Taking on J-codes: How to navigate this drug category to save money and improve patient care

One of the fastest-growing healthcare expenditures today is medical drug costs: the 10 most expensive drugs in the U.S. cost between $600,000 to more than $2.1 million annually. Within that world of costs and billing, “J-codes” are the dirty little secret that health plans and hospitals don’t want to talk about — but learning how to address this expense can save employees upwards of $10,000 while saving potentially millions on employer plans.

Medical billing codes are essential for advisers to navigate the healthcare system and help their clients save money. Healthcare Common Procedure Coding System (HCPCS) Level II codes, also known as J-codes, are the billing codes used by providers for drugs, or medical devices they administer when billing for claims to insurance. Infused drugs —or drugs that can’t be administered by the patient — are often referred to as J-code drugs and are billed through the health plan rather than the prescription drug plan.

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Here’s the problem: The provider pays X, then marks it up to Y which is what the insurer or employer ends up paying. That’s why the place where the drug is infused (doctor’s office, infusion center, hospital, or at home) can significantly drive up the cost of a claim. But in the end, it’s still the same drug.

Because these drugs are bought and then administered by the provider, they are often opaquely priced and not tied to any parameters as they would be in a pharmacy. This applies to everything, including Tylenol provided during a hospital stay, but it becomes especially important for J-code billing items that can have much higher base costs. Many J-code drugs, such as chemotherapy, are often very expensive to begin with, making upcharges even more impactful.

Read more: Your overloaded benefits plan is a waste of moneySimply moving infusions from the doctor’s office to someone’s home can help save significant amounts of money. J-code infusions administered in the hospital, for instance, can cost over five times as much as the same treatment given within the patient’s home.

Another cost-saving strategy is to procure drugs from abroad or through competitive outlets. Given how expensive J-code drugs are, this typically amounts to a savings of hundreds of thousands of dollars in billable costs.

In short, patients do not have to spend extra money just to spend extra, needless time in a hospital. Save by buying drugs directly, and administer with more personal care. As more specialty, high-dollar and infused drugs continue to enter the market each day, it’s vitally important to stay on top of this complex area of spend for your client’s health plan.

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As you consider managing J-code spend, first ensure plan language for both the medical and the Rx programs require a pre-authorization before being dispensed. Then, partner with a third-party administrator that can build an “edit” in their customer service and claims system that will “flag” these medications. Build an incentive-based plan design that will encourage members to explore options for both the medication and plan of service, and educate members about the options they have to lower their cost (and employer cost) while improving quality and safety.

This proactive approach will separate benefits advisers from the pack and allow us all to fulfill our overall mission to positively impact the people we serve, which is to find our clients better benefits at a lower cost.