This year, the Centers for Medicare and Medicaid Services (CMS) updated its discarded drug policy. Two Healthcare Common Procedure Coding System (HCPCS) modifiers now apply to claims for drugs provided in single-use containers: the JW modifier and the new JZ modifier.¹

On July 1, 2023, claims involving drugs from single-dose containers that failed to report either the JW or JZ modifier became subject to denials and potential provider audits. Starting October 1, single-dose drug claims that do not use the modifiers appropriately may be returned as unprocessable until properly resubmitted. This column will answer some questions about how and when to use the JW and JZ modifiers (Table 1).

Q. What is Medicare’s policy for discarded drugs?

A. When a provider discards the remaining drug in a single-use container after administering a dose, Medicare provides payment for the discarded amount, as well as the dose administered, up to the amount designated in the single-use container.

The discarded amount is not part of the prescribed dose. It is the labeled amount on the container minus the prescribed amount of drug administered to the patient. For example, a single-use vial contains 10 units of drug; if 8 units were administered, 2 units must be discarded. Medicare reimburses the provider for all 10 units.

Q. Why did CMS establish a discarded drug policy?

A. In 2017, to encourage practice efficiency, CMS created its discarded drug policy. In ophthalmology, this initially applied to Botox (Allergan/AbbVie) vials that might be shared between patients. Any residual amount in the vial that was discarded was reimbursed when the claim identified it with the JW modifier.

The Infrastructure Investment and Jobs Act of 2021 required manufacturers to refund CMS for discarded drugs. Due to observed low compliance with JW modifier usage and incomplete JW modifier data, as of July 1, 2023, the new JZ modifier is required on claims for single-dose drugs when there are no discarded amounts.

Q. How is modifier JW used on a claim for reimbursement?

A. JW is required on a claim to report at least 1 unit of drug that is discarded and eligible for payment. For example, a provider obtains a single-dose container that is labeled to contain 100 units of a drug. She administers 95 units to the patient and 5 units are discarded. The 95-unit dose is billed on 1 line, while the discarded 5 units must be billed on another claim line with the JW modifier. Both line items would be processed for payment.

Q. How is modifier JZ used on a claim for reimbursement?

A. The JZ modifier should only be used for claims that bill for a single-dose drug container. In particular, the JZ modifier is always required where the JW modifier would be used if there were discarded amounts. For example, a provider obtains a single-dose vial that is labeled to contain 4 units of a drug. She draws up 4 units in a syringe and administers all of it to the patient, discarding the empty vial containing a damp residue as well as the syringe with a tiny amount of leftover fluid in the dead space. The 4-unit dose is billed on 1 line with the JZ modifier.

Q. Are there situations in which modifiers JW and JZ do not need to be used?

A. JW and JZ modifiers do not apply to or in the following:

• Drugs supplied in multiple-dose containers;
• Rural health clinics;
• Federally qualified health centers;
• The Inpatient Prospective Payment System;
• Drugs not separately payable in ambulatory surgery centers or hospital outpatient departments; or
• Vaccines.

Q. When a not otherwise classified HCPCS code applies, how should it be billed?

A. HCPCS codes J3490, J3590, J7999, and C9399 do not specifically identify a drug or units. Nevertheless, CMS requires JW and/or JZ modifiers for drugs from single-use containers. For example, a single-dose syringe of compounded bevacizumab (Avastin; Genentech) (J7999) contains 1 unit and no discard; all of it was administered to the patient, so use modifier JZ.

Q. When the administered dose is less than 1 unit contained in a vial, how should it be billed?

A. Bill for the entire vial using 1 unit on the claim for the drug together with the JZ modifier. It is not possible to bill for fractional billing units with the JW modifier.¹

Q. What is overfill, and how is it handled?

A. Overfill is any amount of drug greater than the amount identified on the package or label. CMS regulations expressly prohibit billing for overfill. The JW modifier does not apply to overfill.

Q. Does discarded medication need to be documented in the medical record?

A. Yes. The procedure note should include all pertinent information about the medication: name, strength, National Drug Code number, identification such as lot number if available, dose administered, and amount discarded. Any discarded amount less than 1 unit, such as overfill, cannot be reported on a claim. In that case, the procedure note should say, “any residual medication less than 1 unit was discarded.”

REFERENCE

1. Discarded drugs and biologicals — JW modifier and JZ modifier policy frequently asked questions. Centers for Medicare and Medicaid Services. Accessed July 26, 2023. https://www.cms.gov/medicare/medicare-fee-for-service-payment/hospitaloutpatientpps/downloads/jw-modifier-faqs.pdf