Knowledge Base Article

Hospitals are constantly being scrutinized to ensure they are following Federal rules and regulations for billing, coding, referrals, etc. In addition to the host of Medicare claim reviewers, there are also those entities that are specifically looking for fraud and abuse, such as the Zone Program Integrity Contractors (ZPICs) and the Office of Inspector General (OIG). When the rules are unclear or the issue is not specifically addressed, some hospitals prefer to “err on the side of caution” just to make sure there is no chance of bad consequences in the future. Such has been the case with the issue of billing Medicare patients for the self-administered drugs (SADs) they receive as hospital outpatients.

Most SADs are not covered under Medicare Part B but are covered under Medicare Part D. Since most hospital pharmacies do not participate in Medicare Part D, this leaves the Medicare patient liable for the self-administered drugs they receive while a hospital outpatient. Since Medicare does not regulate the billing by hospitals of non-covered drugs to Medicare beneficiaries, their only advice for hospitals has been: “a hospital’s decision not to bill the beneficiary for non-covered drugs potentially implicates other statutory and regulatory provisions, including the prohibition on inducements to beneficiaries, section 1128A (a) (5) of the [Social Security] Act, or the anti-kickback statute, section 1128B (b) of the Act.” This statement is enough to make a hospital nervous for sure.

So until the end of October 2015, the question remained, does CMS require hospitals to bill and collect (or make good faith efforts to collect) their usual and customary charges for SADs that are not covered by Medicare Part B (Noncovered SADs) to comply with OIG’s fraud and abuse authorities? And the answer is …No.

On October 29, 2015, the OIG issued a policy statement assuring hospitals they would not be subject to administrative sanctions for discounting or waiving amounts Medicare beneficiaries may owe for self-administered drugs (SADs) they receive in outpatient settings when those drugs are not covered by Medicare Part B. This is good news for hospitals – it will relieve the time and resources for submitting bills to patients and will allow hospitals to avoid the negative patient perception that results from such bills.

The OIG does include some conditions for this exemption from their general policy*:

• This Policy Statement applies only to discounts on, or waivers of, amounts Medicare beneficiaries owe for Noncovered SADs that the beneficiaries receive for ingestion or administration in outpatient settings;
• Hospitals must uniformly apply their policies regarding discounts or waivers on Noncovered SADs (e.g., without regard to a beneficiary’s diagnosis or type of treatment);
• Hospitals must not market or advertise the discounts or waivers; and
• Hospitals must not claim the discounted or waived amounts as bad debt or otherwise shift the burden of these costs to the Medicare or Medicaid programs, other payers, or individuals.

*(Ordinarily routine discounts and costs waivers of amounts owed by Medicare beneficiaries would potentially implicate the Federal anti-kickback statute, the civil monetary penalty and exclusion laws related to kickbacks, and the Federal civil monetary penalty law prohibiting inducements to beneficiaries.)

This OIG policy statement does not require a hospital to waive the amounts owed by Medicare beneficiaries for SADs. It is still the hospital’s decision whether to waive these charges or to bill the patient. At least now, hospitals will no longer feel obligated to bill the patient to prevent getting in trouble with the government.