TY - JOUR
AU - Granko, Robert, P.
AB - charge description master, finance, JW modifier, prior authorization, reimbursement, revenue cycle Hospitals’ and health systems’ reliance on the pharmacy enterprise to effectively manage the revenue cycle has become a significant strategic priority. Inattention to the details of this complex process can negatively affect the short- and long-term financial viability of the organization. Pharmacy leaders are accountable and in an important position to deliver positive financial results while simultaneously improving the patient experience. This article describes the components of the revenue cycle and appropriate actions to ensure its optimal management. This systematic approach to managing and optimizing the revenue cycle encompasses a broad array of topics including prior authorization, bill auditing and optimization, payer engagement, and waste reduction. Emphasis is placed on the role and responsibility of the pharmacy leader in establishing an effective revenue management process. Systematic approach to revenue management. Revenue cycle management can be defined as a series of clinical and administrative processes designed to ensure the capture and receipt of payment for services rendered. From a pharmacy perspective, these services may be clinical practice based but are more commonly associated with the purchase, dispensing, and administration of a pharmaceutical. Pharmacy costs and their associated charges are often 10–20% of healthcare institutions’ total costs and charges. The number of line items in the pharmacy charge description master (CDM) often comprise an even higher percentage of the hospital’s charge master.1 Given the importance of the pharmacy revenue cycle to a health system’s finances, the pharmacy leader should have a detailed knowledge of the revenue cycle and any potential sources of revenue leakage. Prior authorizations, coverage determinations, and review of payment denials. Financial counseling is an important step that should occur before the administration of any high-cost outpatient medications. The financial counseling process may involve a written notice known as an “advance beneficiary notice of noncoverage” (ABN). An ABN, provided to Medicare beneficiaries by a healthcare provider, provides information about the services that a payer may not pay for, along with an estimate of the costs of these services. The intent of the ABN is to engage the patient in decision-making about whether to receive certain services, knowing that he or she may have to accept financial responsibility. An ABN discussion is often followed by a review of financial aid options that may be available to help the patient pay for necessary health services. A similar process to notify commercial payers of noncoverage may be required or used by a health system. The prior-authorization process involves seeking approval of use and verification of payment from the patient’s insurance provider. This process is critical to ensure payment for high-cost outpatient medications, as prior authorization is often required by payers and failure to receive it may result in rejection of the claim. This is an area that the pharmacy leader should investigate thoroughly to ensure that prior authorizations are completed when required and that approval is obtained before the medication is administered. There are a growing number of examples of pharmacy programs assuming responsibility of the prior-authorization process for their institution.2 A pharmacy team may be better positioned than the clinic staff to identify high-cost medications that require additional verification. In addition, creation of a centralized prior-authorization process can save personnel expenses when compared with a decentralized process for which multiple clinics have staff assigned to perform this function. Medicare does not require prior authorization. Instead, national coverage determinations (NCDs) are used to determine if payment is appropriate for certain items or services. If an NCD is not available, local coverage determinations (LCDs) may be used by a Medicare account contractor to determine if the service will be covered. Medicare only reimburses for items or services that are considered reasonable and necessary. NCDs and LCDs are available for review by healthcare personnel; however, no advanced approval may be obtained, and Medicare determines if the claim meets the requirements of an NCD or LCD. Much like a prior authorization, medication-associated NCDs and LCDs require a specific diagnosis, prior treatment failures, or specific laboratory results to be documented in the medical record for payment to be rendered. In addition to obtaining prior authorizations, pharmacy personnel can play a key role by ensuring that NCD and LCD requirements are met before providing services for Medicare beneficiaries. A review of insurance provider denials is an ideal place to begin a revenue enhancement initiative. In many cases, the denial will be for a high-cost medication that was either not preapproved (i.e., did not receive prior authorization) with the payer before administration or lacked the coding necessary to meet the payer’s criteria for reimbursement. An assessment of payment denial data will likely identify details that pharmacy personnel can use to prioritize revenue capture initiatives. Multiple denials for different drugs in the same setting (e.g., ambulatory care cancer center) may indicate that prior authorizations are not being performed correctly. Multiple denials for the same drug may be symptomatic of incorrect coding or routine off-label use of a drug. Pharmacy can address the latter by providing evidence supporting the therapy. CDM maintenance and audit processes. The pharmacy CDM is a complex but integral part of proper billing and reimbursement. The CDM should be assessed for completeness including a description that is reflective of the product being used, accurate billing units, and correct Healthcare Common Procedure Coding System (HCPCS) and revenue codes. Ongoing audits should be conducted to identify pricing errors, charge calculation errors, and other inconsistencies that can result from an incomplete or inaccurate CDM. Medicare and other payers make changes on a quarterly basis that may affect the setup of the pharmacy CDM, necessitating continual maintenance. One approach for an effective audit is to begin with a patient bill and then work backward by matching billed drugs and billing unit quantities to pharmacy dispensing transactions. Any drugs with an HCPCS code can be assessed at that time for accurate CDM mapping. A high-level audit comparing purchase quantities of a given drug against billed units can also be an effective means for detecting revenue leakage. For example, an institution that has purchased 3,000 mg of rituximab in a given time period would expect to find roughly 30 equivalent billing units. Any minor deviation from the exact purchase total might be explained by existing inventory or waste processes, but significant deviations are worthy of investigation. It is possible that the item is being dispensed, but the charge is not being captured (i.e., it is not being documented as administered on the patient’s medication administration record [MAR]). The action of documenting on the MAR is often the trigger for billing, so failure to document is a common reason for lost revenue and would result in variance for the purchase-versus-dispense audit. For items that are dispensed from an automated dispensing cabinet, it is possible that workarounds can result in the use of medication without an accompanying charge if an institution charges based on the dispensing of a medication. Canceled transactions can be audited on a regular basis to identify these workarounds. It is also possible that high-cost drugs could be diverted from the pharmacy. This audit is relatively easy to conduct, and any variances that are not explainable by inventory or waste should be investigated as part of a revenue recovery effort. An audit should also include a review of the charge calculation used to arrive at the price that appears on the patient’s bill. Many institutions use multiple charge markup calculations, often dependent on the work involved in preparation of the product (i.e., more labor-intensive preparation processes might warrant higher markups). Working backward through this markup calculation will lead to a reference cost, often the average wholesale price, the wholesale acquisition cost, or even the actual acquisition cost. The figure used as the basis for the charge calculation should be assessed for accuracy as well. A review of charge totals by drug or charge code should be completed on a regular basis to look for potential charge irregularities. One approach would be longitudinal tracking of high-charge or high-volume charge codes by day. With this approach, pharmacy staff reviewing charge quantities search for significant deviations in charge totals from the historical trends that are not supported by a corresponding fluctuation in billing units. Further, drugs with high charge totals (that are not a part of the longitudinal tracking) can be assessed for appropriateness. Consider an example where $154,500 of charges for gemcitabine was processed in a single day. A pharmacy staff member with knowledge of pharmacy purchasing trends would investigate gemcitabine as an outlier and notice that this charge total is exceptionally high considering the relatively low cost of the drug. An investigation might reveal a charge configuration error where the drug is being billed in increments of milliliters despite the fact that the price per charge unit is set up as a charge per vial. This would result in a significant overcharge that could be detected via a longitudinal charge audit. A prospective evaluation of HCPCS within the CDM should be completed at least once annually.3 This can be completed by a third-party vendor or by downloading public Centers for Medicare and Medicaid Services (CMS) or other payers’ drug crosswalks. These crosswalks provide a list of drugs, national drug codes, and associated HCPCS information. December is an appropriate month to complete this review to ensure the subsequent year’s changes are in place before January 1 of the following year. It may be recommended to complete this evaluation after the quarterly updates or ensure that there is a dedicated individual who reviews billing changes quarterly or monthly. Waste reduction and billing for waste. Waste reduction initiatives can also help to enhance an institution’s margin through cost avoidance or, in some cases, generation of revenue. Every product that is purchased and wasted without appearing on a patient’s bill is essentially lost revenue. Single-dose vials for high-cost infusion medications can result in significant waste if the unused portion of the vial is discarded. Some organizations prepare batches and schedule patients in a manner that allows them to minimize waste, a practice encouraged by CMS.4 If a healthcare provider must discard the remainder of a single-dose vial or package after administering the dose, CMS has created a system to bill for waste separately through the use of a billing modifier called “JW.” As of January 2017, the JW modifier has become a standard for use by all Medicare administrative contractors.5,6 To make this process efficient, pharmacy systems internal or external to the electronic medical record have built-in logic to automatically calculate the waste of a single-dose vial or a field for waste amount to be entered into the pharmacy system upon preparation. These waste calculations or entries then drop a charge for waste attaching the JW modifier. Organizations should ensure the waste charge is only dropped after the drug has been administered to the patient and the wasted portion was not used in any batch preparations. Pharmacy billers may run a report from the pharmacy information system for the previous day, identifying all doses of medications eligible for waste billing. Focus should be placed only on medications that receive separate payment from CMS, as there is typically little financial benefit to billing waste for inexpensive medications. The biller would then calculate the waste amount based on the dose given versus the amount of drug originally in the vial. The waste amount would be entered into the appropriate field within the pharmacy information system to capture it for billing. Conclusion. Revenue cycle management is a complex, rapidly-evolving process that is ripe with opportunities for intervention from a pharmacy leader. The complexities of drug billing, prior authorizations, and appropriately billing for waste are best understood by a pharmacist. Failure to maximize pharmacy involvement in this area can lead to significant loss of revenue for a health system. The Management Consultation column gives readers an opportunity to obtain advice on common management problems from pharmacists practicing in health systems. The assistance of ASHP’s Section of Pharmacy Practice Managers in soliciting Management Consultation submissions is acknowledged. Unsolicited submissions are also welcome. Readers are invited to submit topics for this column to ajhp@ashp.org or ASHP c/o David Chen, Director, Pharmacy Practice Sections, 4500 East-West Highway, Suite 900, Bethesda, MD 20814 (dchen@ashp.org). 1 Edwards R . In struggle to cut expenses , hospitals eye the pharmacy ( November 1 , 2011 ). www.hhnmag.com/articles/4403-in-struggle-to-cut-expenses-hospitals-eye-the-pharmacy (accessed 2015 Dec 29). 2 Leinss R Karpinski T Patel B . Implementation of a comprehensive medication prior-authorization service . Am J Health-Syst Pharm . 2015 ; 72 : 159 – 63 . Google Scholar Crossref Search ADS PubMed 3 Jarrett AT Patel KR Babbitt RM . Understanding pharmacy department billing and the charge master . Am J Health-Syst Pharm . 2008 ; 65 : 2213 – 4 . Google Scholar Crossref Search ADS PubMed 4 Birk S Johnson PE . Waste reduction—reimbursement and revenue integrity . Pharm Pract News . 2013 ; 40 : 4 – 8 . 5 Centers for Medicare and Medicaid Services . JW modifier: drug/biological amount discarded/not administered to any patient. MLN Matters no. MM9603 ( June 9 , 2016 ). www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/MM9603.pdf (accessed 2018 Mar 12). 6 Centers for Medicare and Medicaid Services . JW modifier: drug/biological amount discarded/not administered to any patient: frequently asked questions ( August 26 , 2016 ). www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/JW-Modifier-FAQs.pdf (accessed 2018 Mar 12). Copyright © 2018 by the American Society of Health-System Pharmacists, Inc. All rights reserved.
TI - Optimizing the revenue cycle to promote growth of the pharmacy enterprise
JF - American Journal of Health-System Pharmacy
DO - 10.2146/ajhp170335
DA - 2018-06-15
UR - https://www.deepdyve.com/lp/oxford-university-press/optimizing-the-revenue-cycle-to-promote-growth-of-the-pharmacy-5tCSQ03UyA
SP - 853
VL - 75
IS - 12
DP - DeepDyve
ER -