What’s new: Effective July 1, CMS will require healthcare providers to use the JZ modifier on claims to indicate there has been no drug waste on single-dose containers or single-use packages.
This is applicable on claims that bill for drugs separately payable under Part B.
Why it matters: Claims submitted without the proper modifier will not be accepted. Providers who submit claims without the modifier could be subject to audits.
The big picture: When the cost of single doses of some drugs can run more than $1 million, documenting wasted portions can enable healthcare organizations to capture significant revenue.
What’s next? EMR systems have processes to autocalculate and apply the modifier, but providers should ensure their systems and processes comply with these new CMS requirements.
Go deeper: Read our insights below.
When the cost of single doses of some drugs can run more than $1 million, documenting wasted portions can enable healthcare organizations to capture significant revenue. For lower-cost drugs, however, healthcare providers have often skipped this step, finding the task of calculating and documenting waste too onerous in most electronic medical record (EMR) systems.
Now, the Centers for Medicare & Medicaid Services (CMS) requirements are changing, and reporting drug waste related to partially used vials will no longer be optional:
- As of January 1, 2023, CMS has required providers to use the JW modifier to report waste when single-use vials of certain drugs are not fully utilized. (Until January, providers only needed to use the JW modifier to make a claim for wasted drugs.)
- As early as July 1, 2023, a new modifier – JZ – must be applied instead of JW as attestation when there has been no drug waste.
- Starting October 1, 2023, CMS claims that don’t have either the JW or JZ modifier for the drugs, where it’s required, will not be accepted — and providers who submit claims without the modifiers may be also subject to audits.
Providers will want to act now to ensure their systems and processes comply with these new CMS requirements.
More choice in vial size will lead to less waste
When healthcare organizations discard leftover drugs from single-use vials and don’t report the waste, they lose revenue because provider has paid for the drug but hasn’t obtained the full benefit from the vial. EMR systems today have processes to autocalculate and apply the modifier, but procedures to review and confirm accuracy of these claims are still needed.
Going forward, providers will be required to capture more information about unused drugs. This information will equip CMS to pressure drug manufacturers to provide more vial size options —ultimately resulting in a reduction of drug waste. If those efforts are successful, providers will have greater flexibility to select a vial size closer to their intended dose. CMS might then hold providers accountable for drug waste resulting from use of oversized vials.
Meanwhile, once the new CMS rules for the JW and JZ modifiers go into effect, providers’ claims could be rejected as early as October 2023. The full list of drugs subject to these new rules is given in CMS’ Addendum B, which is updated quarterly.
Gaps in compliance
As providers begin to comply with these new rules, they should be aware of common pitfalls. Organizations can charge for a whole vial or for administration of a drug, but providers need to set up their systems to account for situations where multiple doses are drawn from a single vial (such as in infusion centers and/or when drugs are in shortage).
In particular, administration of mini doses could lead to massive overbilling, since the system might calculate the drug remaining in the vial after each mini dose as waste, even when it gets used for the next mini dose. Each mini dose could be considered a wasteful use of a full vial. This can also be a problem when a single vial is used across multiple patients. Accurate documentation will show what was administered and what was wasted.
Recommended actions
July 1, 2023, is the CMS deadline for using the new JZ modifier to attest that there’s been no drug waste from a single-use vial. Providers will want to automate calculation of waste in their EMR systems now to ensure system and process changes are tested and understood. Early action will help ensure providers can comply — well in advance of the deadline.
Providers will want to make changes within their EMR systems:
- Build the billable units for the drugs in scope.
- Assign the modifiers to all the drugs to which it relates.
- Configure rules to govern when the modifier is to be applied. Consider especially cancer centers, chemotherapy drugs and similar contexts where single-use vials may be used to treat multiple patients.
Providers should test system changes and processes thoroughly before the compliance deadline. There are two areas where system changes like these could lead to error:
- Are the right modifiers appearing for the right drugs? Are there unexpected results for certain drugs? In particular, watch for modifiers applied to drugs where they are not required (such as inpatient drug administration) or where billable units are incorrect.
- Are modifiers correctly populated on the claims once applied? Some systems strip these codes from claims, even when they’re entered correctly at the time doses are made.
Providers also will want to check with their commercial payers to confirm which are following suit for their contracts and be prepared to include the modifiers on claims for these payers as well.
Further, analytic solutions can identify compliance issues proactively and in real time by automating identification of incorrect billable units, missing modifiers and other compliance gaps. They can help providers correct potential overbilling and review pharmacy-related denials before any claims are sent.
Preparing to meet these requirements before they become effective ensures providers will be in compliance on time and avoid claims denials. Making these changes to systems and processes will also set providers up to capture revenue related to drug waste from oversized vials.
Read additional blog posts on The Protiviti View related to compliance in healthcare.
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