Reduce Drug Code Denials Related to Incomplete Claims Data
Claim denials for drug supplies are often the result of improper national drug codes (NDC) format or missing information related to the drug provided—vital information that is needed by the payer to appropriately adjudicate the claim.
Physician claims for drugs supplied in the office must include the 11-character NDC submitted in the 5-4-2 format, as required for most claims editing systems. The NDC is found on the manufacturer’s vial, bottle, or tube label containing the drug. If the NDC provided by the manufacturer does not include 11 digits, it will be necessary to add a leading zero to the appropriate section to create the 5-4-2 arrangement.
In this arrangement, “5” indicates the pharmaceutical company; “4” is the drug identifier; and “2” conveys the drug’s strength. When converted, the NDC submitted will consist of five digits in the first segment; four digits in the second segment; and two digits in the third segment. The placeholder zeroes must be entered on the claim, whenever digits are needed to complete a segment. The NDC code (in the converted format with its preceding N4 product ID qualifier to indicate the NDC code follows) is placed at the claim line in field 24A of the CMS 1500 claim form.
Additional information related to the drug provided is required in the claim line of the CMS 1500 form or its electronic counterpart. This line must include a description of the drug, the NDC unit of measure (UOM) and the number of units of the drug given, which is also indicated in the Healthcare Common Procedural Coding System (HCPCS) J-code reported. NDC units are based on the numeric quantities administered to the patient. The UOM information is included in the product label. Be sure to check with your payers for any specific policy regarding the type of units reported.
The units of measure most commonly used in dermatology are:
UN (Unit): Powder for injection that needs to be reconstituted (bill per vial), pellet, kit, patch, tablet, or device
ML (Milliliter): Liquid, solution, or suspension
GR (Gram): Ointments, creams or bulk powder in a jar
Information needed to report NDC codes:
Drug administered
Drug quantity and strength (i.e., mg/mL)
NDC from drug label (in 5-4-2 format)
NDC unit of measure (based on NDC unit of measure)
Relaying this information on the CMS 1500 claim form or an electronic claim format in the appropriate fields is crucial. Beginning in the shaded area of box 24 on the drug-supply-charge claim line, enter the qualifier “N4” followed by the NDC code, without any space between them. Please check with your software vendor to determine if the N4-qualifier is automatically populated in this field. If so, omit adding it to the claim line and enter the NDC. Add a space and enter the drug description as provided by the product label. Finally, enter a space followed by the UOM-qualifier and the quantity. Note that the quantity entered here may not match the units of service indicated in field 24G of the claim form, as one is based on NDC UOM quantity and the other on HCPCS code description units. The NDC units of service relate to drug rebate and cost comparison and the HCPCS units of service are used to calculate payment (see the following example).
Entry of this information in the appropriate form-fields in your billing software should result in electronic claims in the correct format. If issues occur with how the NDC information is conveyed in your electronic claims, consult your billing software vendor or claims clearinghouse for assistance in correcting these issues.
Patients Supplying Their Own Drugs
Medicare provides limited benefits to its members for outpatient drugs. “The program covers drugs that are furnished under the ‘incident to’ benefit (section 1861(s)(2)(A) or (B) of the Social Security Act). A Food and Drug Administration (FDA) approved drug or biological can be covered and which is furnished by a physician’s practice or hospital (respectively), provided that the drug is not usually self-administered by the patient, and is reasonable and necessary for the diagnosis or treatment of the illness or injury according to accepted standards of medical practice.”
There must be an incurred cost for the drug or biologic by the physician practice, and it must be administered by the physician or auxiliary personnel under the physician’s personal supervision.
Per the “incident-to” guidelines in the Medicare Benefit Policy Manual (CMS Internet-Only Manual [IOM] Publication 100-02, Chapter 15, Sections 50 and 50.3), providers are not allowed to instruct patients to purchase a drug themselves and bring it to the provider’s office for administration.
But for those rare circumstances when the provider has not incurred a drug expense, it is appropriate to report only the administration of a drug with a narrative in Item 19 of the CMS 1500 claim form to indicate how/where it was obtained (e.g., patient purchased through Part D, starter sample from pharmaceutical company, etc.).
For other regulations related to the billing of chemotherapy administration, refer to the IOM Medicare Claims Processing Manual Publication 100-04, Chapter 12, Section 30.5 at MCPM.
