June 2, 2023 | By Grant Huang, CPMA, CPC
You’ve got just over a month before July 1, the day that modifier JZ (zero drug wasted) becomes mandatory on all claims for drugs in single-use containers that are used up without wastage. It’s a seemingly simple change that is being backed up by explicit government penalties and a timeline for when those penalties will kick in.
Beware: This is not some routine coding change mandated by CMS – this is a policy shift by which the federal government aims to claw back cash that it desperately needs to shore up the rapidly depleting Medicare trust fund. The Biden administration’s blockbuster Infrastructure Investment and Jobs Act (IIJA), passed in August 2021, includes a provision called the Drug Waste Accountability Act that aims to reduce drug waste by requiring pharmaceutical manufacturers to reimburse CMS for the cost of any unused or discarded drugs that were paid for by Medicare Part B.
This program gave CMS the responsibility for reducing drug waste and returning wasted funds back to Medicare’s coffers. To do so, CMS is setting a July 1 date for requiring modifier JZ to be appended, on pain of potential audits by your Medicare carrier. On Oct. 1, 2023, the penalty escalates dramatically to complete non-payment of claims. It will be a straightforward task for CMS to detect failures to comply with modifier JZ, because carriers will see J-codes for single-use drugs being reported without either modifier JZ or modifier JW (discarded drug not administered), and the bottom line is that these codes will need to have one or the other.
A cash incentive
It might seem like modifier JZ isn’t adding much information from CMS’ standpoint – after all, modifier JW has been required since 2017, so the assumption would be that single-dose drug codes without JW appended represent cases without any wastage. However, by making modifier JZ mandatory, CMS is eliminating the guesswork and putting the legal liability on your practice – as the billing entity – to explicitly state that single-dose drugs were administered with zero wastage.
One independent analysis found that 379 drugs had some amount of wastage in Q3 2021, with 44 of those drugs having significant wastage (in excess of 10% of the dose). The same analysis, conducted by the D.C.-based healthcare consulting firm Avalere Health, projects that if the 2021 data were annualized and applied to 2022, CMS could recoup $210 million in refunds from pharmaceutical companies under the Drug Waste Accountability Act. Such direct incentives bring to mind the cash bonanza that erupted when CMS unleashed commercial companies to audit Medicare providers under its Recovery Audit Contractor (RAC) program in 2009. The private companies were paid contingency fees by the government, based on a percent of the improper payments they recovered.
While the Drug Waste Accountability Act doesn’t involve private contractors or contingency fees, it still puts the government in a position where it can get more dollars with more aggressive enforcement.
Steps to prepare
You can start using modifier JZ right now – the modifier became effective on Jan. 1, 2023, and the only thing that changes on July 1 is that it becomes mandatory rather than optional. Consider taking the following steps between now and then to adjust your workflow so that July 1 will feel like a barely noticeable speed bump:
- Identify all your single-dose vials. This means all drugs that come in pre-filled syringes, including highly utilized drugs like insulin, heparin, fentanyl, high-dose vitamin K, and injectable biologics such as Humira, will be eligible for modifier JZ. Come July 1, CMS will be looking for a modifier on the codes you report for every single one of these drugs – they will either be fully used or there will be some noticeable problem results in wastage. Thus all of these J-codes will go out with modifier JZ or JW, and this is a new mindset that your coders and billers must begin adopting.
- Review your process for appending modifiers. You should be able to access modifier JZ in your billing system by now because it became effective on Jan. 1. It’s important to figure out right now how you can append modifier JZ in your software, and if you can’t find modifier JZ in your software’s modifier list, then you need to contact the vendor ASAP for instructions.
- Prepare to append modifier JZ to a lot of claims. Drug wastage should be fairly rare for most single-dose drugs. Incomplete injections, contaminated syringes, improperly stored doses, and patient refusals are all scenarios in which modifier JW would be applied to a single-use drug. Outside of these, modifier JZ would be used, which means that the vast majority of your single-dose injectable codes will need modifier JZ appended.
Conclusion
The good news is that modifier JZ shouldn’t be a heavy lift if you start adjusting your workflow now. Your coders and billers won’t need much time to determine whether JZ or JW applies, and they should already be doing an effective job of applying JW. Take advantage of the months that remain before July 1 to get used to modifier JZ.
Your next steps:
- Contact NAMAS for information about customized staff and provider training.
- Read more blog posts to stay updated on the 2023 Revisions to the 2021 E&M Guidelines.
- Subscribe to the NAMAS YouTube channel for more auditing and compliance tips!
NAMAS is a division of DoctorsManagement, LLC, a premier full-service medical consulting firm since 1956. With a team of experienced auditors and educators boasting a minimum of a CPC and CPMA certification and 10+ years of auditing-specific experience, NAMAS offers a vast range of auditing education, resources, training, and services. As the original creator of the now AAPC-affiliated CPMA credential, NAMAS instructors continue to be the go-to authorities in auditing. From DOJ and RAC auditors to CMS and Medicare Advantage Auditors to physician and hospital-based auditing professionals, our team has educated them all. We are proud to have helped so many grow and excel in the auditing and compliance field.
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