Significant changes in the method for billing outpatient drugs to State Medicaid programs will go into effect January 1. Historically, such drugs have been billed using HCPCS J-codes, which in most instances are not sufficient to identify the manufacturer of the drug being administered. As a result of this, State Medicaid programs were often unable to obtain the statutorily mandated drug rebate payments from the appropriate drug manufacturer. Congress acted to remedy this by requiring CMS to mandate that states collect sufficient information to obtain rebates. (Section 6002 of the Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171) (February 8, 2006)). CMS issued implementing regulations on July 17, 2007 (72 Fed. Reg. 39142).

Ober|Kaler's Comments: The implementing regulations make clear that hospitals billing Medicaid for physician administered drugs that are provided as part of hospital outpatient services, and are separately billable, must be coded with the full eleven digit NDC number. States that fail to collect this information will not receive their FFP cost share from the federal government. Not surprisingly, most, if not all, state Medicaid programs have issued implementing rules. Unfortunately, these rules fail to recognize the tremendous practical difficulties that hospitals will face in gathering this NDC information. With the possible exception of chemotherapy drugs, most hospitals do not track the administration of drugs at the eleven digit NDC level. Many hospitals will be faced with the unfortunate choice of expending significant resources to capture this data, or simply forgoing their right to bill Medicaid for these drugs.