Latebreakers: CMS compromises on hospital pharmacy payment system rules

November 19, 2007

Hospitals will not have to deduct pharmacy overhead costs from drug acquisition costs on Medicare claims, nor will they have to report overhead charges as a separate billing line item. However, CMS refused to back off its proposal to cut the 2008 reimbursement rate for all separately payable drugs.

First, the good news: Hospitals will not have to deduct pharmacy overhead costs from drug acquisition costs on Medicare claims under the outpatient prospective payment system for 2008, nor will they have to report overhead charges as a separate billing line item. Earlier this year, CMS proposed requiring hospitals to break out overhead costs and report those costs on an uncoded revenue code line. ASHP criticized the idea, claiming it would be "extremely difficult, if not impossible," to accomplish and would require the creation of two separate billing systems. CMS relented but refused to back off its proposal to cut the 2008 reimbursement rate for all separately payable drugs and biologics from average sales price (ASP) plus 6% to ASP plus 5%. The decrease is bad news for hospital pharmacies, claims ASHP, because it does not adequately cover pharmacy costs or the expense of managing medications. CMS' final rule will be published in the Nov. 27 Federal Register.