Drug Reimbursement: Fool’s Gold?
Be careful you are not settling for less.
MARK LEVITAN, MD
The explosion in intravitreal drug injections is morphing our practices’ balance sheets from a traditional services model to a retailing operation. We have been complacent — but not content — to keep accepting reimbursement cuts for our own professional services. The effect has been to tolerate a monetary devaluation of our time — we work more hours to achieve the same salary. But what happens when our drug reimbursement does not equal our expense? What happens when we post the checks the insurance companies send us and realize they paid too little? We cannot sustain a business model of losing $100 on merchandise and imagine that we can make up the difference on volume. In this article, I will review ways to help increase reimbursements.
Profit can be reduced in 2 ways: (1) decreased drug reimbursement; and (2) increased expenses associated with providing the drug. If our overhead for pharmaceuticals is $2000 and we charge the patient $2120, then there is an apparent profit of $120. Notice that I said drug cost and not drug purchase. You may consider fixed expenses to have already been taken care of by our other reimbursed services, but what were the incremental expenses associated with providing that item? What were the taxes associated with the drug? Some states require sales tax to be paid even though this is a pharmaceutical drug — an interesting problem with legal definitions. Additionally, does your state have a business inventory tax? It is beyond the scope of this article to give accounting or legal advice; however, it is still important to bear in mind for the sake of your bottom line.
Dr. Levitan is in private practice at Austin Retina Associates in Austin, Texas, since 2002. He was born and raised on Long Island, NY.
EIGHT TYPICAL SCENARIOS
Below, you see the 8 typical healthcare purchase scenarios. All Medicare-involved services have certain similarities. First, physicians must accept assignment for covered drugs regardless of whether or not they accept assignment for professional services. Second, the 20% copay can always be collected at the time the drug is administered. Third, collecting money from your patient when Medicare deems the service or drug medically unnecessary requires an Advanced Beneficiary Notice. This is typically used when there are off-label uses of Food and Drug Administration (FDA)-approved medication.
1. Medicare primary — no secondary. At the time of rendering the service, you may collect the 20% co-pay. Each carrier has a published reimbursement schedule from which you can calculate this amount. Problems can develop when
a practice has multiple offices in several states. There is the potential of varying allowable reimbursements for different offices — watch out. Strategy: Collect the co-pay at the time services are rendered.
2. Medicare primary — secondary (Medigap from prior employer). There has been an increasing trend of retired patients obtaining their Medigap policies from their previous employers. It is convenient, requires minimal paperwork, and is initially less confusing. However, since the marketplace constantly forces competition, insurance companies have developed creative combinations of services and premiums. Many have developed ridiculously poor reimbursements for medical services and drugs in their Medigap policies in order to maintain a reduced premium. Typically, patients are shocked that their secondary policy does not pay enough for their co-pay. Strategy: Collect the patient’s co-pay when services are rendered. Do not post the payment until you receive the Medicare reimbursement and see what the Medigap actually pays.
3. Medicare primary — secondary (independent Medigap). As long as it is a covered service and drug, the independent secondary typically covers the entire co-pay for the proper amount. Medigap’s appeals process is usually straightforward. Strategy: Usually, the simple appeal process.
4. Medicare HMO. This is a contract between you and the insurance company. The most important question is not what is reimbursed today, but what are the appeals processes to obtain the right reimbursement tomorrow? Unfortunately, there is no wonderful process to make yourself whole when there is a partial payment for drugs. The rules of typical Medicare do not apply, and the appeal process may not resemble anything you are used to. Just as in private HMO plans, you need be clear what the reimbursement is. Strategy: Consider entering the competitive acquisition program to purchase the drugs or carve out the cost of drugs from your contracts.
5. Private. As the name implies, this is a private contract between your practice and the insurance company. It is your responsibility to know what your contract allows for the reimbursement. If the company treats this information as a state secret, then consider collecting the money up front and not posting that payment until you receive information from the insurance company. Important questions to answer on your contract review are: Does it allow you to collect money from the patient before the company renders payment to you? What are their reimbursement rates? What is their appeal process when they pay less than their stated allowance? This is pure capitalism in that if you do not like the contract terms, you should not enter into the contract. Strategy: If you have a history of problems or if this is a new insurance company to your practice and a good working relationship has not yet been established, try collecting money before the drug is administered. Be sure that you are not violating a contract clause. Insurance companies are better writers of contracts than you are a reader of them.
6. Private primary — Medicare secondary. All the above problems of primary private except that the secondary Medicare policy typically takes care of the full copay. Medicare secondary will pay the co-pay for even more than Medicare considers appropriate in their fee allowance schedule. Strategy: Track the payment.
7.HMO private. The worst of all situations — not only are you at the insurance companies’ mercy for reimbursement, but there is usually a far worse appeals process than a Medicare HMO. Strategy: Carve out all drug payments. If the insurance company is contracting with a third party to obtain drugs, try to negotiate that you can charge the patients for medication even when the HMO says that it is not medically necessary but you do. For example, what happens if the drug is on back order but the patient still needs it right away? You need to limit your liability!
8.No insurance. There are several financial assistance programs offered by the drug companies’ related organizations that can provide ranibizumab (Lucentis, Genentech) and pegaptanib sodium (Macugen, [OSI] Pfizer/Eyetech, New York).When will you receive the drugs? How much of the drug will the company supply? What happens when your patient has exhausted the standard aid program and still needs treatment? Strategy: Have an informed financial consent discussion with your patient that the organization is offering assistance but is not making a contract to provide it. The organization is protecting its reputation by helping but may not be legally obligated to continue the program. Have the organization supply the drug, have the patient understand that he or she can wait for the drug or pay for it up front, and make your patient understand that the program can stop at anytime.
DON’T ACCEPT THE STATUS QUO
It is unfortunate but necessary that this type of article needs to be written. Our offices have become accustomed to write-offs when our services have been disregarded and devalued. However, none of us is ready to accept selling “merchandise” below even wholesale cost. I hope this article helps you triumph over the trend.