Inpatient Facility Coding & Compliance Alert

Do not report HCPCS codes for CMS deemed supplies.

Supply categorization for hospitals is a chargemaster issue that involves inpatient, outpatient, and even physician billing and payment – which means it’s important to everyone.

“This issue is not at all straightforward,” according to Duane C. Abbey, PhD, president of Abbey and Abbey Consultants Inc., in Ames, IA. “Federal Register language can be very confusing to hospital departments when CMS states that certain items are considered as supplies.” This issue results from the way in which Medicare considers payment for supply items. Read on to know more.

Background: Proper supply categorization relates directly to billing and reimbursement. As you are aware, most of the routine stock items such as swabs, cotton balls, etc., are not chargeable. This means that there is not even a line item in the chargemaster for these items. Ancillary or non-routine supply items are separately chargeable, that is, there will be line items in the chargemaster for these types of items. These supply items are specific to the patient, the number used is reported, and these items must be ordered by the physician.

According to the Nov. 13, 2015, Federal Register: “Supplies can be anything that is not equipment and include not only minor, inexpensive, or commodity-type items but also include a wide range of products used in the hospital outpatient setting, including certain implantable medical devices, drugs, biologicals, or radiopharmaceuticals …” (80 FR 70346)

What this Federal Register language implies is that for payment purposes there are some items that must be considered as supply items, subject to the rules and directives surrounding the billing of supply items.

How Supply Categorization Translates to Real Life Situations

The issue of proper supply categorization is most often evident with surgical procedures.

Example: Under certain circumstances a pharmacy item such as eye drops may be considered a supply. This is seen in cataract surgery, which is generally an outpatient service and eye drops are, in theory, self-administrable and thus not covered by the Medicare program. However, CMS has specifically directed that the eye drops are integral to the surgery and should be billed as supply items not billable to the Medicare beneficiary.

The key concept of “being an integral part” has therefore a very decisive, yet equally elusive role to play here. Even though discussed in various Federal Register entries, there really is no formal definition to this. Operationally though, this concept is partially applied through the NCCI (National Correct Coding Initiative) edits along with coding guidelines in the CCI manual.

HCPCS reporting; Pharmacy items, biologicals, skin substitutes, etc., generally have associated HCPCS codes. Some items may even be eligible for separate payment. Remember not to report the HCPCS code, however, if the given item is deemed as a supply for billing purpose, in order to make certain that there is no separate payment.

The road ahead: “Chargemaster coordinators along with coding and billing personnel will have to monitor those services in which there is the possibility of a given item that must be considered as a supply item for billing purposes,” explains Abbey. Therefore, identify first whether the item is to be considered a supply, in which case you may have to alter the billing as per Medicare.

While supply categorization should not be that difficult, you will still need to gradually assimilate the complex way in which the Medicare guidance has evolved.