groups for packaging purposes:

1. High cost skin substitute products - application reported with CPT codes 15271-15278
2. Low cost skin substitute products - application reported with HCPCS code C5271-C5278

See the MLN Matters article for a list of the skin substitute products’ designations as high or low. All pass-through skin substitute products are to be reported in combination with one of the skin application procedures described by CPT code 15271-15278.

As you can tell from the above discussion, even though there are new advancements in technology, devices, and drugs, in the long run, Medicare may bundle the payment.