2023 Billing and Coding Changes: A Guide to this Year’s Policy Updates

The start of a new year always brings about many changes to policies in the medical billing and coding world. In 2023, however, some drug billing and coding changes have created confusion among providers and suppliers. A breakdown of these changes will help providers navigate the updated policies.

New Modifier JZ- Effective January 1, 2023

Effective January 1, 2017, CMS required that providers use the modifier JW (drug amount discarded/not administered to any patient) to report discarded amounts of single-dose container drugs to obtain payment for the quantity discarded. When a provider administers a prescription from a single-dose container to a Medicare beneficiary, CMS provides payment for the administered and discarded amounts.

The discarded amount is any amount that is not part of the prescribed dose and is not intended to have a therapeutic effect on the patient. Typically, the labeled amount on the drug container minus the dosage administered equals the discarded amount.

Because CMS observed low compliance with JW modifier usage in the past and because the discarded drug refund amounts rely on this data, CMS has established a separate modifier, JZ (zero drug amount discarded/not administered to any patient), to be reported on claims for single-dose packaged drugs to attest when there are no discarded amounts. The JZ modifier is effective January 1, 2023, but isn’t required on claims until July 1, 2023. Claims with drugs from single-dose containers without the JZ or JW modifier after July 1 may be subject to provider audits. Claims that do not report the modifiers as appropriate on or after October 1, 2023, may be returned as unable to be processed.

Applicable Settings for the JW and JZ Modifiers

CMS requires the JW and JZ modifiers for providers and suppliers who buy and bill separately payable drugs under Medicare Part B. This commonly occurs in physician’s offices, outpatient settings, and critical access hospitals for beneficiaries who receive drugs incident to physicians’ services. This requirement does not extend to rural health clinics, federally qualified health centers, or hospital inpatient admissions that providers bill under the Inpatient Prospective Payment System.

Appropriate Use of Modifier JW

When a provider administers a single-dose container, and there are discarded amounts, the provider must file a claim with two lines for the drug. Both line items will be processed for payment:

• One claim line must include the billing and payment code (such as a Healthcare Common Procedure Coding System code (HCPCS)) with no modifier and the number of units administered in the unit field.
• The second claim line must include the same billing and payment code as the previous one. However, providers must attach modifier JW and include the number of units discarded in the unit field.

Appropriate Use of Modifier JZ

When a provider administers a single-dose container drug, and there are no discarded amounts, the provider must file a claim with one line for the drug.

• The claim line must include the billing and payment code (such as an HCPCS code), the JZ modifier, and the number of units administered in the units’ field.

New Billing and Coding Processes Around Discarded Drug Amounts

CMS has no specific requirements regarding the method, format, or where the discarded amount of the drug is documented within the EHR. However, CMS expects providers to maintain accurate medical records regarding drug waste for every beneficiary.

Facilities may need to introduce new processes so that the information regarding drug waste flows efficiently from clinicians to the coding and billing staff. Some EHRs allow the clinician to input the dosage into an order set, then complete and document an auto calculation of the waste on the order set.

CMS will accept an automatic calculation of discarded amounts if the discarded amount is accurately documented. Some coding or billing systems may auto-populate drug codes with appropriate modifiers based on information within the EHR.

For example, a facility’s EHR may not allow for this type of automation and can’t be customized to auto-calculate waste and auto-populate the waste modifiers. In this case, organizations need to consider the following factors:

• Who will document this information, and when will they document it during the patient’s visit?
• How will they document it? Will the provider manually calculate the waste every time, or can they build standardization into the record when the waste for certain types of drugs is consistent for every patient?
• Where in the record will providers document the waste? The documentation needs to be easily accessible to whoever is coding the record.

The Bottom Line: Be Consistent

Consistency is critical to a successful process and reducing errors and delays in billing and coding.

For more detailed information from CMS regarding discarded drugs and biologicals and modifiers JW and JZ, see these recently published frequently asked questions: Discarded Drugs and Biologicals – JW Modifier and JZ Modifier Policy.

CMS Reverses 340B Payment Cuts for 2023

In addition to its annual medical billing and coding updates, CMS released the 2023 Outpatient Prospective Payment System (OPPS) Final Rule for the New Year. The latest OPPS final rule states that beginning January 1, 2023, Medicare will pay 340B hospitals under Medicare Part B for certain outpatient drugs (high-cost, separately paid drugs) at the same average sales price (ASP) rate it uses for non-340B hospitals. This rate is generally equivalent to the drug’s ASP plus 6%.

This new policy reverses previous payment cuts where Medicare paid most 340B hospitals for separately paid Part B drugs at a rate typically equal to ASP minus 22.5%. This reversal is due to a decision by the Supreme Court in American Hospital Association et al. v. Becerra, which found that CMS’s payment policy in previous years was not allowed under the Medicare statute.

Although the payment cuts have been reversed, CMS is continuing the 340B modifier policy. Modifiers TB (drug or biological acquired with 340b drug pricing program discount, reported for informational purposes for select entities), which is used by rural sole community hospitals, children’s hospitals, and PPS-exempt cancer hospitals, and modifier JG (drug or biological acquired with 340b drug pricing program discount, reported for informational purposes), which OPPS facilities use, will still be used on 340B drug claims.

The usage of the above modifiers will no longer trigger a payment reduction. However, CMS will use them for informational purposes. When billing for waste, providers should bill the discarded drug amount on a separate claim line with the applicable TB/JG modifier appended first, followed by the JW/JZ modifier.

New Codes for Biosimilars

CMS has also added new drug codes biosimilars as part of the 2023 CPT/HCPCS code set release. Biosimilars are FDA-approved medications comparable to other medications in efficacy, usage, potential side effects, and dosage. Typically, biosimilars cost less than the original biologic.

To support biosimilar production and drive down drug costs, CMS will reimburse biosimilars with an ASP less than or equal to the reference biological price at ASP plus 8%, as opposed to the regular biological reimbursement of ASP plus 6%. This 2% increase for a biosimilar drug started on October 1, 2022, and will continue for five years.

Vitalware® by Health Catalyst users can learn more about codes for biosimilars on the Vitalware dashboard under “Reference Documents” in the file “NDC to HCPCS Crosswalk for Manufacturer Specific Biosimilars CY2023.” This document crosswalks the national drug code (NDC) to the HCPCS code for the biosimilar to aid in using these new codes.

Additional Reading

Would you like to learn more about this topic? Here are some articles we suggest:

• New CPT Codes for 2023: This Year’s Need-to-Know Updates
• Commercial Medical Necessity Edits are Your Key to Fewer Denials
• Surprise Billing in Healthcare: The No Surprises Act Takes a Stand for Patients