PHARMACY WORKFLOW AND FINANCIAL PERFORMANCE OPTIMIZATION

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1 PHARMACY WORKFLOW AND FINANCIAL PERFORMANCE OPTIMIZATION An overview on how to use efficiency, technology, and creativity to further your organization s pharmacy imprint November 16, 2017

2 Your instructors Anthony Harris Manager, Health Care Consulting Services Jon Zolkoske Supervisor, Health Care Consulting Services

3 Agenda Overview of pharmacy operations Formulary, medication order entry, therapeutic subs, cart fill Automated dispensing machines, APA/APS and BCMA COD vs. COA Future state pharmacy operations Five strategies to improve pharmacy financial performance Regulatory update CY18 OPPS drug payments Questions

4 OVERVIEW OF PHARMACY OPERATIONS

5 Pharmacy operations Old to new

policy. Formularies may also contain clinical data such as dosing and contraindications.

6 What is a medication formulary? List of drugs that are approved to be prescribed at a particular hospital, health system, or under a particular insurance policy. Formularies may also contain clinical data such as dosing and contraindications. In some cases, IT departments maintain an organization s medication formulary. However, it is recommended that pharmacy personnel/designees remain entrenched in this maintenance process as they are keenly aware of which drugs are on their shelves.

7 Medication order entry OFTEN PERFORMED BY THE PHARMACIST, PHARM TECH, NURSE OR PROVIDER A PRIMARY BENEFIT IS THE REDUCTION OF MEDICATION ERRORS RELATED TO POOR HANDWRITING AND TRANSCRIPTION OF DRUG ORDERS ITS USE IS OFTEN BASED ON THE EHR SYSTEM IMPLEMENTED TO DELIVER PATIENT CARE Therapeutic substitutions (T-Subs) Aides in decreasing costs to drug plans by limiting coverage to the cheapest product or a more clinically effective alternative Therapeutic substitutions can affect patients starting new meds as well as those on existing drug therapies. e.g., H2Antagonists (Famotidine, Ranitidine, Cimetidine)

8 Cart fill The process by which a pharmacy distributes medications within the health system Centralized Floorstock Cart fill Decentralized Satellite services Automated dispensing cabinets

9 Automated dispensing machines (ADM) Allows drugs to be stored and dispensed near the point of care while controlling and tracking their distribution. Other benefits of ADMs include: - Integration with pharmacy suppliers - Assessment of both pre-packaged and pharmacy-manufactured inventory

10 APA/APS and BCMA AUTO PRODUCT ASSIGNMENT (APA) or AUTO PRODUCT SELECTION (APS) are the basis behind right drug/product and right dose for pharmacy. These order entry mechanisms facilitate efficiency within pharmacy operations. BCMA (Bar Code Medication Administration) Maintenance of the 5 rights: i. Right patient ii. Right drug iii. Right route iv. Right dose v. Right time

11 APA/APS and BCMA cont d Importance of report monitoring: Identifies areas of non-compliance Provides pharmacy a means to address difficulties with specific drugs during medication order entry Promotes ongoing training and education Furthers patient safety measures

12 APA/APS and BCMA cont d Additional considerations: Does pharmacy or IT monitor your reports currently? How is remediation handled for clinicians outside of pharmacy? Has a overall dashboard/scorecard been created for hospital-wide dissemination?

13 COD vs. COA THE CASE FOR CHARGE ON DISPENSE VS. CHARGE ON ADMINISTRATION COD Charges drop when a medication is dispensed from pharmacy COA Charge is captured when the med is scanned by the nurse and administered to the patient Credits the same medication if it s returned to the pharmacy unused No need for pharmacy to credit meds that go unused. Those meds are just returned back to inventory. Simple, but labor-intensive Provides a more accurate electronic patient record

14 COD vs. COA cont d Other points of emphasis: Blended units/shared ADMs Use of anesthesia stations (A-Stations) in procedural areas Billing resources Communication/socialization

15 Pharmacy point of care (future state) What does the future hold for pharmacy? Reorganization of IT infrastructure Pharmacists will have greater prescribing authority Innovation centers will become more commonplace There will also be a priority placed on professionalizing the pharmacy technician staff Perpetual inventory management Need for strategic planning

16 PHARMACY FINANCIAL PERFORMANCE OPTIMIZATION

17 Current strategic pharmacy trends Leveraging pharmacy data analytics to make strategic decisions Regulatory requirements Health system pharmacy seen as a revenue and margin generator Continued growth in specialty market Health system pharmacy operations/supply chain

18 LEVERAGING PHARMACY DATA ANALYTICS TO MAKE STRATEGIC DECISIONS

20 Pharmacy data analytics: Pharmacy pricing Analyzing pharmacy revenue & drug spend is becoming a strategic necessity Assist budget forecasting Drive quality patient care Reduce overall costs Enterprise pricing driven by transparency & consumerism Rationale pricing approach Shifts in cost/cost surrogate used for pricing (AWP/WAC)

21 Pharmacy data analytics: Monitoring drug spend Key to monitor both price & utilization A 5% price increase can have a million dollar impact across your organization Establish a systematic approach to evaluating drug purchase opportunities Compile accurate data Compare available pricing (GPO, WAC, 340B, etc.) Collaborate to change utilization/purchasing

22 REGULATORY REQUIREMENTS: CY18 OPPS FINAL RULE

23 OPPS Addendum D1 Payment status indicators Status indicator G Item/Code/Service Pass-through drugs and biologicals OPPS payment status Paid under OPPS; Separate APC payment includes passthrough amount. H K L M (1) Pass-through device categories (2) Radiopharmaceutical agents (1) Non-pass-through drugs, biologicals, and (2) brachytherapy sources (3) blood & blood products Influenza vaccine; Pneumococcal pneumonia vaccine Items and services not billable to the fiscal intermediary (1) Separate cost-based pass-through payment; Not subject to coinsurance. (2) Separate cost-based non-pass-through payment. (1) Paid under OPPS; Separate APC payment. (2) Paid under OPPS; Separate APC payment. (3) Paid under OPPS; Separate APC payment. Not paid under OPPS. Paid at reasonable cost; Not subject to deductible or coinsurance. Not paid under OPPS. N Items and services packaged into APC rates Paid under OPPS; Payment is packaged into payment for other services, including outliers. Therefore, no separate APC payment.

24 CMS Part B drug payments Separately payable (will see line reimbursement) New drugs not yet assigned unique HCPCS code New pass-through drugs, biologicals, and radiopharmaceuticals Specified covered outpatient drugs (SCODs) costing > $120/day Not separately payable (will not see line reimbursement/bundle) Lower-cost packaged products costing < $120/day Regardless of cost, products used in policy packaged services

25 CY18 OPPS table 69: Drugs & biologicals with expiring pass-through payment

26 CY18 OPPS final rule impacts Payment for biosimilar biological products Remains at 100% of the biosimilar s ASP + 6% of the reference product s ASP when the product has pass-through status and to non pass-through biosimilar biological products with costs that exceed the packaging threshold Payment for drugs & biologicals with passthrough status, including policy-packaged drugs Remains at ASP + 6%

27 CY18 OPPS final rule impacts Payment for blood clotting factors Continues at ASP + 6% and a furnishing fee using an updated amount provided by CMS Payment for blood & blood products Continues to be established using the agency s blood-specific cost-to-charge ratio (CCR) methodology Due to costs of blood & blood products are reflected in the overall costs of C-APCs, CMS would continue not making separate payments for blood & blood products when they appear on the same claims as services assigned to C-APCs

28 340B Program High level Estimated savings: 25 50% of a drug s AWP (GPO is typically 15 20% savings) Manufacturers that want to receive Medicaid payment for drugs required to enter into pharmaceutical pricing agreement (PPA) 340B savings: Used to support hospital s non-profit mission

29 Eligible covered entities Federal grantees/designees Federally qualified health center Federally qualified health center look-alikes Title X family planning grantees State aids drugs assistance programs Ryan White CARE Act grantees (A,B,C,D,F) Black lung clinics Hemophilia treatment centers Native Hawaiian health centers Urban Indian organizations Sexually transmitted disease grantees Tuberculosis grantees Certain hospitals Disproportionate share hospitals Children s hospitals Critical access hospitals Free standing cancer hospitals Rural referral centers Sole community hospitals Source: 29

30 340B size & scope HRSA 340B database statistics (2017) 36,914 registered sites (16,197 non-hospital) 17,633 unique contract pharmacies $12B/year in 340B drug purchases (2015) Source: AHA

31 2018 OPPS final rule 340B impacts CMS surprisingly finalized the proposed 340B payment cuts citing cost alignment and Medicare beneficiary copayment relief OPPS reimbursement rates for 340B-eligible drugs > $120 by roughly 27% Reduction from 106% to 77.5% of ASP Impacted sites: Urban SCH/DSH/RRC hospitals On-campus and grandfathered off-campus PBDs (prior to 11/2/2015) Exempt sites: Rural SCH/PED/CAN hospitals exempt from CY18 payment changes (remain ASP + 6%) CAH due to cost reimbursement Non-grandfathered PBD paid under MPFS rather than OPPS

32 Revenue impact of Medicare s payment reduction to 340B hospitals Source: Pew Charitable Trusts

33 2018 OPPS final rule 340B impacts Estimated $1.6B overall savings to CMS (increased from original $900M estimate) 15.7% cut to overall OPPS Part B drug payment (total payment approx. $10.2B based on 2016 claims data) Savings will be reallocated across all providers (including non- 340B hospitals) Will increase payment rates for other non-drug items and services paid under OPPS in an offsetting aggregate amount of 3.2% Biggest losers are large DSH providers (500+ beds): Decrease of 2.2% after 340B adjustment

34 2018 OPPS final rule 340B impacts Modifier (JG) required for drugs acquired at 340B cost Stated that this should align with new modifier requirements from several state Medicaid programs TB informational modifier requested from SCH/PED/CAN hospitals Several organizations & representatives have come out with strong response against shift in payment Hospital groups to sue CMS over 340B cuts (ModernHealthcare)

35 OPPS payments scenarios Drug purchase Patient coverage status Treatment location CMS payment Payment rules Line item modifier required? Drug A bought at 340B price Medicare Outpatient setting ASP -22.5% OPPS Yes Drug A bought on regular contract Medicare Outpatient setting ASP + 6% OPPS No Drugs bought at 340B price Medicare Ambulatory Setting No change proposed yet Part D No Drugs bought at 340B price Other payors Outpatient setting No change yet proposed by other payors Contract? Drugs bought at 340B price Other payors Ambulatory Setting No change yet proposed by other payors Contract?

36 Implementing 340B OPPS changes (Effective 1/1/18) Quantify financial impacts of reduced payment for separately payable drugs Identify opportunities to either exclude drugs when savings < earnings on payment OR purchase lowest cost multisource products Determine which separately payable status K drugs you ll continue to buy at 340B by OPPS treatment areas Add charge routing logic to EHR system for new JG modifier with applicable 340B drugs Alternative methods: Create a new PDM/CDM entry for each 340B drug with modifier OR manual edit to add modifier depending on system Audit new billing process to compare 340B purchase records to Medicare payments

37 OPPS impact: 340B program optimization Review of 340B scope & designation Strategic purchasing Increase utilization Value-added contract pharmacy partnerships Evaluation of administrative costs

38 Pharmacy regulatory 340B future considerations HRSA delays 340B CMP and ceiling price rule to July 1, 2018 and intends to reopen rulemaking Previously finalized rule to charge manufacturers penalties ($5,000 per instance) if found to be overcharging 340B entities Medicaid program Covered outpatient drug Implementation of 2016 CMS final rule requires state Medicaid programs to implement SPAs that cap ingredient cost reimbursement for 340B drugs at AAC Possible carve-out option to avoid costs with 340B administrative burdens/reporting Covered Entities should assess carve-in / carve-out options based on states policy & cost savings Additional calls for reform to contract pharmacy networks, orphan drugs, user fees, savings measurements, etc.

39 HEALTH SYSTEM PHARMACY SEEN AS A REVENUE AND MARGIN GENERATOR

40 Extending continuum of care with hospital pharmacies As many as 69% of medication-related hospitals admissions in the U.S. are due to non-adherence Hospitals continue to evaluate opportunities to open hospital-owned outpatient pharmacies Drives successful patient outcomes with ability to follow-up and monitor patient long-term Key to documentation efforts for unique patient populations and helping to reduce readmissions

41 Extending continuum of care with hospital pharmacies Benefits: Decrease acquisition costs (leveraging 340B if able) Retain income Provide financial benefit Efficient discharge process Enhanced data integration Source: In sourcing Retail Pharmacy

42 HEALTH SYSTEM PHARMACY OPERATIONS/ SUPPLY CHAIN

43 Supply chain There are numerous steps that a drug must migrate through before it makes it to the patient. Step 1 Manufacturer Step 2 Wholesaler Step 3 Pharmacy Step 4 Provider Step 5 - Payer (Government, PBM, etc.) Step 6 - Other providers (e.g., Home infusion, outpatient hospitals, infusion suites, etc.)

44 Supply chain cont d

45 Supply chain cont d What is supply chain? A system of organizations, people, technology, activities, information and resources involved in making a product reach the customer Framework Governmental Private Civil Membership organizations The ability to reduce costs to the extent possible.

46 Supply chain cont d Responsiveness ability to quickly satisfy unexpected customer needs Responsiveness Agility Agility denotes the capability of revising processes to adapt to changes in cost or market structure Leanness Leanness creating opportunities to reduce costs wherever possible

47 Supply chain cont d Transformation: Revenue-generation through partnership Thinking past the 5 Rights Migration to centralized inventory management Standardized purchasing behavior Top-down support Flexibility of existing EMR/EHR systems

48 Supply chain cont d

49 Supply chain cont d Understanding your organization s KPIs Assessment performed of your health system s charge master Reduction of costs through provider-preferred drugs Vendor management Feasibility of new service lines

50 CONTINUED GROWTH IN SPECIALTY MARKET

51 Specialty pharmacy cont d Emphasis on four basic categories: - Dispensing - Medication management - Patient advocacy - Compliance 51

Specialty pharmacy cont d 4. Econdisc Contracting Solutions includes Express Scripts, Kroger, Supervalu and other retail chains 1. Red Oak includes CVS Health and Cardinal Health 3.

52 Specialty pharmacy cont d 4. Econdisc Contracting Solutions includes Express Scripts, Kroger, Supervalu and other retail chains 1. Red Oak includes CVS Health and Cardinal Health 3. WBAD = Walgreens Boots Alliance Development GbMH; includes AmerisourceBer gen volume Reference: The 2017 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers, Drug Channels Institute, 2017, Exhibit McKesson OneStop generic figures include Rite Aid and Albertsons but exclude Omnicare

53 Specialty pharmacy cont d Barriers to success: Limited number of hospital/health system based specialty pharmacies Competing priorities within the health system Lack of specialty pharmacy experience Accreditation/licensing/contracting Staffing, technology, inventory, etc. Vendors Reporting Pharma/provider relationships

54 Specialty pharmacy cont d 54

55 Specialty pharmacy cont d Licensing and accreditation: Accreditation helps an organization maintain accountability Payers want to see this because it confirms a commitment to quality, cost containment, etc. Can aid with access to limited-distribution products

56 Specialty pharmacy cont d Other takeaways: Should my organization invest the time and resources to see if specialty pharmacy could be an option? When could we reasonably expect our ROI to be realized?

57 Specialty pharmacy conclusion What are the next steps?

58 Your instructors Anthony Harris Manager Health Care Consulting Services, Austin Jon Zolkoske Supervisor Health Care Consulting Services, Milwaukee

RSM US LLP One South Wacker Drive Chicago, Illinois +1 800 274 3978 www.rsmus.

59 RSM US LLP One South Wacker Drive Chicago, Illinois This document contains general information, may be based on authorities that are subject to change, and is not a substitute for professional advice or services. This document does not constitute audit, tax, consulting, business, financial, investment, legal or other professional advice, and you should consult a qualified professional advisor before taking any action based on the information herein. RSM US LLP, its affiliates and related entities are not responsible for any loss resulting from or relating to reliance on this document by any person. RSM US LLP is a limited liability partnership and the U.S. member firm of RSM International, a global network of independent audit, tax and consulting firms. The member firms of RSM International collaborate to provide services to global clients, but are separate and distinct legal entities that cannot obligate each other. Each member firm is responsible only for its own acts and omissions, and not those of any other party. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. RSM and the RSM logo are registered trademarks of RSM International Association. The power of being understood is a registered trademark of RSM US LLP RSM US LLP. All Rights Reserved.

COMPLIANCE IN THE 340B DRUG PRICING PROGRAM

COMPLIANCE IN THE 340B DRUG PRICING PROGRAM Jason Atlas RPh MBA Manager, Education and Compliance Support Apexus Education and Compliance Support Team Apexus Education and Compliance Support Team 1 Objectives