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Maximizing Provider’s Pharmacy Reimbursements – Thriving in a challenging environment

Many pharmacies continue to struggle with the weight of drug prices and an inequitable reimbursement scale from payers. The past several years have brought a steady decrease in allowances for dispensing drugs, along with a renewed focus on reducing AWP (average wholesale price) and WAC (wholesale acquisition cost) based reimbursements. To further complicate matters, constant mergers, new agreements, and recurring price changes make it nearly impossible for pharmacies and hospital systems to synchronously conduct effective compliance audits to help ensure accurate reimbursement from the payer, to gauge the financial impact of rate changes on high impact drugs, to ensure they are receiving the highest level of reimbursement, and to negotiate strategically. Pharmacies are bleeding potential profits from the reimbursement wounds inflicted by payers, who often leave little recourse or no opportunity to negotiate viable rates.

Pharmacy reimbursement rates continue to change at an alarming rate. Notices of rate changes are received on a quarterly, if not monthly basis. These changes occur via a fax blast or during contract negotiations, and they carry huge implications on the pharmacy’s bottom line. In fact, these rate revisions occur so frequently, pharmacies are not always certain that the correct rates are being paid. Moreover, pharmacies are left with few negotiating tools to help offset the impact of overall changes to AWP and WAC based reimbursement rates. Changing external factors such as proposed regulatory rule and potential legislation further warrant pharmacies be proactive in managing and negotiating their reimbursement contracts with payers.

While financial officers may have based their projections on a known set of variables, a multitude of new variables are being introduced frequently. So, how can pharmacies become more proactive in projecting the impact of constant rate changes and monitor payment compliance? We suggest a framework that assists in addressing these issues:

  1. Contract Compliance - Analyze payments received by pharmacy from payer to ensure proper payments, according to the rate tables and calculation methodologies per the agreement.

  2. Payment Normalization - Analyze payments for specific drugs from various payers to compare payments by payer.

  3. Charge Master Analysis - In those instances where the payer contract has a lower of “payment” or “charge” clause, compare payments for specific drugs to the provider’s charges for such drugs to determine if charges must be adjusted to maximize payments.

  4. Revenue Assessment - Analyze impact of change in payment rates from payer on pharmacy’s revenues.

The framework provides better insights into the financial impacts of fast-paced changes in payer reimbursement and assists in ensuring payer compliance with contractual terms. Moreover, pharmacies can create customized comparisons of reimbursement rates for specific drugs from multiple payers and maximize drug reimbursement.

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