Medicare recently announced upcoming changes to the way providers will report discarded amounts of certain drugs on claims, per new rules finalized in the 2023 Physician Fee Schedule. This blog summarizes the new JZ modifier, effective dates, and documentation needed to comply.
Background on Medicare Billing for Discarded Drugs
Currently, Medicare Part B covers the amount of a drug discarded from a single-use vial or package, in addition to the dose administered, if properly documented. This allows billing for the total drug amount prepared, including any discarded portion (1).
Since 2017, providers have been required to use the JW modifier on claims for "Drug amount discarded/not administered to any patient" from eligible drugs. This identifies the discarded amount billed to Medicare (2). Documentation in the medical record is also required.
New Reporting Requirement for No Discarded Amounts
Under the 2023 Physician Fee Schedule final rule, CMS established use of a new modifier when no amount is discarded from a single-dose container.
Effective July 1, 2023, providers must report the JZ modifier ("Zero discarded amount") on applicable claims when no drug is discarded (3). This will indicate no additional amount beyond the dose given was billed to Medicare.
When to Use the JZ Modifier
The JZ modifier applies to separately payable Medicare Part B drugs from single-dose containers or packages when there is no discarded amount (1). This includes drugs paid under:
• Physician Fee Schedule
• Hospital Outpatient Prospective Payment System
• Ambulatory Surgical Centre Payment System
Providers impacted include (1):
• Physicians
• Hospitals
• Ambulatory Surgery Centers
• Any provider billing for these Part B drugs
Billing Requirements with JZ Modifier
Starting July 1, 2023, claims for eligible drugs must include (1):
• The applicable HCPCS billing code
• The JZ modifier to indicate no discarded amount
• The units of the drug dose administered
There are no changes to use of the existing JW modifier to identify discarded amounts.
Phase-In of JZ Modifier
CMS is phasing in the new JZ reporting requirement as follows (1):
• January 1, 2023 - Optional use of JZ modifier
• July 1, 2023 - Mandatory use of JZ on claims within scope
• October 2, 2023 - Claims edits implemented if JW/JZ not reported
No JZ Modifier Leads to Claim Denial
As of October 2023, claims missing the JW or JZ modifiers when required will be subject to denial and audit (1). Using the modifiers improperly may also prompt audits.
Documentation Needed for Compliance
To comply with the billing rules for discarded drugs, providers must (1,2):
• Document the amount of any discarded drug in the patient's medical record
• Only bill Medicare for drug amounts actually administered
• Use the JW modifier to identify any discarded amount billed
• Use the JZ modifier when no drug amount was discarded
• Educate staff on proper documentation and billing protocols
Minimizing Drug Waste
In addition to compliance, providers should take steps to minimize drug waste through (2):
• Purchasing smaller vial/package sizes when appropriate
• Tracking usage patterns to forecast medication needs
• Standardizing vial sizes across departments
• Improving coordination of medication workflows
• Training staff on proper drug handling/dispensing
Summary
Healthcare providers must carefully adhere to the new JZ modifier requirement to indicate when no drug is discarded from a single-use container. Combined with ongoing use of the JW modifier and thorough documentation, this supports appropriate billing of discarded drug amounts under Medicare Part B.
Sources
1. CMS MLN Matters MM13056
2. CMS Manual System Pub 100-04 Medicare Claims Processing Manual Chapter 17
Section 40
3. CY 2023 Physician Fee Schedule Final Rule
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