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How Recognizing Outliers Can Improve Your Bottom Line

Posted on January 16, 2020 by Brady Chatfield

Pharmacy owners are finding that by improving adherence on even a few “outlier” non-adherent patients, they can enjoy huge savings to their bottom line. Ollin Sykes, a certified public accountant (CPA) who specializes in pharmacy tax planning, shares some recent industry trends and how the typical pharmacy can slash direct and indirect remuneration (DIR) fees in half.

“What we’ve noticed, over the last year in particular, is DIR [direct and indirect remuneration] fees have really become an issue on a trimester clawback basis,” says Sykes, CPA and president of Sykes & Company, P.A., based in Edenton, N.C. “Most are doing it monthly. But, those that have star ratings at five, on an average basis, versus those that have star ratings at four average, for those five star pharmacies, we’re seeing [lower] DIR fees ... For those pharmacies with star ratings of four or four and a half, DIR fees can be anywhere up to 4% or 4.5%.”

Sykes says there’s a clear correlation, measurable in dollars, between what’s happening on the adherence side and on the Med Sync side.

“When you take one percentage point of the average pharmacy revenue in this country, which has about $3.6 million in retail sales, that’s $36,000,” Sykes continues. “So if you can reduce the one or two percentage points by increasing your star ratings by having the technology in place like we’re talking about here, that’s a game changer.”

Too good to be true? Here’s how it works

As most pharmacy owners are aware, the US Centers for Medicare & Medicaid Services (CMS) put DIR fees into place in 2006, as part of the Medicare Part D law. DIR fees are tied to star ratings that health plans achieve as part of their mandate to improve care for the population they cover. Technically, pharmacies do not have their own star ratings, but they do have performance metrics that impact star ratings.

Nick Brooke, Director of Industry Relations at Amplicare, explains.

“There are things that are actionable, that independent pharmacies can do to manage their fees,” Brooke says. “It is important for pharmacists to be aware of how the plan works, so they can focus on improving the necessary metrics. Adherence for hypertension, statin, and cholesterol medications are the predominant metrics across all plans. Focusing on good performance in these metrics will help decrease their DIR fees. While Med Sync can be very effective, I think pharmacies need to go beyond that and incorporate a compliance packaging solution like RxSafe’s RapidPakRx.” 

You might think that increasing performance metrics requires laborious work, and valuable time that staff can’t spare. However, Brooke, who has worked with thousands of pharmacies across the country, finds that’s not the case.

“Most of the time it’s just a few patients that are really weighing down a pharmacy’s metrics,” he says. “So if you're thinking, I don't want to have to talk to hundreds of patients about adherence programs, it's actually a much smaller number than that.” Educating staff on the importance of improving performance measures and investing time to increase patient adherence can really help independent pharmacies improve their profitability.

Technology pharmacies can see

To improve medication adherence and meet their performance metrics, many pharmacy owners invest in compliance packaging such as RxSafe’s RapidPak Rx adherence strip packager. Many of them are seeing a return on investment from DIR fees alone. 

One notable example is Benjamin McNabb, Pharm.D., owner of Love Oak Pharmacy in Eastland, Texas

“We all know pharmacies of a pretty good size, they could be seeing $100,000 to $200,000 a year in DIR,” McNabb says. “So we need to minimize that the best we can, and I think adherence packaging just makes it a more seamless process to try to maximize a reimbursement.”

McNabb also noticed a big boost to patient adherence — and his star ratings — after he implemented adherence packaging automation.

“You’ve got to make sure you’re getting a five-star rating on every single plan, so that does make a big difference,” McNabb says. “You have to ask, who are these patients that we can get into adherence packaging to take them from 75% adherence up to basically 99% adherence, so that we can improve our DIR dramatically. Sometimes it’s just a matter of one to two patients on these different health plans and the different scores. And I would say that reducing DIR alone, if you can have a program to improve that, you’re getting your money back [on the automation investment]. DIR savings alone can pay off a unit pretty dang quick if we can just maximize our adherence on our patients. So for us, we found adherence packaging to be a big advantage. ”

Brady Chatfield is the Director of Marketing at RxSafe. To learn more, visit rxsafe.com.