Understanding 340B Drugs in Medical Billing and Coding

The 340B Drug Pricing Program is a vital source of revenue for eligible hospitals and health care organizations. The 340B Drug Pricing Program is an important income generator to eligible hospitals and health care organizations.

To medical billing and coding specialists, the complexity of 340B drugs is mandatory in achieving compliance, maximizing revenue, and preventing expensive audit penalties. This guide is practical in terms of the lifecycle of billing the 340B drugs.

What is the 340B Program?

The 340B Drug Pricing Program was enacted in 1992 and necessitates that drug manufacturers offer outpatient drugs to the covered entities eligible to the available program at considerably lower rates. The Health Resources and Services Administration manages the program to enable these organizations to stretch limited federal resources.

The covered entities are imbalanced share hospitals, children hospitals, critical access hospitals and Federally Qualified Health Centers. The program enables such providers to acquire 340B drugs at a discount and charge insurers at the standard rates to generate savings that should be reinvested to patient care.

Why Billing Accuracy Matters for 340B?

In the case of covered entities, financial assets that result in vital savings are 340B drugs. The program generates a margin between the discounted purchase price and the amount reimbursement made by insurers.

Nevertheless, this is an opportunity that is associated with high compliance risks. The 340B program is supported by the threat of multimillion dollars paybacks and program expulsion. The frontline against compliance failure is the role of the medical billing professionals. All claims on 340B drugs should be carefully examined to avoid making mistakes that will attract audits.

Key Modifier Requirements for 340B Drugs

The Essential 340B Modifiers: 

The correct recognition of 340B drugs on claims needs certain modifiers that indicate to the payers the means of available acquisition. Devoid of these modifiers any claim can be rejected or cause compliance breach.

Special significance to the Medicaid claims is the UD modifier. As per payer requirements, 340B bought drugs need to have the UD modifier to be billed. It must not be used as a modifier before the non 340B purchased drugs so proper inventory segregation is important.

In the case of hospital outpatient claims using the Outpatient Prospective Payment System, the JG modifier is used to indicate in case a drug was purchased through the 340B program. This modifier activates the proper reimbursement rate and it can be lower than the non 340B drugs.

The covered entities should use the modifier code of the correct purchase drug on a claim. The lack of the appropriate identifier may lead to a rebate due to the Medicaid claim, which will give rise to the forbidden duplicate discount. Identification is not the only significance of modifiers. The additions to claims level data assist stakeholders in knowing the discounts that are recorded upon dispense.

Differentiating between 340B and Non 340B Inventory

Both 340B and non 340B drugs can be given by the covered entities, leaving billing teams with an operational problem. The providers are required to have split billing systems which will trace the drugs which were distributed under the 340B inventory.

Modifiers should be accompanied by accurate National Drug Codes and units so that rebates are reliable. The claims should also show clearly whether a drug should be dammed out of invoicing Medicaid rebates or not. This can have more than money changes consequences on payments and possible audit outcomes that may jeopardize an organization to join the 340 B program.

Payer Specific Guidelines 340B Billing

Medicare Billing Rules:

The Centers of Medicare and Medicaid Services has certain regulations that provide the way 340B drugs are billed in Medicare. Current rulemaking offers valuable changes to 340B providers.

Part B Medicare reimbursement of some of the covered outpatient drugs can be at the average purchase cost. The site neutral payment reduction has been extended to drug administration services which the services that relate to administering 340B drugs are affected by the cut.

Medicaid Billing and Duplicate Discounts:

The most important compliance theory in 340B drugs in the Medicaid is the prevention of redundant discounts. Duplicate discount is one in which a covered entity qualifies to receive a discounted drug as part of the 340B program, but the state Medicaid agency is also entitled to a rebate on the same claim.

The methods used by states in preventing duplicates of discounts differ. Carving covered entities in Medicaid are required to supply HRSA with national provider identifier and Medicaid provider number per site to be included in the HRSA Medicaid Exclusion File. This file assists in avoiding the same discounts on claims of 340B drugs.

The states vary in terms of reimbursement. In the case of the 340B drugs that are dispensed by pharmacy providers, some of the states are reimbursed at the actual acquisition cost to the 340B Maximum Allowable Cost. In the case of the physician administered drugs, the reimbursement can be the lesser of the physician administered 340B MAC or the actual acquisition cost.

Commercial Payer Trends:

The commercial payers are increasingly adhering to the example of Medicare in mandating 340B identification. The use of the federal requirements is commonly reflected in contract language, and the provisions include the requirement that network providers must employ 340B stock in order to identify claims.

In the case of point of sale pharmacy claims, commercial contracts normally involve the addition of a certain value into the submission clarification code field. Where the provider administered claims, the UD modifier must follow every 340B eligible HCPCS code. These provisions indicate the growing scope of 340B compliance requirements.

Compliance Challenges and Risk Management

The Three Commandments of 340B Compliance:

Knowing the underlying principles of 340B drugs is a way to make billing professionals understand the importance of their work. The program is based on three major commandments that oversee all activities that relate to 340B drugs.

The first commandment is against deviation. Covered entities are not at liberty to sell a 340B purchased medicine to any other person other than an eligible patient. This is the basic compliance mandate in all the 340B drugs.

The second commandment is against duplication of discounts. Covered entities do not in any way permit a manufacturer to provide two discounts on a single drug i.e., the 340B discount and a Medicaid rebate may not be applied on the same prescription.

In commandment three, there is the GPO exclusion. In case of disproportionate share hospitals, covered entities are not allowed to make outpatient drug purchases on a Group Purchasing Organization contract. It should all be in Wholesale purchase Cost accounts or 340B accounts.

Duplicate discounts are one issue that is of concern. These overlapping discounts are seen when the discounts under the 340B program overlap the rebates under the Medicaid Drug Rebate Program or the commercial insurance plans.

Patient Definition and Diversion Prevention:

The diversion can be prevented by knowing the three-part test of patient eligibility that is offered by HRSA. The three conditions should be met before one is eligible to receive 340 B drugs.

To commence with, the covered entity should have developed a relationship with the individual and keep a record of their health care. Second, the person should be provided services of a health care professional who works with the covered entity. Third, the person should be given a service which is in line with the eligibility of the entity.

To billing professionals, this represents keeping audit-able documentation of all prescriptions of 340B drugs which were sent to a qualified patient. The prescription should be based on a registered child site. In the absence of this documentation, diversion may be experienced by the auditors.

The Future of 340B Billing

Understanding the Shift to a Rebate Model:

The major shift in 340B drugs is the move towards upfront discounts to a rebate model. HRSA developed a rebate pilot program targeting the drugs that will be negotiated under the Medicare price negotiation established through the Inflation Reduction Act.

This is because under this model, 340B discount changes will be on a different basis in terms of timing. The 340B discounts will not occur at the time of dispensing but after the drugs have been dispensed. Purchase of pilot drugs must be done by pharmacies by using normal 340B accounts at full Wholesale Purchase Cost. Once the covered entity dispenses to a qualifying patient, then a rebate is requested to the manufacturer.

The movement poses budgetary concerns especially to small covered organizations. The rebate model leaves the temporary increase in the cost of drugs on the balance sheets of the providers. This poses a threat to organizations having low cash reserves that rely on instant 340B savings.

The effects are dependent on the type of provider. The big nonprofit hospitals are in a better position to wait before the rebates. Nevertheless, federal grantees and publicly funded hospitals are more affected by tight budgets and, thus, cannot afford waiting until discounts on the 340B drugs apply.

Medical Billing and Coding Implications:

The rebate pilot comes with new complexities to billing professionals. Covered entities should develop and submit data files to the manufacturers, which provides auditable documentation of every claim of 340B eligible drugs. This puts strain on administration on the billing teams.

State policies can be in need of revision. In Medicaid, many states do charge drugs on the 340B acquisitions cost to covered entities. In case of pilot drugs, the cost of acquisition will be the Wholesale Acquisition Cost, and the policy will need a revision of the reimbursement of the 340B drugs.

Best practices in 340B Revenue Cycles

Performing a Coding Assessment:

Since 340B drugs are rather complicated in medical billing and coding, frequent evaluations of billing policies are necessary. Billing units are recommended to check that modifiers are used properly and that the units of NDC correspond to the dispensed amounts.

Effective 340B programs cannot occur without education. The active role in learning about the impact of 340B on the organization contributes to driving a compliance-oriented mindset. Billing professionals are expected to revise changes in program requirements on a regular basis.

Preparing for Audits:

Audit readiness demands the methodical recording of all the procedures in the 340B billing process. With any 340B prescription that an auditor chooses, the provider should provide evidence of the site status that is eligible, the existence of a valid relationship with the patient, and of the proper use of the modifiers.

More frequent in-house audits are aimed at detecting problems before they are discovered by the regulators. Conducting a review of charge capture processes and checking registrations to child sites helps to build compliance confidence. These reviews are expected to be directed towards claims relating to 340B drugs.

Conclusion:

Learning how to utilize the billing lifecycle of 340B drugs is still critical to the economic fitness of any covered entity. In a choice of proper modifiers up to the rebate pilot program, medical billing professionals are the guardians of compliance and the revenue integrity.

Program oversight is also on the rise creating an ever-increasing stakes. Duplicate discounts jeopardize integrity of the program. Site neutral payment policies decrease reimbursement. The rebate pilot creates cash flow issues to safety net providers.

The underlying task, however, is the same. The phenomena of 340B drugs savings are there to facilitate care to vulnerable populations. Billing professionals do this directly through proper claims and avoiding compliance breaches, which is connected to this mission.

To providers wishing for expert assistance in these complicated requirements, having an allied expert may either give them confidence in their compliance or make them apprehensive about audit. Medical billing and coding The 340B drugs are important to understand to promote long-term operations of the covered entities.

For expert guidance on optimizing your 340B billing processes, contact Billing Care Solutions. Our staff is aware of the issues involved in medical billing and coding of 340B drugs and can assist your organization in achieving the best benefit of the program and least risk of compliance.

Frequently Asked Questions