Consolidated billing made simple: Managing costs for patients who require expensive drugs and treatments

Jul 01, 2019
AMBR Journal

The “Consolidated billing made simple” series delves into the ins and outs of consolidated billing (CB). This series will untangle CMS CB regulations and give billers a solid understanding of the rules so that they can apply them appropriately.

As SNFs prepare for the implementation of the Patient-Driven Payment Model (PDPM) on October 1, they may be assessing their ability to take on more clinically acute residents.

“Under PDPM, caring for residents with higher acuities may result in greater revenue,” says Stefanie Corbett, DHA, postacute regulatory specialist for HCPro.  

The new payment model incentivizes SNFs to care for more clinically complex patients with multiple comorbidities. For example, residents with conditions such as certain cancers, HIV/AIDS, depression, or morbid obesity will fall into higher PDPM payment categories and generate more revenue for SNFs.

However, more clinically complex patients also bring higher costs because they require more expensive drugs, equipment, supplies, and staff time. “It will be important for billers to be familiar with consolidated billing requirements to help with projecting and managing expenses,” Corbett says.

Residents with high acuities may have extensive care expenses. As billers estimate costs and revenue, they must pay close attention to the drugs that the patient is taking prior to admission and that the SNF’s clinical care team prescribes, as those drugs can often cause the SNF’s cost of care to skyrocket.

“The expenses are so extreme. The cost of some drugs can sometimes exceed the revenue that you’re getting for that resident,” says Pam Duchene, PhD, APRN-BC, NEA, FACHE, vice president of education and training for Harmony Healthcare International.

With the high cost of the drugs, SNFs will have more money on the line under PDPM. The challenge for billers is that the CB rules governing expensive drugs are not always clear, making it difficult to determine profitability.

CB rules outline several exclusions that must be billed by the provider to Medicare. Billers must know how to identify these exclusions so that they do not bear the cost of these services or include them on the CB, Duchene explains. So, to accurately estimate the projected revenue and costs of care, billers must have a thorough understanding of CB rules and know how to apply them appropriately.

A word about inclusion vs. exclusion

Before exploring the CB requirements for expensive drugs and services, it’s important to define the terms “included” and “excluded.” This article will use the terms in the following manner:

  • “Included” refers to the covered PPS items and services that are subject to or included in the CB. The SNF is responsible for billing Medicare for these services and items, and for paying the outside vendor from the PPS per diem rate.
  • “Excluded” refers to items or services that providers should exclude from the CB. The outside vendor should bill these directly to Medicare Part B.

Chemotherapy and CB Major Category III

Unlike many other drugs that do not fall into a specific CB major category, CMS includes it in Major Category III: services excluded from CB when provided by any entity except a SNF.

There are four Major Category III subsets:

  • Certain chemotherapy drugs
  • Chemotherapy administration
  • Radioisotopes and their administration
  • Certain customized prosthetic devices

Category III services may be delivered by any licensed Medicare provider, except a SNF. Therefore, they are excluded from the SNF PPS, and CB, when administered by a provider other than the SNF, says Frosini Rubertino, RN, BSN, C-NE, C-DONA/LTC, RAC-CT, founder of

Additionally, chemotherapy administration is only excluded from a SNF CB if it is provided on the same date of service as an excluded chemotherapy drug, Rubertino says.

“If the chemotherapy is administered in the SNF, the facility is responsible for covering the cost. The biller would include that on the CB,” Duchene says.

Chemotherapy often presents CB challenges for billers who must consider the specific drug, how it was administered, and the setting when determining whether to include it on the SNF CB.

  • Drugs. The Major Category III exclusions are limited to the specific HCPCS codes listed in the SNF Part A MAC update file. Only the drugs (brand or generic) that appear on this list should be excluded from the CB unless otherwise stated in the file, Rubertino says. Billers can search this file by HCPCS code or drug name and determine whether to include or exclude the chemotherapy drug. (For more information on how to access this file, please see the accompanying sidebar, “Helpful consolidated billing resources.”)
  • Administration of the drug and setting. There are many options for where and how patients can receive chemotherapy, which makes CB complicated.
    “It is important for facilities to be mindful of how chemotherapy drugs are administered. Medications can be administered via tablets or injections, which are usually within the scope of the SNF’s abilities and would therefore be subject to consolidated billing. However, those drugs that must be administered in a certified facility are not subject to consolidated billing.” Corbett says.

    Because the CB rules covering the delivery setting of chemotherapy drugs are so nuanced, both the SNF and physician office side have a high chance of making errors. Billers should foster relationships with oncologist offices in the community to avoid CB mix-ups. With these relationships in place, the physician’s billing office is more likely to notify the SNF that a resident has elected to have chemotherapy administered by the oncologist. The billers from both entities can clarify coverage, and the SNF can request that the patient return to the facility for chemotherapy.  

Ambulance trips for Major Category III services

As if CB rules for chemotherapy were not confusing enough, billers must also contend with ambulance services related to Major Category III services.

If an ambulance is needed to facilitate the provision of a Major Category III service, billers should account for the trip on the SNF’s CB. Ambulance trips for Major Category III services are not excluded from CB regardless of whether they meet the medical necessity criteria. For many other services, Medicare only reimburses for ambulance services if it is medically necessary.

Additionally, when rendered to a beneficiary during a Part A SNF stay, trips to or from a diagnostic or therapeutic site other than a hospital or a renal dialysis facility (e.g., a cancer treatment center) should be included in the CB. Because the SNF will account for these trips in the CB, the SNF will reimburse the ambulance service provider from the PPS rate payment it receives from Medicare based on this claim, Rubertino says.

   Ambulance trips associated with Major Category I.A–E and G services are excluded from the SNF CB. Additionally, ambulance trips associated with Major Category II.A services provided in renal dialysis facilities are also excluded from SNF CB, Rubertino says.

Drugs not explicitly addressed by a major category

Part of the reason why CB is so tricky for expensive drugs is that many do not fall into a major category, as chemotherapy does, Rubertino says. “When you receive the pharmacy bill, there are certain drugs that could be excluded if they are high-cost drugs,” she says.

Determine whether to include these drugs in the CB by consulting the SNF Part A MAC and SNF Part B MAC update files. These files go beyond just listing the chemotherapy drugs and services included or excluded from CB; they contain all drugs, items, or services subject to CB. Billers should search this file whenever they’re unsure whether to include something on the CB, Duchene says.

The files are in Microsoft Excel® format, so billers can enter the drug name or an HCPCS code to find out whether it is subject to CB. CMS updates the Part A and Part B lists quarterly with new, changed, or deleted HCPCS codes that should be included in the CB. CMS does not make these changes in the Excel spreadsheet until the following year, but they are listed on the CMS website.

Many hospitals, physician offices, or other outpatient facilities see that a resident is on a Part A stay and automatically bill the SNF for drug treatments provided in those settings. It is always prudent for the biller to carefully review invoices from these vendors and use the CMS files to determine whether the drugs or treatments provided are subject to CB, Rubertino says.

 Experimental drugs

Medicare does not cover experimental drugs or those the FDA has not approved, regardless of how they are administered, who administers them, or the setting. Residents will always be responsible for those drug costs out of pocket.

“Prior to admission, billers should check the plan’s formulary list or call their pharmacy to determine if drugs are considered experimental and not covered by Medicare,” Corbett says.

If the drug is experimental and not covered by Medicare, the facility can issue an advance beneficiary notice, which informs the resident of Medicare’s noncoverage and explains that he or she still has the option to pay out of pocket, Corbett explains. The SNF’s clinical team may also help the resident find an FDA-approved drug that Medicare would cover.

Protect the bottom line by managing drug costs

With a solid understanding of CB rules, billers can help manage costs related to expensive drugs by creating new reimbursement and cost projections as residents’ conditions change.

“As residents stay in our facilities, especially long term, they will have changes in their condition or new diagnoses. The biller needs to be informed of those changes that will involve new expenses such as specialized equipment, supplies, drugs, and appointments that may be subject to CB, for example,” Corbett says.

Ensuring that the MDS coordinator and clinical care team loop the biller in on changes in a resident’s conditions that will require a new drug is critical. Billers can flag expensive drugs physicians or nursing staff prescribe, as there’s a chance the prescribing staff may not understand the financial implications of those drugs.

“The nursing staff and physicians are tasked with managing clinical functions, but the biller can help manage expenses by informing the staff of exorbitant expenses that may present an opportunity to consider less costly alternatives,” Corbett says.

Of course, these cost-saving measures will only work if the MDS coordinator or nursing staff remembers to loop in the biller, which doesn’t always happen. Request that the pharmacy print a list of the costliest drugs commonly prescribed to patients at the SNF and give it to MDS coordinators and nursing staff.

 “Share this with the nursing and clinical care team and ask them to give you a heads up if they are recommending any of the drugs on the list,” Corbett recommends. 

Helpful consolidated billing resources

CMS regularly updates its lists of excluded items and services that are not within a SNF’s scope of services. Excluding these items and services from consolidated billing (CB) prevents SNFs from having to pay for high-cost services, items, and drugs. Maintaining current knowledge of these rules is critical. Billers need to be aware of the resources CMS has available and know how to look up whether something is included or excluded.

The Association for Medicare Billing and Reimbursement for LTC created this list of helpful resources so that you have them at your fingertips the next time you’re navigating a tough CB question.

  • Medicare Guide for SNF Billing and Reimbursement, Second Edition.
  • Centers for Medicare & Medicaid Services’ SNF CB website. This is a great starting point for accessing materials on CB.
  • The 2019 Annual SNF Consolidated Billing HCPCS Update files. Commonly referred to as the SNF “Help Files” or “Update Files,” they will tell you whether a particular item or service is excluded or included. The files contain comprehensive lists of HCPCS codes that are subject to SNF CB. Billers can search for drugs, items, or services using the HCPCS code or name. The file is updated quarterly.
    Note that there are two files; one contains information for Part A patients and the other has information for Part B. Download the file from the Downloads section at the bottom of the webpage.
  • SNF consolidated billing transmittals.
  • Explanation of the Major Categories for SNF CB. This provides an overview of each of the major categories. Download the file from the Downloads section at the bottom of the webpage.
  • Fee Schedule lookup. If CMS prices an item or service, billers can look up the cost using this file. Billers will have to provide data such as the HCPCS, location of the provider, and dates of service to access the information.


Avoid a double whammy: Prevent costly consolidated billing mistakes with these preadmission screening tips

Understanding consolidated billing (CB) rules for expensive drugs is only one component of successfully projecting profitability. Providers also need robust pre-admission processes in place that help billers weigh drug costs vs. revenue.  

Without such processes, the SNF may take on a patient with exponential costs that far outweigh the amount of revenue you will receive, says Pam Duchene, PhD, APRN-BC, NEA, FACHE, vice president of education and training for Harmony Healthcare International.

As part of the pre-admission screening process, billers, nursing, admissions, and the MDS coordinator must collaborate to determine whether the SNF should admit a patient. The biller, specifically, weighs in on whether the facility can afford to care for that resident, Duchene says.

During the prescreening process, billers should review the list of drugs or drug orders included in the patient’s referral packet from the hospital or another SNF. Check those costs against the resident’s Medicare Part D plan formulary, suggests Stefanie Corbett, DHA, postacute regulatory specialist for HCPro.

Solicit the help of your pharmacists. They can quickly determine drug costs for you, and can tell you if the drug is experimental and therefore not covered by Medicare, Corbett says.

Also check the resident’s Medicare Part D coverage to determine the cost of drugs. “Medicare Part D plans have different formularies. Coverage amounts are unique to each plan and alternatives can be provided,” Corbett says.

Because the setting in which a resident receives the drugs impacts whether the SNF includes the drug on the CB, billers should also factor the answers to the following questions into their estimated reimbursement rates for each resident:

  • What is the Medicare allowable amount for the drugs?
  • May all drugs be administered in the facility (or a hospital or physician’s office)?
  • Will the resident need appointments with external specialists during the Medicare Part A stay (i.e., appointments for drug administration)?
  • Where will those appointments take place, and will they be included in CB?
  • Will the resident require ambulance/transportation to/from the appointments?


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