Finding a Way for Hospitals to Bill for Part D Drugs

Executive Summary

Patients often need “self-administered drugs” while in hospital outpatient settings (emergency room visits, observation care, etc.). These are the medications you take every day, and should be covered by Medicare Part D. However, on a practical basis Medicare coverage for these drugs is only available at a retail pharmacy—but you can’t take them into the hospital. Medicare patients often receive large bills for these drugs because hospitals have no mechanism to bill their Medicare drug plans.

The Innovation: We proposed a billing portal to let hospitals bill Medicare the same way pharmacies do. The technology was doable, but hospitals believed it was unworkable. Most would prefer to stop billing for these drugs as a matter of policy, but many were unsure if they could legally do so. We also explored the idea of bundling payment for these drugs into the Emergency Room or Observation Care service as was recently recommended by the Medicare Payment Advisory Commission (MedPAC).

Our team found a 2003 memo that is the basis for hospitals’ belief that failure to bill might violate the law. We obtained a legal opinion from the General Counsel at the Office of the Inspector General (OIG) that setting a policy not to bill for these drugs wasn’t in any way a violation of law. At our request the OIG’s Industry Guidance Branch has drafted guidance to confirm hospitals may voluntarily stop billing for these uncovered drugs. This guidance will be published quite soon.

A more comprehensive solution is possible by implementing MedPAC’s recommendation 7-5 to bundle the payment for these drugs into Medicare Part B, so that they are paid along with the claim for Emergency Room or Observation Care services. This would completely resolve the problem. Our team seeks to encourage CMS and HHS to advance this by recommending the President submit this proposal in his next budget to Congress.

OIG estimates hospitals bill $200 million/year for these drugs. We believe that 80-90% of hospitals will cease billing with new guidance, for an estimated $150 million/year reduction. The proposed legislation would completely resolve the problem.

A project supported by: HHS Ignite Accelerator

Team Members

Ken Gardner (Project Lead), CMS
Lucy Saldana, CMS
Jon Langmead, CMS
Kirk Sadur, CMS
Rajul Patel, University of the Pacific

Milestones

May 2014: Project selected into the HHS Ignite Accelerator
June 2014: Time in the Accelerator began
September 2014: Time in the Accelerator ended

Project Sponsor

Max Wong, Manager, Customer Relations Branch, Division of Medicare Health Plans, Region IX, Centers for Medicare & Medicaid Services (CMS)