The Forest or the Trees: Defining Waste and Setting Priorities

On June 25, 2013, the HHS Office of Inspector General (OIG) released an audit of a contractor’s Medicare payments for unused, discarded single use drugs, focusing on a particular drug, Xolair®.  The OIG found that physicians who administered Xolair  and claimed payment for the unused portion of the drug failed to document the amount of the unused drug in the patient’s medical record. Over a one-year period, the OIG estimated that about $69,000 paid for Xolair ought not to have been paid for that reason.   The drug is relatively expensive; together, Medicare and the beneficiary pay $1,188 for a 300-milligram (mg) dose.

Defining the Problem

The unused portion of a single-use drug must be discarded. The Medicare Claims Processing Manual (Pub. 100-4) provides that payment may be made for a single-use drug up to the amount indicated on the vial. A physician may file a claim for the entire amount in the vial or may bill for the amount administered on one line and enter a “JW” code for the remainder on a second line. Contractors may, but don’t have to, require use of the JW code. This contractor chose not to require physicians to use the JW code, but to require documentation of the unused amount in the medical record instead.

Xolair is an injectable drug that is most often administered in standard doses of 150, 225, 300, or 375 mg. In the United States, it is available in vials of 150 mg. In Europe, however, it is also available in 75 mg vials. Whenever a dose of 225 or 375 mg is administered in the United States, 75 mg is wasted.

What are CMS, the contractor, and the OIG trying to accomplish? Patient safety requires that leftovers from a single use drug may not be used for another patient. Medical records must be accurate, and it makes sense that a physician would record in the patient’s chart the amount administered rather than the amount in the vial.  If we want to avoid waste, what is the most logical solution?

What Doctors Did

The OIG reported that it examined 100 line items from physician claims for Xolair, and 30 of those line items were for discarded medication. The physicians who claimed those 30 line items said they didn’t know about the contractor’s requirement. But for 16 more, Xolair was discarded but not billed. Some physicians didn’t know that they could be reimbursed for the discard; others did not bill for discarded drugs as a matter of policy. The physicians who were aware of the requirement to record discards in the patient’s medical record did not submit any of the claims for discarded Xolair.

OIG’s Recommendation

The report states that 46 of 100 line items reflected treatments in which 75 mg of Xolair was discarded. Of those, 30 billed for the discarded drug, and 16 did not. OIG found that only 2/3 of the potential claims for discarded Xolair were presented; it recommended that the contractor require doctors to use the JW code on line items for discarded Xolair, educate doctors about the requirement, and monitor for compliance with usage of the code.  Use of the JW code would speed up review of the claims for discarded drug. It would be easier for physicians than adding the information to patients’ files. But it wouldn’t reduce unnecessary payments or prevent wastage of an expensive drug.

The Source of the Problem?

As the OIG report states, only the 150 mg vials are available in the United States, although the developer presented both 75 and 150 mg vials to the FDA for approval. Medicare payment for unused Xolair removes any incentive physicians might have to demand the 75 mg vial.  And it benefits the manufacturer, because it sells more Xolair than it would if doctors could buy only what they needed for a patient.  But the Medicare Trust Fund and beneficiaries pay the price.