Hospitals nationwide are being targeted for noncompliant Medicare outpatient pharmacy billing practices. Each month, audits by the U.S. Department of Health and Human Services Office of Inspector General (HHS OIG) routinely create the demand for repayments of hundreds of thousands of dollars – and sometimes millions – for billing errors caused by hospitals reporting incorrect codes, billing units or both. These errors occur easily because of the sheer number of drugs used in the hospital setting and the complexity of Medicare coding and billing requirements, which often addressed are addressed inadequately by information systems and processes in place.

As a result, hospitals in more than a dozen states – including Arkansas, Arizona, California, Florida, Illinois, Minnesota, Montana, North Dakota, New Jersey, Massachusetts, New York, Ohio, Virginia and Washington – have turned to PHARMauditor as the preferred automated solution to simplify compliance with Medicare reporting requirements for drugs. With PHARMauditor, clients simply upload their current charge description master (CDM), pharmacy formulary data and usage statistics at the service code, patient type and payer plan code level to PHARMauditor compares hospital data with information in an extensive, validated, multi-source drug database and creates benchmark reports that instantly identify potentially noncompliant coding, billing unit management and reporting. Combined with expert Panacea chargemaster consulting support offered at no additional cost, hospitals are able to evaluate and correct errors in a fraction of the time required when using traditional manual or semi-automated review methods.

In one of many successful applications, a hospital in the Midwest used PHARMauditor as part of its annual chargemaster review and discovered that approximately 31 percent of reported HCPCS codes and related billing units were incorrect, invalid or incomplete. To ensure compliance with Medicare billing requirements, the hospital’s chargemaster managers are taking advantage of the precise mapping logic PHARMauditor provides to verify that the correct codes and billing unit assignments are accurate, now and in the future.

In another instance, a large Eastern regional medical center used PHARMauditor to evaluate past and current risks related to Recovery Audit (RAC) and OIG investigations. Because PHARMauditor allows users to analyze large and changing data sets, it now is used on a continuous basis to monitor and update pharmacy billing data as part of the medical center’s compliance program.

PHARMauditor is also invaluable as an auditing tool to aid in transition to new billing system platforms. Recently, three hospitals used PHARMauditor not only to develop new pharmacy chargemasters, but to validate the accuracy of data in recently implemented billing systems. In each instance, the hospitals not only were able to mitigate overpayment risk due to coding and billing unit errors, but also to identify hidden issues related to incorrect pricing algorithms and improve regulatory compliance outcomes.

If you would like to learn more about how your hospital can use PHARMauditor to take your pharmacy billing compliance and revenue capture to a higher level of excellence, we invite you to visit us online at for a free on-demand presentation.

About the Authors

Gary R. Fong, Pharm. D. is Senior Vice President of Panacea. Gary has been in healthcare for over 30 years and his experience has been in pharmacy administration, hospital administration, the pharmaceutical industry and for the past several years, healthcare revenue cycle management consulting and service.

Randy Wiitala, BS, MT(ASCP) is Vice President, Clinical Consulting Services – Pharmacy of Panacea. Randy’s areas of expertise include pharmacy, chargemaster, and lab reviews for coding and regulatory compliance and revenue assurance. He is co-lead on the development of Panacea’s and, Randy is a contributing author to variety of publications and electronic products that help providers maintain revenue streams and regulatory compliance for Laboratory and Pharmacy services. Contact Randy at 800-252-1578 x3405 or This email address is being protected from spambots. You need JavaScript enabled to view it..