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Volume 8, Issue 3 Download for iPad

Sequestration Cuts

The sequestration cuts that began in March 2013, are part of the Budget Control Act of 2011, which requires mandatory across-the-board reductions in Federal spending. These sequestration cuts, which are aimed at reducing the deficit, would decrease spending by $1.2 trillion from fiscal year 2013 to fiscal year 2021.

The threat of the sequester was supposed to provide an incentive for the Joint Select Committee on Deficit Reduction to develop a plan to cut federal spending by $1.5 trillion over 10 years. The idea was that the bipartisan committee would be motivated to agree on a deal in order to avoid the automatic sequester cuts. However, this bipartisan “Supercommittee” was unable or unwilling to agree on a deal and thus triggered the sequester.



While the government must apply the sequester cuts to most programs, there are some notable exclusions including Medicaid, social security and disability payments, SNAP (Supplemental Nutrition Assistance Program) and SSI (Supplemental Security Income).

Although some sequester cuts went in to effect in March, the implementation date for Medicare cuts was April 1, 2013. After being deluged with complaints and letters, the Centers for Medicare and Medicaid Services (CMS) have repeatedly stated that they have no control on how the sequestration cuts are to be implemented. CMS states that they remain hopeful that Congress will take action to eliminate the mandatory payment reductions.

Meanwhile, Medicare fee-for-service (FFS) claims with dates-of-service or dates-of-discharge on or after April 1, 2013, will incur a 2% reduction in Medicare payment. The 2% reduction in payment also applies to claims for durable medical equipment (DME) and supplies, including claims under the DME Competitive Bidding Program when the date-of-service, or the start date for rental equipment or multi-day supplies, is on or after April 1, 2013.

The 2% claims payment adjustment is applied to all claims after determining coinsurance, any applicable deductible, and any applicable Medicare Secondary Payment adjustments. Therefore, beneficiary payments for deductibles and coinsurance are not subject to the 2% payment reduction. Furthermore, providers are prohibited from collecting the 2% from the Medicare beneficiary.

According to the Congressional Budget Office (CBO), the cuts apply to provider payments for services administered under Medicare Part A, Medicare Part B, and the contractual payments made to Medicare Advantage Plans (Part C) and Medicare Prescription Drug Plans (Part D).

In a memo dated May 1, 2013, CMS clarifies that the sequestration cuts apply to the payment rates they pay the Medicare Advantage Plans (MA Plans) and Prescription Drugs Plans (PD Plans). CMS also clarified that these plans cannot pass the cuts through to contracted providers and suppliers unless the payment terms of the contract between the plan and provider allows them to do so.

While Medicare Advantage plans and Part D plans whose contracts with providers allow them to pass on the sequester cuts to their contracted providers may do so, CMS states, "Medicare Advantage Organizations and Part D sponsors are not permitted to modify the currently approved benefit or cost sharing structure in any way. This includes increases in premiums or cost sharing, or reductions in benefits in an attempt to offset the lower payments due to sequestration."

Additionally, if you provide services to a MA patient and you are a non-contract provider for that plan, you must accept, as payment in full, the amount that you would collect if the beneficiary were enrolled in the Medicare fee-for-service program. Therefore, the sequestration cuts would be applied to your payment.

To date, most MA plans whose contracts allow it are indeed passing the sequester cuts on to the provider.
CMS has confirmed that eligible professionals (EPs) and hospitals will also receive a 2% reduction to the Medicare electronic health record (EHR) incentive payments for meaningful use of EHRs. CMS will reduce the incentive payments by two percent when the last day of the EHR reporting period is on or after April 1, 2013. However, Medicaid EHR incentive payments are not subject to the sequester cuts.

The Impact on Cancer CareThe Impact on Cancer Care
Oncology practices are most concerned with the 2% decrease in reimbursement on Medicare Part B physician administered drugs. When the 2% reduction is applied to the drug payment, it reduces the payment rate from ASP+6% to ASP+4.3%. This reduction has resulted in more drugs being reimbursed at a rate lower than the physician’s purchase price making it difficult if not impossible to treat some Medicare patients in the office.

On April 9, Representative Renee Ellmers (R-N.C.) introduced the Cancer Patient Protection Act of 2013. This bill seeks to reverse the sequester cuts that are being applied to physician administered cancer care drugs. The measure also directs Medicare to reimburse physicians for any reduced reimbursements since the sequester took effect on April 1. As of June 1, 2013, this bipartisan bill has 75 cosponsors.

Cancer research is also taking a huge hit due to the sequester. In a May 7 statement, Harold Varmus, Director of the National Cancer Institute (NCI), reported the NCI budget is being cut by 5.8% in 2013. The NCI is part of the National Institute of Health (NIH) which will see a reported budget drop of $1.71 billion (a 5% drop) in 2013.

Although there is considerable and growing opposition to the sequester cuts, it would be a mistake to think that there will be an easy fix. Unlike the Sustainable Growth Rate (SGR) formula, this political issue is much more involved. While there is bipartisan support for replacing the SGR formula, the sequester cuts are very much a partisan issue.

In a recent American Society of Clinical Oncology (ASCO) survey of ASCO members, 80% of the 500 survey respondents reported that the sequester cuts are already affecting their practices. ASCO in Action provides the following survey result highlights:

  • Nearly 50% reported not being able to continue caring for Medicare patients unless they have supplemental insurance.
  • 50% of respondents reported sending their Medicare patients elsewhere for chemotherapy, primarily to more expensive hospital outpatient infusion centers.
  • Of those respondents sending Medicare patients elsewhere, the majority of practices reported between 10% and 50% of their patients were affected by this dislocation. However, some have had to redirect all of their patients.
  • 25% reported no longer participating in clinical research.
  • 14% reported having to stop taking Medicare patients altogether at the time of this survey.
  • 74% of survey respondents reported having difficulty paying for chemotherapy drugs.
  • 22% reported they have or will need to close satellite clinical or outreach clinics, assuming the sequester cuts remain in place.

The ASCO survey was conducted between April 23 - May 1, 2013 when Medicare first began processing reimbursement claims under the funding cuts. ASCO intends to re-survey their members in the coming months in order to examine the effects of the reimbursement cut over time.


CMS to Correct 96361 EditMid-April, oncology practices began reporting Medicare denials for hydration services billed with CPT code 96361 hydration, each additional hour when performed subsequent to therapeutic or chemotherapy drug administration. The denials are based on Medicare’s add-on code edits. An add-on code is a HCPCS/CPT code that describes a service that is always performed in conjunction with another primary service. Add-on codes have a Medicare physician fee schedule (MPFS) indicator of "ZZZ" which indicates that they are only eligible for payment when reported with an appropriate primary procedure performed during the same encounter by the same provider.

The issue of add-on codes for drug/fluid administration is addressed in the Medicare Claims Processing Manual Chapter 12 - Physicians/Nonphysician Practitioners, Section 30.5 - Payment for Codes for Chemotherapy Administration and Nonchemotherapy Injections and Infusions. In fact, the CMS Manual uses the hydration codes as an example of when the add-on code may be billed with a different primary code (note that the text below from the CMS Manual uses the old CPT codes for hydration services 90760 and 90761):

Several chemotherapy administration and nonchemotherapy injection and infusion service codes have the following parenthetical descriptor included as a part of the CPT code, “List separately in addition to code for primary procedure.” Each of these codes has a physician fee schedule indicator of “ZZZ” meaning this service is allowed if billed with another chemotherapy administration or nonchemotherapy injection and infusion service code.

Do not interpret this parenthetical descriptor to mean that the add-on code can be billed only if it is listed with another drug administration primary code. For example, code 90761 will be ordinarily billed with code 90760. However, there may be instances when only the add-on code, 90761, is billed because an “initial” code from another section in the drug administration codes, instead of 90760, is billed as the primary code.

The recent denials for 96361 occurred with the publication of CMS Transmittal 2636, Change Request 7501 dated January 16, 2013. This Change Request provides a list of add-on CPT codes and the primary service codes that they must be performed in conjunction with. The Add-On Code edit file released for April 1, 2013 listed CPT code 96360 (IV infusion, hydration; initial 31 minutes to 1 hour) as the only primary code for add-on code 96361 (each additional hour of hydration). This edit is clearly at odds with the published AMA and Medicare billing rules for hydration services that are secondary to therapeutic or chemotherapy drug administration.

Nevertheless, because of this erroneous edit, practices have been experiencing denials when billing hydration (96361) as a secondary or subsequent service after a different initial service. Billing staff should be made aware of this issue and instructed not to write off any incorrectly denied hydration reported with CPT 96361.

CMS is taking steps to correct this edit error. In the Add-On Code Edits version for July 1, 2013, and retroactive to April 1, 2013, CMS will be expanding this list so that the primary codes will be listed as 96360, 96365, 96374, 96409, and 96413. In the meantime, it is suggested that oncologists may choose to delay submission of claims for CPT code 96361 to July 1, 2013 or later. At that time, providers may appeal denials or resubmit claims, depending upon your local Medicare contractor’s rules, for hydration services denied due to the edit.

Remember, CMS does not require A/B MACs to automatically reprocess claims. Contact your MAC to determine how best to resolve any incorrect denials.

Tips for Proper Billing of HydrationTIPS FOR PROPER BILLING

Hydration services continue to be audited by the various Medicare contractors. In addition, audit results demonstrate that there is still a good deal of confusion as to when an infusion of fluids with electrolytes is to be billed with the hydration codes and when it is to be billed with the therapeutic infusion codes. Below are some basic tips for proper billing of hydration services.

  • Hydration must be medically necessary - make sure the medical record documentation clearly supports medical necessity,
    • Medical record documentation should include a signed physician order for hydration;
    • For pre and/or post chemotherapy hydration, orders and notes must clearly document medical necessity of "pre-hydration/post-hydration".
  • Do not report hydration that is administered over 30 minutes or less.
  • Do not report hydration codes when the purpose of fluid administration is to “keep open” an IV line prior or subsequent to a therapeutic or chemotherapy infusion.
  • Do not report hydration codes when the fluids are used to run IV piggyback drugs or other substances. Hydration may not be reported concurrently with any other service.
  • Hydration services (96360 & 96361) require direct supervision in the physician office.
  • CPT Codes 96360 and 96361 are time-based codes and must be documented with start and stop times or total hydration infusion time. When hydration services are performed at the same encounter as another drug administration, documentation must show that the hydration was performed before and or after the drug administration.

Practices should consult their Medicare contractor for specific guidance on billing for hydration services and a number of the A/B MACs have published articles on hydration services on their website.

Sample Clinical Scenarios from CGS Medicare:

  1. A patient is seen in a facility because of dehydration due to continuous nausea with vomiting. She is given a prepackaged solution of 1,000 cc's of D5 ½ NS with 20 mEq KCL added to the bag (prepared by the pharmacy). The hydration is administered for an hour and 15 minutes. CPT code 96360, Intravenous infusion, hydration; initial, 31 minutes to 1 hour, would be reported for this encounter because there was no other intravenous infusion service performed during this encounter and the primary reason for the encounter was to administer the fluids and electrolyte(s) due to fluid loss from the patient’s continuous nausea with vomiting. The additional 15 minutes would not be reported due to the hydration services not being greater than 30 minutes past the initial hour.
  2. A patient was seen for low potassium level. He received a one-hour bolus of intravenous fluid mixed with potassium for treatment of his low potassium level. What would the correct CPT code be for this encounter? 96365, infusion, for therapeutic, prophylactic or diagnostic purposes; initial; up to one hour. Since the potassium bolus is targeted at the treatment of the patient’s low blood levels, the infusion becomes therapeutic as opposed to hydration.

Source: www.cgsmedicare.com

If your Medicare MAC does not provide specific guidance on billing and coding hydration services you should refer to the AMA guidance. The following statement appeared in the AMA's CPT Assistant December 2011 Volume 21 Issue 12:

Hydration vs. Therapeutic Infusion

The reporting of codes 96360 and 96361 vs. 96365, 96366, 96367, 96368 (therapeutic infusion codes) is predicated on the primary reason for the encounter, and whether any other infusion/injection services are performed. If the purpose of the infusion is for rehydration and with no other IV-infusion service provided on that day, this is an initial service (only hydration), which is then represented by code(s) 96360, 96361.

However, if, for example, the primary reason for the infusion was to address a low potassium level for which 20 mEq of KCl was added to an IV fluid, then the appropriate code(s) from the therapeutic infusion series should be reported for this therapeutic infusion performed for other than hydration (e.g., 96365, 96366, 96367, 96368) based on the time interval of the infusion, and whether any other infusion(s)/injection(s) were performed that day.

Source: AMA CPT Assistant Newsletter


ERX Deadline to Avoid 204 Payment PenaltyeRx DEADLINE TO AVOID 2014 PAYMENT PENALTY

The 2013 eRx 6-month reporting period (January 1, 2013 to June 30, 2013) is the final reporting period available to you if you wish to avoid the 2014 eRx payment adjustment. If you do not successfully report and have not received an exclusion or hardship exemption, a payment adjustment of 2% will be applied, and you will receive only 98% of your Medicare Part B Physician Fee Schedule (PFS) amount for covered professional services in 2014.

Avoiding the 2014 eRx Payment Adjustment

Individual eligible providers (EPs) and eRx Group Practice Reporting Option (GPRO) participants who were not successful electronic prescribers in 2012 can avoid the 2014 eRx payment adjustment by meeting specified reporting requirements between January 1, 2013 and June 30, 2013. Below are the 6-month reporting requirements:

  • Individual EPs - 10 eRx events via claims
  • eRx GPRO of 2-24 EPs - 75 eRx events via claims
  • eRx GPRO of 25-99 EPs - 625 eRx events via claims
  • eRx GPRO of 100+ EPs - 2,500 eRx events via claims

Exclusions and Hardships Exemptions

Certain EPs and group practices may be excluded from the 2014 eRx payment adjustment. In certain instances, CMS will automatically exclude those individual EPs and group practices who meet specific criteria and in other instances, the EP will have to report a hardship code and request the hardship exemption. More information on exclusion criteria and hardship exception categories can be found on the Electronic Prescribing (eRx) Incentive Program: 2014 Payment Adjustment Fact Sheet.

Resources from CMS
eRx Incentive Program Payment Adjustment Information
Electronic Prescribing (eRx) Incentive Program: Updates for 2013.

Questions about eRx?

If you have questions regarding the eRx Incentive Program, eRx payment adjustments, or need assistance submitting a hardship exemption request, please contact the QualityNet Help Desk at 866-288-8912 (TTY 1-877-715-6222) or via qnetsupport@sdps.org. The Help Desk is available Monday through Friday from 7am-7pm CT.


H.R. 800 introduced by Representative Ed Whitfield (R-KY) on February 15 would exclude customary prompt pay discounts from manufacturers to wholesalers from the average sales price for drugs and biologicals under Medicare. This bill continues to gain sponsors with 53 cosponsors to date.


October 1, 2014 is the scheduled implementation deadline for the transition from ICD-9 to the ICD-10 code set. Any ICD-9 codes used in transactions for services or discharges on or after October 1, 2014 will be rejected as non-compliant and the transactions will not be processed.

New Bill Introduced to Stop ICD-10On Wednesday, April 24, Representative Ted Poe (R-TX) introduced legislation in the U.S. House of Representatives that would stop the replacement of the ICD-9 code set with ICD-10 or any other code set. H.R. 1701, The Cutting Costly Codes Act, would prohibit the U.S. Department of Health and Human Services from implementing, administering or enforcing current regulations that require the new code set to take effect. The bill also calls for a federal study to identify ways to mitigate disruptions caused by any replacement of the ICD-9 code set.

In a letter of support to Poe, the AMA states that they remain deeply concerned about the timing of the ICD-10 transition during a time when physicians are devoting significant time and resources towards implementing EHRs and participating in numerous Medicare programs to avoid present and future penalties. The AMA states that “physicians are overwhelmed with the prospect of the tremendous administrative and financial burdens of transitioning to the ICD-10 diagnosis code set,” and that the timing could not be worse as physicians are also dealing with the 2% sequester cuts and the prospect of even more cuts from the flawed sustainable growth rate (SGR) formula.

Nevertheless, the AMA is urging physicians to continue to prepare for ICD-10 in order to avoid financial hardship if the October 1, 2014 deadline is not delayed. If the October 1, 2014 deadline is upheld providers not meeting the deadline in transitioning to ICD-10 will not receive payment for their services.

Not all stakeholders are calling for a halt to the implementation of ICD-10. In fact, the American Health Information Management Association (AHIMA) and the BlueCross and BlueShield organization (along with eight other entities) have co-authored a letter to Congress in support of the October 2014 adoption of ICD-10.

In the coalition letter, they state their opposition to any further delays in the adoption of ICD-10 saying, "any delay or deviation from the October 1, 2014 compliance date would be disruptive and costly for health care delivery innovation, payment reform, public health and health care spending."

The letter also cites the need for data that would be reported through the new ICD-10 code set to measure service quality, outcomes, safety, and efficiency without which they say it would be impossible to support new payment and delivery models such as patient-centered medical homes and value-based purchasing.

ICD-10 Resources:

AMA ICD-10 Web page:

CMS ICD-10 Web page:

AMA ICD-10 Resources

AAPC ICD-10 Implementation Web page:



On May 2, CMS published MLN Matters Number MM8286 listing several HCPCS code changes effective for Medicare for dates of service on or after July 1, 2013. The table below outlines these changes:



Injection, Zoledronic Acid (Zometa), 1mg

Deleted effective July 1, 2013


Injection, Zoledronic Acid (Reclast), 1mg

Deleted effective July 1, 2013


Injection, Doxorubicin Hydrochloride, Liposomal, Doxil, 10mg

Deleted effective July 1, 2013


Q2033 Influenza Vaccine, Recombinant Hemagglutinin Antigens, for intramuscular use (Flublok) Payable effective July 1, 2013
Q2050 Injection, Doxorubicin Hydrochloride, Liposomal, not otherwise specified, 10mg Payable effective July 1, 2013
Q2051 Injection, Zoledronic Acid, not otherwise specified, 1mg Payable effective July 1, 2013

Remember, these HCPCS codes are specific to Medicare claims. Consult with your private payers to determine which HCPCS codes they require for these drugs.



The Medicare Recovery Audit Contractor (RAC) program has been a successful venture from the start with a reported $1 billion in improper payments recouped during the three-year pilot project.

Medicare Audits Increase and So Do Their ReturnsThe latest CMS report on the Medicare Recovery Auditors (RAs - formerly RACs) shows a record $1.37 billion in overpayments recouped in the first six-months of fiscal 2013 (Oct 2012 - March 2013). Moreover, as the audit efforts ramp up it is interesting to note that all four Medicare RAs identified "medical necessity" as their top issue.

Meanwhile, there has been a significant increase in the reported RA audit activity in the medical oncology office in the past few months and many of these audits are on chemotherapy drugs. Reported audits on chemotherapy drugs include audits focused on billing for wasted drugs and medical necessity.

It is very important to respond to the RAs in a timely manner and to provide the appropriate medical record documentation and any supporting literature. If you determine that you have billed the service correctly, and the service was medically necessary, you should also contact your state oncology society about the audit issue and ask them to address the issue at a statewide level.

If you live in one of the few states that do not currently have an active state society, you can contact ASCO at practice@asco.org or contact me at Rise@oplinc.com.

Recovery Audit Resources

CMS Recovery Audit Website

MGMA Recovery Audit Webpage


Published by Rise Marie Cleland. Sponsored by Lilly Oncology

Risë Marie Cleland Rise@Oplinc.com

Oplinc, Inc.
1325 Officers Row
Suite A
Vancouver, WA 98661
360.695.1608 office

Comments and suggestions for future issues are welcome, please forward correspondence to Risë Marie Cleland by email at: Rise@Oplinc.com

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Risë Marie Cleland is the Founder and CEO of Oplinc, Inc., a national organization of oncology professionals. Through Oplinc, Inc., Ms. Cleland publishes the weekly Oplinc Fast Facts focusing on the timely dissemination of information pertaining to billing, reimbursement and practice management in the oncology office and Oplinc’s Best Practices Review, which provides a more in-depth look at the issues and challenges facing oncology practices. Ms. Cleland also works as a consultant and advisor for physician practices, pharmaceutical companies and distributors.

Please note that this newsletter is presented for informational purposes only. It is not intended to provide coding, billing or legal advice. Regulations and policies concerning Medicare reimbursement are a rapidly changing area of the law. While we have made every effort to be current as of the issue date, the information may not be as current or comprehensive when you review it. Please consult with your legal counsel for any specific reimbursement information. For Medicare regulations visit: www.cms.gov.

CPT® is a Trademark of the American Medical Association Current Procedural Terminology (CPT) is copyright 2013 American Medical Association. All Rights Reserved. No fee schedules, basic units, relative values, or related listings are included in CPT. The AMA assumes no liability for the data contained herein.

Copyright ©2013 Oplinc, Inc.

Oplinc, Inc., grants permission to distribute this newsletter without prior permission provided it is forwarded unedited and in its entirety.

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