Questions on the Most Favored Nation (MFN) Model Rule

We’ve had another great question this week about the “Most Favored Nation” Model Rule and billing the new HCPCS code, M1145- MFN drug, add-on payment.

Question: How would you suggest establishing the M1145 charge in the charge router in order to ensure billing compliance across all financial classes? 

Answer: We agree that there are a number of factors that contribute to this decision and it is a gray area in the Interim Final Rule. Without additional guidance from CMS or other payers, we recommend billing M1145 on all patients regardless of payer or patient type. Below we’ve outlined some pertinent Medicare instructions on establishing charges, balancing of primary and secondary payer claims, as well as previous situations where Medicare created special HCPCS codes that result in “add-on” payments for drugs that you should consider in setting up your Chargemaster with this new HCPCS code. 

Provider Reimbursement Manual Instructions

First, let’s talk about the charge instructions. The Medicare Provider Reimbursement Manual- Part 1, Chapter 22 includes section 2202.4 which is the definition for “Charges”: “Charges refer to the regular rates established by the provider for services rendered to both beneficiaries and to other paying patients. Charges should be related consistently to the cost of the services and uniformly applied to all patients whether inpatient or outpatient. Based upon this definition, we interpret that your charges need to relate to your overall costs (which include handling, storage and overhead), and are applied to both Medicare patients and other paying patients. The charges also need to be the same whether the patient is an inpatient or outpatient status. Medicare indicates that these charges are reported at “gross value”; i.e., charges before the application of allowances and discounts deductions.

Based upon these instructions we believe it would be appropriate to bill M1145 to all payers and patient types. These are billing instructions only, not necessarily payment. Although Medicare will pay at a rate of $148.73 in the 1stQU2021 per billed unit, other payers may choose to not recognize M1145 or to not pay any additional separate payment based upon contracted terms or subsequent policies. We hope that other payers will not choose to reject claims entirely since it is a valid HCPCS code, effective January 1, 2021. If a payer continues to reject a claim stating the M1145 is not recognized, an alternative recommendation may be to remove the HCPCS and bill the charge under revenue code 250 to ensure the total charges on the claim balance regardless of payer.

Matching of Primary and Secondary Payer Claims: Total charges

Second, it is important that any charges billed to a primary payer also be represented on the claim for a secondary payer as the charges need to match in order to determine what portion the primary payer has paid and what amount the secondary payer is responsible for. In the case of dual eligible patients with Medicare primary and Medicaid secondary, CMS electronically submits the claim after adjudication to the appropriate Medicaid program so the M1145 will be transmitting automatically. It is unclear if State Medicaid programs will recognize this as an “add-on” payment and NOT require an NDC number on the charge line even if the charge is reported in revenue code 636 or 250. Under Medicare Secondary Payer rules, the amount the provider bills for services rendered (Charge Amount) should match the amount billed to both the primary insurer and Medicare.

For other secondary payers, removing the M1145 charge from either payer claim will cause balancing issues when reconciling insurer payments and patient responsibility. If a secondary payer rejects a claim with the new M1145 code, it is recommended that the payer be contacted for clarification as it is a valid HCPCS code. We do not recommend that billers automatically mark the charges as non-covered for both Medicare and non-Medicare as this will result in a loss of revenue from non-billing of a valid service.

Another consideration is that insurance information often gets changed from the original information provided at registration. If a facility is selectively reporting the M1145 code based upon the insurance plan, resequencing of payer information can lead to claim processing delays.

Other situations when Medicare has established a drug add-on payment

In 2006, CMS recognized that Intravenous Immune Globulin (IVIG) products were in short supply and significant resources were expended in locating IVIG products in both hospitals and physician offices. HCPCS code G0332 – Preadministration-Related Services for Intravenous Infusion of Immunoglobulin, (this service is to be billed in conjunction with administration of immunoglobulin) was used to bill for the service of locating and shipping of IVIG. This HCPCS code had to be billed on the same claim as the IVIG product and the same date of service. Medicare established an add-on payment of $75 in the hospital outpatient setting and expected the G0332 to be billed only once per date of service. This payment was in addition to the payment for the drug and the drug administration service. Medicare established edits so if G0332 was billed without the drug product HCPCS code and a drug administration service, the claim was returned to the provider to be reviewed and revised. An edit also rejected a claim if G0332 was billed with a unit of more than “1” for each date of service.  This payment was continued through CY2008 and eliminated as of January 1, 2009. (Note: Medicare has not indicated yetwhether they will establish similar edits for the MFN Model drugs with HCPCS code M1145).

In 2013, Medicare established HCPCS code Q9969- Tc-99m from non-highly enriched uranium source, full cost recovery add-on, per study dose (FR page 68316) to be billed separately from the TC-99m radiopharmaceuticals that are used in diagnostic procedures. Medicare provided instructions that the code would be paid at $10.00 per dose. HCPCS code Q9969 continues as an active code with a payment rate of $10.00 per dose in the October2020 Addendum B. (Note: Medicare has reminded providers that for the MFN Model, they will pay the lower of the established payment rate of $148.73 or the claim charge, so in order to receive the $148.73 per dose, providers should ensure that M1145 has an established charge of $148.73 or greater).

In summary:

We recommend that M1145 be set up to bill all payers on both inpatients and outpatients based upon:

1. Medicare instructions that charges for services should be the same for all payers and patient types and based upon costs (including handling, storage, and overhead),
2. the requirement that primary and secondary payer claims balance regarding individual and total charges to ensure appropriate reconciliation of payer and patient financial responsibility, and,
3. previous precedents where Medicare has established specific drug add-on codes with payment rates.

We also recommend that initial claims be closely scrutinized to verify that the units of M1145 are being billed correctly (‘per dose’), that Medicare is applying the appropriate payment rate, that other payers are not rejecting claims which contain M1145, (effective January 1, 2021) and are reimbursing according to contracted terms and policies.