Navigating Short-Cycle Billing

More From The May/June 2017 Cover Story: Raising The Level
by René Bloemke, C.Ph.T., Director of Pharmacy Services, Net-Rx

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Rene Bloemke MHA Net-Rx
René Bloemke

In January 2013, the Centers for Medicare and Medicaid Services (CMS) implemented a new federal rule, often called the “short-cycle dispensing rule,” aimed at reducing Medicare waste. This rule requires pharmacies to dispense some brand-name drugs in 14-day or less increments, rather than the more traditional 30-day increments, to patients located in long-term care facilities. As a result, billing for these prescriptions has become more complex, lending itself to possible billing errors that can result in lost revenue for pharmacies. What can you do to help ensure proper reimbursement?

Read the May/June 2017 Cover Story to Learn How LTC Pharmacies Are Raising the Service Level

Why the New Rule? 

Based on studies, CMS estimated the average length of stay for a patient in a long-term care facility as under 30 days. When the pharmacy fills a prescription for a 30-day supply of medication for a patient who only stays in the facility for 14 days, the unused portion of the medication is discarded. By reducing the days’ supply given per fill to 14 days, CMS expects to save Medicare millions of dollars without negatively impacting patients.

View The Studies

“Short-Cycle Dispensing: New Age for Long Term Care?” in Today’s Geriatric Medicine

“Long-Term Care Hospitals Under Medicare: Facility-Level Characteristics” in Healthcare Finance Review

“Long-term Acute Care Hospital Utilization After Critical Illness” in The Journal of the American Medical Association

There are some exceptions to the short-cycle dispensing rule. Low-cost generic drugs, for example, would not generate measurable savings and therefore are exempt from the 14-day supply rule. In addition, liquids, antibiotics, and drugs with unbreakable packages are also excluded from this rule.

How Does Short-Cycle Dispensing Affect Long-Term Care Pharmacies?

Dispensing medications in 14-day increments instead of 30-day increments results in additional costs for long-term care pharmacies. For patients who do require 30 days or more of medication, their prescription is filled twice in 30 days, resulting in additional costs for the pharmacy. Some of those additional costs include added labor, labeling, and packaging.

To mitigate the added expense, CMS required payers to contract with providers addressing increased costs when dispensing any drug required to be short-cycled. When submitting a claim for a drug that was short-cycled, the pharmacy must submit very specific codes to receive accurate payment for the claim, and to avoid rejection or take-backs.

Short-cycle billing can seem daunting, but here are three things to look for when filing a claim specifically for a short-cycled prescription:

  1. Confirm that the drug is indeed a brand or has the new drug application (NDA) status. Some drugs that are widely considered generic carry NDA status because they were filed with the FDA under an NDA when seeking approval for market. According to CMS, NDA drugs must be short-cycled even though they are thought to be generic.
  2. Confirm that the special package indicator code agrees with the NDC code. The special package indicator code indicates if the drug is in an unbreakable package, unit dose, or other packaging excluding it from short-cycle requirements. If this code, which is supplied by drug database management entities, contradicts the NDC code, the claim may not be paid accurately.
  3. Submit the correct submission clarification codes (SCCs). While SCCs have many purposes, in the context of short-cycled billing this code is used to clarify why the claim was billed for the days’ supply and quantity dispensed. There are over 30 submission clarification codes to choose from, and up to three separate codes can be submitted with each claim. If the codes contradict the drug, quantity, days’ supply submitted, or even each other, the claim may not be paid accurately.

There are steps you can take to help ensure proper payment for any claim: Review billing procedures regularly to help your staff avoid costly mistakes; read payer contracts carefully to identify unusual or nonstandard code requirements; and examine past claims, identify and correct any data or coding issues that may have resulted in lost revenue, and then take steps to prevent those mistakes from recurring on subsequent fills.

Long-term care pharmacies provide an increased level of care to the Medicare population, leading to high operational costs. It is critical that these pharmacies take the necessary steps to ensure proper payment for all claims, especially with short-cycle claims, in order to continue serving their patients. Don’t let claim-coding errors undermine the success of your pharmacy. CT

This article is a general summary of regulatory developments and potential implications. It does not constitute legal or regulatory advice.