Beginning in January 2024, the Centers for Medicare & Medicaid Services (CMS) will implement a new process for assessing pharmacy DIR fees. An expected result of the transition could be a short-term cash flow crunch for pharmacists, as the new way of assessing the fees overlaps with existing practices. As pharmacists anticipate this unwelcome start to the new year, they can find an important ally in their PrimeRx pharmacy software system.
PrimeRx includes multiple capabilities that can assist pharmacies in planning for the expected revenue squeeze. This includes solutions for gaining full visibility into the pharmacy’s economic performance, anticipating DIR fee assessments, and building plans to manage through the transition.
But first, following is a brief overview of the significant changes planned for 2024.
- In May 2022, CMS published a final rule in the Federal Register announcing changes to the Medicare Part D (drug plan) with regard to pharmacy price concessions. Specifically, the agency directed that beginning on January 1, 2024, pharmacy benefit managers (PBMs) will end the practice of retroactively assessing direct and indirect remuneration (DIR) fees. Instead, going forward, fees will be reflected in the negotiated price paid by the patient at point-of-sale.
- The announcement was praised by major pharmacy trade groups, many of which, including the American Pharmacists Association (APhA) had advocated for the change. “APhA appreciates CMS’ efforts to end the uncertainty and lack of drug cost transparency at the pharmacy caused by retroactive DIR fees,” noted an APhA statement released after the final rule was issued. Similarly, the National Community Pharmacists Association (NCPA) acknowledged that while the rule was “not perfect,” it would “make pharmacy reimbursement more transparent and predictable.” The pharmacy groups noted the harmful impact retroactively-assessed fees have had on pharmacies, citing a shocking 107,400% increase over the 2010-2020 period.
- While the end of retroactive DIR fee assessments is certainly a positive development, the ensuing transition period will pose a significant challenge for pharmacies. As explained by APhA, “though CMS’ rule acknowledged the impact of retroactive DIR fees, it failed to address the transition period for pharmacies from calendar year (CY) 2023 to (CY) 2024. Medicare Part D beneficiaries will start seeing lower out-of-pocket costs and pharmacies will receive the ‘lowest possible reimbursement’ in 2024. However, PBMs will continue to collect retroactive DIR fees from 2023, which will create significant cash flow issues for pharmacies during the transition.”
Pharmacists have been understandably alarmed by the coming changes, and not quite sure of the expected impact on their pharmacies. Which is why pharmacists have been urged to get ahead of the issue by proactively taking steps to reduce overhead costs, consider additional revenue sources, and ensure they have full awareness about their pharmacy’s financial situation.
PrimeRx – A Critical Tool for Planning and Managing Pharmacy Performance
Technology-based solutions, including PrimeRx, can be essential resources in helping pharmacists assess their vulnerability and plan for the coming transition period. Pharmacists can rely on PrimeRx for an industry-leading array of capabilities that include:
- DIR Fee Analysis. PrimeRx captures historical data about DIR fees assessed by each Part D plan. This allows pharmacy managers to easily track all prior fee payments, which provides a good indication of future fee assessments.
- Part D Plan-by-Plan Analysis. Since each plan assesses DIR fees based on different metrics, it’s essential to understand how each plan is structured. PrimeRx breaks down each plan and allows pharmacies to track performance based on unique requirements.
- Workflow Optimization. PrimeRx automates key pharmacy operations including prescription intake, dispensing, refills, inventory management, and claims processing. Tasks that used to take significant chunks of time are now automated, with minimal staff involvement. Automated workflows allow pharmacies to function more efficiently, which enables managers to more strategically allocate headcount and staff resources.
- Refill Optimization – Improved Adherence. Beyond automating the dispensing process, PrimeRx identifies all outstanding refills and alerts patients about lapsed medications. The system generates an automated email or text to the patient with a reminder that a refill is due. This helps improve medication adherence among patients while also boosting dispensing rates.
- Business Records Management. PrimeRx maintains records for essentially all pharmacy operations. This allows managers full visibility across all cost centers as a way to identify potential opportunities for savings. Pharmacists can have immediate access to inventory costs, payroll expenditures, and fixed costs for outlays on rent, insurance, and utilities, among multiple other cost centers. PrimeRx allows pharmacists to see precisely where dollars are allocated each month. This in turn can help identify opportunities to reduce costs, at least for the duration of the DIR fee transition.
- Accounts Receivable. The system can identify all outstanding invoices and generate follow-up reminders, providing the potential for an increased revenue stream.
- Staff Productivity. The system tracks employee performance, with reporting available on dispensing rates, patient interactions, and staffing levels during peak/non-peak periods. This allows a manager to better allocate staff hours to ensure maximum coverage during busy times, thereby reducing payroll by avoiding over-staffing during non-peak periods.
- Inventory Management. Pharmacies can track every penny spent on inventory and identify opportunities to cut costs by reducing supplies of slower-moving medications, or by reconfiguring ordering practices so that less inventory is on hand at any given time.
- Report Generation. Managers can generate reports on essentially any aspect of pharmacy operations. Reports can be customized based on a manager’s preferred topic and reporting period. Extensive reporting allows managers to monitor performance across all self-selected metrics, and provides an opportunity to identify areas of strong performance, along with opportunities for improvement.
- Clinical Services Support. Pharmacies can rely on PrimeRx to support clinical services they may implement as a way to generate additional revenue. PrimeRx allows pharmacists to easily record all services delivered to patients including immunizations, health screenings, patient education, and lab testing, among other services.
- CPESN eCare Plans. Pharmacies can easily create and maintain patient eCare plans within PrimeRx. This allows pharmacies to capture comprehensive patient records, interact with patient healthcare teams, and demonstrate this high level of patient involvement in seeking reimbursement for services provided.
- Denial Conversion Services. Pharmacies can generate critically-needed revenue by participating in Micro Merchant Services’ Denial Conversion Services program. The program allows pharmacists to provide patients with their prescribed medications – after the claim has been rejected by the patient’s payer. The program converts the denied claim to “paid” status, thereby allowing the pharmacy to dispense the medication. Micro Merchant Systems, the company behind PrimeRx, reimburses the pharmacy for the cost of the medication and also pays the pharmacy a transaction fee. As pharmacies search for additional revenue opportuntieis, denial conversion presents a win-win: Patients are able to obtain their preferred medications, while pharmacies benefit from increased revenue.
The coming DIR fee transition is poised to be an unsettling period for pharmacies. But pharmacists can help themselves by ensuring they have complete awareness of their pharmacy’s cashflow and expenditures, and by identifying opportunities to maximize revenue and efficiency. Technology-based solutions, including the extensive capabilities provided by PrimeRx, can be real lifelines in helping pharmacies manage – and even thrive – during this time of change.
