The Medicaid program is the nation’s largest insurance plan, and the growth in Medicaid spending has prompted the Federal government to scrutinize this program. Federal and state governments, with the federal government covering more than 50% of the cost in 2005, jointly finance the Medicaid program.

The Deficit Reduction Act of 2005 (DRA), signed into law by the President on February 8, 2006, contains several significant changes to the Medicaid program that are projected to reduce the growth in Medicaid spending by almost $5 billion dollars over the next five years and to reduce federal Medicaid spending by $43.2 billion in the next ten years .

In a February 8 press release, President Bush said that the DRA of 2005 would reduce federal overpayment for prescription drugs, and tighten loopholes that allowed people to transfer assets to their children in order to qualify for Medicaid benefits.

The DRA also provides financial resources for implementation of the new Medicaid Integrity Program. This program will mirror the Medicare fraud and abuse reduction program through reviews, audits, identification and recovery of overpayments, and education of providers, managed care companies, beneficiaries and others.

Prescription Drugs

Currently, the federal upper limit (FUL) rate caps Medicaid payments for brand name drugs for which there are three therapeutically and pharmaceutically equivalent medications available. CMS set the FUL at 150 percent of the lowest price (Average Wholesale Price, Wholesale Acquisition Cost, or Direct Price).

Effective January 1, 2007, Section 6001(a) of the Act amends 42 U.S.C. § 1396r-8 to change the FUL rate from 150 percent of the lowest published price to 250 percent of the average manufacturer price (AMP). The DRA also increases the number of drugs subject to the FUL by lowering the requirement for available therapeutically and pharmaceutically equivalent products from three to two. The AMP calculation will not include prompt pay discounts extended to wholesalers.

Effective July 1, 2006, CMS must post the AMP of drug products on its website. This previously confidential information will be updated quarterly and will be available to the public. It is expected that the public availability of the AMP will affect pricing on multi-source drugs and drugs with therapeutic alternatives.

It is worth noting that in their report Medicaid Drug Price Comparison: Average Sales Price, to Average Wholesale Price, the OIG states that AMP is 70% lower than AWP at the median for generic drugs.

Physician-Administered Drugs

Effective January 1, 2006, for single-source physician-administered drugs, states must implement such methodologies, e.g. J-codes and National Drug Code (NDC) numbers, that will facilitate the translation of utilization data into a format that will allow the states to identify and invoice manufacturers for rebates owed on those drugs.

States that do not submit rebate claims may lose their federal matching funds for those drugs. Unless the Secretary specifies an alternative system is to be used, NDC codes will be required not later than January 1, 2007.

Effective January 1, 2008 states must implement such methodologies for identifying and invoicing manufacturers for rebates owed on the list of the top 20 highest-dollar physician-administered multi-source drugs (to be published by the Secretary no later than January 1, 2007). Editors note: For more information see the article entitled “Understanding the Medicaid Drug Rebate Program.”

Understanding the Medicaid Drug
Rebate Program

The Medicaid Drug Rebate Program, established through the Omnibus Budget Reconciliation Act of 1990 (OBRA'90), requires manufacturers to provide rebates on drugs paid for by a state. The program was designed to reduce the state and Federal expenditures for prescription drugs.

This program is administered by the Centers for Medicare and Medicaid Services (CMS). Drug manufacturers provide price data to CMS quarterly. CMS uses this information to calculate the rebate, and reports the rebate information to the state. The state then bills the manufacturers for the rebates.

In order to file for the rebates the states must be able to identify the drugs by the National Drug Code (NDC). The NDC identifies the manufacturer (or labeler) of the drug allowing the states to invoice the appropriate manufacturer. The collection of the NDC has been difficult for the states because physicians generally bill physician-administered drugs with the Healthcare Common Procedure Code (HCPC), represented most commonly by J-codes. HCPCS codes do not identify the manufacturer of the drug.

The April 2004 Office of Inspector General (OIG) report entitled, Medicaid Rebates For Physician-Administered Drugs detailed the degree to which State Medicaid programs collected drug manufacturer rebates on physician-administered drugs and the potential savings under the Medicaid Drug Rebate Program if all states collected these rebates.

The initial OIG survey on 2001 data suggested that Medicaid could have saved an additional $37 million in that year if all states had collected rebates on all single-source, and the top 40 multiple-source, physician-administered drugs.

The OIG reported that as of March 2003, three states collected rebates on all physician-administered drugs, one state collected rebates on all physician-administered drugs billed by a targeted group of providers, 20 states collected rebates on single-source drugs only and 24 states did not collect any rebates on physician-administered drugs (one state did not respond to the OIG).

According to the OIG, the 3 states that collected rebates on all physician-administered drugs (Hawaii, Missouri and Pennsylvania) used National Drug Codes (NDC) to bill physician-administered drugs, while the 20 states that collected rebates only on single-source drugs used procedure codes. The states that collected rebates on single-source drugs alone used a crosswalk to link procedure codes to the NDC.

The OIG recommended that CMS continue to encourage all states to collect rebates on physician-administered drugs. The OIG also recommended that states that are collecting these rebates share information and resources in order to facilitate the rebate collection, and that CMS issue a letter to Medicaid Directors to inform them of the NDC HCPCS Crosswalk available on the CMS website.

CMS agreed with the OIG recommendations and in the CMS Letter to State Medicaid Directors dated March 14, 2003, CMS stated, “We strongly encourage each State Medicaid program to collect rebates for all cancer and injectible drugs billed to the Medicaid program and to establish a conversion system which would permit the collection of rebates on any J-coded drug.”

While the NDC HCPCS crosswalk is helpful in the collection of rebates on single-source drugs, states are not accurately able to identify the drug manufacturer to be invoiced for multi-source drugs unless the physician reports the specific NDC of the drug administered. Consequently the DRA requires the use of the NDC (unless the Secretary identifies an alternative coding system to be used) no later than January 1, 2007. Editor’s note: See inset titled Medicaid Drug Rebate Provisions in the DRA of 2005.

Issues that make reporting of the NDC for physician-administered drugs problematic for providers:

  • Many practice management systems cannot store and transmit the 11-digit NDC
  • Some practice management systems can only hold and transmit 1 NDC per claim
  • Providers would have to report both the HCPCS and the NDC for each drug administered as the NDC does not convey actual dosage given
  • Providers often switch brands on multi-source drugs, based on drug availability, pricing etc.,
    • practices would need to be able to identify the specific vial used for each dose of drug administered
    • practice management systems would have to be updated with all of these NDC numbers
What is an NDC Number?

Drug products are assigned a unique 10-digit, 3-segment National Drug Code (NDC) number that identifies the labeler, product, and trade package size. The NDC will be in one of the following segment configurations: 4-4-2, 5-3-2, or 5-4-1.

  • The first segment, the labeler code, identifies the firm that manufactures, repacks, relabels or distributes the drug under its own name.
  • The second segment, the product code, identifies the specific strength, dosage form, and formulation of the drug.
  • The third segment, the package code, identifies the package size.

The HIPAA standard is an 11-digit NDC with a 5-4-2 configuration. Therefore when submitting an NDC a leading zero is added to the 10-digit NDC. The placement of the zero will depend upon the configuration of the NDC with the zero being added to the appropriate segment to achieve the HIPAA standard 5-4-2 configuration as shown below:

10- Digit NDC # Configuration
Leading Zero Placement for
5-4-2 Configuration
4 - 4 - 2
5 - 4 - 2
5 - 3 - 2
5 - 4 - 2
5 - 4 - 1
5 - 4 - 2


Pay for Performance

Pay-for-Performance initiatives are gaining momentum in the oncology community and there will be no turning back. The Centers for Medicare & Medicaid Services (CMS) has been paving the way with the 2005 and 2006 Oncology Demonstration projects. The 2006 demonstration project shows an increased understanding, on the part of CMS, of the information that is necessary to measure adherence to evidenced-based guidelines. While this project remains limited in its ability to measure the quality of care provided it is clearly a step forward for CMS.

CMS states that their Physician Voluntary Reporting Program (PVRP) is designed “to substantially improve the health and function of our beneficiaries by preventing chronic disease complications, avoiding preventable hospitalizations, and improving the quality of care delivered.” PVRP was launched January 1, 2006 and is widely considered the first step towards an expansive pay-for-performance (P4P) reimbursement system. The 16 core starter set measures in the PVRP are primarily focused on emergency care, nephrology, surgery and ESRD. However, CMS is working with the American Medical Association (AMA) and specialty societies on the expansion of the measures.

In testimony to the House Subcommittee on Health, Committee on Energy and Commerce in November 2005, Mark B. McClellan, CMS Administrator stated that the current model of reimbursement does nothing to support quality care and avoid unnecessary costs and disease complications. McClellan testified that, “Compensation for physicians who provide for our Medicare beneficiaries should encourage and support their efforts to provide the highest quality care in the most cost effective manner.   Measuring the quality of care provided, and providing better incentives and support for evidence-based care that improves quality and avoids complications and their associated costs, can give us data we need to help physicians to improve quality and avoid unnecessary costs.”

Private payers have had P4P programs in other disease states for many years. They are now increasingly turning their focus to oncology with the goal of replacing the current system of rewarding for treatment with one that rewards physicians for providing quality care and the efficient use of resources.

The current P4P programs in oncology are focused on adherence to clinical guidelines. This is due to the belief that variations in practice patterns signal either the overuse of inefficient treatments or the underuse of effective treatments. The challenge for payers and providers is the establishment of a standard set of measures that can quantify quality cancer care and the adoption of those standards across P4P programs.

Currently, payers have only claims data. This data includes the diagnoses but does not indicate current disease stage or any information on previous treatments and/or patient specific information that would influence the choice of treatment such as co-morbidities, hormone receptor status or genetic markers. From the limited data submitted with claims one could infer that there are no standard approaches to some of the most common cancer types.

The majority of oncologists agree with the principal of developing measurement standards that can help ensure the highest quality of cancer care is delivered. The American Society of Clinical Oncology (ASCO) developed the Quality Oncology Practice Initiative (QOPI) to promote excellence in cancer care.

Through the QOPI, participating practices conduct retrospective reviews of patient charts focusing on the QOPI set of quality measures. The de-identified data is sent to the secured QOPI system where the data is aggregated so that practices can compare their results with that of the other participating practices. The QOPI system allows practices to track outcomes and to benchmark themselves against other participating practices as well as their own previous benchmark data.

Large cancer organizations such as the National Comprehensive Cancer Network (NCCN) and its members have been actively involved in the identification and development of evidenced-based guidelines in cancer care for many years. The NCCN Oncology Outcomes Project is an ambitious program featuring a database of information for measuring clinical and other outcomes data on breast cancer, non-Hodgkin’s lymphoma, and cancer pain assessment and management.

Provider participation in P4P will require additional resources from the practice. Systems and processes that will ensure the identification and implementation of the accepted standards of care for each patient encounter will have to be established. The technology to accurately capture outcomes data and the time requirements for collecting this data are significant. The cost to the practice in terms of new or enhanced technology, staff time and physician work will vary according to the demands of the program and the current practice resources.

From the payers’ perspective, collaboration between payers to develop a common set of measures would help to ensure the success of the program, and the increasing consolidation of health insurers makes this task easier. According to the AMA’s recent report, Competition in Health Insurance a Comprehensive Study of U.S. Markets 2005 Update, this consolidation is increasing at an unprecedented rate. The AMA reports that two insurers, WellPoint and United, now control 33 percent of the U.S. commercial health insurance market.

Both WellPoint and United are moving forward with oncology P4P programs. The consolidation and collaboration of insurers may mean the development of common P4P measurement standards and program requirements that will make participation easier for the providers. Conversely, it may mean that providers will be pressured to accept contracts and enter into programs that are not favorable for the providers or patients.

P4P programs in cancer care are inevitable. The goal is not to stop these programs but rather to shape them into programs that support the highest level of cancer care throughout the continuum of cancer services.


Avoiding Untimely Filing Denials

The Medicare program allows a minimum of 15 months to file a claim. Most private payers allow far fewer. In order to avoid untimely filing denials, you must first know the timely filing limit for each of your payers. While it is possible to overturn timely filing denials, it is far easier to prevent them.

Patient Demographics
It is the responsibility of the practice to obtain and maintain updated patient demographics. Outdated insurance information, including claims billing addresses, will cause a significant delay in the billing process.

Clean Claims
Medicare and many private payers do not consider a claim properly submitted unless it is a “clean claim.” That means that the timely filing clock is ticking until receipt of a clean claim. The most common errors are:

  • Missing or invalid patient identification number or other patient information (sex, date of birth, address etc.)
  • Missing or invalid subscriber information
  • Assignment of benefit box not checked
  • Invalid dates of service
  • Missing or invalid modifiers
  • Missing or invalid diagnosis code
  • Missing or invalid provider information
  • Incorrect place of service
  • Missing address of facility where service is rendered

Charge Capture
Retrospective reviews often identify missed charges but unless you perform these on a regular basis, you might find that you have missed the time filing limit on these charges.

Review your charge capture processes. Compare:

  • Drug inventory report
  • Chemotherapy flow sheet
  • Treatment order form
  • Charge ticket

Are you capturing every encounter? Compare:

  • Schedule to charge tickets
  • Charge tickets generated to charge tickets posted

Is every appropriate CPT code being billed?

  • Follow CMS NCCI & local carrier rules for Medicare
  • AMA CPT guidelines for private payers (unless your contract states otherwise)

Claim Submission & Follow-up
How long does it take charge tickets to get to the billing department? Are you monitoring for lost tickets?

Monitor the time between:

  • Date of service to date of charge entry
  • Date of charge entry to date billed to payer
  • Date billed to payer to date payment received
  • Date payment received to date payment posted

Ideally, claims should be filed every day, at a minimum, twice a week. Once claims are transmitted you should monitor electronic transmission reports to verify that claims were properly sent, and have been received by the payer.

Balance the accepted transmission reports to your practice management billing batches for any lost or dropped claims. Monitor your rejected claims reports for claim processing or transmission errors, and correct errors promptly.



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.hhs.gov.

Medicaid Drug
Rebate Provisions
in the DRA of 2005

§ 6002 of S. 1932 Deficit Reduction Act of 2005


(A) SINGLE SOURCE DRUGS - In order for payment to be available under section 1903(a) for a covered outpatient drug that is a single source drug that is physician administered under this title (as determined by the Secretary), and that is administered on or after January 1, 2006, the state shall provide for the collection and submission of such utilization data and coding (such as J-codes and National Drug Code numbers) for each such drug as the Secretary may specify as necessary to identify the manufacturer of the drug in order to secure rebates under this section for drugs administered for which payment is made under this title.

- Not later than January 1, 2007, the Secretary shall publish a list of the 20 physician administered multiple source drugs that the Secretary determines have the highest dollar volume of physician administered drugs dispensed under this title. The Secretary may modify such list from year to year to reflect changes in such volume.
(ii) REQUIREMENT - In order for payment to be available under section 1903(a) for a covered outpatient drug that is a multiple source drug that is physician administered (as determined by the Secretary), that is on the list published under clause (i), and that is administered on or after January 1, 2008, the state shall provide for the submission of such utilization data and coding (such as J-codes and National Drug Code numbers) for each such drug as the Secretary may specify as necessary to identify the manufacturer of the drug in order to secure rebates under this section.

(C) USE OF NDC CODES - Not later than January 1, 2007, the information shall be submitted under subparagraphs (A) and (B)(ii) using National Drug Code codes unless the Secretary specifies that an alternative coding system should be used.

(D) HARDSHIP WAIVER - The Secretary may delay the application of subparagraph (A) or (B)(ii), or both, in the case of a state to prevent hardship to states which require additional time to implement the reporting system required under the respective subparagraph.


Medicare Timely Filing ISSUES REVISED

To be eligible for Medicare payment, claims must be filed within the qualifying time limit. Medicare determines the timeliness of claims filing by comparing the date of service and the date the claim is accepted for adjudication.

CMS Transmittal 830, Change Request 4010 dated February 2, 2006 with an effective date of July 1, 2006 and an implementation date of July 3, 2006, clarifies that claims denied for exceeding the timely filing limit are not subject to appeal. An initial “determination” must be received prior to requesting the first level of appeal, a “redetermination.” Timely filing denials do not constitute an “initial determination” therefore these denials are not subject to appeal.

If the provider feels that a Medicare program administrative error has been made and that the claims were filed timely, a written request for a reopening may be made.

If the provider is responsible for not filing a timely claim, the provider may only charge the beneficiary for the deductible and/or coinsurance amounts that would have been incurred had the Medicare payment been made. Review the Medicare Claims Processing Manual Chapter One for information on when to file a no-payment claim.

When a provider’s claim is denied for untimely filing, the Medicare beneficiary will receive the following messages on their monthly Medicare Summary Notice (MSN):

25.1 – This claim was denied because it was filed after the time limit.

25.2 – You can be billed only 20% of the charges that would have been approved.

25.3 – The time limit for filing your claim has expired, therefore appeal rights are not applicable for this claim.

This is in accordance with the provider agreement in which the Medicare provider agrees not to bill for any service that would have been payable by the Medicare program. The Medicare Claims Processing Manual – Chapter 1 – General Billing Requirements states:

30.1.1 - Provider Charges to Beneficiaries
(Rev. 1, 10-01-03)
SNF-317, RHC-321

In the agreement/attestation statement signed by a provider, it agrees not to charge Medicare beneficiaries (or any other person acting on a beneficiary’s behalf) for any service for which Medicare beneficiaries are entitled to have payment made on their behalf by the Medicare program. This includes items or services for which the beneficiary would have been entitled to have payment made had the provider filed a request for payment (see §50).

The provider may bill the beneficiary for the following items:

  • Part A deductible;
  • Part B deductible;
  • First 3 pints of blood, which is called the blood deductible (if there is a charge for blood or the blood is not replaced);
  • Part B coinsurance;
  • Part A coinsurance; or
  • Services that are not Medicare covered services. See Chapter 30 for related requirements.

Determination of Timely Filing
Claims must be filed on or before December 31 of the calendar year following the year in which the service was provided (an exception may be made in the case of the Medicare’s program administrative error). Services that are furnished in the last quarter of the year have until December 31 of the second year after the year in which the service was provided. However, Medicare may impose a ten percent reduction in payment on claims received more than one year after the date of service.

The following table illustrates the usual Time Limitations for Filing Provider Claims and is available in CMS Change Request 4041 dated February 2, 2006.

Table: Usual Time Limit

Date of
filing date
Months to file*
Dec 31: Service year plus 1 year


Dec 31: Service year plus 1 year
Dec 31: Service year plus 1 year
Dec 31: Service year plus 1 year
Dec 31: Service year plus 1 year
Dec 31: Service year plus 1 year
Dec 31: Service year plus 1 year
Dec 31: Service year plus 1 year
Dec 31: Service year plus 1 year
Dec 31: Service year plus 2 years
Dec 31: Service year plus 2 years
Dec 31: Service year plus 2 years

* The number specified in “Months to file” represents the number of full months remaining after the month in which the service was rendered


Late Breaking News!

The Centers for Medicare and Medicaid Services (CMS) has announced that BioScrip® will be the sole vendor for the initial phase of the Medicare Competitive Acquisition Program (CAP) for Part B Drugs and Biologicals. It has been reported that five entities bid to be a CAP vendor, however, the bidders were under no obligation to accept a contract if offered one. BioScrip was the sole bidder to accept the contract.

CMS has stated that they expect to widen the categories of drugs offered under CAP and they hope to increase vendor and physician interest in the program.

The CAP is a voluntary program and is designed to offer physicians an alternative to buying and billing for most physician administered Medicare Part B drugs. The CAP is available only for Medicare-fee-for-service beneficiaries, Medicare Advantage beneficiaries do not qualify for this program.

Physicians who elect to participate in this program will order the Medicare patient’s drugs from the CAP vendor. The CAP vendor will ship the drugs to the physician’s office, bill Noridian, the Medicare CAP carrier, for the drugs and the secondary insurer or patient for any deductible and co-insurance. The physician will administer the drug and bill the Medicare Part B carrier for the administration of the drug.

The first physician election period is scheduled to begin this Spring, with the exact date yet to be announced. The CAP in 2006 will be abbreviated due to the late start for the program. The first CAP year will run from July 1, 2006 – December 31, 2006. Thereafter the program will run from January 1 – December 31.

There has been little enthusiasm for CAP among oncologists as the administrative requirements for participation are seen by most to outweigh the benefits.

CAP Resources

CMS maintains a CAP Web Page containing information for physicians and vendors including links to the applicable Regulations and Notices, information on the CAP vendor and CAP carrier, and related press releases. Monitor this site for the latest news on CAP.

Noridian Medicare, the CAP carrier also maintains a CAP Web Page containing much of the same information as the CMS site.


About BioScrip®, Inc.

BioScrip is a Pharmacy Services company with Specialty Pharmacy, Pharmacy Benefit Management (PBM) and Infusion Services product lines. BioScrip also has an ambulatory infusion center located in Los Angeles, CA.

Contact Information:

BioScrip Business Headquarters
10050 Crosstown Circle -
Suite 300
Eden Prairie, Minnesota 55344

Healthcare Payors
For information on our Specialty Pharmacy and PBM Programs:
Jeff Vigh
VP of Sales and Client Services
P: 614.850.6681
F: 877.347.1448

Drug Manufacturers
For information on our Specialty Pharmacy Programs:
P: 914.460.1632


Final Rule Medicare Enrollment Requirements

The Final Rule, Medicare Program; Requirements for Providers and Suppliers To Establish and Maintain Medicare Enrollment was published in the Federal Register on April 21, 2006.

All providers will be required to re-enroll with Medicare at a minimum every five years to verify the accuracy of enrollment information, according to the Final rule effective June 20, 2006. Providers will be required to update the information on their enrollment application, form CMS-855, or a variation thereof, anytime there is a change of the information on the form. In addition, CMS may require a provider to verify the information on their enrollment form at any time. CMS believes that requiring re-enrollment will be a strong deterrent in Medicare fraud and abuse.

Summary from the Final rule:

This ruling requires that all providers and suppliers (other than physicians or practitioners who have elected to "opt-out" of the Medicare program) complete an enrollment form and submit specific information to us. This final rule also requires that all providers and suppliers periodically update and certify the accuracy of their enrollment information to receive and maintain billing privileges in the Medicare program. In addition, this final rule implements provisions in the statute that require us to ensure that all Medicare providers and suppliers are qualified to provide the appropriate health care services. These statutory provisions include requirements meant to protect beneficiaries and the Medicare Trust Funds by preventing unqualified, fraudulent, or excluded providers and suppliers from providing items or services to Medicare beneficiaries or billing the Medicare program or its beneficiaries.

More analysis on this Final rule will be available in the next edition of Oplinc’s Best Practices Review.



Risë Marie Cleland

300 West 8th Street, Unit 419
Vancouver, WA 98660-3440
580.695.0632 phone
360-993-5065 fax



The May/June Issue of the Oplinc Best Practices Review will focus on fraud and abuse issues and will feature an in-depth article by David Glaser, E.S.Q.

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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