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HCFA to Pay Hospitals Extra for Some Outpatient Items

Cheryl A. Thompson

As part of the Medicare prospective pricing system (PPS) that starts July 1 for hospital outpatient services, the Health Care Financing Administration (HCFA) will pay extra for certain drugs and biologicals.

The additional payments compensate for the typically higher cost of new drugs and biologicals, compared with older treatments, and the inability of the ratemaking system to predict the costs of new agents. According to the Balanced Budget Refinement Act of 1999, HCFA must, for up to three years, pay hospitals more than they would normally receive under the PPS for outpatient services for the following categories of items:

  • Current orphan drugs, 
  • Current drugs, biologicals, and brachytherapy devices used for treating cancer, 
  • Current radiopharmaceuticals and biologicals used for diagnosing, monitoring, or treating conditions, 
  • New or innovative medical devices, new drugs, and biologicals not paid by HCFA as a hospital outpatient service before Jan. 1, 1997, and whose cost is "not insignificant" compared with the overall payment under PPS.

HCFA will include the above "pass-through" items in its ambulatory payment classifications (APCs) for hospital outpatient services. As the agency identifies specific items, it will assign HCFA common procedure coding system (HCPCS) codes so that hospitals can request the extra payments.

As of May 12, 204 drugs, biologicals, and radiopharmaceuticals have been declared eligible for pass-through payments. Most of the items identified can be considered cancer treatments, including oral and injectable antiemetic agents, hematopoietic growth factors, and bisphosphonates.

The list of eligible items, with corresponding HCPCS codes and payment rates, can be found online at Last year’s budget act requires HCFA to pay for these drugs, biologicals, and radiopharmaceuticals at 95 percent of their average wholesale price.

With the introduction of a new governmental PPS, hospitals should assess their billing programs to ensure compliance with federal laws and guidelines. Rules and regulations for the Medicare PPS for hospital outpatient services were published April 7 in the Federal Register. The document is available online as eight separate files:

Compliance-related services can be purchased from various private companies including Massachusetts-based MediRegs Inc., which provides straightforward access to relevant government documents, and New Jersey-based Healthcare Intelligence Network, which publishes the Health Care Compliance Program Manual.