How are outpatient pharmacies reimbursed?

A Drug Trend report published in 2009 had predicted continued price increase among traditional branded and biotech drugs that lack generic competition. Now, further, CMS has reduced its Average Sales price (ASP) margin from 6 percent to 4 percent for non-pass-thorough. This has affected pharmacy reimbursement. However, there are certain other aspects of Pharmacy Billing that can affect reimbursement and thereby the Revenue Cycle Management (RCM) process if not well implemented.

1. Data Workflow:

Recognizing how the revenue cycle works in pharmacy is very essential. Procurement to Inventory, billing and reimbursement involves purchase of medications, their storage, and method of dispensing, how they are administered, way they are coded & billed, and finally reimbursed. If the drug is covered as a pharmacy benefit, or the payer needs that to be obtained via a specialty pharmacy as identified through patient-specific benefit verification, then here both the provider and the pharmacy are part of the reimbursement process. The physician writes a prescription and orders the drug. This is followed by the pharmacy that fills the order and issues the drug to the physician, CMHC, or hospital outpatient department. Here the pharmacy bills the insurance company for the drug. If any information is entered incorrectly into the pharmacy system in the initial phase of the cycle, errors can prove to be costly, impacting aspects of clinical and revenue cycle.

2. Procurement:

During this phase information is converted from purchased quantities and pricing to storage units of measure (UOM) and inventory costs. Manually entering the data is followed in most cases. UOM conversions, when data is uploaded from the wholesale distributor to the pharmacy system, are also checked and verified manually. Here too mistakes can lead to breakdown in the revenue cycle management (RCM) process.

3. The Charge master:

Critical & substantial revenue leakage can occur when separately reimbursable medications are either missing from or miscoded in the charge master. Conversion of pharmaceutical quantities is a must from purchased amounts to patient-administered amounts, and only then made billable. There is often a difference between dosage amounts required for patient use as from that purchased. Besides inventory, the clinician and pharmacist should convert dosage, strength, and delivery mechanism for each drug. Drug data must be correctly converted from the quantities residing in clinical systems into the payer-billable quantities appropriate for the financial system or charge master. The UOMs must be reconciled to avoid any under- or over-payments. More than often, missing or incorrect data in the charge master can result in negative financial consequences – denied claims, partial reimbursement, and compliance risks.

4. Linkages between Purchases & Billing:

Most hospitals have separate processes to order drugs, administer them, and process reimbursement. Without linkage between pharmacy expenditures for medications (i.e., spend data) and the charge master, ensuring proper charge capture and optimal reimbursement is a challenge. Besides hospitals should have automated tools to identify charge capture errors precisely, so as to pinpoint when and where their occurrence to decreasing revenue loss.

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