There has been a lot of information in the news recently about the amount that Medicare spends on high-cost drugs. If you have reviewed the Medicare Drug Spending Dashboard, you may have identified many of the drugs and biologicals as being packaged as a single-use or single-dose vial (SDV).

On April 29, the Centers for Medicare & Medicaid Services (CMS) issued an update mandating the use of modifier JW when billing for discarded waste from a SDV. It is safe to assume that this transmittal represents another step in containing Medicare spending and in ensuring that dollars spent can be supported by documentation in each patient’s medical record (does anyone see the next approved item for audit here?)

Guidance for when this modifier would be appropriately appended to the HCPCS of a drug was first issued on May 25, 2007. For the past nine-plus years, the instruction from individual payors at the regional Medicare Administrative Contractor (MAC) level has been lacking or unclear. While some payors have required professional claims to include the JW modifier on claim lines representing discarded waste, the instruction has not been applied to the institutional claims of the hospitals. However, based on CMS transmittal 3508 (issued April 29), all providers will be required to append modifier JW when billing for waste. With issuance of this transmittal, CMS has removed contractors’ discretion for monitoring payment of unused drug volume, having implemented a July 1, 2016 effective date for requiring use of the modifier.

But be warned that use of the modifier must be supported by documentation in the medical record.

One of the primary rules that providers need to keep in mind when assigning HCPCS codes is to select the name of the drug or biological that accurately identifies the product administered. The HCPCS code description will determine the conversion factor for reporting of the correct unit of service on the claim. In other words, if the description contains verbiage such as per unit, per mg, per dose, etc., report the proper number of HCPCS code units to correlate with the final dose given to the patient. 

Most hospitals will rely on their pharmacy information systems to convert dispensed doses to correct HCPCS units for billing, while others will apply a calculation factor through the chargemaster. Regardless of where this conversion occurs, it is necessary to test the process and ensure that all calculation parameters have been accurately defined. 

Another factor in this equation is the National Drug Code (NDC). Refer to the special edition MLN Matters article SE1316 (issued Aug. 1, 2013), which reminded providers that the billed amount for administered dosage plus waste “must correspond with the smallest dose (vial) available for purchase from the manufacturer(s) that could provide the appropriate dose for the patient.” Some drugs are purchased in several different dose strengths, resulting in multiple NDCs being in inventory for the same drug. Some drugs come in different vial types (single-dose and multi-dose). This will place emphasis on NDC management by the pharmacy and increases the importance for accurate programming of the field that identifies single-dose vials versus multi-dose vials.

The requirement to report administered dosages and discarded waste from a SDV on separate lines of each claim means that most hospitals will need to implement a revised process within the billing system. The revised process must allow two separate charges with the same HCPCS and revenue code to be reported separately on the claim – the administered dose on one line of the claim with no modifier, and the discarded waste on a second line of the claim with the JW modifier appended.

The guidance for modifier JW is a billing rule that will apply to separately payable drugs as well as packaged drugs. To separately report the unique HCPCS code assigned to either a packaged drug or a separately payable drug, it is necessary to map (or link) the HCPCS code to revenue code 636.

Two points of caution must be addressed:

  • Ensure that discarded waste is billed only for a drug preparation from a SDV. Billing for waste from a multi-dose vial is not allowed.
  • Ensure that when billing for discarded waste, the patient’s medical record include sufficient documentation to support the billed unit of service for both the administered dose and the discarded waste.

In the clinic or hospital outpatient setting, the nurse’s documentation in the patient record typically focuses on ensuring that the administration procedure has been adequately and correctly documented. However, insufficient or absent documentation specific to the drug or biological will have a significant impact on reimbursement. Ensuring payment for the products administered starts at the point of order. Whether the encounter represents a scheduled, walk-in, or emergent visit, a key component of documentation will be the correct recording of the dose administered and the volume wasted. This places emphasis on the need for the pharmacy department to be actively involved in the quality of documentation in the medical record and participation in quality improvement initiatives of the hospital.

When the minimum unit of service defined by the HCPCS code description is equal to or exceeds the total of the dose administered plus the amount discarded, it would not be appropriate to bill separately for waste, and the JW modifier should not be appended. 

Example: HCPCS code definition is per 100 mg. Patient dose is prepared from a SDV containing 100 mg. The administered dose is 75 mg, and the discarded waste is equal to 25 mg. The total of the administered plus discarded waste is equal to the HCPCS billed unit of 1. Billing another unit of service on a separate line item with HCPCS and modifier JW appended for the discarded 25 mg of drug is not permitted because it would result in overpayment.

When the unused portion of the drug/biological is appropriately discarded, and documentation supports appending HCPCS modifier JW, the charge may be billed on a separate line of the claim. If all coverage requirements are met, CMS will provide payment for the amount of discarded drug or biological in addition to payment for the administered dose.

Example: HCPCS code definition is per 5 mg. Patient dose is prepared from a single-dose vial containing 100 mg. The administered dose is 75 mg and the discarded waste is equal to 25 mg. The total of the administered dose would equal 15 billed units of service reported on claim line 1. The 25 mg of discarded waste is equal to a HCPCS billed unit of 5 reported on claim line 2 with the JW modifier appended. 

Claim line 1 will include following information:

  • HCPCS code for drug administered
  • No modifier
  • Number of units administered to the patient
  • Charge submitted (representing the price of only the amount of drug administered to the patient).

Claim line 2 will include the following information:

  • HCPCS code for the drug discarded and documented as waste
  • HCPCS modifier JW appended to indicate waste
  • Number of units representing volume wasted
  • Charge submitted (representing the price of only the amount of drug wasted).

When documentation is insufficient to support billing of waste, the claim should include only the information necessary to represent the dose administered. Do not bill units of service equal to the entire vial when the unit of service cannot be supported by documentation in the patient record. Instead, submit a claim for only the drug amount administered to the patient.

About the Author

Robin Zweifel is the senior vice president of revenue capture services for Panacea Healthcare Solutions Inc. Robin’s areas of expertise include clinical laboratory and chargemaster management, as well as infusion and pharmacy regulatory compliance.

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