Pharmacies

Managing the Managed Care Maze

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Partnering for profitability, efficiency and outcomes.

Since first appearing in 2011, preferred status within Medicare Part D networks has continued to gain prominence among prescription drug plans.1  From a contracting perspective, plans aim to shift market share to pharmacies with the preferred status by incentivizing patients with lower copayments when they fill prescriptions at those pharmacies.  In turn, pharmacies agree to accept the lower reimbursement with the potential to increase patient traffic and patient retention.  It's important to note that while some pharmacies are designated as "preferred cost share pharmacies," all pharmacies are in the same network and patients have the choice to visit any pharmacy in the network. 

As pharmacies, like all healthcare stakeholders, continue to feel squeezed by tighter margins, the question becomes, when it comes to preferred cost share, are pharmacies attracting more patients to fill more prescriptions and make up what they are losing in reimbursement? And since Medicare Part D patients can continue to use any pharmacy in the network, including those not participating in the preferred cost share - and many do - the real risk is not picking up additional prescription volume.

The bottom line is that seeking preferred cost share at any cost doesn't make sense as a business-building strategy for independent community pharmacies.  The future is being carved by Pharmacy Services Administrative Organizations (PSAOs) that take a more intentional approach on behalf of member pharmacies. 

Some PSAO's have framed the preferred cost share dilemma as a patient access issue. This implies that the pharmacy will no longer be able to serve a set of patients without agreeing to preferred cost share. That is simply not true; Medicare Part D patients select their plans and select their pharmacy. It is more accurate to frame preferred cost share as a patient incentive issue, not a patient access issue, with patient incentives usually coming in the form of lower copays on generic prescriptions.  

When a more intentional approach is taken and the choice is properly framed around patient incentives, a more sustainable model for pharmacy growth can be achieved. A long-term sustainable strategy starts with the right partnership. A more progressive PSAO is thinking about the pharmacy business holistically to help pharmacies navigate the changing Medicare Part D landscape, realize maximum reimbursement and deliver quality patient care. And an innovative approach in today's healthcare environment can make all the difference in a pharmacy's tomorrow. What might that look like?

Achieving an optimal payer network model through balance. 
There are PSAOs that have taken a very aggressive approach to preferred cost share, indiscriminately signing up in every instance it is offered and expecting member pharmacies to offset the immediate profit losses through the promise of higher prescription volume. This is justified as essential to patient access; implying that preferred cost share is the only way the pharmacy will be able to retain these patients. In actuality, patients are very loyal to their independent pharmacy.  According to a study conducted by NCPA, 89% of independent community pharmacy patients reported a high level of connection with their pharmacist.2 Only a limited number of Part D patients are motivated to change their pharmacy because of lower copays.3 Pharmacies should understand this, because without increased prescription volume, in some plans, pharmacies participating in the preferred cost share actually lose money. 

There is a more practical approach to profitability. PSAOs with access to member and industry data use analytics to carefully weigh patient access, patient incentives and sustainable margins. This information is then used to determine the appropriate participation level for each plan leading to more profitable prescription growth. PSAOs taking this balanced approach optimally mix standard and preferred cost share participation, negotiate the most effective contracts, and balance the need for patient incentives while ensuring prescription profitability.  And payer contracting is not the only way PSAOs are well positioned to help pharmacies receive the maximum reimbursement they are owed. 

Managing the full lifecycle of the claim for maximum reimbursement. 
The ability to manage and maximize claims is critical to a pharmacy's profitability. Often, pharmacies leave money on the table, not realizing many prescription claims can go un-paid or underpaid. In today's environment, managing the full lifecycle of the claim is essential to achieving sustainable reimbursement rates and operating profitably.

By taking a more expansive view, PSAOs have the ability to create access to data and services that plug profit leaks in real-time, such as pre and post edit services. They recognize the value of double checking claims on behalf of pharmacies thereby reducing the risk of submission errors and optimizing reimbursement. A few key edits where inaccurate claims escaped detection by the pharmacy system could save a pharmacy thousands of dollars. 

Additionally, with managed care analysts to proactively monitor payer compliance and identify outlier MAC prices, thereby maximizing overall MAC and contract reimbursement and eliminating the manual submission of MAC request forms, progressive PSAOs are not only contributing to the pharmacies bottom line, but freeing up time to be spent with patients. 

Using analytics to inform sound business decisions.
Pharmacies need to be thinking long-term and making decisions to bolster their futures. Pulling through data from the pharmacy system and organizing the information into actionable reports with performance indicators and peer benchmarking is another way a PSAO can save member pharmacies time while enabling them to view opportunities to operate more efficiently and increase profitability. And with actionable analytics that allow pharmacies to view not just prescriptions, but the total prescription profile of their patients, pharmacies are further empowered to deliver optimal patient care. 

Driving adherence and loyalty while increasing Star ratings. 
Independents are incredibly relevant in their communities, especially when they deliver adherence programs and service offerings that further their patient relationships. In this way, achieving maximum Star ratings is critical to pharmacy success. Because Star ratings are closely tied to patient medication adherence, ensuring patients are refilling and taking their medications as prescribed, not only results in improved patient outcomes but also improves Star ratings.  

While CMS does not assign Star Ratings directly to pharmacies, Medicare Part D plans evaluate the performance of pharmacies for how they contribute to the quality metrics.  And increasingly, these plans are creating bonus or incentive payments for those who do well and penalties for those who don't. And it's already happening; some five star pharmacies are receiving higher compensation. 

Forward-looking PSAOs recognize this opportunity for pharmacies. They are helping member pharmacies focus on med-sync enrollments and increasing the pharmacy's visibility into missed refill opportunities and MTM case expirations, removing barriers and improving adherence and loyalty.  

Star ratings create one more opportunity in the managed care maze. Innovative PSAOs are helping pharmacies seize it with dashboards to help gauge progress towards improved Star ratings. 

When it comes to navigating the complexities of Medicare Part D networks, pharmacies don't have to go it alone. A PSAO partner with like goals, seeking practical solutions and innovative ways to ensure long term pharmacy success can make all the difference in a pharmacy's financial well-being and the well-being of the patients they serve.


Elevate Provider Network is an analytics-driven Pharmacy Services Administration Organization. We partner with our more than 4,500 pharmacy members to help them grow their business profitability, improve operational effectiveness and enhance patient care. Our members look to us to model and negotiate smarter payer contracts, provide intuitive pharmacy analytics, tools to improve quality measures and offer expertise in handling a range of managed care issues. With this unique combination of analytics, technology and professional services -- Elevate Provider Network is strengthening our network's presence in managed care and providing pharmacies with a smarter path to profitability. 

1 http://www.drugchannels.net/2013/10/exclusive-for-2014-more-than-70-of.html
2 http://www.ncpa.co/adherence/AdherenceReportCard_Full.pdf
3 Based on data from InSite, AmerisourceBergen Drug Corporation's proprietary pharmacy knowledge base and analytics system, used to measure and compare pharmacy performance. InSite collects, organizes and analyzes pharmacy claim and other business transaction data directly from participating pharmacies to provide peer benchmarking and other performance metrics for pharmacies. 
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