July 5, 2005

Note:  The survey referenced in the following article ended August 31, 2005.

The Department of Health Care Services (DHS) is asking providers to complete the Conversion of X Codes to NDC Survey during August 2005. The survey is intended to gauge provider interest in using National Drug Codes (NDCs) for billing non-pharmacy drugs.

Background
DHS is currently determining the impact of HIPAA requirements for the billing of drugs and biologics on medical, clinic, and other non-pharmacy claims for drugs.

At this time, HIPAA does not name a standard medical data code set to report drugs and biologics for non-pharmacy drug transactions. For pharmacies, NDCs are the standard medical data code set. The Centers for Medicare & Medicaid Services (CMS) has recommended that state Medicaid programs use NDC numbers rather than Healthcare Common Procedure Coding System (HCPCS) codes on claims for drugs and biologics in order to maximize manufacturer rebate collection. Medi-Cal supports this recommendation because it offers standardization of drug identification and billing requirements for all drugs regardless of the dispensing entity.

DHS also supports the proposal because NDCs:

• Enable more rapid claim processing
• Can eliminate the need for attachments to claims for drugs
• Allow greater use of electronic submission and adjudication of claims
• Enable better analysis of drug usage
• Provide information essential for DHS to collect rebates
• Reduce medical costs incurred by recipients
• Reduce DHS, provider community, biller and health care plan operational costs when used in electronic transactions

Purpose of Survey
The purpose of this survey is to:

• Solicit information from affected Medi-Cal providers about the billing of drugs and biologics supplied in physicians' offices, clinics, and other non-pharmacy settings
• Determine providers' position about the standard code set that should be used to bill for drugs and biologics on non-pharmacy drug claims

For the purposes of this survey, non-pharmacy drugs are defined as those drugs that are administered in any outpatient setting (that is, a physician's office or clinic), or outpatient hospital setting, and submitted for payment on a UB-92 or HCFA 1500 paper claim or equivalent electronic format. Drugs dispensed by pharmacies to long-term care facilities are considered pharmacy drugs. This survey does not include drugs billed on a National Council for Prescription Drug Programs (NCPDP) claim transaction.

California's Medi-Cal program currently uses interim HCPCS Level III “X” codes to process drug claims. The interim codes are inefficient, not as specific as needed, and not in compliance with HIPAA code requirements. California proposes to replace these interim codes with NDCs rather than the HCPCS Level II codes currently allowed under HIPAA rules. Claims for physician-administered drugs would be billed and processed using UB-92 or HCFA 1500 paper claims or ASC X12N 837 v.4010A1 standard electronic claims.