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Claim Preparation and Transmission

Chapter 6

© 2010 The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 6 2

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 3

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 4

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 5

Claim Content (Cont.)

• Five components must be recorded when a claim is submitted:

1. Patient information2. Prescriber information3. Pharmacy information4. Insurance information5. Prescription information

• The correct insurance plan, codes, pricing, and fees need to be assigned

Chapter 6 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 7

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 8

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 9

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 10

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 11

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 12

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 13

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 14

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:1. Labeler code2. Product code3. Package size

Chapter 6 15

Pricing Prescriptions

• Four main methods are used to price pharmacy prescriptions in the retail setting:

1. Usual and customary price (U&C)2. Maximum allowable cost (MAC)3. Average wholesale price (AWP)4. Pending AMC Price

• Mathematical calculations are often required to find the appropriate price

Chapter 6 16

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 17

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 18

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 19

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 20

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 21

Creating Claims

• Within the pharmacy system, three claim submission options are in use:

1. Electronic (real-time)2. Electronic (batch)3. Paper

Chapter 6 22

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 23

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 24

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 25

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 26

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 27

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 28

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