Fact sheet






On October 30, 2008, the Centers for Medicare & Medicaid Services (CMS) issued a final rule with comment period that updates payment policies and rates for drugs, biologicals, and radiopharmaceuticals furnished in hospital outpatient departments (HOPDs) for calendar year (CY) 2009. 


The final rule for the Outpatient Prospective Payment System (OPPS), which updates the rates for services furnished in HOPDs, is generally issued by November 1 each year and, unless otherwise specified, becomes effective January 1 of the subsequent year.  The final rule identifies several provisions that were not addressed in the proposed rule, and are therefore open to comment during the 60-day comment period for the final rule.


This Fact Sheet addresses only the OPPS CY 2009 payment policies for drugs and biologicals.  CMS has also posted a Fact Sheet explaining the general provisions of the CY 2009 final rule.





Packaging Threshold for Drugs and Biologicals:

Under the OPPS, CMS includes payment for many drugs and biologicals in the payment for the associated procedure in which the drug is administered.  However, CMS makes separate payment for drugs and biologicals with estimated per day costs greater than the OPPS drug packaging threshold, which is a dollar amount specified in the rule.  For CY 2009, the OPPS drug packaging threshold is $60.  As in CYs 2007 and 2008, CMS has updated the drug packaging threshold based on the Producer Price Index (PPI) for prescription drugs, rounded to the nearest $5 increment. 


Payment for Separately Payable Drugs and Biologicals

CMS will pay for separately payable drugs and biologicals at the manufacturer’s average sales price (ASP) plus 4 percent in CY 2009.  Based on hospitals’ CY 2007 claims and most recent cost report data, CMS calculated hospitals’ average costs for drugs and biologicals (including both drug acquisition and pharmacy overhead costs) to be equivalent to ASP plus 2 percent.  However, similar to CY 2008, CMS is continuing the transition to a claims-based payment rate for separately payable drugs and biologicals.  For CY 2009, CMS will pay for these drugs and biologicals at a transitional rate of ASP plus 4 percent determined by blending the CY 2008 payment rate of ASP plus 5 percent and the rate from claims data of ASP plus 2 percent.  This transitional payment will provide a single payment for hospital drug acquisition and associated pharmacy overhead costs, consistent with standard OPPS practice. 


In response to comments on the proposed rule expressing concerns about increasing administrative burdens on hospitals, CMS is not adopting the proposed changes to the Medicare cost report that would have established two cost centers for reporting drugs with high and low pharmacy overhead costs. 


In the final rule, CMS also responds to concerns raised by commenters that include hospital charges for drugs obtained through the 340B Drug Pricing Program, which allows certain hospitals to purchase drugs at a discount, and deflates the overall equivalent average ASP calculation for hospitals that do not participate in the 340B program.  Given that CMS currently pays all hospitals the same rate for drugs, CMS continues to include hospital charges from 340B hospitals in the equivalent average ASP calculation based on claims data from all hospitals, but requests additional comments from the public regarding the 340B program’s impact on OPPS payment for drugs and biologicals.


Pass-Through Payment for Drugs and Biologicals

CMS provides transitional pass-through payments for certain new drugs, biologicals, and radiopharmaceuticals for a period of at least two but not more than three years.  CMS will continue to pay for pass-through drugs and biologicals at ASP plus 6 percent in CY 2009, equivalent to the rate these drugs and biologicals would receive in the physician’s office.


Payment for Therapeutic and Diagnostic Radiopharmaceuticals

As mandated by Section 142 of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), CMS will continue to pay for therapeutic radiopharmaceuticals at charges adjusted to cost for CY 2009. 


CMS will also continue to package payment for all diagnostic radiopharmaceuticals, which are used to perform a diagnostic nuclear medicine study, into the Ambulatory Payment Classification (APC) payment for their associated nuclear medicine procedures.  Accordingly, CMS calculated the CY 2009 payment rates for nuclear medicine procedures using only those claims that include a charge for a required diagnostic radiopharmaceutical or other radioactive product.



While currently no radiopharmaceutical products have pass-through status, per the MIPPA, CMS will pay for all new therapeutic radiopharmaceuticals that are granted pass-through status at charges adjusted to cost.  If a diagnostic radiopharmaceutical is granted pass-through status in CY 2009, CMS will provide separate payment at ASP plus 6 percent. 


Payment for Intravenous Immune Globulin Preadministration-Related Services:

For CY 2009, CMS is packaging payment for IVIG preadministration-related services, rather than making a separate payment for these services as CMS did on a temporary basis from CY 2006 to CY 2008.  Because it appears that market for IVIG has become more stable, the OPPS will now package the payment for IVIG preadministration-related services with the payment for the associated IVIG drug administration procedures, consistent with OPPS rule for the administration of other drugs and biologicals.


Payment for Drug Administration Services


CMS is restructuring the drug administration APCs from a 6-level into a 5-level structure for CY 2009 to more closely align payment to hospital claims data.  This structure places the Current Procedural Terminology (CPT) codes for drug administration into five levels that are based on logical, clinically coherent principles and are consistent with observed differences in hospital resource costs, both across levels and within each level.  Hospitals will continue to report CPT codes for drug administration services, and the five-level APC structure will continue to pay hospitals separately for each additional hour of infusion, in addition to the initial hour payment.



The final rule with comment will appear in the November 18 Federal Register. Comments on designated provisions are due by 5:00 p.m. Eastern time on December 29, 2008, and a final rule responding to the comments will be published at a later date.



For more information on the CY 2009 final rule with comment period for the OPPS, please see the CMS Web site