Cone Health

Andre Harvin

At the onset of the 2022 calendar year, COVID-19 continues to have a substantial financial impact on our organization and core business model. These challenges are largely being driven by increased contract labor costs, reduction in elective procedures, and a higher-than-normal patient length of stay. Federal funding provided by the CARES Act continues to provide critical relief, however most U.S. hospitals reported margin declines for the first quarter of 2022. As our entire industry faces similar challenges, this represents a unique opportunity to evaluate pharmacy revenue integrity and explore new strategies for improvement.

Most hospitals and health systems are aware of the costs associated with their pharmacy program; less are aware of the revenue potential waiting to be unleashed. Pharmacy leaders are often held accountable for reducing pharmaceutical spend through contracting and utilization efforts. The other side of the story, depending on the site of care, is that pharmaceutical spend could equate to optimized financial performance, if managed appropriately. Unfortunately, in many health systems there exists a barrier between health system finance and pharmacy leaders that prevent the level of synergy required to strengthen the pharmacy revenue integrity opportunity.

The Physician-Administered Drug Program is a program that refers to pharmacy products and medical injectables that are purchased and administered in a provider’s office or in a hospital outpatient clinic setting. These include injectable drugs and drugs for IV administration. What is unique about this setting is that drugs are separately reimbursed through the medical benefit versus bundled payments seen in the acute setting. Securing reimbursement for medications in this setting is a complex multi-step process. As health care insurers increase their restrictions on which drugs can be infused in which setting and the growing pipeline of ultra-high cost specialty medications intensifies, having a clear strategy around this process is critical.

Disparate Data.

The combination of people, processes, and technology are still insufficient in answering the basic question, ‘Do we know how much we were paid for this service/drug administration?’. Unfortunately, hospitals and health systems struggle to identify areas where they generate a net profit or loss. A key challenge to answering these questions is most organizations have information about pharmaceutical costs, drug utilization, and reimbursement scattered across different systems and databases that don’t communicate with one another. Pharmaceutical costs are managed by the department leader in pharmacy, which can be influenced by drug shortages, contract negotiations with wholesalers, and price escalation. Drug utilization can be monitored by pharmacy but is more often dictated by formulary design and physician behaviors. Finally, the reimbursement of these drugs is managed by a finance and managed care team who are often isolated from the clinical and operational decisions being managed by the patient care team. The result is organizations asking teams to address problems that are not core to their business or experience. The goal should be to promote collaboration between pharmacy and finance to enhance communication, share information, and optimize efficiencies.

"Unfortunately, In many health systems there exists a barrier between health system finance and Pharmacy leaders that prevent the level of Synergy required to strengthen the Pharmacy revenue integrity opportunity"

Prior Authorization.

Although touted as a cost-savings measure by health insurers, the practice of prior authorization has an administrative and patient-care burden that requires further evaluation. An effective prior authorization process is essential in preventing patient care delays, preventing denials, and ensuring reimbursement for costly drugs. Often, hospitals and health systems require the provider and clinic staff or a centralized prior authorization team to complete the prior authorization process for their patients. These teams may be ill-equipped to manage the complexity that health care insurers require. The most common criteria involved with prior authorization decisions involve indication, dose, duration, labs and results, and previous therapies. Criteria in which the pharmacy team is most qualified to provide, but rarely involved with the process. In addition to prior authorization requirements, the process has introduced greater scrutiny over the years:

• Biosimilars are biologic drugs that are highly similar to and have no clinically meaningful difference from an existing biologic medicine (the reference product) that is already licensed by the U.S. Food and Drug Administration. Biosimilars represent a unique opportunity to reduce health care costs yet have barriers to adoption and implementation. One barrier is that health care insurers each have different preferred biosimilars (or prefer the reference/originator product) on their respective formularies and reimburse at markedly different rates depending on the drug. This can result in confusion at the prior authorization stage as each biosimilar has a unique J-Code (Healthcare Common Procedure Coding System procedure codes for non-orally administered medication and chemotherapy drugs) that must also align with the insurers formulary. Coupled with the known challenges of linking drug costs with reimbursement, it is probably that most hospitals and health systems are unaware of how to maximize reimbursement within this class of drugs.

• Step therapy is another cost-saving tactic employed by health insurers that requires patients to try a lower cost drug before trying a similar-acting, but most expensive drug. Though this practice has been utilized in retail pharmacy for years, increased utilization of these tactics in hospital outpatient departments have been noted. Appropriate documentation and rationale for treatment decisions could be the difference between timely payment and a denial.

• Site of care can be dictated by insurers where the choice for physical location of infusion administration is dependent