Audit Advisor

Note that all Audit Advisors are by H. Edward Heckman, R.Ph., president of PAAS National, the Pharmacy Audit Assistance Service. For information, call toll free at 888-870-7227.(Revised March 2013) Mark Jacobs RPh

Audits and Glaucoma Drops

Q: Have you heard anything about third parties auditing glaucoma drops for days supply?

A: Many prescription drug plans are now auditing and scrutinizing glaucoma drops for possible days supply conflicts. If you fill prescriptions for any package size of a glaucoma eye drop that a doctor prescribes without questioning the days supply …you had better start thinking twice. Prime Therapeutics, CVS/Caremark Express Scripts, Humana and others are now recouping money in audits for excessive quantities and incorrect days supply on the various ophthalmic glaucoma drops.

We have seen prescription drug plans employ different measures to calculate days supplies on drops. According to the American Journal of Ophthalmology, they can range anywhere from 15 or 20 drops per milliliter. In any event, the package size for a 30-day plan rarely calculates to be more than the smallest package size manufactured. Watch packages sizes to avoid audit recoupments.

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Surviving an Audit

Q: I have heard horror stores about audits. What should I expect if my pharmacy is audited?

A: A prescription drug plan audit might cost much more than you think. According to tabulations put together by PAAS National®, the average audit in 2011 resulted in an average recoupment of $11,989. This is the initial amount that prescription drug plans attempt to extract from pharmacies as a charge-back. One recent audit resulted in a recoupment demand of more than $800,000! From 2009 to 2011 the numbers of audits have increased by 42%. PAAS expects the upward trend to continue due to changes in the Patient Protection and Affordable Care Act.

PAAS works with member pharmacies to defend themselves against audit challenges. Each prescription drug plan has their own set of discrepancies they search for in audits. PAAS is skilled in assisting pharmacies with documentation requirements and in helping members to exercise their rights to due process. Results may vary by each individual situation, but PAAS estimates their services help slice audit charge-backs in half.

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Filling and Billing Audit Flags

Q: What types of filling and billing activities can flag a pharmacy for a prescription drug plan audit?

A: Keep in mind, your pharmacy will be selected for an audit because it falls outside of a prescription drug plan norm. With online adjudication, prescription drug plans create subterranean audit networks, constantly monitoring your filling behavior and dispensing patterns. Prescription drug plans constantly create new algorithms to harvest claims data. The following are a few (but certainly not all) of the activities that can flag a pharmacy for an audit:

  • Physician ID: Auditors are honing in on correct prescriber ID's. All claims must use the NPI# of the practitioner authorizing the prescription. Make sure that mid-level practitioners such as nurse practitioners and physician assistants have their own NPI#.
  • Lookout for "cheater" prescriber DEA numbers. Plans now strictly prohibit the use of any cheater DEA numbers. Due to increased emphasis and restricting DEA numbers for controlled substance orders only, pharmacy providers may want to work with software vendors to prevent the number from being transmitted with non-controlled substance prescriptions. If the number is inadvertently wrong, plans may attempt to recover full payment even though the prescription claim did not require the number.
  • DAW 1: percentage of use of DAW 1 on multi-source prescriptions where brand products are dispensed. This is very easy to audit for large recoupment amounts.
  • Refill patterns: by day of the week (i.e., Sunday), classes of drugs (antibiotics), etc.
  • 100 tabs/caps billed as 30-day supply: If you typically transmit 100 quantities as a 30-day supply (instead of TID=33 days), this is an easy flag indicating a lax attitude toward prescription drug plan policies and a possible target for large recoupments.
  • Claims paid at U&C: percentage of time the submitted U&C price is below contract price.
  • Generic substitution: rates total generics dispensed over all multi-source opportunities.
  • Average Rx cost: pharmacies with high average costs send up flags.
  • Average number of prescriptions: per patient or family.
  • Compounded prescriptions: in large numbers, these will trigger audits. Remember, they aren't coming to give money back!

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Document Override Codes

Q: When I dispense an early refill do I really have to document the override code I use?

A: From time to time nearly all prescription drug plans have audited the documentation of override codes for appropriate use in a situation. Plans continue to get tougher and tougher on pharmacies when auditing their use of override codes. Pharmacies are cautioned to follow the plan's documentation requirements when using one of these codes to obtain an adjudicated claim. These codes typically include 03 for Vacation Supply Early Refill; 04 for Lost or Spilled Medication Early Refill; 05 for Dosage or Therapy Change, and 02 for Maximum Daily Dosage Exceeded. For audit purposes document the reason for any override on the hard copy prescription, and if applicable, include any Authorization Override Number given by the prescription drug plan. Not all plans allow for use of these codes and for those that do, not all overrides listed may be a patient benefit. Early refills require a plan acceptable reason and you should clearly document the reason for any early refills with a complete explanation. Additionally, double-check your pharmacy dispensing software to ascertain how it handles override codes. Several pharmacies have reported software glitches. Some systems apparently hold the override code and continue to transmit it on subsequent fills, even though the prescription isn't being refilled early. This is a big audit flag that could cost your pharmacy a lot of money.

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Excessive Use of DAW Triggers Audits

Q: What triggers an audit more often than anything else?

A: Excessively high Dispense as Written (DAW) 1 rates are almost certain to flag a pharmacy for an audit. Discrepant DAW 1's are still a large source of recoupments in audits. You can limit the number of DAW 1 transmissions by implementing the following steps:

  • DAW 1 should only be used for the brand drug when multi-source options are available and the physician indicates (per applicable laws) that the brand product is to be dispensed without substitution.
  • Check your computer's default DAW code; it should not default and it should force you to select a DAW code or be set to DAW 0.
  • Patients who demand branded products over generics must be transmitted as DAW 2—Patient DAW. Don't allow patients to bully you into transmitting their requests as physician DAW 1. In an audit situation, you may have to repay at least the copay and cost difference to the prescription drug plan.
  • Use DAW 5 for brand drugs dispensed as generics (example, if your pharmacy uses Amoxil for amoxicillin).
  • Use DAW 7 on prescriptions for drugs that your state does not allow substitution.
  • Use DAW 8 for generic not available on the market place. Don't confuse this code with DAW 0—Generic or single source brand though! DAW-8 is restricted to circumstances in which a generic was available, but now is not available usually as a result of manufacturing delays or raw material shortages. Some audits will demand proof that the generic was not available from any source at the time you used it. In order to prove this for a future audit, it's a good idea to photocopy an invoice from the day you transmitted the DAW 8 code stating that the generic you attempted to order is temporarily unavailable and no other generic replacement exists.
  • Encourage physicians to allow substitution whenever possible.
  • Auditors consider patient-induced call-backs to the doctor by the pharmacist to prescribe brand only as DAW 2.
  • • If the DAW is written on the hard copy prescription in a different color ink or writing style than the body of the prescription, expect a difficult time from the prescription drug plan in an audit. By limiting your DAW 1 transmissions, you are taking proactive steps to avert an audit. .

At the end of the day, all claims submitted with a DAW code other than 0 (e.g. 1-9) should have documentation on the prescription to support its use.

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Signature Logs

Q: I recently had an audit and the auditor was a real stickler with my signature logs. Why are signature logs so important?

A: Money lost due to incomplete signature logs have resulted in recovery demands exceeding $50,000. Signature logs for deliveries are equally important. One pharmacy received an audit results statement for 17 missing signatures that was extrapolated to demand over $800,000 in repayment! If not stored electronically, signature logs should be handled and treated with the same care and respect as original hard copy prescriptions; using an approved form, filed chronologically; checked for completeness, and stored in a safe area. The primary function of a signature log is to verify the delivery and receipt of services to patients. The log form should contain the appropriate patient release of information and the NCPDP-approved disclaimer. If your log contains these clauses and space for appropriate patient and prescriptions information, it should be acceptable to all major prescription drug plans. Additionally, a well-designed log can incorporate an area to document patient consultation, thus serving a dual purpose. While a signature on a log is not the only method to document the delivery of services, well-kept signature logs make life much easier during any audit situation. Put these practices into play and you will be one step ahead of the audit game. You must retain signature logs for the same duration of time as hardcopy prescriptions.

A word of caution for those pharmacists that use electronic signature logs: Make sure that your electronic log contains all the same information (such as patient release, NCPDP disclaimer, etc.) as in paper logs.

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Trading Inventory Between Pharmacies

Q:Are there prescription drug plan pitfalls when trading inventory with other pharmacies?

A: Many pharmacies have cooperative relationships with other pharmacies located in their trade area, selling and exchanging pharmaceuticals on an emergency basis. The professional courtesy extended by one pharmacy to another can help save business and improve the quality of patient care. However, I caution pharmacists to keep accurate records and invoices of all such trades. In audits when prescription drug plans require pharmacies to prove their inventory purchases, the swapping activities between pharmacies can cause problems. Many pharmacies have no record of the item, date and quantity of what was procured from another pharmacy. This causes prescription drug plans to frown upon after-the-fact record keeping; keep accurate transfer logbooks with invoice slips be kept. A little extra time and effort to maintain these records can save big money in an audit situation.

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Audit Flag: Insulin

Q: Can insulin present audit issues?

A: Patients receiving more than two vials of insulin per month may create an audit flag that will result in an onsite audit of your pharmacy. While it is possible for a patient to use large amounts of insulin, prescription drug plans view two or more vials as unusual. They believe that pharmacies allow patients to stockpile insulin which is possibly "fraud", "waste", or "abuse". Take extra care whenever a patient is using two or more vials of insulin in a month. Many prescription drug plans have asked pharmacies to take large repayment penalties for discrepancies over the correct days supply. If the insulin amounts being dispensed by your pharmacy are justified by the documentation on the hard copy prescription, you should not have a problem. If all of your insulin prescriptions state "As Directed," expect aggressive challenges from the prescription drug plan. Since insulin doses may vary, a call to the prescriber to obtain minimum and maximum daily dosages to document on the hard copy prescription can help determine the quantity and days supply to dispense based on the amount ordered and plan limits.

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Identification Numbers

Q: Is it important to transmit the correct National Provider Identification (NPI) and Drug Enforcement Administration number (for controlled substances) with every prescription?

A: Prescription drug plans require the correct prescriber identification number on claims. In most cases this is the prescriber's NPI number. Auditors are making deductions from pharmacies that use "cheater" numbers to transmit claims. Also beware of the fact that auditors are focusing on claims with an NPI number from someone other than who wrote the order. During an on-site audit, the auditor will review the actual prescription and compare data submitted by the pharmacy to data on the actual prescription. This is particularly true and a growing problem for pharmacies who inadvertently reassign a prescription signed by a new doctor that contains old prescriber information. Beware; the prescription drug plans are very serious about this.

On January 23, 2004 the Department of Health and Human Services published the Final Rule in the Federal Register establishing the National Provider Identifier (NPI) as the standard unique identifier for health care providers. The NPI is a 10 position intelligence-free numeric identifier. All health care providers who are HIPAA-covered entities must obtain an NPI, including physicians, nurses, dentists, chiropractors, physical therapists, nurse practitioners, physician assistants and pharmacists. There are two types of NPI numbers. Type 1 is for individual health care providers and Type 2 is for organization health care providers and their sub-parts such as hospitals, clinics, nursing homes, and pharmacies. Pharmacy providers must be careful to submit the prescriber's personal (Type 1) NPI number and not that of their organization.

  • All entities who meet the government definition of "health care provider" or "covered entities" are required to obtain NPIs.
  • The NPI is a 10 digit number (9 plus a check-digit).

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Auditor Computer Access

Q: An auditor asked to use one of my pharmacy computer terminals to access information. Should I allow the auditor to operate my pharmacy system?

A: Absolutely not! Some prescription drug plans and auditors may insist on accessing information from your pharmacy computer system. Only an employee of the pharmacy should access any information viewed.

Additionally, only the records of patients covered by the prescription drug plan administrator conducting the audit should be viewed. An auditor is not authorized to view other patient prescriptions and computer records. HIPAA (the Health Insurance Portability and Accountability Act) holds you civilly and criminally liable for such activities. You must maintain patient confidentiality and cannot reveal information. Auditors should not be allowed to operate your computer system.

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"As Directed" Prescriptions

Q: Do prescriptions written "as directed" increase a pharmacy's risk in billing prescriptions to the insurance plan?

A: Yes! Prescriptions written "as directed," can increase a pharmacy's risk in billing the prescription drug plan without first obtaining clear and mathematically useful directions. Prescription drug plans are interested in controlling plan maximums in terms of days supply and quantity of medication dispensed. "As directed" prescriptions create problems for prescription drug plans in policing those parameters. The safest procedure is to contact the prescribing physician for clearer definition. If it isn't convenient to contract the physician, ask the patient how often he or she takes the medication. Remember to document this information on the hardcopy prescription. Make sure dispensing quantities stay well within therapeutic guidelines. Never use "as directed" to skirt plan limitations. PBMs are becoming savvier at flagging excessive and illogical quantities and contacting physicians to verify dosages. Pharmacists must resist patients who place unfair pressure upon them to boost dispensing limits. The U.D. (As directed) designation may be translated by the PBM into much lower quantities than you are dispensing. Pay particular attention to expensive brand name medications. PBMs are also going after insulin and syringe quantities on "as directed" prescriptions.

Prime Therapeutics has asked pharmacies to take large repayment penalties for discrepancies over the correct days supply. Pharmacies can protect themselves by taking the following steps to save audit headaches:

Always submit the correct days supply when transmitting claims.

If the prescriber indicates "As directed," talk with the patient or call the physician to determine the dosing schedule and the appropriate quantities to dispense. Document these discussions for future reference and the justification of your actions. The moral is to use common sense: protect your patients and your practice.

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Providing Audit Documentation

Q: My pharmacy is scheduled for an on-site audit. What records is the auditor entitled to review?

A: In most cases, prescription drug plan auditors are entitled to review hard copy prescription records and usually signature logs for the services your pharmacy billed to them. The records of the patients from other plans and coverages are confidential, and the auditor should be restricted from accessing them. In fact, the Health Insurance Portability and Accountability Act (HIPAA) restrictions placed upon personally identifiable health information will make such a practice a federal offense. A more in-depth answer to which records must be made available to the prescription drug plan is found in your provider agreement and plan manual. Review these documents carefully to read what you contractually agreed to allow a prescription drug plan to review. Prescription drug plan provider agreements are more complex, detailed, and demanding than ever before. It is essential to read and understand all contracts in their entirety before signing them.

Q: When I dispense an early refill, do I really have to document the override code I use?

A: From time to time nearly all prescription drug plans have audited the documentation of override codes for appropriate use. Insurance plans continue to get tougher and tougher on pharmacies by auditing their use of override codes. Pharmacies are cautioned to follow the plan's documentation requirements when using one of these codes to obtain an adjudicated claim. These codes typically include 03 for Vacation Supply Early Refill; 04 for Lost or Spilled Medication Early Refill; 05 for Dosage or Therapy Change, and 02 for Maximum Daily Dosage Exceeded. For audit purposes, document the reason for any override on the hard copy prescription and if applicable include an Authorization Code Number. Additionally, double check your pharmacy dispensing software to ascertain how it handles override codes. Several pharmacies have reported software glitches. Some systems apparently hold the override and continue to transmit it on subsequent fills, even though the prescription isn't being refilled early. Watch for this as it is a big audit flag.

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Q: What is the safest method for billing prescriptions to a prescription drug plan?

A: A money saving tip to community pharmacists is to "FILL AND BILL PRESCRIPTIONS AS THE DOCTOR WRITES THEM WITH THE CORRECT DAYS SUPPLY." Many pharmacies are needlessly penalized during audits for cutting or increasing prescribed quantities without the appropriate documentation. These errors coupled with submitting the incorrect days supply can lead to major headaches and large recoupment payments to prescription drug plans. Transmit prescriptions exactly as written by the physician, with the correct quantity and number of days supply. Most claims adjudication programs offer on-line edits to assist you in bringing claims within plan guidelines. If the quantity or day's supply exceeds plan limitations, the claim will reject with instructions detailing clues to resubmit the claim correctly. If a physician authorizes a change in quantity, directions or refills; PAAS strongly recommends that a new prescription be created (per your state's laws) rather than amending the old order. Every month hard earned dollars are needlessly returned to prescription drug plans due to lack of attention to this issue. Remember that extra effort today may save big money in the future.

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Q: How should I document patient requests for brand name drugs?

A: Auditors are becoming more interested than ever in patient-requested brand drugs: DAW 2. It is a wise move to begin documenting prescriptions transmitted as DAW 2. Prescription drug plans are beginning to scrutinize this dispensing category and are looking for problems. Several prescription drug plans are penalizing pharmacies in audits when they cannot supply documentation for patient-requested brand named dispensing when lower cost generic products are available. It may be helpful to ask the patient to initial and date the word "DAW 2" on the original prescription. Some pharmacies use a rubber stamp and then collect the patient's initials to document DAW 2 dispensing. If the only documentation you have is the computer entry of DAW code "2", then many auditors will attempt to recover payment. Remember that a little effort now can limit your risks in an audit situation down the road.

Q: If a physician writes a prescription for a single source brand drug and indicates "DAW 1," should I go ahead and bill the prescription as "DAW 1?"

A: No. Occasionally, a physician will indicate "DAW" on a single source brand drug, even though there is not a generic substitute available. Such situations should be billed on-line to the prescription drug plan as "DAW 0". Billing single source drugs as "DAW 1" may flag you for an audit and may also count against you in tabulating PBM generic utilization incentives. Remember, bill single source brand products as "DAW 0".

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NDC Numbers

Q: Why do prescription drug plans accept claims filed on obsolete or old NDC numbers?

A: Once a NDC number has been superseded or replaced with a new number, a prescription drug plan cannot project how long product with the old number will remain in pharmacies. Also, the old number probably has an old (lower) price that isn't updated, which means lower reimbursements. Occasionally you may notice an on-line response with a strange level of reimbursement. This may be a situation where you are reimbursed only the professional fee and paid a "zero-dollar" value for the ingredient cost. When this occurs, check carefully to see if a newer NDC number supersedes the one you billed. One company responded to us regarding this problem by reporting that a "zero-dollar" value is returned after an NDC has been discontinued for 18 months. All pharmacists are cautioned to make sure they are using current NDC numbers on their transmissions to all prescription drug plans. When in doubt you should check for a newer NDC replacement. Remember your safest practice is to fill and bill the NDC from the container you dispense.

Q: How important are correct National Drug Code (NDC) numbers with prescription drug plan billing?

A: Prescription drug plans across the country are toughening standards for the transmission of correct manufacturer and NDCs on prescriptions, including the last two digits (for package size). It is important to bill the correct manufacturer NDC number. Contested manufacturer rebates are now costing state Medicaid programs millions of dollars annually. As a result of these challenges, the states must verify provider purchases of contested manufacturer's products through NDC mail audits. Private-pay prescription drug plans also are jumping on the NDC bandwagon. Prescription drug plans continue to conduct aggressive mail audits across the country focused upon verifying inventory purchases to NDC numbers. Expect a much tougher approach than in the past.

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Oral/Telephone Prescriptions

Q: Are there special precautions to take on oral or telephone prescriptions that are billed to prescription drug plans?

A: Taking oral prescription orders can present special audit problems and challenges. All verbal prescription orders must contain at least the minimum information as is legally required on any prescription:

  • Patient's first and last name
  • Date written
  • Drug name, strength, dosage unit, and quantity
  • Dosing directions (avoid U.D.) and refill authorizations
  • Prescriber's name and DEA number (when applicable)
  • Prescriber's substitution preference (DAW or BMN mandate), if applicable
  • Pharmacist initials

If someone other than the doctor phones in the prescription, it is a good idea to note the name and title of the person calling. In audits, prescription drug plans are penalizing pharmacies for oral prescription orders that fail to contain the requisite information. For instance, many pharmacies neglect to properly indicate or check DAW/BMN on verbal prescriptions when physicians specify brand product only. When a telephone prescription does not contain the correct Dispense as Written information, auditors view such prescriptions as eligible for generic substitution. Many prescription drug plans will not allow any subsequent documentation after the fact to reverse their findings. Please avoid problems by making sure procedures are in place to sufficiently document all required information and actions concerning verbal prescription orders.

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Q: My state's pharmacy laws allow a prescription to be refilled up to two years. Why do prescription drug plan prescriptions have to be updated annually?

A: Many prescription drug plans require prescriptions to be updated annually. The safest practice is to update all prescriptions at least annually, regardless of your state's pharmacy laws. Many prescription drug plans have language in their contracts and plan manuals that stipulate they will not pay for prescriptions where the date of service is more than one year from the date the prescription was originally written. When the prescription's original date reaches one year, a new prescription order should lawfully be generated. Any refills remaining on the original prescription should be voided. This is a safe filling and billing tip that can save headaches in the event of an audit.

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