Preparing Pharmacy for Performance-Based Reimbursement

February 3, 2020

How pharmacies should adopt value- and performance-based payment models and offer DIR fee reductions for pharmacists’ and their patients’ benefit.

The current pharmacy payment model is based on payment for dispensing services without accounting for clinical services designed to improve patient care and outcomes. Pharmacists routinely counsel patients on proper use of medications and other health issues, but new payment structures are needed to support pharmacists’ role as healthcare providers, allowing them to receive consistent reimbursement for disease state management, medication optimization and other preventive services. 

In 2019, pharmacies felt increased downward pressure on reimbursement rates as narrow networks continued to form and grow in relevance. However, now in 2020, we expect the industry to continue moving towards value-based care and performance-based payment models that will benefit pharmacies-and most importantly, their patients. 

Performance-based opportunities increasing

Focused on the performance of pharmacy networks and their ability to drive better adherence and outcomes, payers and pharmacy benefit managers (PBM) are increasingly looking to incentivize performance. This includes offering Direct and Indirect Remuneration (DIR) fee reductions to pharmacies and pharmacy networks who meet performance requirements.  

While pharmacies would like to live in a world without DIR fees, that will not happen in 2020. In fact, the amount of DIR fees collected will very likely continue to grow on average next year. This requires pharmacies to actively understand their contracts, manage their cash flow and focus on lowering their DIR fees by improving on clinical services that impact performance by optimizing outcomes. Now, more than ever, community pharmacies need a pharmacy services administrative organization (PSAO) partner that can leverage scale and influence in contract negotiations with PBMs and other third-party payers.

Health Mart Atlas is working to evolve its performance strategy. This year, Health Mart Atlas is partnering with a large national payer to evaluate its two chain codes separately. This means pharmacies who illustrate top performance will be evaluated separately, better positioning the high-performing pharmacies for increased rebates.

Related: Healthcare Tech Company Disrupts Billion Dollar Pharmacy Benefits Industry

Alternative reimbursement plans

Payers and PBMs have started to contemplate a world without DIR fees; however, without another performance-based payment plan to replace DIR fees, pharmacies will have lower reimbursement with no potential upside. The healthcare industry is beginning to see a spectrum of new payment methods ranging from traditional fee for service to shared savings and risk-bearing models based on patient outcomes. However, if DIR fees dissolve, it is critical the plans and the networks are structured to incentivize the top performing pharmacies and ensure they are still being reimbursed based on driving better patient outcomes.

Industry consolidation: Challenges and opportunities
The mega-deals involving the CVS Health acquisition of Aetna and Cigna agreeing to buy Express Scripts closed in 2019. These deals could very well generate a hyper-competitive marketplace for PBMs, PSAOs and for pharmacies, in general. As these vertical integrations, strategic alliances and partnerships continue to form across the pharmaceutical industry, there is also an opportunity to create new ways of delivering and paying for care. For pharmacies, it’s all about accessing new patients and providing care outside of the pill bottle–clinical services.

For example, some of the largest prescription drug plans–representing millions of lives–are now managed by one or two PBMs. Clearly, this could be a huge challenge for community pharmacies from an access perspective, but also an opportunity. A PSAO can be an important partner for community pharmacies to help minimize their DIR fees and maximize reimbursement to succeed in this new model. It is critical to be part of a top performing pharmacy network that is invited to the negotiation table and is aligned with the payers that recognize the value of pharmacy. The right PSAO will partner with payers willing to incentivize pharmacies through the contract or through pay-for-performance opportunities.

Bottom line: community pharmacies must take action. This starts with knowing the top plans used by patients at their pharmacy and understanding the performance metrics those plans target. They need to proactively address these areas by targeting the right patients and taking action to drive better outcomes. Pharmacists need to utilize tools to improve patient behavior and boost outcomes, such as: medication therapy management case completion, refill reminder programs, medication synchronization, and behavioral coaching.

Building transparency into performance

In addition to creating tools and solutions to help pharmacies track and improve their performance, Health Mart Atlas is working with industry organizations like National Community Pharmacists Association (NCPA) and National Association of Chain Drug Stores (NACDS) that are focusing efforts on driving transparency, as well as expanding non-DIR performance-based bonus and activity fee opportunities. If DIR fees continue, pharmacies need more transparency and standardization in how they're being measured. There is an opportunity for the Centers for Medicare & Medicaid Service (CMS) to help drive guidance around how these fees are implemented. In the event that DIR fees fade away, CMS can help ensure that true performance-based payment models are in place so that top performing pharmacies continue to benefit from better reimbursement due to their hard work.

Fortunately, health experts see more reimbursement tied to performance and most Medicare Part D claims now have some type of performance related payments–DIR fees or others. This is expected to continue into 2020 and beyond. This means community pharmacies must prepare for value-based care and focus on demonstrating the impact they have on patient outcomes and reducing total cost of care. Not only is it the right thing for patients, it is also critical to community pharmacies in maintaining their financial success.

Eyad Farah is vice president and general manager of Health Mart Atlas.