Drug Pricing and Reimbursement 101: RJ Health – HCPCS & CPT Codes – Explained

Wondering about the different types of HCPCS (Healthcare Common Procedure Coding System) codes and how they apply to reimbursement? Chris and Jason walk through HCPCS and CPT® (Current Procedural Terminology) code background in this edition of Drug Pricing and Reimbursement 101. These webinar clips from “Shedding Light on Medically Covered Specialty Drug Pricing Methods” touch upon primary and ancillary HCPCS codes, the differences between CPT® and HCPCS codes, and how they can be linked. Reimbursement also differs based on whether the reimbursement is AWP(Average Wholesale Price)/WAC (Wholesale Acquisition Cost) or ASP (Average Selling Price) based.

All past RJ webinars are viewable on-demand here: rjhealth.com/webinars.

Healthcare Common Procedure Coding System (HCPCS)

Chris Webb: So HCPCS codes, as I mentioned earlier, are created by CMS. Typically, they consist of route of administration, usually injections as we’re dealing with medically covered pharmaceuticals, a generic product name and then billable unit. Different types of HCPCS codes that we see for primary use are J-codes. People kind of use the term HCPCS, HCPCS codes and J codes intermittently… they’re interchangeable. These are to be provider submitted codes typically. They are permanent, so Medicare has created them; they are specific to an individual product. They can be used for community or hospital billing for outpatient physician-administered drugs, and as I mentioned, they do have the generic product name and billable unit strength.

C codes come up more frequently than J codes. J codes are typically released for new products on the calendar year. C codes can be released in the mid-point of the year on a quarterly basis. These are typically hospital based, again for outpatient hospital billing. They’re paid under the OPPS – the hospital Outpatient Prospective Payment System. They are also created by CMS. While we have Q codes on the site, these are temporary codes. Either they are a temporary mid-point between a product getting its own HCPCS code, or sometimes as new products enter the market they’ll be used as placeholders for CMS to create individual codes or J codes, for those products. So Epogen and Procrit previously had two J codes: J0885 for end-stage renal disease or non-end stage renal disease. J0886 for non-end stage renal. CMS then left the standard J0885, they created a Q code to bundle that services for the end-stage renal disease. So, Q codes can be used as either a unique new code for new products, new entity, or it can be used as a temporary holding place for a new HCPCS code for an existing product.

The other primary code we see are S codes, these are created by the Blue Cross Blue Shield Association, and they are listed as a CMS code as set by CMS. These particular products can either be for items that Medicare might not necessarily cover, so you wouldn’t bill Medicare with an S code. However, for a community billing or for a commercial plan, they could be used. They typically do have that route of administration, generic product name, they can provide a little bit more guidance regarding market share and help for reimbursement rate for commercial plan. So, something like Insulin. There are many, many products that crosswalk back to the standard Insulin J code. The S codes will have multiple lengths [again, splitting those] out by type of insulin being used.

There are also ancillary HCPC codes. So, these will kind of go either in conjunction or separate from the type of billing we would see for the medically covered pharmaceutical. So, something like A codes for miscellaneous supplies, so the needles or syringes, or radiopharmaceuticals needed. Again, either in conjunction with those J coded products, or the standalone for rare pharmaceutical tests.

B codes for Enteral feeding.

E codes for durable medical equipment, such as glucometers, pain pumps, that sort of thing.

P codes for blood-related. And then the G codes are kind of interesting. Medicare demonstration projects. So, the new flu codes sometimes can go onto these G codes, as well as anything else that CMS is trying to track as relates to either new types of products or new treatments.

HCPCS/CPT® Coding Background

Chris Webb: I’ll give you a little bit of background on the HCPCS codes. Again, as I mentioned, HCPCS codes are healthcare common procedure coding systems, created by CMS. They consist of a letter and four digits; in this case a favorite example here is J9000. The description is created by CMS and will usually consist of the generic product name and strength. So, for J9000 we have injection, doxorubicin hydrochloride 10 milligrams. There could be multiple products that crosswalk back to a single HCPCS code. So, for the J9000 example here, based off of 10 milligrams of products there are 10 milligram NDCs, 20 milligram NDCs, I think 50 Milligram NDCs, that all crosswalk back. They limit the products based off of that description, so if CMS had a generic product code that had unique strength and multiple billable strengths and multiple codes. We would limit those NDCs to those particular codes. But typically choosing one HCPCS code, multiple strengths, and then we’d utilize multiple billable units of that code to account for all the milligrams being dosed in that NDC. So again, the price is based off the billable unit of the code descriptor, not the packet size. A vial of a NDC could have multiple code units associated with it.

We also have CPT drug codes on the site and not to be confused with the standard CPT codes for administration or the like. But the drug codes, in this case, are going to be five numerical digits. 90281 is for Immune Globulin, I think it is Gammaguard in this case. So, again, it will have the generic product name, the billable unit strength associated with that description. Based off of that description we’ll link all the NDCs appropriate to bill. So, for a CPT® code you will see Immune Globulins, vaccines and toxoids. A lot of these cases will actually have a corresponding J code as well. But if you are looking at CPT® codes, again, it’s five digits that you’ll be looking for.

Difference between NDC, HCPCS/CPT®

So, here’s a good question, what is the difference between an NDC unit and a HCPCS code unit? So, as I mentioned CMS will create a HCPCS code with a generic product name and billable unit strength. Those billable unit strengths are usually done in milligrams. So, the amount of milligrams administered. However, the NDCs are typically submitted as various units of measure, like a liquid ML or an EA or one of those reconstitute solutions or tab. The NDC units typically don’t have the strength in them. So, there is a correlation that’s needed to take the number of milligrams at HCPCS code level and then translate to the number of ML or pricing units at the NDC level. Again, I just confused myself, as you can see from here; the difference can lead to some confusion as it relates to exact amount of drug being administered. Multiple milligrams can result in multiple MGs.

Okay, Jason, tell you what, why don’t you mention how we currently crosswalk our NDCs and link them to the HCPCS codes?

Jason Young: Absolutely Chris. So, as mentioned there is basically a generic name description and strength on all of the HCPCS code descriptions or CPT’s. So, what we do here as far as cross walking, is we’re really assigning all the NDC products to the most appropriate code for billing under the HCPCS or CPT® scheme. So, all of the products that might be submitted on a potential claim billed with a HCPCS or CPT® code would be accounted for in that NDC crosswalk for that respected code. The idea behind this really is to ensure proper coding, both on the provider submitting the claim and then also from health plan or payor perspective that they’re validating that the NDC submitted matches the HCPCS or CPT® code that it was billed under to make sure, again, that we have proper coding on the claim before we move into the discussion about to actually reimburse the claims. The first step really is to validate that crosswalk and make sure that the coding is accurate for the drug and code utilized.

HCPCS/CPT® Reimbursement: AWP/WAC

Chris Webb: Okay, so we calculate our own AWP and Wholesale Acquisition Price based off of the code given, so those… the description of the code again is J9000 it was 10 milligrams. So, this is going off of a methodology that CMS actually used back in the 90s and they’re still on AWP model, well before the ASP change that they made back in 2005. So, looking at the NDCs that crosswalk back to the code, again they are linked by the gene based off of the generic product name, strength, and then route of administration. If there’s only branded NDCs in the code, we will calculate a code price based off of the lowest cost brand. There could be multiple strengths of the product as I’ve mentioned for that doxorubicin example, 10 milligrams, 20 milligrams, 50 milligrams. We’ll use all the NDCs that either match or are closest to the code descriptor strength. We will then come up with the lowest cost AWP, price or Wholesale Acquisition for that branded NDC, and that will drive our code level price. So, if you are looking at a code level, we’ll take a look at all those NDCs, this will give you the lowest branded price. The second level as if there were brand and generics or generics only within a code, we’ll go that same process. We’ll take a look at all the products that either are at the code strength of the descriptor or closest to, and we will look either at the lowest brand or the median generic. The median generic will be calculated at the straight up average. You will have, in theory, half the products that are matching the code description above the price that we calculate, as well as half below. The lower of the two then will win out, either the lowest brand or the median generics. The nice thing about this particular methodology is it prevents a plan from paying for highest cost brands; however, it does also allow a greater reimbursement rate for cheaper generic use. There’s a safeguard for the plan, again making sure that they’re not paying for higher cost items. There is also an incentive for providers to source cheaper generic stuff, hopefully to maximize their reimbursement rate for these particular products.

HCPCS/CPT® Reimbursement: ASP (Average Sales Price)

Chris Webb: We kind of touched on this before, but ASP-based code pricing, this is the net sales data from the manufacturers on a quarterly basis. It has a weighted average, so whoever has a major market share will have a greater say in the current price that’s published by CMS. There is a two-quarter sales data gap or delay where they are acquiring all the information. And CMS will also go back and retroactively revise these rates as new sales information comes in. So, on Reimbursement Codes, I know that we provide different notes on there as well those new rates are reflected on our data files. If CMS does go back and retroactively revise a rate they do not go ahead and re-bill those clients, they don’t offer refunds or incentives, or will pay at a greater rate. It’s basically paid off of that historical rate. They will go back and then change it – I think they can go back two years to submit a claim to CMS. So, again that historical rate can vary, but there is that six-month delay. Again, it is based off of market share. And then if there is not an ASP calculated, especially for NOC Codes, they will typically use WAC plus 6 percent or there are also those caveats of vaccine rates, DME or blood limit.


To watch this full webinar: “Shedding Light on Medically Covered Drug Pricing Methods,” click here.

Learn why different pricing methods exist, how they are different, when each is used, and how they impact reimbursement. We also cover how NDCs are linked and crosswalked to HCPCS codes.

Hosted by:

Christopher Webb, CPhT
Director, Product Development

Jason Young, PharmD
SVP, Clinical Data Operations

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