Consultant Pharmacy Forum An Analysis and Comparison of Medication Therapy Management Cost-Avoidance vs. Fee-for-Service Financial Models Michael J. Schuh Objective: To describe, compare, and contrast cost-avoidance
and fee-for-service medication therapy management (MTM) financial models of practice to allow clinicians to better choose the type of MTM practice that best fits their particular practice environment. Data sources: Literature regarding pharmacist practices providing MTM services and capstone projects of proposed and currently operating MTM pharmacist practices presented in the University of Florida Master of Science MTM program. Study and source selection: Understanding the two major payment methods of sustaining a financially viable MTM pharmacist practice is critical to practice success. Survey was broad with regard to clinical models to compare differences because funding to support these services can be difficult to obtain. Data synthesis: Despite differences in approach, various methods exist to financially sustain a pharmacist with an MTM practice. Each method or model has advantages and disadvantages in differing practice environments. Conclusion: With enough cost avoidance or revenue generation, financially dissimilar MTM financial models can be sustainable. Key Words: Cost avoidance, Fee-for-service, Financial viability, Medication therapy management, MTM, Profitability. Abbreviations: CA = Cost avoidance, CPT = Current procedural terminology, FFS = Fee-for-service, MTM = Medication therapy management. Consult Pharm 2015;30:291-7.
Introduction Since pharmacists were named as potential providers in the Medicare Modernization Act of 2003, they have been able to provide medication therapy management (MTM) services.1 The goal of these services, defined by this law, is to optimize therapeutic outcomes for individual patients with certain conditions. MTM services provided by pharmacists have taken many operational forms or models, but for the most part they have been divided into only two general financial models: cost avoidance (CA) or fee-for-service (FFS). For the scope of this discussion, it is assumed through prior research that the patient benefits clinically from MTM via either financial model through improved patient health, which also lowers overall health care costs.2-5 This review will only address the financial viability of the two financial MTM models, which pharmacists commonly use in providing services in ambulatory practice. The primary objective is to describe, compare, and contrast CA and FFS financial models of practice to help clinicians choose the type of MTM practice that best fits their particular practice environment.
Data Sources Data sources included a survey of the MTM literature regarding CA models of care, including the Asheville Project and others.2-5 The literature on practices producing revenue that are viable enough to support a full-time practice is difficult to find, particularly those getting buy-in from decision makers to implement CA models. To fill this gap, sources such as the American Pharmacists Association’s MTM Digest were surveyed, as well as selected University of Florida MTM Masters revenue-model capstone projects.6,7 These projects are business plans for MTM pharmacy practices that can be implemented following graduation. Well-researched business plans are required for graduation and are subject to a faculty evaluation, and some practices were created while completing the masters program. Criteria for data source and study selection were primarily based on demonstrated examples of successful, self-sustaining, financially viable MTM practices. Though
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Consultant Pharmacy Forum CA practices and literature about these were somewhat easy to find, revenue-producing practices able to support a full-time pharmacist were problematic. Data extraction was difficult with regard to financial information. Because of antitrust constraints, revenue reporting is scant to nonexistent. Multiple sources such as government current procedural terminology (CPT) code data, which are used to bill Medicare, was garnered from Centers for Medicare & Medicaid Services payment sites.8-11 Payer platform data were obtained from platform sites.12-14 These data were applied with the primary costs to provide MTM services and were defined as the pharmacist’s salary and overhead. Since there are little hard organizational financial data to be gleaned, descriptive examples have been used. (Specifics can be obtained from the reference sources as to payments and CPT-code valuation.) Costs to perform pharmacist-rendered MTM services were compared with the most common sources of revenue available to pharmacists. When informally surveyed, providers frequently report the lack of available payment to sustain a full-time practice.15
Discussion The primary financial goal of CA models is precluding health care costs for the client’s organization in the form of lower medical-claim costs. This model is beneficial for self-insured employers, insurance companies, or an intermediary between an MTM provider and an insurance company. A provider, who can be a pharmacist, provides MTM services for patients who are members, subscribers of the client organization, or individuals for whom the client organization has contracted to receive MTM services. In this general financial model, the primary beneficiary of the MTM service is the client organization, since the providing pharmacist does not directly benefit from the cost savings. Since the price paid using the CA model is fixed, and determined by the client or its representative, the client can predict its MTM costs. Furthermore, the costs for providing MTM services can be controlled by stratifying the designated patient population into groups that will or
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will not be eligible for paid MTM benefits. Historically, this financial model has done well in large health care organizations, self-insured groups such as large employers or insurance companies, government organizations such as the Veteran’s Administration, and other government entities that focus on containing costs.2 From the pharmacist’s perspective, he or she is paid a contracted price for services rendered, a price determined by the client or its representative. Though monies are paid to the pharmacist provider, the overarching principle in this model is CA for the client. Since a fee is paid to the pharmacist, this type of model may be viewed as an FFS model. However, the client sets the pricing to its advantage, so the provider payment comes out of the avoided costs. This is different from an FFS model in which the pharmacy provider determines the pricing based on costs used to provide the service. The clinical goal of an FFS financial model is the same as the CA model, i.e., the lowering of health care costs by making patients healthier and lowering the use of expensive medical procedures and activities. The primary financial goal of models based on FFS is the covering of the expense to provide MTM services, with some remaining for growth of existing services or to expand into other services. In the FFS model, the pharmacist sets the price for MTM services and therefore has more control over the pricing of services. Patients have demonstrated that they are willing to pay for pharmacist “cognitive services” (counseling on drug therapy) such as MTM; however, they are generally willing to pay less as the amount paid for by insurance decreases.16 In other words, the more cost burden is shared by patients, the less they are willing to pay for MTM services. Therefore, pharmacists must be aware of the local market or their specific targeted market for MTM services and must not charge more for services than that which a patient or other payers are willing to pay. The advantages of the financial CA model are many and well documented.2-5 As mentioned earlier, it is popular with large organizations that wish to lower costs; it is easier to demonstrate outcomes for research, especially in clinical monitoring models, and because of these traits, it has become the most popular financial MTM model. For
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pharmacists, however, the drawback to the widespread implementation of this model is its lack of revenuegenerating ability for those pharmacists willing to perform MTM. They don’t have the opportunity to contract with large organizations to provide MTM services, nor are they in a position of strength to negotiate enough payment for services to adequately cover their costs. Therefore, many may only be able to operate in the private FFS marketplace—where they are subject to local and targeted market conditions—to glean enough revenue to provide MTM services to financially support themselves. This is a difficult task, taking into account that historically the public has been receiving many pharmacist services for free. The Affordable Care Act has recently emphasized the CA model. Greater focus is being placed on public officials to demonstrate their ability to develop “best practice” models and to document improved outcomes and patient safety. Pharmacists have long performed clinical services that contribute to both cost containment and CA.17 Unfortunately, because of the lack of provider status for pharmacists (that would allow federal reimbursement), challenges to financial sustainability of clinical pharmacy services has resulted in limiting a routine integration of clinical pharmacists on treatment teams in organizations emphasizing revenue. In a recent CA analysis, El Rio Health Center, a federally qualified health center, evaluated an integrated pharmacist-care model. The objective was to assess the effects of El Rio’s Pharmacist-Based Diabetes Program comparing two similar community health centers in Arizona. These were chosen for their similar patient populations and size. This analysis is based on adherence to practice guidelines and the resulting economic impact of a pharmacist-led program.18 It is unlikely that these CA models easily be duplicated by other MTM providers, which would enable a comparison with compensation received by a community pharmacist filling prescriptions or the revenue in the average community pharmacy needed to sustain an MTM service-only practice. Pharmacists, especially in small markets, small independent pharmacies, or other organizations with few resources,
may be less able to participate in many CA models except those offered by online intermediaries such as Mirixa or OutcomesMTM.12,13 Though these programs pay for cognitive services to improve the quality of drug therapy and patient care, they still do not cover the total costs of pharmacist professional time to perform MTM services. There are or have been state plans such as in Minnesota, Iowa, Wisconsin, and Ohio that offer similar payment programs through the state Medicaid or others such as Ohio Department of Health/ Bureau for Children with Medical Handicaps and state of Iowa employees.19-22 “Opportunity cost” in this case is defined as the cost of giving up or not participating in one activity (filling prescriptions) to perform another activity such as providing MTM services. If the cost of providing, or loss of revenue to provide, MTM services, exceeds that income that can be earned by filling prescriptions, there is no financial incentive to provide MTM services. One example of a profitable FFS service is the provision of immunizations in community pharmacies. These have become popular because of the low cost to deliver this service ($11.00 to $18.00), with few additional overhead costs compared with providing immunizations in a physician’s office ($28.00 to $29.00). This results in favorable retail gross margins when the service is sold to the patient ($20.00 to $30.00).23-26 Therefore, when compared with many third-party prescription reimbursement margins, immunizations are attractive because they may offset the loss of income from filling prescriptions over the same time period. Other FFS cognitive models not associated directly with CA or immunizations have been slower to catch on despite the fact that there appears to be widespread provision of payment for these services through online FFS/CA combination software intermediaries such as OutcomesMTM, a consulting firm that administers MTM programs. According to the Lewin Group, a health care consulting firm, in 2005 the price to provide these types of MTM services should be in the $2.00 to $3.00 per minute range, which covers the cost of providing the service and enough gross margin to cover overhead.14 At a $50 flat fee for a comprehensive consult, compared with the time
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Consultant Pharmacy Forum spent preparing and documenting the patient evaluation, payment is inadequate to cover the time needed to perform the service and workup the patient. Even if other “add-on” services, such as substituting a generic, are performed, and the result is the desired one of higher payment to pharmacists, these add-on activities may still take more time than pharmacists are paid to support this additional activity. In addition, there is no guarantee that the time spent will result in a change in therapy if the patient or medical provider refuses the pharmacist’s recommendations. This is significant because payment for these activities can be from $10.00 to $20.00 for each addon service or as low as $0.00 to $2.00, resulting in little to no compensation for a significant amount of professional time. Comparing the guaranteed average gross margin of a pharmacist filling prescriptions for two to three hours with the nonguaranteed total payment received from FFS services related to CA, there is an obvious disparity in the amount of revenue received from the two activities. To obtain enough revenue through a direct CA model of payment, a pharmacist providing MTM services would either need to negotiate a higher payment from CA payers to truly cover MTM service costs or to participate only in plans that paid enough to cover these costs. With CA financial models or FFS/CA combinations or hybrids, the primary financial beneficiary is not the pharmacist but the client avoiding the costs of paying for additional—often unneeded or inefficient—health care. In short, the pharmacist provider is dependent on the client to pay enough to cover the cost of MTM services by cost savings. If MTM services can help decrease health care costs in the CA financial model, the same could be said in a pure FFS financial model. The difference is that there are fewer payers for services in such a pure FFS model unless patients are willing to pay for the pharmacist-provided MTM services out of pocket. Two examples of FFS financial models are ones in which pharmacists receive compensation from other medical providers such as physicians or those who bill patients directly for MTM services. Both models are closely affiliated with physicians in a collaborative arrangement.
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Providing services via physician or self-referral to an MTM pharmacist service is one FFS example.27 If not covered by insurance, patients must pay out-of-pocket. If the patient wishes to discuss the costs of the service, the pharmacist can explain that the patient is paying for the pharmacist’s professional time in the same way that he or she would pay for services rendered by a lawyer, physician, or dentist. The pharmacist can then describe those services. Some patients choose to opt out if their insurance does not pay. The vast majority of patients pay for the service out of pocket. The pharmacist sets prices at a level to cover the costs of the service based on fees charged by other allied professional services such as physical therapy, occupational therapy, and speech therapy. Fees charged by these allied professionals fall in line with fees that most likely would be required to sustain pharmacist-provided MTM services in similar practices.28-33 Success in this financial model is dependent on physician collaboration and knowledge of the MTM service so physicians value the services enough to refer patients. Other keys to success are separating MTM services from other pharmacy activities and differentiating MTM services from dispensing. This distinction can help separate the services in the mind of the patient and increase perceived value and demand for the service. This approach requires constant marketing, but can encourage physicians to recognize its usefulness and apply it to their own practices. In the second FFS model, the pharmacist leverages physician time by seeing patients before they see the physician.34 In this case, the physician collaborates with the pharmacist, allowing the physician to see more patients, do more procedures, and avoid hiring more office staff to assist with patient workload. The physician bundles billing for both pharmacist and physician services, then pays the pharmacist provider a rate per patient seen. In this model, the pharmacist makes recommendations to the physician using software designed to incorporate chronic disease-state guidelines. The pharmacist reviews the patient’s medical profile, laboratory values, and medication list, enters the data into the software with monitoring parameters, and the software assists with the pharmacist
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recommendations to the physician. The physician then examines the patient and accepts or rejects the pharmacist’s recommendations. With bundled billing, enough revenue is generated by the physician to cover the cost of the pharmacist, who is paid by the physician. One advantage of this model is that the pharmacist uses the physician office overhead, so pharmacist expenses and overhead remain low and the primary pharmacist expenses are labor and technology costs. Case studies may be the best way of identifying successful FFS financial models. Although case studies in and of themselves can limit external validity, FFS models are more applicable because of the difficulty in preparing something that may have little external validity because of numerous variables such as population, marketing savvy of a small organization, large differences in operating costs, and the local variables of the external environment. Studies involving CA financial models are easier to construct because variables are easier to control for and the power of the study is easier to obtain because the sample size is larger than for FFS financial models. Though CA and FFS financial MTM models have different immediate financial objectives—one to directly avoid costs, the other to generate revenue to provide services that avoid those same costs—to be successful they have some commonalities. They both can and should ultimately accomplish health care savings through the provision of MTM services. Both require buy-in from payers, whether they are the client in a CA model or the patient or another medical provider in a FFS financial model. In the CA model, the pharmacist must avoid enough costs to perpetuate the service by maintaining value to the client and negotiate enough payment to cover the cost of providing MTM services. In the FFS model, the pharmacist must market to create enough demand by the patient or medical provider to pay enough to provide and maintain pharmacist MTM services. Both financial models are much stronger with close physician collaboration and support. One cannot underestimate the importance of having a physician champion and the marketing power of a physician referral for MTM services. Unless financially satisfactory agreements can be obtained
from larger organizations such as the large software intermediaries, smaller providers of FFS MTM services will need to depend on effective local marketing of MTM services to maintain a financially viable practice. Since there are fewer opportunities for profitable CA financial models available to many pharmacists who would wish to perform MTM services, effective marketing of an FFS financial model is critical to generate the demand needed to obtain sufficient payment to sustain MTM services.
Table 1. Comparison of Cost-Avoidance vs. Fee-for-Service Methods of Payment for MTM Services Cost-Avoidance Model Good literature support Difficult to sell the concept to decision makers May be linked to product (electronic retail platforms) No immediate financial gain for service provider Payment absent or lowpaying when combined with fee-for-service Payment determined by payer Limits to widespread use
Fee-for-Service Model Less literature support Easier to sell concept to decision makers Does not need link to product Immediate financial gain to service provider Highest-paying
Payment determined by provider No limits to widespread use
Abbreviation: MTM = Medication therapy management. Source: References 2-5, 12-14, 27-34.
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Consultant Pharmacy Forum Conclusion There are advantages and disadvantages to each type of financial MTM model (Table 1). Those pharmacists providing MTM services who are best able to communicate the value of these services—and thus generate the most demand—will be those who can best sustain a successful, financially viable FFS MTM practice. On the other hand, pharmacists who are best able to provide services that avoid costs and are able to obtain enough payment as a result of the cost that have been avoided to receive payment for their MTM services, are the ones who can best sustain a successful, financially viable CA MTM practice.
Michael J. Schuh, PharmD, MBA, is clinical pharmacist and assistant professor of pharmacy, family medicine, and palliative medicine, Mayo Clinic Florida, Jacksonville, Florida; and assistant professor and course coordinator, University of Florida Medication Therapy Management Master of Science Program, University of Florida College of Pharmacy, Department of Pharmacotherapy and Translational Research, Jacksonville. For correspondence: Michael J. Schuh, PharmD, MBA, Mayo Clinic Florida, 4500 San Pablo Road, Jacksonville, FL 32224; Phone: 904953-2673; Fax: 904-953-2274; E-mail: [email protected]. Disclosure: No funding was received for the development of this manuscript. The author has no potential conflicts of interest. Acknowledgement: The author acknowledges 2015 PharmD candidate Julienne Pauly, Palm Beach Atlantic University, West Palm Beach, Florida. © 2015 American Society of Consultant Pharmacists, Inc. All rights reserved. Doi:10.4140/TCP.n.2015.291.
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References 1. Centers for Medicare and Medicaid Services. Medicare Modernization Act Final Guidelines-Formularies. Available at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/ PrescriptionDrugCovContra/downloads/FormularyGuidance.pdf. Accessed August 26, 2014. 2. Cranor CW, Christiansen DB. The Asheville project: short-term outcomes of a community pharmacy diabetes care program. J Am Pharm Assoc 2003;43:149-59. 3. Fera T, Bluml BM, Ellis WM. Diabetes ten city challenge: final economic and clinical results. J Am Pharm Assoc 2009;49:383-91. 4. Isetts BJ, Schondelmeyer SW, Arts MB et al. Clinical and economic outcomes of medication therapy management services: the Minnesota experience. J Am Pharm Assoc 2008;48:203-11. 5. de Oliveira DR, Brummel AR, Miller DB. Medication therapy management: 10 years of experience in a large integrated health care system. J Manag Care Pharm 2010;16:185-95. 6. American Pharmacists Association. Medication Therapy Management Digest. Available at http://www.pharmacist.com/sites/default/ files/MTM%20Digest_2014%20FINAL.pdf. Accessed October 17, 2014. 7. University of Florida. Medication Therapy Management Program. Available at http://pharmd.distancelearning.ufl.edu/mtm-program/. Accessed October 17, 2014. 8. Centers for Medicare & Medicaid Services. HCPCS—General Information. Available at http://www.cms.gov/Medicare/Coding/ MedHCPCSGenInfo/index.html. Accessed October 20, 2014. 9. Centers for Medicare & Medicaid Services. Fee for Service Advance Beneficiary Notice of Noncoverage. Available at http://www.cms.gov/ Medicare/Medicare-General-Information/BNI/ABN.html. Accessed October 20, 2014. 10. Centers for Medicare & Medicaid Services. All Fee-For-Service Providers. Available at http://www.cms.gov/Center/Provider-Type/ All-Fee-For-Service-Providers-Center.html. Accessed October 20, 2014. 11. Centers for Medicare & Medicaid Services. Medicare. Available at http://www.cms.gov/Medicare/Medicare.html?redirect=/home/ medicare.asp. Accessed October 20, 2014. 12. Outcomes Pharmaceutical Health Care. Available at http://www. getoutcomes.com/aspx/Pharmacists/currentmtmopportunities.aspx. Accessed August 12, 2014. 13. Mirixa. Available at http://www.mirixa.com/. Accessed October 20, 2014. 14. The Lewin Group. Medication Therapy Management Services: A Critical Review: Executive Summary Report. Available at http://www. lewin.com/publications/publication/148/. Accessed August 20, 2014. 15. Beatty SJ, McCormick KM, Beale DJ et al. Current trends in outpatient pharmacy services and billing. J Am Pharm Assoc 2012;52:154-60. 16. Schuh MJ, Droege M. Cognitive services provided by pharmacists: is the public willing to pay for them? Consult Pharm 2008;23: 204-11. 17. Hatoum HT, Catizone C, Hutchinson RA et al. An eleven-year review of the pharmacy literature: documentation of the value and acceptance of clinical pharmacy. Drug Intell Clin Pharm 1986;20:33-48.
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18. American Pharmacists Association. Leal points the way forward for provider status. Available at http://www.pharmacist.com/lealpoints-way-forward-provider-status. Accessed August 12, 2014. 19. Minnesota Department of Human Services. MHCP Enrolled Providers-Pharmacies. Available at http://www.dhs.state.mn.us/main/ idcplg?IdcService=GET_DYNAMIC_CONVERSION&RevisionSe lectionMethod=LatestReleased&dDocName=id_054232. Accessed August 14, 2014. 20. DaVanzo J, Dobson A, Koenig L et al. Medication therapy management services: a critical review. J Am Pharm Assoc 2005;45:580-7. 21. American Society of Health-System Pharmacists. Pharmacist Provider Status in 11 State Health Programs. Available at http:// www.ashp.org/DocLibrary/Advocacy/ProviderStatusPrograms.aspx. Accessed August 14, 2014. 22. National Association of the Boards of Pharmacy. New Iowa Program Offers MTM Services to Thousands of Iowa Patients. Available at http://www.nabp.net/news/new-iowa-program-offersmtm-services-to-thousands-of-iowa-patients/. Accessed August 13, 2014. 23. Prosser LA, O’Brien MA, Molinari NA et al. Non-traditional settings for influenza vaccination of adults: costs and cost effectiveness. Pharmacoeconomics 2008;26:163-78. 24. American Pharmacists Association. Immunization Center. Available at http://www.pharmacist.com/immunization-center. Accessed August 20, 2014. 25. Publix Supermarkets. Available at http://www.publix.com/ pharmacy/flu/Home.do;jsessionid=E2D6BB65D43ADD856ADFC01 BA7E8209E. Accessed August 10, 2014.
26. Managed Care Magazine. Should Pharmacists Be Allowed to Vaccinate Their Patients? Available at http://www.managedcaremag. com/archives/0801/0801.medmgmt.html. Accessed July 28, 2014. 27. Schuh MJ, Crumb DJ, Dubois J et al. Building a pharmacistmanaged pharmacotherapy medication therapy management practice. Consult Pharm 2011;26:404-13. 28. American Speech-Language-Hearing Association. 2011 Medicare Fee Schedule for Speech-Language Pathologists. Available at http:// www.asha.org/uploadedFiles/2011-Medicare-Fee-Schedule-SLPs.pdf. Accessed August 19, 2014. 29. Akron General. A Tradition of Care Focused on You. Available at http://www.akrongeneral.org/portal/page/portal/AGMC_ PAGEGROUP/Price_guide/PRICE_GUIDE3a. Accessed August 15, 2014. 30. University Health Services. Tang Center at UC Berkeley. Physical Therapy. Available at http://uhs.berkeley.edu/students/medical/ physicaltherapy.shtml. Accessed August 21, 2014. 31. Medi-Cal of California. Speech Therapy: Billing Codes and Reimbursement Rates. Available at http://files.medi-cal.ca.gov/ pubsdoco/publications/masters-mtp/part2/speechcd_a02a08o01o11. doc. Accessed July 30, 2014. 32. The Stuttering Foundation. Why Go to Speech Therapy? Available at http://www.stutteringhelp.org/Default.aspx?tabid=148. Accessed August 19, 2014. 33. Genesis Physical Therapy and Wellness Center. Physical Therapy Division: Center Policies. Available at http://genesisptdenver.com/ about-us/the-center. Accessed August 19, 2014. 34. Ceuticare, LLC. Optimizing Medication Therapy at the Point-ofCare. Available at http://ceuticare.com/. Accessed August 19, 2014.
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and fee-for-service medication therapy management (MTM) financial models of practice to allow clinicians to better choose the type of MTM practice that best fits their particular practice environment. Data sources: Literature regarding pharmacist practices providing MTM services and capstone projects of proposed and currently operating MTM pharmacist practices presented in the University of Florida Master of Science MTM program. Study and source selection: Understanding the two major payment methods of sustaining a financially viable MTM pharmacist practice is critical to practice success. Survey was broad with regard to clinical models to compare differences because funding to support these services can be difficult to obtain. Data synthesis: Despite differences in approach, various methods exist to financially sustain a pharmacist with an MTM practice. Each method or model has advantages and disadvantages in differing practice environments. Conclusion: With enough cost avoidance or revenue generation, financially dissimilar MTM financial models can be sustainable. Key Words: Cost avoidance, Fee-for-service, Financial viability, Medication therapy management, MTM, Profitability. Abbreviations: CA = Cost avoidance, CPT = Current procedural terminology, FFS = Fee-for-service, MTM = Medication therapy management. Consult Pharm 2015;30:291-7.
Introduction Since pharmacists were named as potential providers in the Medicare Modernization Act of 2003, they have been able to provide medication therapy management (MTM) services.1 The goal of these services, defined by this law, is to optimize therapeutic outcomes for individual patients with certain conditions. MTM services provided by pharmacists have taken many operational forms or models, but for the most part they have been divided into only two general financial models: cost avoidance (CA) or fee-for-service (FFS). For the scope of this discussion, it is assumed through prior research that the patient benefits clinically from MTM via either financial model through improved patient health, which also lowers overall health care costs.2-5 This review will only address the financial viability of the two financial MTM models, which pharmacists commonly use in providing services in ambulatory practice. The primary objective is to describe, compare, and contrast CA and FFS financial models of practice to help clinicians choose the type of MTM practice that best fits their particular practice environment.
Data Sources Data sources included a survey of the MTM literature regarding CA models of care, including the Asheville Project and others.2-5 The literature on practices producing revenue that are viable enough to support a full-time practice is difficult to find, particularly those getting buy-in from decision makers to implement CA models. To fill this gap, sources such as the American Pharmacists Association’s MTM Digest were surveyed, as well as selected University of Florida MTM Masters revenue-model capstone projects.6,7 These projects are business plans for MTM pharmacy practices that can be implemented following graduation. Well-researched business plans are required for graduation and are subject to a faculty evaluation, and some practices were created while completing the masters program. Criteria for data source and study selection were primarily based on demonstrated examples of successful, self-sustaining, financially viable MTM practices. Though
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Consultant Pharmacy Forum CA practices and literature about these were somewhat easy to find, revenue-producing practices able to support a full-time pharmacist were problematic. Data extraction was difficult with regard to financial information. Because of antitrust constraints, revenue reporting is scant to nonexistent. Multiple sources such as government current procedural terminology (CPT) code data, which are used to bill Medicare, was garnered from Centers for Medicare & Medicaid Services payment sites.8-11 Payer platform data were obtained from platform sites.12-14 These data were applied with the primary costs to provide MTM services and were defined as the pharmacist’s salary and overhead. Since there are little hard organizational financial data to be gleaned, descriptive examples have been used. (Specifics can be obtained from the reference sources as to payments and CPT-code valuation.) Costs to perform pharmacist-rendered MTM services were compared with the most common sources of revenue available to pharmacists. When informally surveyed, providers frequently report the lack of available payment to sustain a full-time practice.15
Discussion The primary financial goal of CA models is precluding health care costs for the client’s organization in the form of lower medical-claim costs. This model is beneficial for self-insured employers, insurance companies, or an intermediary between an MTM provider and an insurance company. A provider, who can be a pharmacist, provides MTM services for patients who are members, subscribers of the client organization, or individuals for whom the client organization has contracted to receive MTM services. In this general financial model, the primary beneficiary of the MTM service is the client organization, since the providing pharmacist does not directly benefit from the cost savings. Since the price paid using the CA model is fixed, and determined by the client or its representative, the client can predict its MTM costs. Furthermore, the costs for providing MTM services can be controlled by stratifying the designated patient population into groups that will or
292
will not be eligible for paid MTM benefits. Historically, this financial model has done well in large health care organizations, self-insured groups such as large employers or insurance companies, government organizations such as the Veteran’s Administration, and other government entities that focus on containing costs.2 From the pharmacist’s perspective, he or she is paid a contracted price for services rendered, a price determined by the client or its representative. Though monies are paid to the pharmacist provider, the overarching principle in this model is CA for the client. Since a fee is paid to the pharmacist, this type of model may be viewed as an FFS model. However, the client sets the pricing to its advantage, so the provider payment comes out of the avoided costs. This is different from an FFS model in which the pharmacy provider determines the pricing based on costs used to provide the service. The clinical goal of an FFS financial model is the same as the CA model, i.e., the lowering of health care costs by making patients healthier and lowering the use of expensive medical procedures and activities. The primary financial goal of models based on FFS is the covering of the expense to provide MTM services, with some remaining for growth of existing services or to expand into other services. In the FFS model, the pharmacist sets the price for MTM services and therefore has more control over the pricing of services. Patients have demonstrated that they are willing to pay for pharmacist “cognitive services” (counseling on drug therapy) such as MTM; however, they are generally willing to pay less as the amount paid for by insurance decreases.16 In other words, the more cost burden is shared by patients, the less they are willing to pay for MTM services. Therefore, pharmacists must be aware of the local market or their specific targeted market for MTM services and must not charge more for services than that which a patient or other payers are willing to pay. The advantages of the financial CA model are many and well documented.2-5 As mentioned earlier, it is popular with large organizations that wish to lower costs; it is easier to demonstrate outcomes for research, especially in clinical monitoring models, and because of these traits, it has become the most popular financial MTM model. For
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pharmacists, however, the drawback to the widespread implementation of this model is its lack of revenuegenerating ability for those pharmacists willing to perform MTM. They don’t have the opportunity to contract with large organizations to provide MTM services, nor are they in a position of strength to negotiate enough payment for services to adequately cover their costs. Therefore, many may only be able to operate in the private FFS marketplace—where they are subject to local and targeted market conditions—to glean enough revenue to provide MTM services to financially support themselves. This is a difficult task, taking into account that historically the public has been receiving many pharmacist services for free. The Affordable Care Act has recently emphasized the CA model. Greater focus is being placed on public officials to demonstrate their ability to develop “best practice” models and to document improved outcomes and patient safety. Pharmacists have long performed clinical services that contribute to both cost containment and CA.17 Unfortunately, because of the lack of provider status for pharmacists (that would allow federal reimbursement), challenges to financial sustainability of clinical pharmacy services has resulted in limiting a routine integration of clinical pharmacists on treatment teams in organizations emphasizing revenue. In a recent CA analysis, El Rio Health Center, a federally qualified health center, evaluated an integrated pharmacist-care model. The objective was to assess the effects of El Rio’s Pharmacist-Based Diabetes Program comparing two similar community health centers in Arizona. These were chosen for their similar patient populations and size. This analysis is based on adherence to practice guidelines and the resulting economic impact of a pharmacist-led program.18 It is unlikely that these CA models easily be duplicated by other MTM providers, which would enable a comparison with compensation received by a community pharmacist filling prescriptions or the revenue in the average community pharmacy needed to sustain an MTM service-only practice. Pharmacists, especially in small markets, small independent pharmacies, or other organizations with few resources,
may be less able to participate in many CA models except those offered by online intermediaries such as Mirixa or OutcomesMTM.12,13 Though these programs pay for cognitive services to improve the quality of drug therapy and patient care, they still do not cover the total costs of pharmacist professional time to perform MTM services. There are or have been state plans such as in Minnesota, Iowa, Wisconsin, and Ohio that offer similar payment programs through the state Medicaid or others such as Ohio Department of Health/ Bureau for Children with Medical Handicaps and state of Iowa employees.19-22 “Opportunity cost” in this case is defined as the cost of giving up or not participating in one activity (filling prescriptions) to perform another activity such as providing MTM services. If the cost of providing, or loss of revenue to provide, MTM services, exceeds that income that can be earned by filling prescriptions, there is no financial incentive to provide MTM services. One example of a profitable FFS service is the provision of immunizations in community pharmacies. These have become popular because of the low cost to deliver this service ($11.00 to $18.00), with few additional overhead costs compared with providing immunizations in a physician’s office ($28.00 to $29.00). This results in favorable retail gross margins when the service is sold to the patient ($20.00 to $30.00).23-26 Therefore, when compared with many third-party prescription reimbursement margins, immunizations are attractive because they may offset the loss of income from filling prescriptions over the same time period. Other FFS cognitive models not associated directly with CA or immunizations have been slower to catch on despite the fact that there appears to be widespread provision of payment for these services through online FFS/CA combination software intermediaries such as OutcomesMTM, a consulting firm that administers MTM programs. According to the Lewin Group, a health care consulting firm, in 2005 the price to provide these types of MTM services should be in the $2.00 to $3.00 per minute range, which covers the cost of providing the service and enough gross margin to cover overhead.14 At a $50 flat fee for a comprehensive consult, compared with the time
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Consultant Pharmacy Forum spent preparing and documenting the patient evaluation, payment is inadequate to cover the time needed to perform the service and workup the patient. Even if other “add-on” services, such as substituting a generic, are performed, and the result is the desired one of higher payment to pharmacists, these add-on activities may still take more time than pharmacists are paid to support this additional activity. In addition, there is no guarantee that the time spent will result in a change in therapy if the patient or medical provider refuses the pharmacist’s recommendations. This is significant because payment for these activities can be from $10.00 to $20.00 for each addon service or as low as $0.00 to $2.00, resulting in little to no compensation for a significant amount of professional time. Comparing the guaranteed average gross margin of a pharmacist filling prescriptions for two to three hours with the nonguaranteed total payment received from FFS services related to CA, there is an obvious disparity in the amount of revenue received from the two activities. To obtain enough revenue through a direct CA model of payment, a pharmacist providing MTM services would either need to negotiate a higher payment from CA payers to truly cover MTM service costs or to participate only in plans that paid enough to cover these costs. With CA financial models or FFS/CA combinations or hybrids, the primary financial beneficiary is not the pharmacist but the client avoiding the costs of paying for additional—often unneeded or inefficient—health care. In short, the pharmacist provider is dependent on the client to pay enough to cover the cost of MTM services by cost savings. If MTM services can help decrease health care costs in the CA financial model, the same could be said in a pure FFS financial model. The difference is that there are fewer payers for services in such a pure FFS model unless patients are willing to pay for the pharmacist-provided MTM services out of pocket. Two examples of FFS financial models are ones in which pharmacists receive compensation from other medical providers such as physicians or those who bill patients directly for MTM services. Both models are closely affiliated with physicians in a collaborative arrangement.
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Providing services via physician or self-referral to an MTM pharmacist service is one FFS example.27 If not covered by insurance, patients must pay out-of-pocket. If the patient wishes to discuss the costs of the service, the pharmacist can explain that the patient is paying for the pharmacist’s professional time in the same way that he or she would pay for services rendered by a lawyer, physician, or dentist. The pharmacist can then describe those services. Some patients choose to opt out if their insurance does not pay. The vast majority of patients pay for the service out of pocket. The pharmacist sets prices at a level to cover the costs of the service based on fees charged by other allied professional services such as physical therapy, occupational therapy, and speech therapy. Fees charged by these allied professionals fall in line with fees that most likely would be required to sustain pharmacist-provided MTM services in similar practices.28-33 Success in this financial model is dependent on physician collaboration and knowledge of the MTM service so physicians value the services enough to refer patients. Other keys to success are separating MTM services from other pharmacy activities and differentiating MTM services from dispensing. This distinction can help separate the services in the mind of the patient and increase perceived value and demand for the service. This approach requires constant marketing, but can encourage physicians to recognize its usefulness and apply it to their own practices. In the second FFS model, the pharmacist leverages physician time by seeing patients before they see the physician.34 In this case, the physician collaborates with the pharmacist, allowing the physician to see more patients, do more procedures, and avoid hiring more office staff to assist with patient workload. The physician bundles billing for both pharmacist and physician services, then pays the pharmacist provider a rate per patient seen. In this model, the pharmacist makes recommendations to the physician using software designed to incorporate chronic disease-state guidelines. The pharmacist reviews the patient’s medical profile, laboratory values, and medication list, enters the data into the software with monitoring parameters, and the software assists with the pharmacist
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recommendations to the physician. The physician then examines the patient and accepts or rejects the pharmacist’s recommendations. With bundled billing, enough revenue is generated by the physician to cover the cost of the pharmacist, who is paid by the physician. One advantage of this model is that the pharmacist uses the physician office overhead, so pharmacist expenses and overhead remain low and the primary pharmacist expenses are labor and technology costs. Case studies may be the best way of identifying successful FFS financial models. Although case studies in and of themselves can limit external validity, FFS models are more applicable because of the difficulty in preparing something that may have little external validity because of numerous variables such as population, marketing savvy of a small organization, large differences in operating costs, and the local variables of the external environment. Studies involving CA financial models are easier to construct because variables are easier to control for and the power of the study is easier to obtain because the sample size is larger than for FFS financial models. Though CA and FFS financial MTM models have different immediate financial objectives—one to directly avoid costs, the other to generate revenue to provide services that avoid those same costs—to be successful they have some commonalities. They both can and should ultimately accomplish health care savings through the provision of MTM services. Both require buy-in from payers, whether they are the client in a CA model or the patient or another medical provider in a FFS financial model. In the CA model, the pharmacist must avoid enough costs to perpetuate the service by maintaining value to the client and negotiate enough payment to cover the cost of providing MTM services. In the FFS model, the pharmacist must market to create enough demand by the patient or medical provider to pay enough to provide and maintain pharmacist MTM services. Both financial models are much stronger with close physician collaboration and support. One cannot underestimate the importance of having a physician champion and the marketing power of a physician referral for MTM services. Unless financially satisfactory agreements can be obtained
from larger organizations such as the large software intermediaries, smaller providers of FFS MTM services will need to depend on effective local marketing of MTM services to maintain a financially viable practice. Since there are fewer opportunities for profitable CA financial models available to many pharmacists who would wish to perform MTM services, effective marketing of an FFS financial model is critical to generate the demand needed to obtain sufficient payment to sustain MTM services.
Table 1. Comparison of Cost-Avoidance vs. Fee-for-Service Methods of Payment for MTM Services Cost-Avoidance Model Good literature support Difficult to sell the concept to decision makers May be linked to product (electronic retail platforms) No immediate financial gain for service provider Payment absent or lowpaying when combined with fee-for-service Payment determined by payer Limits to widespread use
Fee-for-Service Model Less literature support Easier to sell concept to decision makers Does not need link to product Immediate financial gain to service provider Highest-paying
Payment determined by provider No limits to widespread use
Abbreviation: MTM = Medication therapy management. Source: References 2-5, 12-14, 27-34.
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Consultant Pharmacy Forum Conclusion There are advantages and disadvantages to each type of financial MTM model (Table 1). Those pharmacists providing MTM services who are best able to communicate the value of these services—and thus generate the most demand—will be those who can best sustain a successful, financially viable FFS MTM practice. On the other hand, pharmacists who are best able to provide services that avoid costs and are able to obtain enough payment as a result of the cost that have been avoided to receive payment for their MTM services, are the ones who can best sustain a successful, financially viable CA MTM practice.
Michael J. Schuh, PharmD, MBA, is clinical pharmacist and assistant professor of pharmacy, family medicine, and palliative medicine, Mayo Clinic Florida, Jacksonville, Florida; and assistant professor and course coordinator, University of Florida Medication Therapy Management Master of Science Program, University of Florida College of Pharmacy, Department of Pharmacotherapy and Translational Research, Jacksonville. For correspondence: Michael J. Schuh, PharmD, MBA, Mayo Clinic Florida, 4500 San Pablo Road, Jacksonville, FL 32224; Phone: 904953-2673; Fax: 904-953-2274; E-mail: [email protected]. Disclosure: No funding was received for the development of this manuscript. The author has no potential conflicts of interest. Acknowledgement: The author acknowledges 2015 PharmD candidate Julienne Pauly, Palm Beach Atlantic University, West Palm Beach, Florida. © 2015 American Society of Consultant Pharmacists, Inc. All rights reserved. Doi:10.4140/TCP.n.2015.291.
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