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SNIP -- Translations Sub Work Group

NDC Codes

A White-Paper Giving a General Overview and Possible Solutions Associated With NDC's Replacing HCPCS Drug Codes For Institutional and Professional Billing.

WEDI SNIP White Paper Disclaimer This document is Copyright © 2001 by The Workgroup for Electronic Data Interchange. It may be freely redistributed in its entirety provided that this copyright notice is not removed. It may not be sold for profit or used in commercial documents without the written permission of the copyright holder. This document is provided "as is" without any express or implied warranty. While all information in this document is believed to be correct at the time of writing, this document is for educational purposes only and does not purport to provide legal advice. If you require legal advice, you should consult with an attorney. The information provided here is for reference use only and does not constitute the rendering of legal, financial, or other professional advice or recommendations by the Workgroup for Electronic Data Interchange. The listing of an organization does not imply any sort of endorsement and the Workgroup for Electronic Data Interchange takes no responsibility for the products, tools, and Internet sites listed. The existence of a link or organizational reference in any of the following materials should not be assumed as an endorsement by the Workgroup for Electronic Data Interchange (WEDI), or any of the individual workgroups or sub-workgroups of the Strategic National Implementation Process (SNIP).

The following draft document has been prepared by SNIP (Strategic National Implementation Process) for the express purpose of soliciting industry review and input. All comments received by or before the comment closing date will be considered for inclusion in the associated final document. SNIP recognizes the critical importance of Industry review and input to the successful implementation of HIPAA. So please take this opportunity to participate and let your voice be heard.

DISCLAIMER This [article] is Copyright© 2001 by The Workgroup for Electronic Data Interchange. It may be freely redistributed in its entirety provided that this copyright notice is not removed. It may not be sold for profit or used in commercial documents without the written permission of the copyright holder. This article is provided "as is" without any express or implied warranty. While all information in this Article is believed to be correct at the time of writing, this article is for educational purposes only and does not purport to provide legal advice. If you require legal advice, you should consult with an attorney.

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National Drug Codes (NDC)

National Drug Codes (NDC) White-Paper Purpose and Scope

Purpose

The SNIP Translations Set Sub Work Group has identified issues related to the adoption of National Drug Codes (NDC's) as the standard for reporting drugs and biologics. The Secretary of HHS adopted NDC's as the standard in the Final Rule on Code Sets that was published on Aug 16, 2000. The purpose of this white paper is to provide an overview and identify key issues involved in replacing HCPCS Drug Codes with NDC's. This white paper was constructed based on the final transaction rule, which requires the use of NDC's in electronic transactions. It is unknown if any future rule changes will remove or will not remove the NDC requirement. Regardless, it is important to fully understand the NDC issue.

Scope

The scope of this white paper will address the following issues: 1. What are NDC's? 2. What are J-Codes (HCPCS Drug Codes)? 3. 4. How are HCPCS Drug Codes and NDC's used today? What are the issues surrounding the replacement of HCPCS Drug Codes with NDC's for reporting drugs and biologics on standard transactions?

5. Problems using NDC's on current paper claim forms. 6. Overview of Hospital Processes and why Providers will struggle with NDC's. 7. Letter from NCVHS recommending that the requirement at section 162.1002 (c) in the Final Rule for Standards for Electronic Transactions be modified by retracting the adoption of NDC's as the standard for drugs and biologics for use in standard transactions other than for retail pharmacy. February 22, 2001

Overview

NDC's were adopted as the standard for reporting drugs and biologics on all standard electronic transactions (August 17, 2000). Currently, most drugs and biologics are reported with HCPCS Drug Codes. The NCPDP retail pharmacy claim, which was adopted as the standard for retail pharmacy claims, has always used NDC's for reporting drugs and biologics. The X12N 837 Dental Claim, the adopted standard dental claim, does not capture drugs or biologics. However, the X12N 837 Institutional and Professional claim transactions do capture drugs/biologics through the use of NDC's. Furthermore, the X12N 835 Payment and

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Remittance Advice will use NDC's to report drug/biologics information on adjudicated claims back to the provider. The Final Rule does not require the use of NDC's on paper claims. However, the following responses in the Preamble and Q/A Section on the HHS website seem to indicate that Trading Agreements can be created which allow a payer and a provider to choose whether to use HCPCS Drug Codes, NDC's or both when billing a paper claim. It appears that while not required by the Final Rule, a health plan may create new paper claim form instructions that require providers to submit paper claims with standard Health Care code sets. "Response: These are powerful arguments from a cost benefit standpoint. While the HIPAA statute provides the Secretary with the authority to declare these standards applicable to all transactions, including those on paper, we chose at this point to focus on standards for electronic transactions. Most of the paper forms currently in use today cannot accommodate all of the data content included in the standard transactions. This does not prevent health plans from requiring the same data, including identifiers for paper transactions as is required by the HIPAA regulations with respect to electronic transactions." The HHS Administrative Simplification website (http://aspe.os.dhhs.gov/admnsimp) also lists the following answer to a question about NDC's and the HCFA-1500 (the paper claim form used by physicians and suppliers). "The standards adopted in the Standards for Electronic Transactions Final Rule do not apply to the HCFA-1500 or to other paper forms. The National Uniform Claim Committee (NUCC), which is responsible for the content of the HCFA-1500, has no current plans to revise that form in light of the publication of the Final Rule. However, the NUCC is interested in developing general completion instructions that could be used by many, if not all, health plans. Such instructions would likely address the collection of the National Drug Codes for drugs and biologicals. Health plans that use the HCFA-1500 may choose to revise their instructions for completing the HCFA-1500 in an effort to collect information that will be the same as or consistent with the standards adopted in the Standards for Electronic Transactions Final Rule. For example, the Health Care Financing Administration (HCFA), which administers the Medicare program, will be making changes to its HCFA-1500 completion instructions in order to collect NDC's. Item 24d of the HCFA-1500 can accommodate up to 12 characters in the combined spaces labeled "CPT/HCPCS" and "Modifier." When reporting an NDC in item 24d, however, another item on the HCFA-1500 would have to be used to capture a modifier or supporting documentation, if that information also needed to be reported. "

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National Drug Codes (NDC)

Business Drivers

· · · To provide the healthcare industry background information on HCPCS Drug Codes and NDC's. Raise the industry's awareness to the differences between HCPCS Drug Codes and NDC's as they relate to billing Institutional and Professional Claims. Make the industry aware of the available options when dealing with the replacement of HCPCS Drug Codes with NDC's.

Background

Subtopic 1: What are NDC Codes? The National Drug Code (NDC) serves as a universal product identifier for human drugs and biologics. The NDC is presented in several formats. The 11-position format was adopted as the standard. The NDC is divided into 3-segments. The 11digit format is the format adopted by the Final Rule as noted in the Preamble: "We are adopting the 11-digit NDC in order that the format is distinctive and will be in place until the Secretary decides to adopt a new code system." The first segment is the labeler code that identifies any firm that manufactures, repacks/distributes a drug product. The second segment is the product code. It identifies the strength, dosage form and formulation. The third segment is the package code. This segment identifies package size. The NDC Directory is updated on a quarterly basis by the Food and Drug Administration (FDA) as noted here in the Preamble of the Final Rule: "...The Food and Drug Administration's Center for Drug Evaluation and Research provides daily updates to the New and Generic Prescription Drug Approval List. They provide weekly updates to the FDA Drug Approval List. This list includes additions and deletions to prescription and over the counter (OTC) drug products. This list must be used in conjunction with the most current publication of the Approved Drug Products with Therapeutic Equivalence Evaluations (a.k.a. Orange Book), which is updated on a monthly basis. The NDC Directory is updated on a quarterly basis. These lists are available via the Internet at: http://www.fda.gov/cder."

Because of the frequent updates, it is very important that provider and payer systems be designed to apply NDC updates in a highly automated manner.

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National Drug Codes (NDC)

Subtopic 2:

What are J-Codes? The J-Codes are part of the alphanumeric (leading alpha + 4 numbers) HCPCS Level II codes beginning with `J'. Like other HCPCS Level II codes they are updated annually. While the HCPCS J Codes are assigned to drugs, HCPCS Level I codes (the CPT codes) contain some drug/biologic codes (e.g. vaccines). It is therefore more appropriate to use the term HCPCS Drug Codes to refer to Level I and Level II HCPCS codes that represent drug biologics. Because HCPCS Drug Codes are updated annually, many local codes were established independently of the HCPCS process to represent new drugs or combinations of drugs. Local Codes must be eliminated as part of HIPAA. If entities believe there is no existing code to meet a particular business need, they must work through the Designated Standards Maintenance Organization (DSMO's) assigned to the code set in question rather than create a local code. HCPCS Drug Codes are much more generic than NDC's. The single code describes the drug used and the quantity given. They do not identify the manufacturer of the drug. For example the description of J1820 is: Injection, insulin, up to 100 units. Code used for Humalog, Regular, NPH, Lente, or Ultralente insulin.

Subtopic 3:

How are HCPCS Drug Codes and NDC Codes used today? Today, the combination of NDC and HCPCS Drug Codes are used by some health plans to determine reimbursement for outpatient institutional, physician and pharmaceutical (chemotherapy and some injectables) services. Nonetheless, most payers and providers exclusively use HCPCS Drug Codes. The reason for the predominant use of HCPCS Drug Codes may be related to the fact that most providers' billing, practice management and payer systems were built many years ago when HCPCS Drug Codes were the only existing standard. To fully utilize the NDC's required by the regulations; providers and payers alike must undergo extensive process and system reengineering. The following is an illustration of how one payer today, for some services, requires NDC codes on the HCFA 1500. When billing generic or unlisted HCPCS codes, the NDC code is required to determine benefit and reimbursement. J9999 is billed on one line and the NDC code describing the drug is put on the following line. Pricing is performed manually for these claims by referring to an NDC database maintained by a business partner. Payers may choose to develop a complete NDC pricing system or outsource it to a business partner. The degree of manual intervention versus automation will vary payer to payer. For injections, the payer requires the NDC only. Claims may or may not come in with the J code or the administration code. The NDC units (including partial units) are included on the claim form. Pricing is not done manually, but rather information is

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input into a file and sent to a business partner who prices the drug and returns the information to the payer. The following instructions explain how the PAYER ABC uses NDC's in combination with HCPCS on paper claim forms today.

Determining drug units PAYER ABC recommends that you follow the guidelines below when recording the number of units in column 24G of the HCFA 1500 claim form:

· · · · · · Each vial of powder for reconstitution should be billed as one unit. Combination drug packages that are dispensed in an unbreakable package should be billed as one unit. Bulk powders should be billed in grams (g). Liquids, suspensions, solutions, large-volume IV solutions, irrigations, etc., should be billed in milliliters (ml). Small-volume injectables (piggybacks) in solution, injectables in solution (vials) and pre-filled syringes should be billed in milliliters (ml). Use the actual metric package size when it is available from the manufacturer or distributor. If this measurement is unavailable, the following standard conversions should be used:

.

One fluid ounce equals 30 ml. One pint equals 480 ml. One ounce equals 30 g. One pound equals 454 g. One liter equals 1000 ml.

Completing the HCFA 1500 claim form Please use the NDC number to specify the particular drug used in column 24D of the HCFA 1500 claim form. This number, along with the appropriate "J" code or HCPCS code, should be used for all drugs, injectables and enteral nutrition solutions.

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National Drug Codes (NDC)

Examples

If possible, please place the NDC number in the modifier section of the same service line as the "J" code as shown below. If this is not possible because you do not have small font sizes on your typewriter or computer, place the NDC number on the next service line. Indent slightly as shown below to clearly distinguish the NDC number from other codes.

Preferred

24. A DATE(S) OF SERVICE FROM TO MM DD YY MM DD YY B PLACE OF SERVICE C TYPE OF SERVICE D PROCEDURES, SERVICES, OR SUPPLIES (Explain Unusual Circumstances) CPT/HCPCS | MODIFIER E DIAGNOSIS CODE F $CHARGES G DAYS OR UNITS H EPSDT Family Plan I J K RESERVED FOR LOCAL USE EMG COB

07 |01| 96

07 |14| 96

12

NDC: J9999

| 00002-7266-25

1

XX XX

42

Acceptable

24.

A DATE(S) OF SERVICE FROM TO MM DD YY MM DD YY

B PLACE OF SERVICE

C TYPE OF SERVICE

D PROCEDURES, SERVICES, OR SUPPLIES (Explain Unusual Circumstances) CPT/HCPCS | MODIFIER

E DIAGNOSIS CODE

F $CHARGES

G DAYS OR UNITS

H EPSDT Family Plan

I

J

K RESERVED FOR LOCAL USE

EMG

COB

07 |01| 96 07 |14| 96

12

J9999 | NDC:00002-7266-25

1

XX XX

42

| |

| |

NOTE: There is a print matrix of the HCFA-1500 available in the Medicare Carriers Manual and at www.hcfa.gov. It should also be noted that the matrix is designed for Pica size characters; Medicare providers cannot change the font in order to add more characters to the field.

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Subtopic 4:

What are the issues surrounding the replacement of HCPCS Drug Codes with NDC Codes? Many have commented on the fact that the NDC's indicate the manufacturer and packaging of a particular drug and that the packaging has no correlation with its distribution. Therefore, the number is not useful for claim submission when dispensing subsets of a given drug and should be eliminated from the Final Rule. The X12N 837 Institutional and Professional Claim Implementation Guides are not clear in conveying the way that units of measure are to be reported when using NDC's. The sv205 element in the 837I and sv104 in the 837P are defined as data type "R" which means it can contain a decimal (i.e. 15.4). This will allow for the coding of partial dosage amounts. However, the 837 implementation guides indicate International Units as the unit of measure for NDC's. Another approach would be to change the implementation guides for SV103 (in the 837P) and SV204 (in the 837I) to allow additional units of measure: tablets, milliliters, grams and etc. This is the same method that the Retail Pharmacy Industry uses to describe how much of any drug was dispensed to a customer. Because the retail pharmacy industry managed to resolve the issue of drug packaging versus how the drug is dispensed, they continue to use NDC's in the NCPDP retail pharmacy claim. For clarity the following example is provided, a large bottle of Drug X is in stock in the pharmacy. The bottle contains 500 tablets, 200mg each tablet. A customer fills a 20-tablet prescription. The pharmacist indicates on the claim that only 20 (quantity) tablets (unit of measure) of Drug X NDC 12345678900 were dispensed. A claim is created using the NDC for the 500-tablet bottle. In the case of compounds and/or "Cocktails", every ingredient in the "cocktail" is listed by NDC, quantity, and unit of measure per ingredient in the mix.

Methods systems may use to manage NDC and HCPCS Drug Code Issues Cross walking is an approach for converting one set of values to another set through the application of business rules. EDI systems have cross-walked many types of external code sets to internal code sets over the years. Cross walking is done to insulate the internal systems from being changed to process a different set of data. NDC and HCPCS Drug Codes cannot be cross-walked one for one because HCPCS Drug Codes are less specific. In addition, HCPCS drug codes are assigned primarily to drugs that are administered by physicians or other practitioners (some exceptions exist), whereas NDC's are assigned to all drugs and biologics. Because of this, NDC's can be cross-walked to HCPCS Drug Codes but HCPCS Drug Codes cannot be cross-walked to the more specific NDC's. One HCPCS Drug Code may map to many NDC's.

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National Drug Codes (NDC)

One-to-Many Relationship Example: HCPCS Drug Code Q2016 Q2016 Q2016 Q2016 Q2016 NDC Description (Brand Name) Humatrope 5mg vial Humatrope 6mg cartridge Nutropin 5mg vial Nutropin AQ 10mg vial Genotropin 13.8mg vial NDC Number 00002-7335-16 00002-8089-01 50242-0072-02 50242-0023-08 00013-2646-81

Reimbursement amounts for the Q2016 (Somatropin, 1mg) example given above range from 187.00 to 468.00 for the same HCPCS Drug Code. This is a dramatic difference in the reimbursement amount and illustrates one of the problems with establishing reimbursement rates based on generic HCPCS Drug Codes. Because there is not a one to one mapping of HCPCS Drug Codes to NDC's, building a crosswalk may not be very useful. This leaves the following options: 1. As much as possible, build a cross walk between NDC's and HCPCS Drug Codes and handle unmapped values manually. This assumes that the internal system producing or receiving the claim information would not be changed to use NDC's. Instead, theses systems would continue to exclusively use HCPCS Drug Codes. This is not a good alternative because it defeats the purpose of establishing national standards. Furthermore, it could create confusion in provider/payer communications regarding claim adjudication as well as COB processing among multiple payers.

2. Change internal systems to process NDC's and HCPCS Drug Codes. Payers and providers will migrate at different times prior to the transaction regulation compliance date. During this transition period, payers and providers alike will need to process claims and remits containing both NDC and HCPCS Drug Codes. After the rules become effective, systems will still be required to process both code sets if paper claims do not exclusively use NDC's. One must keep in mind that, unless a paper claim is filled out by hand, the information for a paper claim comes from a computer system. If the paper forms are changed to allow for the larger NDC, the industry would benefit from using the unique NDC than having to support one code set on paper and another electronically.

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3. Revise the HIPAA regulations to accept both HCPCS Drug Codes and NDC's. Trading partner agreements would specify which code set to use. Removing NDC's as a requirement for drugs and biologics would save the industry substantial financial resources because most provider and payer systems currently do not support NDC's. Allowing parties to report drugs and biologics using different code sets defeats the purpose of establishing national standards. If the NDC requirement is removed from the regulation, some will choose to covert to NDC's anyway, others will stay with HCPCS Drug Codes and still others may use a combination of both. This will serve to complicate the industry rather than simplify it. HCPCS Drug Codes are much more generic than NDC's. Any benefits gained by using the more specific NDC number would be lost if the NDC requirement is removed from the regulation. Benefits such as being able to specifically track what manufacturer made a particular drug and which patients received a given drug produced by that manufacturer. This could prove to be a valuable piece of information in tracking drug effectiveness, quality of care and managing the impact of drug recalls.

Subtopic 5:

Problems using NDC's on the current paper claim forms. 1. Current claim forms do not have enough room on them to accommodate the larger NDC's when using Pica size characters. If the larger NDC number is printed on the current form, it will overflow into adjacent fields. Many payers use optical scanning technology to read information from the paper claim and create an electronic claim. These processes greatly reduce the amount of time it takes to adjudicate paper claims. If a payer receives some paper claims with HCPCS Drug Codes and some with NDC's, the optical scanning process may not be able to differentiate between an invalid number and an NDC that has overflowed into the adjoining field on the paper form. If the overflow issue could not be resolved, it could result in an increase in manual processing thus delaying claim adjudication. If the NDC requirement remains part of the rule, the current paper forms should be expanded to handle the larger format of the NDC's. At that same time, the forms should be evaluated in light of other HIPAA Codes Sets and Identifiers. While not required by the regulation, the industry should voluntarily switch to NDC's (after the forms are modified) for billing drug and biologics on paper claims. Having to support multiple code sets complicates rather than simplifies processing.

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Subtopic 6:

Overview of Hospital Processes and why some Providers will struggle with NDC's Concerns: Many provider Information Systems do not transfer the NDC's from the pharmacy system to the billing system. HCPCS Drug Codes are assigned to the bill by referring to the doctor's notes regarding what drug was ordered rather than the pharmacy passing along the NDC of the drug used to fulfill that order. Many providers purchase drugs and biologics through a bid process. The manufacturer of any given drug may change week-to-week or day-to-day. When the provider purchases the same drug from a different manufacturer, the NDC changes. The pharmacy system would have the responsibility of managing the NDC's as drug orders were fulfilled by various manufactures/suppliers and communicating those changes to the enterprise as appropriate. Possible Solutions: Provider pharmacy systems will need to be modified to communicate NDC's to the billing system. One approach is to utilize Enterprise Application Integration (EAI) technology to connect the disparate systems. Once in place, this EAI backbone could facilitate the communication of many other pieces of data (not just NDC's) throughout the Provider Enterprise thus lowering the total cost of ownership for the organization. A second (less technical) approach is to have the pharmacy produce a physical label at the time of dispensing. This label would contain (among other things) the NDC. When the drug is administered the label is applied to the chart and the quantity and unit of measure is recorded. When the billing personnel use the chart to create the claim, the NDC would be readily available.

Subtopic 7:

Letter from NCVHS recommending that the requirement at section 162.1002 (c) in the Final Rule for Standards for Electronic Transactions be modified by retracting the adoption of NDC's as the standard for drugs and biologics for use in standard transactions other than for retail pharmacy. February 22, 2001 Go to the following link to review the letter from the National Committee on Vital and Health Statistics (NCVHS) to the U.S. Department of Health and Human Services Secretary Tommy G. Thompson http://www.ncvhs.hhs.gov/010222lt.htm

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National Drug Codes (NDC)

Value in Accepting

NDC's are a unique number assigned to all drugs and biologics. Some of the possible industry benefits from utilizing the unique NDC in combination with, the prescribed quantity and prescribed unit of measure are as follows: Tracking drug effectiveness and Quality of Care o Does the same drug made by two different manufactures have the same effectiveness? o Which mix of drugs, in what quantities and made by which manufactures give the best result when given in "cocktails"? o Payer systems could use the NDC to "watch" for accidental drug interactions. This can occur when a patient is prescribed drugs/biologics from multiple providers and the patient does not fully disclose their current medication to each provider. Managing the impact of drug recalls o The ability to track which drugs, made by which manufactures, were given to which patients, in what dosage amounts, during a given date range, would be an invaluable tool in managing the impact of drug recalls and other quality control issues. Linking the NDC's to patients would speed a provider's ability to follow-up with and/or notify patients of any potential problems associated with the recall. More accurate fee schedules o The price of drugs and biologics can vary in price from manufacturer to manufacture and from time to time. Rebuilding fee schedules that utilize NDC's and automatically update based on current market trends could help to eliminate underpayment/overpayment of some drugs and biologics. Drugs and Biologics are a growing part of the healthcare expense. Systems utilizing NDC's will aid providers and payers in better cost management. Utilizing the unique NDC, in an automated fashion, throughout the entire Healthcare Industry from manufacturing, distribution and repackaging, retail and wholesale pharmacy, government, provider and payer systems will require large sums of human and financial resources. However, the benefits to the healthcare industry, of using this one unique number abound.

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Acknowledgments

The SNIP Translation Sub Workgroup is comprised of organizations from all facets of the Health Care Industry. The Members of these organizations, which have volunteered their time and energies, are greatly appreciated.

Healthlink IBM Corporation, Global Services ­ special thanks to Ruben Zagagi co-author of this document Lakeside HealthCare, Inc ­ special thanks to Mary Mitchell co-author of this document McKessonHBOC Modis ­ special thanks to Jonathan Showalter co-author of this document Sybase

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