CMS has released its much anticipated guidance on the reimbursement reduction for 340B-acquired drugs initially explained in the CMS CY2018 OPPS Final Rule.

As described in the Final Rule, CMS established two new modifiers to identify 340B drugs – the “JG” and “TB” modifiers. The “JG” modifier will trigger a 26.89% reimbursement reduction, while the “TB” modifier will be used for informational purposes. Beginning January 1, 2018, affected entities are required to report these modifiers on OPPS claims for certain separately payable drugs or biologicals that are acquired through the 340B program and administered or dispensed to a Medicare patient. These modifiers must be reported regardless of whether Medicare is a primary or secondary payor.

Generally speaking, a hospital’s Medicare OPPS designation determines the modifier regardless of how the hospital is enrolled in the 340B program. For example, if a hospital is paid under the OPPS as a rural SCH but is simultaneously enrolled in the 340B program as a DSH, the hospital will not have to implement the JG modifier; it will be subject to the TB modifier requirements described below.

Advis is pleased to provide further insight below regarding CMS’s recent guidance.

When the “JG” modifier should be used:

  • Which entities require the “JG” modifier?

Hospitals designated as Disproportionate Share Hospitals (DSH), urban Sole Community Hospitals (SCH), and Rural Referral Centers (RRC) are required to append the “JG” modifier to certain HCPCS codes acquired through the 340B program.

Hospitals must also report the JG modifier for services rendered in excepted (i.e., grandfathered) off-campus hospital outpatient departments (HOPDs). As a reminder, hospitals must also report the “PO” modifier for services rendered within these HOPDs. When reporting multiple modifiers, pricing modifiers should be listed first, and descriptive modifiers thereafter. Thus, in this instance, the “JG” modifier should be reported before the “PO” modifier.

  • With which drugs should the “JG” modifier be reported?

The “JG” modifier should be appended to separately payable non-pass through OPPS drugs (those with status indicator “K”) that are acquired through the 340B program. The modifier does not need to be appended to drugs with a status indicator of “F”,”L”,”M”, or “G”.

**DSHs, urban SCHs, and RRCs are also required to append the “TB” modifier to 340B-acquired drugs with status indicator “G” (pass-through drugs). A description of how each entity should use the modifiers is summarized below.

When should the TB modifier be used?

Hospitals that have been explicitly excepted from the reimbursement reduction are required to report the “TB” modifier for all drugs acquired through the 340B program, except status indicator “N” drugs subject to bundled payment, for which the modifier is optional. For CY 2018, these excepted hospitals are rural SCHs, Children’s hospitals, and PPS-exempt cancer hospitals.

As noted above, DSHs, urban SCHs, and RRCs affected by the 340B reimbursement reduction must also append the “TB” modifier to status indicator “G” drugs (pass through drugs).  For status indicator “N” drugs, these hospitals are not required to report a modifier, but may elect to report either modifier if it would be more administratively efficient.

  • What is a rural Sole Community Hospital?

The guidance released by CMS clarified the rural SCH definition. Rural SCHs are hospitals that (1) either meet the definition of a SCH under 42 C.F.R. § 412.92 or are Essential Access Community Hospitals (EACHs) and (2) are located in a rural area (as defined under 42 CFR § 412.109) or treated as being located in a rural area under 42 CFR § 412.10.  CMS refers hospitals to the OPPS impact file to determine whether they are designated as rural or urban.

  • Which drugs trigger reporting the “TB” modifier?

The “TB” modifier must be appended to all status indicator “G” drugs that are acquired through the 340B program. All hospital types that are paid through OPPS must report the “TB” modifier for status indicator “G” drugs. This includes DSHs, urban SCHs, and RRCs.

  • Are non-excepted HOPDs required to use the TB modifier?

In its recent guidance, CMS provided that hospitals are also required to report the “TB” modifier for drugs administered in non-excepted (i.e., non-grandfathered) off-campus HOPDs. This requirement was not included in the CY2018 OPPS Final Rule and is a new addition.

How should my entity use the modifiers?

Per CMS’ guidance, we have summarized how each entity should utilize the modifiers:

  • For Children’s Hospitals, PPS-exempt Cancer Hospitals, and Rural SCHs:
    • Status Indicator “K” drugs: TB
    • Status Indicator “G” drugs: TB
    • Status Indicator “N” drugs: TB optional
    • Non-excepted Off-campus HOPDs: TB
  • For DSH, RRCs, and Urban SCHs:
    • Status Indicator “K” drugs: JG
    • Status Indicator “G” drugs: TB
    • Status Indicator “N”: drugs: JG or TB optional
    • Non-exempted Off-campus HOPDs: TB

How should discarded drugs be treated?

Discarded drugs that were acquired through the 340B program should be billed with both the “JW” modifier (used to report the amount of drug discarded) and the appropriate 340B modifier.

Does this affect Medicare managed care claims?

As of today, CMS has not yet referenced Medicare managed care claims in any written guidance in relation to the CY 2018 OPPS Final Rule. Therefore, based on the information currently available, these modifiers appear to apply only to Medicare fee-for-service claims.

Does my hospital still need to report the Medicaid-required modifier?

Also as of today, this CMS rule and guidance does not change any Medicaid billing requirements. Therefore, if your state requires a 340B modifier for Medicaid claims (i.e., “UD” or “U8”), you should continue to report this modifier.

Given that the use of these Medicaid modifiers is now duplicative as a result of the new CMS 340B modifiers, Advis is actively working with state Medicaid departments to seek waivers from the state-specific modifier requirements.

What happens if my hospital is unable to implement the modifiers before the January 1, 2018 deadline?

In a situation where an entity is unable to fully implement the modifiers before the January 1, 2018 effective date, CMS advises hospitals to contact their MAC to discuss potential options. Your options include rebilling or holding claims once or until the modifiers are implemented. Hospitals are responsible for remaining fully compliant with all 340B regulations, including CMS’ CY2018 OPPS Final Rule and subsequent guidance.

Advis has vast experience in the 340B program and is available to assist with all 340B reimbursement matters, including compliance with the new Final Rule and implementation of the “JG” and “TB” modifiers. For additional clarification on the CY2018 OPPS Final Rule, 340B modifier guidance, or information regarding the 340B program in general, contact an expert.

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