Pharmacy Retroactive Claim Adjustments FAQs

Effective January 1, 2022, many pharmacy services, including covered outpatient drugs, enteral nutrition, some medical supplies and the applicable administrative services (for example, claim submission, processing, appeals, authorization, etc.) related to pharmacy claims, transition to Medi-Cal Rx. Pharmacy providers should submit claims for these products to Medi-Cal Rx. For more information on services covered by Medi-Cal Rx, providers should refer to the Medi-Cal Rx website.

Pharmacy Retroactive Claim Adjustments

  1. Why is the Department of Health Care Services (DHCS) reprocessing fee-for-service pharmacy claims for covered outpatient drugs?
    The Centers for Medicare & Medicaid Services (CMS) approved State Plan Amendment (SPA) 17-002 on August 25, 2017, with a mandated policy effective date of April 1, 2017. This SPA outlines the new actual acquisition cost (AAC)-based methodology DHCS has adopted for reimbursement of Medi-Cal fee-for-service covered outpatient drugs (CODs), to comply with the CMS COD Final Rule (CMS-2345-FC). The SPA also outlines the methodology for a new two-tiered professional dispensing fee. It took significant time for the state to update the claims processing system to reimburse using the new methodology. As a result, DHCS is required to process retroactive adjustments for impacted claims with dates of service on and after the policy effective date of April 1, 2017, and that were processed before the system implementation date of February 23, 2019.

  2. Is the authority to collect retroactive payments approved by CMS?
    Yes, with the policy effective date of SPA 17-002 being April 1, 2017, as approved by CMS, DHCS is obligated to reprocess pharmacy claims according to the new methodology between the policy effective date and the system implementation date of the new methodology.

  3. Are all pharmacy claims impacted?
    No, the following pharmacy-related claims are not subject to retroactive adjustments:
    • Blood factors

    • Enteral products

    • Incontinence supplies

    • Medical supplies

    Note: Physician-administered drug (PAD) rates impacted by this adjustment were implemented in Fall 2017, and claim adjustments occurred at that time.

  4. Does this affect Medi-Cal Managed Care pharmacy claims also?
    No, this only affects Medi-Cal fee-for-service pharmacy claims.

  5. Are 340B pharmacy claims impacted?
    Yes, 340B fee-for-service pharmacy claims for covered outpatient drugs will be reprocessed. However, because the drug ingredient cost reimbursement is already equal to the actual acquisition cost, only the professional dispensing fee component will be recalculated for these claims.

  6. When was the first claim adjustment processed?
    Pharmacy providers saw the first claim adjustment (Iteration 1 for claims with dates of service during April 2017) in the last checkwrite in May 2019, and for some providers, this continued into the first checkwrite in June 2019.

  7. What Remittance Advice Detail (RAD) code will be used for these adjustments?
    These adjustments will appear on RAD forms warrant date, with RAD code 0812: Covered Outpatient Drug Retroactive Payment Adjustment.

  8. Where can I direct my question related to retroactive payment adjustments not specific to the alternative payment arrangement option?
    Before January 1, 2022, contact the Medi-Cal Telephone Service Center at 1-800-541-5555. If outside of California, please call 1-916-636-1960.

    On or after January 1, 2022, contact the Medi-Cal Rx Call Center Line 1-800-977-2273 twenty-four hours a day, seven days a week, or 711 for TTY Monday through Friday, 8 am to 5 pm.

  9. Non-Alternative Payment Arrangement (non-APA) Providers

  10. When will the next claim adjustments and associated recoupment occur?
    To be determined. DHCS will notify pharmacies prior to resumption of the retroactive adjustments.

  11. How will the iterations and checkwrites work together to complete all of the claim adjustments over this period?
    There are several scenarios that could play out for each iteration, which will differ by provider. These scenarios include, but may not be limited to the following:

    • Scenario 1: All claims are reprocessed for the iteration, and the provider has a positive amount to be refunded to them. This positive reimbursement will be applied in its entirety to the next checkwrite.

    • Scenario 2: All claims are reprocessed for the iteration, and the provider’s amount owed for that iteration is fully recovered in the next checkwrite. Recoupment for that iteration is now complete.

    • Scenario 3: All claims are reprocessed for the iteration, and the provider’s amount owed for that iteration is NOT fully recovered in the next checkwrite. The remaining balance for that iteration would roll over to be applied to subsequent checkwrites until recovered.

    • Scenario 4: Claims are reprocessed for the iteration, but the claim volume exceeds weekly limits and not all claims are reprocessed before the checkwrite begins. The first checkwrite will attempt to recover the initial balance owed. The amount owed from the iteration may increase the following week after the remainder of the claims have been reprocessed and add to the amount owed for that iteration. The following checkwrites will attempt to recover any remaining balance for the iteration.

  12. What will my weekly claim adjustment amount be?
    It depends on your net difference for that iteration, and your weekly checkwrite amount. It is not a set amount. Up to 100 percent of your checkwrite will be used to satisfy any amount owed.

  13. When will we be notified of our liability in totality for the claim adjustment period?
    Since the remaining claims in the adjustment period spans 22 months broken into eight remaining iterations, providers will not receive notification of their total liability in advance.

  14. Will an Erroneous Payment Correction (EPC) letter for each iteration be posted to the DHCS website explaining these claim adjustments?
    No,While an EPC letter posted to the EPC page of the Medi-Cal website explaining the claim adjustments in totality and the RAD code identified for this EPC is posted, there will not be one letter posted per iteration.

  15. With so many claims being reprocessed in batch, it makes it difficult to dispute a claim.
    Historical NADAC prices are listed by week on the CMS Pharmacy Pricing website. Pharmacy providers may leverage the information provided on that website to determine appropriate claim reimbursement.

  16. If there has been a change in pharmacy ownership between April 1, 2017 and now, who is responsible for the recoupment?
    The “owner” on file for the date of service of the claim is responsible for any recoupment on that claim.

  17. I have erroneously been identified as the owning provider for an accounts receivable for an amount owed to DHCS because of these claims adjustments. My pharmacy sales contract clearly articulates the liability for the debt to the other party. What should I do?
    Please visit the Third Party Liability and Recovery Division’s (TPLRD) Provider Overpayments Program web page to submit an online update, or call TPLRD at 1-916-713-8222 for assistance.

  18. Alternative Payment Arrangement (APA) Providers

  19. My application was approved for the APA. When will I be informed of the amount to be withheld monthly?
    A final Alternative Payment Arrangement (APA) letter indicating the specific monthly amount to be withheld will be sent in mid-January 2021.

  20. What are the various repayment terms that TPLRD may assign to my approved application, and what are the criteria used to make that assignment?
    Approved providers will qualify for repayment terms based on their overall pharmacy operation’s gross profit margin, as follows:

    Gross Profit Margin Repayment Term
    10% or higher 24 Months
    5 – 9.99% 36 Months
    4.99% or less 48 Months

  21. Was the calculated Gross Profit Margin applicable only to the pharmacy’s Medi-Cal line of business, or all business operations?
    The calculated Gross Profit Margin was applicable to all business operations.

  22. What if weekly withholds do not fulfill the monthly amount due?
    You will be required to remit the payment shortage to DHCS via check or Electronic Funds Transfer (EFT) within 30 days from the last date of a given month. Failure to submit any payment shortages to DHCS may result in the termination of the APA and the remaining balance placed on a 100 percent offset until paid in full.

    Payment shortages may be submitted via the following payment methods:

    Payment by Check:
    Checks should be made payable to “Department of Health Care Services” and must list the appropriate provider number (NPI) and account receivable (A/R) number. Checks should be mailed to the following address:

    Department of Health Care Services
    Overpayments Unit, MS 4720
    PO BOX 997421
    Sacramento, CA 95899-7421

    Payment by EFT:
    Visit the TPLRD Electronic Funds Transfer Payments web page and follow the instructions to make an EFT payment.

  23. What if I wish to make payments in excess of the monthly amount due?
    If at any time you wish to make payments in excess of the monthly amount due, you may submit payment via check or Electronic Funds Transfer (EFT) to the Overpayments Program.

  24. If I still have an unanswered question regarding the Alternative Payment Arrangement option, where can I direct my question?
    If your question is not addressed within the FAQs, you may submit your questions online to TPLRD via the Provider Overpayments Program webpage, or call TPLRD at 1-916-713-8222 for assistance.

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