Compounded medications can be beneficial in certain circumstances. This article discusses how they can be billed in a retina practice. 

Q. How should a clinic bill for compounded medicines? 

A. Unlike FDA-approved drugs, off-label drugs and compounded medications are reimbursed at the primary payer’s discretion. Compounded drugs do not have National Drug Code numbers or an average sale price, so the local Medicare Administrative Contractor (MAC) sets the reimbursement for these medications. Generally, Medicare only covers compounded drugs administered by a physician or under the physician’s supervision; self-administered medications are not covered. 

Most compounded drugs are billed under the Healthcare Common Procedure Coding System (HCPCS) using “not otherwise classified” J-codes, J3490 or J3590. Bevacizumab is billed using J9035, while its recently approved biosimilars have been assigned specific Q-codes (Table 1). The appropriate coding can vary among MACs, so clinic staff must verify their specific payer’s policies to ensure that claims are approved when using compounded medications.

Table 1. HCPCS J-codes Used to Bill Compounded Medications

The Centers for Medicare and Medicaid Services (CMS) advises using the appropriate J-code on a single claim line. Many MACs may have a local coverage determination or local coverage article that specifies the approved J-code. Commercial, Medicare Advantage, and Medicaid plans may prefer other codes for claim submission. The options for compound medications include J9035, J3490, J3590, and J7999. The JW and JZ modifiers are used in the context of billing for compound medications. The JW modifier is used to report the amount of a drug that was discarded and not administered to any patient. On the other hand, the JZ modifier is used to attest that there was no discard amounts.   

The description of the medication and dosage should be indicated in box 24a of the CMS-1500 form or EDI loop 2410. The ICD-10-CM code used must represent the condition treated by the drug(s) billed on that detail line.¹ For example, if there is no discarded waste from a patient’s drug administration, the coding should be entered on 1 line as follows: 

• HCPCS code for the medication given;
• JZ modifier;
• Number of units administered: for compounded medications, this is usually 1 unit;
• Calculated price for the administrated amount; and
• ICD-10 code used for the condition being treated by the drug.

For Part B Medicare, most drugs and biologics administered during a surgical procedure are treated as part of the outpatient facility reimbursement; payment is bundled with the ambulatory surgery center (ASC) or hospital outpatient department facility fee. However, CMS will reimburse separately for some compounded drugs under the outpatient prospective payment system (OPPS) when they are provided in association with a covered surgical procedure; for example, compounded ceftazidime and vancomycin that are used to treat endophthalmitis during a vitrectomy. HCPCS code C9257 (injection, bevacizumab, 0.25 mg) is used for the treatment of approved ophthalmologic indications when billed in an ASC.²

Q. Are compounding pharmacies regulated?

A. Yes, this oversight has become more stringent over the past decade. The Federal Food, Drug, and Cosmetic Act established 2 categories of compounding pharmacies, 503A and 503B, named for subchapters of the law. 503A pharmacies compound according to prescriptions specific to individual patients. They are regulated by state boards and are required to follow United States Pharmacopeia guidelines. 503A pharmacies are not allowed to compound large batches, and physicians and surgical facilities cannot maintain an inventory of 503A-compounded medications.³

503B compounding pharmacies have federally regulated outsourcing facilities. They may manufacture large batches, with or without prescriptions, to be sold to health-care clinics for office use only. 503B compounding pharmacies may also provide patient-specific medications. Those that do are held to higher regulatory standards.³ Please note that these regulations can vary by state and it’s always a good idea to check with local regulations and guidelines. RP

Brandy H. Sperry, COMT, COE, CPC, CPMA, is an associate consultant with Corcoran Consulting Group (CCG) in San Bernardino, California, which specializes in coding and reimbursement issues for ophthalmic practices. Reach her at bsperry@corcoranccg.com.

References

1. Centers for Medicare and Medicaid Services. Billing and coding: approved drugs and biologicals; includes cancer chemotherapeutic agents. November 2, 2023. Accessed May 3, 2024. https://www.cms.gov/medicare-coverage-database/view/article.aspx?articleid=59576

2. Centers for Medicare and Medicaid Services. Billing and coding: bevacizumab and biosimilars. July 1, 2023. Accessed May 3, 2024. https://www.cms.gov/medicare-coverage-database/view/article.aspx?articleid=52370

3. US Food and Drug Administration. Application of federal law to practice of pharmacy compounding. June 21, 2018. Accessed May 4, 2024. https://www.fda.gov/drugs/human-drug-compounding/application-federal-law-practice-pharmacy-compounding