If you find rereading and trying to figure out the nebulizer medical policies of the four Durable Medical Equipment Regional Carriers (DMERCs) more challenging than deciphering tax codes written in Latin, you are not alone. Providers of nebulizers and the common nebulizer medication combination albuterol/ipratropium often struggle with these provisions, particularly with the section on how to use the KP and KQ modifiers when two or more drugs (such as albuterol and ipratropium) are combined.

Unfortunately, what you do not know can hurt you. Last fall, CIGNA, the Region D DMERC, figured out that respiratory medication suppliers who billed the unit dose with the KP modifier on the albuterol and the KQ modifier on the ipratropium were being reimbursed as much as 31% more than the suppliers who billed with the KP modifier on the ipratropium and the KQ modifier on the albuterol.

CIGNA reacted by sending overpayment letters to pharmacy suppliers who billed the unit dose with the KP modifier on the albuterol and the KQ modifier on the ipratropium. In addition, AdminaStar Federal, the Region B DMERC, followed suit and sent letters to similarly situated pharmacy suppliers stating that AdminaStar had identified them as billing this combination incorrectly and would review the pharmacy suppliers’ albuterol/ipratropium claims from September 1, 1997, through June 30, 2001. Palmetto GBA, the Region C DMERC, is reportedly currently reviewing the issue, and it is safe to assume that Region A has also noticed the coding problem.

At the heart of the issue is whether the pharmacy suppliers knew, or should have known, how to determine the “correct” way to code the KP and KQ modifiers. The nebulizer medical policies of all four DMERCs contain the following provision:

The KP modifier is defined as “First drug of a multiple drug unit dose formulation,” and KQ is defined as “Second or subsequent drug of a multiple drug unit dose formulation.” But in the case of albuterol/ipratropium combinations, which comes first? Put albuterol first in the most common albuterol/ipratropium combination and the reimbursement computations look as follows:

Put ipratropium first in the exact same drug combination and reimbursement computations look as follows:

Some pharmacy suppliers have interpreted the sentence at issue as a mandatory billing instruction and have selected the drug for the KP modifier based solely on which KP/KQ combination results in the lowest cost. Other pharmacy suppliers have interpreted the sentence at issue as simply commentary as to why the KP/KQ modifier system was implemented, and have sought guidance to determine which drug receives the KP modifier.

As of April of last year, various DMERC personnel gave the following contradictory verbal responses when questioned about the issue:

• “The less expensive drug of the combination should have the KP modifier and the more expensive drug should have the KQ modifier.” (In the albuterol/ipratropium combination, there are usually 2.5 mg of albuterol and 0.5 mg of ipratropium. The cost of albuterol with the KP modifier is 2.5 times $0.47 or $1.175. The cost of ipratropium with a KP modifier is .5 times $3.34, or $1.67. Thus, guidance that the KP modifier should go on the less expensive drug would indicate that the KP modifier should go on the albuterol.)
• “Compare the reimbursement of the unit dose form of each of the drugs in the compound, and whichever one is cheaper is the drug that should receive the KP modifier.”
• “Ipratropium should be billed with the KP modifier because it only comes in unit dose form, and albuterol should be billed with the KQ modifier because it comes in a concentrate form and will be paid at a lesser rate.”
• “It does not matter which modifier is assigned to which drug as long as the KP modifier is assigned to only one drug in the compound and KQ to all others.”
• “The pharmacist should determine which drug is the first drug in the compound.”

Studying the example contained in each of the DMERCs’ Supplier Manuals also fails to clarify the issue. In the example, there is a combination unit dose comprised of 20 mg of cromolyn sodium and 2.5 mg of albuterol. The cromolyn is assigned the KP modifier and the albuterol is assigned the KQ modifier. However, the example fails to state why cromolyn is selected for the KP modifier. In the example, the 20 mg of cromolyn in the combination is greater than the 2.5 mg of albuterol (which could support the argument that the KP modifier goes on the drug considered by the pharmacist to be the “primary drug”), but using the KP modifier on cromolyn also results in a lower cost (which could support the “lower cost” argument).

Lack of Clarification/Notification
Unlike medical necessity issues that require the DMERC to review additional information to determine whether the claim is appropriate, the correct or incorrect use of the KP/KQ modifiers is determinable from looking solely at the claim. Despite the fact that pharmacy suppliers have been submitting albuterol/ipratropium combination unit dose claims since 1997 (some with the KP modifier on albuterol and others with the KP modifier on ipratropium), we are unaware of any pharmacy supplier submitting albuterol/ ipratropium claims with the KP modifier on albuterol that has previously been informed that doing so was improper. In fact, pharmacy suppliers have had such claims be the subject of prepayment reviews, postpayment audits, and reviews of denied claims when the usage was in excess of utilization guidelines and the claims were either approved, or denied or adjusted, for reasons other than incorrect usage of the KP/KQ modifiers. If the “correct” use of the KP/KQ modifiers was so clear, why didn’t the DMERC personnel reviewing these claims identify this as an issue at the time?

Is it a Flawed Methodology?
The DMERCs’ methodology of requiring that the supplier compute all of the KP/KQ permutations for the drugs being dispensed and select the one that results in the lowest cost can result in a situation where a pharmacy supplier will get reimbursed less for dispensing three drugs in a single unit dose than it would if it dispensed only two of the three drugs. For example, assume that a pharmacy is asked to dispense unit doses containing 2.5 mg albuterol, .5 mg ipratropium, and .4 mg triamcinolone. Under the fee schedule for first quarter 2002, the calculations would be as follows:

To combat overpayments charges, review your files to locate documentation of DMERC guidance on the use of KP/KQ modifiers and claims where the DMERC did not identify the “incorrect” use of KP/KQ modifiers.

Lisa K. Smith, JD, is an attorney with the Health Care Group of Brown & Fortunato PC of Amarillo, Tex.