Claim Preparation and Transmission Chapter 6 © 2010 The McGraw-Hill Companies, Inc. All rights reserved.

Key Terms Average wholesale price (AWP) Birthday rule CMS-1500 Compounding Coordination of benefits (COB) Dispense as written (DAW) codes Dispensing fee Durable medical equipment (DME) Maximum allowable cost (MAC) Chapter 6

Key Terms (Continued) National Council for Prescription Drug Programs (NCPDP) Telecommunications Standard Version 5.1 and Batch Standard 1.1 National Drug Code (NDC) Primary insurance Real-time claims management systems Secondary insurance Switch vendors Universal Claim Form (UCF) Usual and customary price (U&C) Chapter 6

Claim Content When a patient fills a prescription with the aid of any type of medical insurance, a claim is sent to the necessary third parties Proper filing saves the pharmacy from unnecessary penalties and delays, and ensure that the maximum benefit is received Most claims are now filed electronically through online claim submission, although paper claims are still sometimes used Chapter 6

Claim Content (Cont.) Five components must be recorded when a claim is submitted: Patient information Prescriber information Pharmacy information Insurance information Prescription information The correct insurance plan, codes, pricing, and fees need to be assigned Chapter 6

Claim Content (Cont.) Patient information Recording the correct patient information is vital to a successful claim submission The general beginning point for filing a claim Patient information includes: Basic information – name, gender, address, date of birth, and phone number Relationship to cardholder, if applicable Pharmacy/Prescriber’s Internal Patient ID Chapter 6

Claim Content (Cont.) Prescriber information Correct information about the prescribing physician must be recorded on the claim Must be verified in order for a prescription to be valid Prescriber information includes: Prescriber ID (NPI or DEA) Prescriber last name Prescriber phone number Chapter 6

Claim Content (Cont.) Pharmacy information Identifies the pharmacy filling a prescription Will be consistent for every prescription the pharmacy fills for a patient Pharmacy information includes: Identifier (NPI), formerly known as the NABP number Basic information – pharmacy and pharmacist name, address, and phone Chapter 6

Claim Content (Cont.) Insurance information For patients who have medical insurance, all the relevant information is collected and proper steps are taken to determine how to file the claim Insurance information includes: Cardholder ID Group ID Patient relationship Chapter 6

Claim Content (Cont.) Prescription information Vital in determining how any applicable medical insurance provider handles the claim and what benefits will be assigned Prescription information includes: Drug name Drug dosage DEA number (required for controlled medications) Chapter 6

Coordination of Benefits A provision that ensures that when a patient is covered under more than one policy, maximum appropriate benefits are paid, but without duplication Some patients have more than one insurance policy The primary plan is billed first and after adjudication, the second plan can be billed for any eligible, unreimbursed amount Chapter 6

Determining the Primary Plan Primary insurance is the first insurance that the patient will use for claims, while secondary insurance is used afterwards for any remaining expense Specific facts are used to determine which plan is primary by technician specialists A child’s primary insurance is usually determined by the birthday rule Chapter 6

Dispense As Written (DAW) Codes Set of NCPDP codes used to inform third parties of the reason why a brand or generic product was used to fill a prescription Prescribers and pharmacies must prescribe and dispense the generic form of a drug whenever possible DAW codes indicates whether or not the prescriber’s instructions regarding generic substitution were followed Chapter 6

National Drug Codes (NDC) All outpatient prescription drugs are billed using the drug’s NDC Services for pharmaceuticals must be submitted using NDCs in 11-digit format The three segments of the NDC are: Labeler code Product code Package size Chapter 6

Pricing Prescriptions Four main methods are used to price pharmacy prescriptions in the retail setting: Usual and customary price (U&C) Maximum allowable cost (MAC) Average wholesale price (AWP) Pending AMC Price Mathematical calculations are often required to find the appropriate price Chapter 6

Usual and Customary Price (U&C) Price the provider most frequently charges the general public for the same drug Generally determined at the corporate level by providers Computers in pharmacies are often programmed to calculate the U&C price automatically Also known as Usual, Customary, and Reasonable Payment Structure (UCR) Chapter 6

Maximum Allowable Cost (MAC) The greatest unit price that the payer or PBM will pay If the pharmacy has a contract as a network member of a health plan run by third-party payers and PBMs that covers the customer, charges for prescriptions are based on the terms of that contract Chapter 6

Average Wholesale Price (AWP) The AWP of a prescription drug is the average price at which a wholesaler sells drugs to pharmacies, physicians, and other consumers The pricing information is based upon data obtained from various distributors, manufacturers, and other suppliers Generally used as a drug pricing benchmark for payers Chapter 6

Compounded Drugs Procedure of creating combinations of drugs that are prepared or mixed prior to purchase is called compounding Pricing structure is generally U&C, and fees are usually higher Compounding may require a pharmacist to utilize medication knowledge and expertise to mix, assemble, package and label, and prepare drugs (and other components) in a specific manner Chapter 6

Dispensing Fees Fee for a pharmacy’s professional services Determined by several factors specific to a pharmacy, including the following components of pharmacy operating costs: Staffing Store operations and overhead Prescription preparation Assurance of proper medication use Allowing for a reasonable profit Chapter 6

Creating Claims Within the pharmacy system, three claim submission options are in use: Electronic (real-time) Electronic (batch) Paper Chapter 6

Electronic Claims In pharmacy billing, electronic claims can be adjudicated in real time or in several batches throughout the day Real-time claims management systems enable providers to submit electronic pharmacy claims in an online real-time environment Within seconds, a patient’s eligibility is confirmed and the provider receives a response indicating payment or denial Chapter 6

Electronic Claims (Cont.) In some cases, the claim is routed to a switch vendor before being sent on to the payer Switch vendors verify that a claim conforms to NCPDP transaction standards before forwarding it to the payer’s claim system Real-time systems perform many other functions as well Chapter 6

National Council for Prescription Drug Programs Standards The National Council for Prescription Drug Programs (NCPDP) Telecommunications Standard Version 5.1 and Batch Standard 1.1 is the HIPAA standard for electronic retail pharmacy drug claims Defines the record layout for prescription claim transactions between providers and adjudicators Chapter 6

Paper Claims Most payers require the NCPDP universal claim form (UCF) for paper claims A two-sided document Requires the patient’s information and their signature Details about the prescription are included Paper claims are processed through the pharmacy system but do not result in real-time claim responses to the provider Chapter 6

Drug Utilization Review (DUR) Once a claim has been submitted, whether electronically or on paper, it is subjected to editing for drug utilization review Process by which prescribed medications are evaluated against explicit criteria to improve the quality of drug therapy and reduce unnecessary expenditures Chapter 6

Drug Utilization Review (Cont.) Examples of DUR issues include: Early refill High or low dose Ingredient or therapeutic duplication Maximum duration Drug-drug interaction Late refill monitoring Several other precautions Chapter 6

Durable Medical Equipment Another type of pharmacy billing that will occur from time to time DME is comprised of certain medical equipment that is ordered by a doctor for use in the home Such as walkers, wheelchairs, and hospital beds Chapter 6