Self-Administered Drugs: Charge Master Compliance Checklist

Does your hospital have adequate controls for addressing Medicare’s self-administered drug coverage restrictions? We have developed a Charge Management Compliance checklist to help our customers with this challenging area. When tackling Self-Administered drug billing compliance (also referred to as “self-administrable drugs” or “SADs”), many hospitals are amazed at the work needed, the coordination required, and the controls necessary for long term accuracy. We often encounter Charge Management teams taking the lead on data corrections and monitoring for long term SAD billing compliance.

To help ensure your team is appropriately controlling charge data related to this coverage limitation, we have provided an overview of the SAD topic, checklist suggestions, and several beneficial resources.


SAD Background

  • Self-Administrable drugs are not billable to CMS on outpatient Medicare claims unless they are paid separately under OPPS or other payment systems, or are integral to the procedure/service with which they are being provided.
  • Specific claims data is required for Medicare outpatient claims.
  • Non-Covered modifiers, coverage issues, and patient responsibility policies need to be considered for multiple payer types. This causes the SAD issue to be higher-profile than most CDM issues.
  • Industry webinars, speeches, articles and educational venues (as well as direct feedback from our hospital contacts) identify this as a high priority compliance topic.
  • The “integral to procedure” exception cited in CMS regulatory documents appears to be one of the biggest challenges for hospital teams.
  • The SAD policy extends beyond simply addressing injectable drugs listed on the various MAC websites, and includes drugs defined as SAD by form. Many hospitals are aware of their Contractor-specific guidance on injectable SADs, but fail to fully implement CDM updates for Pharmacy CDM items for other forms of administration such as tablets, liquids, ointments, or drops.
  • Solutions to SAD compliance vary due to diverse hospital systems functionality and data population options. However, both data and processes must be evaluated to ensure accuracy.

#1 Research Regulatory & Payer Guidance

Obtain appropriate regulatory reference sources. Examples include:

  • Policy language from your Medicare Contractor
  • Pub. 100-02, Medicare Benefit Policy Manual, chapter 15, section 50.2
  • Transmittals and MLN articles that may demonstrate policy or regulatory language updates
  • Part D policy and other details in the Medicare Claims processing manual (Despite whether Part D applies to your facility, the manual language is informative.)

#2 Perform Data Flow & Operations Evaluation

Hospitals’ “Self-Administered Drug” CDM plans require attention to data, processes, and policies. This section provides areas of focus for CDM, Patient Accounting, and Pharmacy. Confirm whether your hospital has other operational areas that are impacted in your assessment.

  • Conduct a CDM masterfile functionality and data flow assessment:
  • Confirm which CDM Cost centers and charge items should be analyzed
  • Obtain from your IS staff, hospital team, or vendor(s) the basic CDM, Pharmacy & claims processing/editing functionality
  • Be sure to obtain complete information on:
  • All Information Systems
  • Applications
  • Masterfiles
  • Data Elements
  • Third Party Add-In Tools
  • Reports or Forms that are Involved in the SAD Charging Process
  • Identify applicable CDM data including:
  • Charge Number
  • Charge Description
  • Multiplier or Divisor (if in CDM)
  • HCPCS Code
  • Department Name
  • Confirm functionality of all of the above
  • Review any override or editing software logic that revises or modifies the data elements of concern
  • Note: It may be beneficial to obtain documentation of the claims editing/override logic (by payer, bill type, etc.) for internal Charge Compliance reference files
  • Confirm whether changes are made from other billing, editing, or manual processes
  • Confirm whether special data elements drive claims logic. For example:
  • Insurance code field
  • Unique symbols or descriptions in charge descriptions
  • Special billing system indicators that are prompting action
  • Identify code-specific payment indicators (Status Indicators, Pricing Indicators, etc.) or other payment policy data fields by payer
  • Link the current quarter’s OPPS Status Indicator and payment amounts to audit files
  • Link other payers’ reimbursement indicators to audit files
  • Research Pharmacy functionality and fields:
  • Identify applicable Pharmacy system data including: form, drug name, charge number (linking to CDM), multiplier field (if in RX) and numerous other fields based on system functionality and data population
  • Ask your pharmacy department to help clarify all drug forms that fall into your SAD policy (Disregard CMS payment or ‘integral to’ rules at this point)
  • Confirm whether you have (or need to design) the appropriate analysis worksheets or tools
  • Import and link applicable files and fields
  • Compare multiple masterfiles to ensure synchronization
  • Sort worksheet in various ways to analyze and compare data
  • Identify any codes that are OPPS Status Indicator G, K, or L (paid under OPPS)
  • Ask Pharmacy to help determine which of the above fall into the “integral to the procedure” classification
  • Option: Add column to worksheet to list associated service/procedure for which they are integral
  • Analyze the Outpatient Medicare claims data fields for all items not listed as “integral to procedure”
  • Analyze HCPCS and modifiers

#3 Seek Tools & Assistance Where Needed

  • Use CDM auditing and resource tool functionality (when available) for more comprehensive, timely and complete data that is integrated with your hospital data
  • Seek consulting guidance for managing the CDM process if interpretation of rules and a rapidly-deployed action plans are a challenge
  • Work with CDM consulting firms with pharmacy audit staff
  • Pharmacy auditing is most effective and efficient with credentialed Pharmacist or Pharmacy Tech auditors
  • Less qualified auditors will either take longer to audit data, or risk error due to lack of familiarity with various drug charge items or regulatory/reimbursement rules
  • Set timelines and rapidly internalize processes & management after consulting assistance is provided

#4 Audit & Implement Revisions

Don’t let your SAD Compliance plan fail because of ineffective data review or incomplete implementation. These activities will help manage your hospital’s process:

  • Work with qualified internal staff or CDM consulting resources (with credentialed Pharmacist auditors) to review masterfiles
  • Confirm which masterfiles and data element within the masterfiles populate claims
  • Begin the audit with a global masterfile assessment
  • Synchronize CDM and RX data:
  • Ensure all items in one file are also in the other
  • If files are not in synch, confirm the rationale
  • Check for erroneous data in masterfiles:
  • Are HCPCS current and valid?
  • Are billing multipliers or divisors used to report or modify claims data fields?
  • Are drug names and units of service parallel?
  • Does the pharmacy system have any data fields or functions that may impact your SAD analysis?
  • Are other data elements or functions used that change claims or charge data that were not uncovered in earlier fact-finding?
  • Coordinate data updates based on the global masterfile assessment (above) prior to auditing and changing CDM data
  • Use updated masterfiles to audit and update CDM data fields
  • Ideally, this means using a Charge Master software resource tool for current code descriptors, payment system information, and edits

HCPCS CODES Confirm HCPCS Level II coding for the SAD based on various payer requirements, CDM field options, or claims logic.

  • Determine HCPCS reporting requirements for all payers
  • Confirm with your specific MAC whether they require reporting of each SAD charge item with A9270 (Non-Covered Item or Service)
  • This is important, as some other payers may need the itemized HCPCS code for reporting
  • Decide whether the non-covered code, if required by your MAC, can be assigned through claims logic if detailed coding is needed by other payers

MODIFIERS Determine modifier requirements for payers and decide which to hard code into the CDM file. This decision must be based on varied payer billing requirements, and your hospital’s use of claims logic or CDM override fields.

  • SADs on Medicare outpatient claims need modifier –GY (item or service statutorily excluded or does not meet the definition of Medicare benefits)
  • Confirm that your hospital understands the implications of using the -GY modifier relative to EOB, patient responsibility, etc.

#5 Develop Process Improvements Nearly all significant CDM management topics need extra attention for assurance of long-term accuracy and process improvements. These may include documented workplans, process improvement steps, procedure development, or new hospital policies. More examples of process improvement tasks include:

  • Evaluate compliance impact to determine your hospital’s exposure if erroneous claims data has been erroneously submitted
  • Debrief hospital leadership and possibly your Compliance team on the findings
  • Develop a systems update plan for sequencing data corrections
  • Define auditing and sign off requirements and timelines
  • Develop a systems update plan for ongoing data accuracy, file synchronization and masterfile maintenance
  • Identify areas needing formal documentation of the SAD policies
  • Define and prioritize the needed protocols, policies, procedures; and assign ownership for each
  • Determine which SAD policy documentation needs to be integrated into existing hospital guidance, and follow the appropriate process and format
  • Ensure team buy-in and sign-off on the above, and continue a SAD workgroup for long-term oversight and controls

We hope this checklist and the associated reference materials will help your team better understand Charge Master data population and compliance implications of Self-Administrable Drugs. Hospitals that focus attention on SAD billing compliance take comfort in knowing that their organization’s exposure is minimized, and policies and data are defensible. Use this post’s content to refine your own hospital-specific checklist and see how quickly this challenging CDM issue can become more manageable.


Reference Sources Medicare Benefit Policy Manual, Pub. 100-02, Chapter 15, Section 50.2. §50.5 – Self-Administered Drugs and Biologicals (Rev. 1, 10-01-03) B3-2049.5 Medicare Part B does not cover drugs that are usually self-administered by the patient unless the statute provides for such coverage. The statute explicitly provides coverage, for blood clotting factors, drugs used in immunosuppressive therapy, erythropoietin for dialysis patients, certain oral anti-cancer drugs and anti-emetics used in certain situations. Medicare Hospital Manual (HCFA-Pub. 10), MED-MANUAL §230.4 Outpatient Therapeutic Services. B. Drugs and Biologicals.–Generally, drugs and biologicals furnished to outpatients for therapeutic purposes are includable only if they are of a type which cannot be self-administered. Whether a drug or biological is of a type which cannot be self-administered is based on the usual method of administration of the form of that drug or biological as furnished by the physician. Thus, where a physician gives a patient pills or other oral medication, these are excluded from coverage since the form of the drug given to the patient is usually self-administered. Similarly, if a physician gives a patient an injection which is usually self-injected, this drug is excluded from coverage, except for insulin administered to a patient in a diabetic coma. Where, however, a physician injects a drug which is not usually self-injected, this drug is not subject to the self- administrable drug exclusion (regardless of whether the drug may also be available in oral form) since it is not self-administrable in the form in which it was furnished to the patient. (Of course, such injections could not be reasonable and necessary where injection is not considered an indicated method of administration according to accepted standards of medical practice for the condition for which given.)


Example policy SCOPE: All departments providing and/or billing outpatient self-administered drugs. PURPOSE: To outline billing requirements for outpatient self-administered drugs. POLICY: Outpatient self-administered drugs are statutorily excluded from the Medicare program and must not be billed as covered services. Outpatient self-administered drugs must be billed to the patient or other third party payer. DEFINITION: Self-Administered Drug: A self-administered drug is a drug or biological furnished to a hospital patient in an outpatient setting for therapeutic purposes which is usually self-administered and is not integral to the performance of a treatment or procedure. A drug or biological which is integral to the performance of a treatment or procedure is considered to be a packaged supply and may be covered by Medicare. Drugs and biologicals which are excluded from the self-administered drug provision include blood clotting factors, drugs used for immunosuppressive therapy, EPO, and certain oral anti-cancer drugs and their associated antiemetics. SPECIAL CONSIDERATIONS: Patient Notification of Non-Covered Services: Outpatient self-administered drugs are excluded from Medicare coverage, therefore it is not appropriate to issue an Advance Beneficiary Notice (ABN) prior to providing services. However, the hospital may provide notice in another form to the patient in order to inform the patient of their financial responsibility. For Medicare Part D beneficiaries, the hospital may also notify the patient that he or she may submit a paper claim to the Medicare Part D Plan for possible reimbursement. The patient should follow the Medicare Drug Plan enrollment materials or call the Plan for information about submitting a claim. PROCEDURE: 1. Pharmacy personnel must identify which drugs provided to a patient in an outpatient setting are in a self-administrable form (i.e., tablets, capsules, ointments, ) are “self-administered” according to the definition in this policy. 2. If a drug provided to a patient in an outpatient setting is determined to be “self-administered,” facility personnel must then determine if the drug or biological is integral to the performance of a treatment or procedure. If the drug or biological is integral to a treatment or procedure, it is considered to be a packaged supply and should be billed as a covered service to Medicare. Examples of situations where “self-administered” drugs provided in an outpatient setting would be considered “packaged” as integral to a treatment or procedure include, but are not limited to:

  • Oral sedatives or anti-emetics administered to patients while they are in the preoperative area being prepared for a procedure.
  • Mydriatic drops instilled into the eye to dilate the pupils, anti-inflammatory drops, antibiotic ointments, and ocular hypotensives that are administered to the patient immediately before, during, or immediately following an ophthalmic procedure.
  • Barium or low osmolar contrast media are supplies that are integral to a diagnostic imaging procedure.
  • Topical solution used with photodynamic therapy furnished at the hospital to treat nonhyperkeratotic actinic keratosis lesions of the face or scalp.
  • Local anesthetics such as marcaine, lidocaine (with or without epinephrine).
  • Antibiotic ointments such as bacitracin, placed on a wound or surgical incision at the completion of a procedure.

Statutorily excluded from the self-administered drug provision are drugs and biologicals such as blood clotting factors, drugs used for immunosuppressive therapy, EPO, and certain oral anti-cancer drugs and their associated antiemetics. 3. Pharmacy staff must review their charge master files and billing procedures to confirm that self-administered drugs, and self-administered drugs that are packaged as integral to a treatment or procedure, are appropriately identified. 4. Drugs determined to be “self-administered”, but not packaged as integral to a treatment or procedure must not be billed as covered services to Medicare. Self-administered drugs should be specifically indentified in the CDM file with 637. If the drug does not have an assigned HCPCS code, HCPCS code A9270 (Non-covered item or service) may be used in order to report modifier GY (Item or service statutorily excluded or does not meet the definition of any Medicare benefit). This will assign payment liability to the beneficiary instead of the provider. 5. Self-administered drugs not considered ‘integral to a treatment or procedure’ must be billed to the patient or other third party payer. (RH note: confirm your own hospital’s policy on this) 6. Drugs determined not to be “self-administered,” or determined to be “self-administered” but considered packaged as integral to a treatment or procedure, should be billed to Medicare as covered services, provided all other Medicare coverage requirements have been met. 7. CDM management must oversee internal auditing, validity monitoring, and ongoing data accuracy of CDM masterfile content (in consideration of other system functions and data population). 8. Patient Accounting personnel must oversee accuracy of any claims edits and educate all staff responsible for billing pharmacy services on the contents of this policy. 9. Pharmacy management must oversee accuracy of any pharmacy data fields impacting this policy, and educate all pharmacy staff responsible for requesting or adding procedure charge codes to the Charge Master on the contents of this policy. 10. Patient Accounting personnel must identify and share with all applicable parties the Medicare Contractor interpretations which vary from the interpretations in this policy. Specific documentation from the MAC or other insurors related to the variance(s) must be obtained and provided to CDM Team.


Medicare Benefit Policy Manual Chapter 15 – Covered Medical and Other Health Services 50 – Drugs and Biologicals (Rev. 1, 10-01-03) B3-2049, A3-3112.4.B, HO-230.4.B The Medicare program provides limited benefits for outpatient drugs. The program covers drugs that are furnished “incident to” a physician’s service provided that the drugs are not usually self-administered by the patients who take them. Generally, drugs and biologicals are covered only if all of the following requirements are met:

  • They meet the definition of drugs or biologicals (see §50.1);
  • They are of the type that are not usually self-administered. (see §50.2);
  • They meet all the general requirements for coverage of items as incident to a physician’s services (see §§50.1 and 50.3);
  • They are reasonable and necessary for the diagnosis or treatment of the illness or injury for which they are administered according to accepted standards of medical practice (see §50.4);
  • They are not excluded as non-covered immunizations (see §50.4.4.2); and
  • They have not been determined by the FDA to be less than effective. (See §§50.4.4).

Medicare Part B does generally not cover drugs that can be self-administered, such as those in pill form, or are used for self-injection. However, the statute provides for the coverage of some self-administered drugs. Examples of self-administered drugs that are covered include blood-clotting factors, drugs used in immunosuppressive therapy, erythropoietin for dialysis patients, osteoporosis drugs for certain homebound patients, and certain oral cancer drugs. (See §110.3forcoverage of drugs, which are necessary to the effective use of Durable Medical Equipment (DME) or prosthetic devices.) 50.1 – Definition of Drug or Biological (Rev. 1, 10-01-03) B3-2049.1 Drugs and biologicals must be determined to meet the statutory definition. Under the statute §1861(t)(1), payment may be made for a drug or biological only where it is included, or approved for inclusion, in the latest official edition of the United States Pharmacopoeia National Formulary (USP-NF), the United States Pharmacopoeia-Drug Information (USD-DI), or the American Dental Association (AOA) Guide to Dental Therapeutics, except for those drugs and biologicals unfavorably evaluated in the ADA Guide to Dental Therapeutics. The inclusion of an item in the USP DI does not necessarily mean that the item is a drug or biological. The USP DI is a database of drug information developed by the U.S. Pharmacopoeia but maintained by Micromedex, which contains medically accepted uses for generic and brand name drug products. Inclusion in such reference (or approval by a hospital committee) is a necessary condition for a product to be considered a drug or biological under the Medicare program, however, it is not enough. Rather, the product must also meet all other program requirements to be determined to be a drug or biological. Combination drugs are also included in the definition of drugs if the combination itself or all of the therapeutic ingredients of the combination are included, or approved for inclusion, in any of the above drug compendia. Drugs and biologicals are considered approved for inclusion in a compendium if approved under the established procedure by the professional organization responsible for revision of the compendium. 50.2 – Determining Self-Administration of Drug or Biological (Rev. 123, Issued: 04-30-10, Effective: 07-30-10, Implementation: 07-30-10) The Medicare program provides limited benefits for outpatient prescription drugs. The program covers drugs that are furnished “incident to” a physician’s service provided that the drugs are not usually self-administered by the patients who take them. Section 112 of the Benefits, Improvements & Protection Act of 2000 (BIPA) amended sections1861(s)(2)(A) and 1861(s)(2)(B)of the Act to redefine this exclusion. The prior statutory language referred to those drugs “which cannot be self-administered.” Implementation of the BIPA provision requires interpretation of the phrase “not usually self-administered by the patient”. A. Policy Fiscal intermediaries, carriers and Medicare Administrative Contractors (MACs) are instructed to follow the instructions below when applying the exclusion for drugs that are usually self-administered by the patient. Each individual contractor must make its own individual determination on each drug. Contractors must continue to apply the policy that not only the drug is medically reasonable and necessary for any individual claim, but also that the route of administration is medically reasonable and necessary. That is, if a drug is available in both oral and injectable forms, the injectable form of the drug must be medically reasonable and necessary as compared to using the oral form. For certain injectable drugs, it will be apparent due to the nature of the condition(s) for which they are administered or the usual course of treatment for those conditions, they are, or are not, usually self-administered. For example, an injectable drug used to treat migraine headaches is usually self-administered. On the other hand, an injectable drug, administered at the same time as chemotherapy, used to treat anemia secondary to chemotherapy is not usually self-administered. B. Administered The term “administered” refers only to the physical process by which the drug enters the patient’s body. It does not refer to whether the process is supervised by a medical professional (for example, to observe proper technique or side-effects of the drug). Injectable drugs, including intravenously administered drugs, are typically eligible for inclusion under the “incident to” benefit. With limited exceptions, other routes of administration including, but not limited to, oral drugs, suppositories, topical medications are considered to be usually self-administered by the patient. C. Usually For the purposes of applying this exclusion, the term “usually” means more than 50 percent of the time for all Medicare beneficiaries who use the drug. Therefore, if a drug is self-administered by more than 50 percent of Medicare beneficiaries, the drug is excluded from coverage and the contractor may not make any Medicare payment for it. In arriving at a single determination as to whether a drug is usually self-administered, contractors should make a separate determination for each indication for a drug as to whether that drug is usually self-administered. After determining whether a drug is usually self-administered for each indication, contractors should determine the relative contribution of each indication to total use of the drug (i.e., weighted average) in order to make an overall determination as to whether the drug is usually self-administered. For example, if a drug has three indications, is not self-administered for the first indication, but is self-administered for the second and third indications, and the first indication makes up 40 percent of total usage, the second indication makes up 30 percent of total usage, and the third indication makes up 30 percent of total usage, then the drug would be considered usually self-administered. Reliable statistical information on the extent of self-administration by the patient may not always be available. Consequently, CMS offers the following guidance for each contractor’s consideration in making this determination in the absence of such data: 1. Absent evidence to the contrary, presume that drugs delivered intravenously are not usually self-administered by the patient. 2. Absent evidence to the contrary, presume that drugs delivered by intramuscular injection are not usually self-administered by the patient. (Avonex, for example, is delivered by intramuscular injection, not usually self-administered by the patient.) The contractor may consider the depth and nature of the particular intramuscular injection in applying this presumption. In applying this presumption, contractors should examine the use of the particular drug and consider the following factors: (no additional CMS info following this) 3. Absent evidence to the contrary, presume that drugs delivered by subcutaneous injection are self-administered by the patient. However, contractors should examine the use of the particular drug and consider the following factors: A. Acute Condition – Is the condition for which the drug is used an acute condition? If so, it is less likely that a patient would self-administer the drug. If the condition were longer term, it would be more likely that the patient would self-administer the drug. B. Frequency of Administration – How often is the injection given? For example, if the drug is administered once per month, it is less likely to be self-administered by the patient. However, if it is administered once or more per week, it is likely that the drug is self-administered by the patient. In some instances, carriers may have provided payment for one or perhaps several doses of a drug that would otherwise not be paid for because the drug is usually self-administered. Carriers may have exercised this discretion for limited coverage, for example, during a brief time when the patient is being trained under the supervision of a physician in the proper technique for self-administration. Medicare will no longer pay for such doses. In addition, contractors may no longer pay for any drug when it is administered on an outpatient emergency basis, if the drug is excluded because it is usually self-administered by the patient. D. Definition of Acute Condition For the purposes of determining whether a drug is usually self-administered, an acute condition means a condition that begins over a short time period, is likely to be of short duration and/or the expected course of treatment is for a short, finite interval. A course of treatment consisting of scheduled injections lasting less than 2 weeks, regardless of frequency or route of administration, is considered acute. Evidence to support this may include Food and Drug administration (FDA) approval language, package inserts, drug compendia, and other information. E. By the Patient The term “by the patient” means Medicare beneficiaries as a collective whole. The carrier includes only the patients themselves and not other individuals (that is, spouses, friends, or other care-givers are not considered the patient). The determination is based on whether the drug is self-administered by the patient a majority of the time that the drug is used on an outpatient basis by Medicare beneficiaries for medically necessary indications. The carrier ignores all instances when the drug is administered on an inpatient basis. The carrier makes this determination on a drug-by-drug basis, not on a beneficiary-by-beneficiary basis. In evaluating whether beneficiaries as a collective whole self-administer, individual beneficiaries who do not have the capacity to self-administer any drug due to a condition other than the condition for which they are taking the drug in question are not considered. For example, an individual afflicted with paraplegia or advanced dementia would not have the capacity to self-administer any injectable drug, so such individuals would not be included in the population upon which the determination for self-administration by the patient was based. Note that some individuals afflicted with a less severe stage of an otherwise debilitating condition would be included in the population upon which the determination for “self-administered by the patient” was based; for example, an early onset of dementia. F. Evidentiary Criteria Contractors are only required to consider the following types of evidence: peer reviewed medical literature, standards of medical practice, evidence-based practice guidelines, FDA approved label, and package inserts. Contractors may also consider other evidence submitted by interested individuals or groups subject to their judgment. Contractors should also use these evidentiary criteria when reviewing requests for making a determination as to whether a drug is usually self-administered, and requests for reconsideration of a pending or published determination. Note that prior to August 1, 2002, one of the principal factors used to determine whether a drug was subject to the self-administered exclusion was whether the FDA label contained instructions for self-administration. However, CMS notes that under the new standard, the fact that the FDA label includes instructions for self-administration is not, by itself, a determining factor that a drug is subject to this exclusion. G. Provider Notice of Noncovered Drugs Contractors must describe on their Web site the process they will use to determine whether a drug is usually self-administered and thus does not meet the “incident to” benefit category. Contractors must publish a list of the injectable drugs that are subject to the self-administered exclusion on their Web site, including the data and rationale that led to the determination. Contractors will report the workload associated with developing new coverage statements in CAFM 21208. Contractors must provide notice 45 days prior to the date that these drugs will not be covered. During the 45-day time period, contractors will maintain existing medical review and payment procedures. After the 45-day notice, contractors may deny payment for the drugs subject to the notice. Contractors must not develop local coverage determinations (LCDs) for this purpose because further elaboration to describe drugs that do not meet the ‘incident to’ and the ‘not usually self-administered’ provisions of the statute are unnecessary. Current LCDs based solely on these provisions must be withdrawn. LCDs that address the self-administered exclusion and other information may be reissued absent the self-administered drug exclusion material. Contractors will report this workload in CAFM 21206. However, contractors may continue to use and write LCDs to describe reasonable and necessary uses of drugs that are not usually self-administered. H. Conferences Between Contractors Contractors’ Medical Directors may meet and discuss whether a drug is usually self-administered without reaching a formal consensus. Each contractor uses its discretion as to whether or not it will participate in such discussions. Each contractor must make its own individual determinations, except that fiscal intermediaries may, at their discretion, follow the determinations of the local carrier with respect to the self-administered exclusion. I. Beneficiary Appeals If a beneficiary’s claim for a particular drug is denied because the drug is subject to the “self-administered drug” exclusion, the beneficiary may appeal the denial. Because it is a “benefit category” denial and not a denial based on medical necessity, an Advance Beneficiary Notice (ABN) is not required. A “benefit category” denial (i.e., a denial based on the fact that there is no benefit category under which the drug may be covered) does not trigger the financial liability protection provisions of Limitation On Liability (under §1879 of the Act). Therefore, physicians or providers may charge the beneficiary for an excluded drug. J. Provider and Physician Appeals A physician accepting assignment may appeal a denial under the provisions found in Chapter 29 of the Medicare Claims Processing Manual. K. Reasonable and Necessary Contractors will make the determination of reasonable and necessary with respect to the medical appropriateness of a drug to treat the patient’s condition. Contractors will continue to make the determination of whether the intravenous or injection form of a drug is appropriate as opposed to the oral form. Contractors will also continue to make the determination as to whether a physician’s office visit was reasonable and necessary. However, contractors should not make a determination of whether it was reasonable and necessary for the patient to choose to have his or her drug administered in the physician’s office or outpatient hospital setting. That is, while a physician’s office visit may not be reasonable and necessary in a specific situation, in such a case an injection service would be payable. L. Reporting Requirements Each carrier, intermediary and Medicare Administrative Contractor (MAC) must report to CMS its complete list of injectable drugs that the contractor has determined are excluded when furnished incident to a physician’s service on the basis that the drug is usually self-administered. The CMS expects that contractors will review injectable drugs on a rolling basis and update their list of excluded drugs as it is developed and no less frequently than annually. For example, contractors should not wait to publish this list until every drug has been reviewed. Contractors must enter their self-administered drug exclusion list to the Medicare Coverage Database (MCD). This database can be accessed at www.cms.hhs.gov/mcd. See Pub.100-08, Medicare Program Integrity Manual, Chapter 3, Section 3.3, “Articles”, for instructions on submitting these lists to the MCD.


CMS Manual System Pub. 100-18 Medicare Prescription Drug Benefit Manual Transmittal 2 Date: July 18, 2008 Subject: Chapter 6 of the Medicare Prescription Drug Benefit Manual I. Summary of Changes: Introduction of Chapter 6 of the Medicare Prescription Drug Benefit Manual into the CMS Manual System. Medicare Prescription Drug Benefit Manual Chapter 6 – Part D Drugs and Formulary Requirements (excerpt of pertinent text) Part B Covered Drugs in the Context of a Professional Service Drugs furnished “Incident To” a Physician’s Service. These are injectable or intravenous drugs that are administered predominantly by a physician or under a physician’s direct supervision as “incident to” a physician’s professional service. The statute limits coverage to drugs that are not usually self-administered. In order to meet all the general requirements for coverage under the “incident-to” provision, an FDA approved drug or biological must:

  • Be of a form that is not usually self-administered (as determined by the A/B Contractor)
  • Must be furnished by a physician; and
  • Must be administered by the physician, or by auxiliary personnel employed by the physician and under the physician’s personal supervision.

The charge, if any, for the drug or biological must be included in the physician’s bill and the cost of the drug or biological must represent an expense to the physician. Drugs and biologicals furnished by other health professionals may also meet these requirements. Drugs furnished by a Medicare Advantage Organization “Incident To” a Physician’s Service If a drug could be covered under Part B when furnished by a physician who incurred an expense in procuring the drug, it could also be covered under Part B in the case of a Medicare Advantage (MA) plan physician when the MA organization has incurred the expense of procuring the drug, and the drug is administered to an enrollee in the MA plan. Under Pub. 100-02, Medicare Benefit Policy Manual, chapter 15, section 60.1, drugs can be covered as “incident to” physicians’ services if they “represent an expense to the physician or legal entity billing for the services or supplies.” Applying this principle to the case of a not-usually self-administered drug administered by an MA plan physician to an MA plan enrollee, if the MA organization supplies the drug to the plan physician, it is the “legal entity billing” for the drug, since it is the entity that receives payment from Medicare that includes the cost of such a drug. Consequently, if the MA organization supplies the drug to the network provider, the MA organization should account for the drug under its A/B benefits. If a network pharmacy supplies the drug directly to the beneficiary, the drug must be accounted for under its Part D benefits. Separately Billable ESRD Drugs Most drugs furnished by dialysis facilities are separately billable. The largest Medicare expenditures for such drugs are for erythropoietin (EPO) which is covered for dialysis beneficiaries when it is furnished by independent and hospital-based ESRD facilities, as well as when it is furnished by physicians. Separately billable drugs provided in Hospital Outpatient Departments Medicare continues to pay separately for drugs, biologicals and radiopharmaceuticals whose median cost per administration exceeds an amount (or threshold amount) determined by CMS, while packaging the cost of drugs, biologicals, and radiopharmaceuticals whose median cost per administration is less than an amount (or threshold amount) determined by CMS into the procedures with which they are billed. Drugs covered as Supplies or – “Integral to a Procedure” Some drugs are covered as supplies that are an integral part of a procedure which is a diagnostic or therapeutic service, including radiopharmaceuticals (both diagnostic and therapeutic) and low osmolar contrast media. Other examples of drugs covered under the “integral to a procedure” provision include eye drops administered before cataract surgery. Blood Medicare does make separate payment for blood and blood products and these products are regulated as biological agents by the FDA. Drugs furnished as a part of a service in these provider settings: 1. Drugs packaged under the Hospital Outpatient Prospective Payment System (OPPS); 2. Drugs furnished by ESRD facilities and included in Medicare’s ESRD composite rate; 3. Osteoporosis drugs provided by home health agencies under certain conditions; 4. Drugs furnished by critical access hospitals’ (CAH) outpatient departments; 5. Drugs furnished by a rural health clinic (RHC); 6. Drugs furnished by federally qualified health centers (FQHC); 7. Drugs furnished by community mental health centers (CMHC); 8. Drugs furnished by ambulances; 9. Separately billable drugs provided in comprehensive outpatient rehabilitation facilities (CORF).


Copyright Holliday & Associates 2017