What You Need to Know About Common Hospice Pharmacy Pricing Model

Consider, for instance, the recent modifications to Medicare hospice benefits. Shortly, Medicare changes will eliminate the prevalent "per diem" payment model for pharmacies. Despite this, some sellers promote the per diem model, which is typically a mail-order product, as the ideal solution. This approach features built-in obsolescence for hospice administrators concerned about reducing expenses while boosting care quality.

Let's assess the scenario and ask, "What's the next step?"

The Per Diem Business Model

When examining Medicare's recent developments, the writing is on the wall. The question is not "whether" the per diem business model for pharmacy benefits administration is on its way out but "when." Hospices that have embraced PBMs or a pharmaceutical solutions provider using a per diem model will be required to transition. The business pricing model of their provider will no longer be cost-effective. The outcome is, at best, an annoyance and, at worst, an unanticipated investment of time and money.

As its vendor catches up with Medicare, some of the largest hospice care networks in the United States will be forced to weather a storm of pricey, annoying fee increases and administrative snafus in the coming year.

Model of AWP Discounts

PBMs and pharmacies offering their clients an average wholesale price (AWP) negative business model will likewise conflict with Medicare reimbursements and their clients' bottom lines. Currently, these businesses offer an AWP minus a discount rate of between 40 and 60%. The advertised discounts appear reasonable at first glance. However, care providers are losing money. How could this be?

Frequently, generics are significantly less expensive than the cost charged. Consider Olanzapine 5mg 30 tablets, which have an AWP of $396.04. The pricing is astounding when one considers that this prescription can be purchased for less than ten dollars at a local pharmacy. A hospice provider would still pay $237.63 for 30 5mg Olanzapine tablets with a 40% AWP rebate. The same holds for a large number of additional hospice drugs. In recent decades, the gap between the price of medicine and the amount hospices pay has grown substantially.

PBMs (and many local pharmacies conducting direct business with hospices) promote an "AWP minus a Discount" model, so they have no problem with the perception that they are cutting pricing. In addition, their hidden margins employ theatrical gestures to focus their consumers' attention where they desire. After establishing a pharmaceutical benefits relationship in a particular place, these individuals will promise nearly anything to maintain that contract.

What follows? Suppose the PBM per diem model is obsolete and the non-transparent fee-for-service model inflates prices to the detriment of their client's financial well-being. What alternatives could hospice administrators consider? SpectrumPS has pondered this matter extensively and developed a viable option: the cost-effective pass-through approach. Here, let's have a look at it.

Model of Pass-Through

Pioneered by SpectrumPS, the "Hospice TaperTM" pass-through PBM purchasing approach has proven to be an industry disruptor. In hospice pharmacy, the degree of information the client receives regarding medication expenses is exceptional. How transparent is it exactly? In a fiduciary and authentic pass-through purchasing arrangement, the client retains the right to audit the hospice pharmaceutical supplier at any moment. In addition, the client and PBM contract establishes the actual pass-through rates. This is neither left ambiguous nor vaguely identified. There are no hidden fees or revenue sources, and the client's value is agreed upon beforehand.

How can one make sense of the proposals made by potential pharmacy suppliers when there are three distinct business model types? We recommend a cost comparison breakdown similar to the one presented below. An apples-to-apples comparison of a hospice's most frequently administered medications should uncover information that could remain concealed.

A hospice administrator's job is to ensure that terminally ill patients receive the highest quality of care, including attention to their physical, emotional, social, and spiritual requirements. Your hospice can provide high-quality care at a reasonable cost by hiring people from the area who are already trained in the necessary skills.

Despite CMS setting the ground rules for hospice agencies to follow, the real change in people's lives occurs at the regional and municipal levels. Ultimately, hospices and pharmacies in the same area should work together to serve patients better. Some pharmacy benefit managers offer procedures that improve patient care, but the vast majority do not.

Insurance coverage issues in the pharmacy

Your working relationship with the pharmaceutical benefit service firm may affect the quality of care and the level of patient satisfaction you achieve. As an illustration, several pharmacy benefit managers (PBMs) also operate the pharmacies that participate in their mail-order prescription service. The PBM handles the administration of the drug benefit and the processing of prescriptions. To make matters worse, your hospice patients must wait for drugs rather than receive faster relief.

To divide these two tasks, the benefit design should have the pharmacy benefit service firm handle the prescription benefit administration. In contrast, a community pharmacy takes the actual filling of the prescription. It is essential to have local caregivers in charge of local care, so a contracting arrangement should pair independent community pharmacies with independent hospice providers. As a result, patients can receive professional pharmacy care.

Moreover, the hospice organization must have unrestricted, unhindered access to all relevant patient and prescription data. The hospice should be able to see exactly what the patients are receiving, how much the pharmacies are being paid, and any fees the PBM charges them.

What has spread pricing, and why should you care?

Because of spread pricing, your hospice organization may overpay for pharmaceuticals and have no idea how much money was wasted. Most PBMs use spread pricing, which means that after reimbursing the pharmacy, the PBM will send a bill to your hospice at the agreed-upon rate. Your pharmacy's reimbursement is likely much lower than your agreed-upon amount. The PBM will keep the difference for themselves.

The hospice organization will not know how much the PBM paid for the drug because of spread pricing. Some PBM contracts may include wording forbidding you from seeing or even asking your pharmacy about the total cost of your prescription drugs. Your agency has no way of knowing if it is overpaying for them. PBMs' secrecy about their business practices makes negotiating favorable terms for your prescription drug coverage difficult. Furthermore, suppose your community pharmacy is suffering financially because they are not adequately reimbursed for the hospice patients' prescriptions. In that case, it could hurt the quality of care provided.

Benefit and formulary framework for hospice pharmacies

The cornerstones of a well-designed hospice benefit are quality patient care and protecting the hospice from extra expenses. Patients, families, and caregivers' satisfaction can be improved through a benefit design that encourages local respect.

A mutually agreed-upon pharmaceutical formulary determines a hospice's drug benefit for treating the patient's terminal disease symptoms. Prescriptions for drugs not included on the hospice formulary will either not be covered by the hospice prescription benefit or must be approved in advance by hospice staff. Through the PA procedure, hospice administrators can specify which goods should be covered in light of the needs of individual patients. The PA procedure safeguards the hospice from paying for unnecessary medications while guaranteeing that patients receive all necessary care.

Payment terms for medications and pharmacy services should be spelled out in a service contract between the hospice and the local pharmacy. Important for hospice management to examine before agreeing on whether medication will be given by mail order rather than through a direct relationship with a local pharmacy. What would happen if a new mail-order patient required emergency medication to be delivered the very next day? A local pharmacy could fulfill the requirement instantly and provide a greater degree of care than the hospice could if they had to wait two days. For more information visit spectrumPS.