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    Dear 340B Hospital: Add Medicare Fraud to Your List of Compliance Concerns

    By Timothy Kerr, PharmD • November 7, 2017

    340B program requirements have always been a challenge for covered entities. The program itself is convoluted and audits by HRSA highly inconsistent, gleaning on auditor opinion as opposed to standard procedures that reign supreme with other audits.

    That being said, since the government signed a contract with a private consulting firm to conduct HRSA audits, the quality of audits and personnel performing the audits has tremendously improved from what it used to be in my opinion.

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    Even so, it is absolutely critical that covered entities check all the boxes with respect to complying with standard 340B program requirements. These boxes include abiding by duplicate discount prohibitions, GPO prohibitions, and avoiding diversion to name a few. And on January 1, 2018 the stakes will rise even higher -- this time not by HRSA, but by Centers for Medicare and Medicaid Services (CMS).

    On November 1, 2017, CMS announced it would cut Medicare Part B drug payments by roughly 30% for certain types of 340B program participants and overhauled its claims submission process to include two new codes.

    3 Steps to Complying With CMS's New Rules

    In layman's terms, there are three things you must do to stay compliant with the new ruling:

    1. Determine whether you are subject to payment reduction, new billing requirements or both.
    2. Identify the drugs affected by this rule.
    3. Determine which billing modifier applies to you: "JG" or “TB”.


    Payment Reduction, New Billing Requirements, or Both?

    While I covered the first item in part one of this series, let's review for those just finding this series:

    • If you are a Disproportionate Share Hospital (DSH) or Rural Referral Center (RRC), you are subject to both a payment reduction AND billing requirement.
    • If you are a PPS-exempt cancer center, children’s hospital, or rural Sole Community Hospital (SCH), you are only subject to the new billing requirement.
    • If you are a Federally Qualified Health Center (FQHC), FQHCLA (Federally Qualified Health Center Look Alike), State or Federal Grantee, Community Health Center (CHC), or Critical Access Hospital (CAH), you are not affected by this rule, so rest easy -- for now.

    Which Drugs are Affected?

    To add to the complexity, not all drugs are subject to the payment reduction and billing requirements. The drugs impacted are individually-reimbursed products with a status indicator of “K” as part of the Outpatient Prospective Payment System (OPPS) classification.

    You must identify which items apply to you and plan to update existing billing systems. For help in identifying the drugs specific to your organization, please reach out to me directly via LinkedIn. Happy to help!

    'JG' or 'TB'?

    Most likely, you will need to overhaul your billing systems. You will also need to update your billing systems whenever you start administering new drugs at your facility.

    If you are a DSH or a RRC, the "JG" modifier should be applied to applicable OPPS drugs (status indicator “K”). The JG modifier describes the claim as a “Drug or Biological acquired with 340B Drug Discount Program” and will trigger the payment reduction. Additionally, for status indicator "G" drugs, you are required to apply the TB modifier.

    If you are a PPS-exempt Cancer Center, children’s hospital, or rural SCH, the "TB" modifier should be used for status indicators "G" and “K” drugs.

    Confused yet?

    The “TB” modifier describes the claim as a “Drug or Biological acquired with 340B Drug Discount Program, Reported for Informational Purposes”. It will NOT trigger a payment reduction.

    Educate your billing office personnel, compliance officers, and staff regarding the significance of correct billing practices -- and remember, incorrect billing practice is considered Medicare fraud. These new codes and related review will certainly serve as “low-hanging fruit” during a Recovery Audit Contractor (RAC) audit.

    As the CMS October 2016 Medicare Fraud & Abuse: Prevention, Detection and Reporting booklet reminds us:

    Defrauding the Federal Government and its programs is illegal. Committing Medicare fraud exposes individuals or entities to potential criminal and civil liability, and may lead to imprisonment, fines, and penalties. Criminal and civil penalties for Medicare fraud reflect the serious harms associated with health care fraud and the need for aggressive and appropriate intervention. Providers and health care organizations involved in health care fraud risk exclusion from participating in all Federal health care programs and risk losing their professional licenses.

    Finally, a recommendation: As an increasing number of interested parties put their hands into the 340B program, it might behoove you to consider a complete review of your program. After working with more than 50 covered entities, I have yet to see a single entity that was not sitting upon undiscovered opportunity to expand its 340B program.

    Editor's Note: This is part two of a two-part series written by guest blogger, independent 340B consultant and Vice President, Pharmacy Services at Great Plains Health Alliance Timothy Kerr. Read part 1 - Medicare Part B 340B Cuts: What You Need to Know - here.

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