Understanding and properly managing Prescription Drug Events (PDEs) is vital to a Medicare Part D plan's financial success, as good PDE data allows for accurate reconciliation with the Centers for Medicare and Medicaid Services (CMS), and ultimately, revenue optimization for the plan. A Pharmacy Benefits Manager (PBM) that is aligned with a plan sponsor can provide the tools and guidance necessary—along with solid business processes—to improve PDE management and optimize plan reimbursement.
PDE Background
As of November 2008, the industry average PDE unresolved reject rate for the 2008 plan year was 1.3% across Part D plans, resulting in more than 11 million unreimbursed claims, many of which could have been reconciled. By following best practices, and working closely with an expert in the industry, a plan can significantly improve PDE accuracy and reduce the reject rate percentage.
The PDE is central to CMS reimbursement and year-end prescription drug plan financial reconciliations. Through the PDE, CMS calculates cost-sharing subsidies for qualifying low-income individuals (low income subsidies), federal reinsurance subsidies, and risk sharing (through the risk corridor structure). A PDE rejection rate above CMS' threshold can trigger an audit or other regulatory action.
Because CMS relies on accepted PDE data to determine payments to plans, effective processing is a cornerstone of financial success for Medicare Part D plans. Well-managed PDE programs optimize the plan's CMS reimbursement for incurred claims. On the other hand, in cases of unreconciled PDEs, the plan pays the claim, but the rejected PDE will not be factored into any reimbursement from CMS.
Consider this:
- Effectively processing PDEs can result in significant returns—for every dollar of PDE reject avoided, a plan can increase reimbursement by $0.40 to $0.80.
- For a health plan with 100,000 Part D members, this could translate into $680,000-$1.5 million annually.
Strategies to increase PDE accuracy, avoid rework, and optimize CMS reimbursement
1. Take command of critical timeframes. Because reconciliation covers an 18-month window, a plan needs to keep three plan years open simultaneously to reconcile rejected PDEs from a prior plan year, the immediate past year, and the current plan year. Delayed PDE processing may result in last minute resubmissions and missed CMS deadlines. To avoid these issues, timely management of PDE rejects is essential.
2. Monitor open enrollment activity. Plans need to be aware of their enrolled members in relation to members processed/accepted by CMS. In Medco Health Solutions' experience, more than 90% of all PDE rejects are related to enrollment issues, making PDE a lagging indicator of other "upstream" processes. Focusing on PDE-related success drivers—in this case quality of enrollment data reconciliation with CMS—at the very outset of the plan year will be beneficial over the ensuing 12-18 months.
3. Incorporate pre-edits into PDE generation. In many cases, PDE issues may be a result of basic information processing or data quality gaps. For example, a blank health insurance claim number (HICN) on the PDE will result in a 603 reject code that could have been addressed prior to submitting to CMS. Plans using vendors for PDE processing should make sure those business partners incorporate the necessary pre-edits.
4. Identify root causes for rejected PDEs. Rather than resubmitting rejected PDEs, first have reporting mechanisms in place that will analyze PDE rejects so you can address their root cause and communicate that information to senior management. Vendors supporting a plan's PDE process should offer this service, along with the expertise to advise on an appropriate course of action.
5. Create automated PDE tracking that references the PDE data repository. It's not uncommon for plans to submit PDE records multiple times in the ordinary course of business, whether due to adjustments or other events. Ideally, your PDE processing system should create and apply a unique "fingerprint"to each of these PDE iterations, so they can be traced back to the original version. Successful implementation of a system such as this will increase accuracy and reduce the likelihood of reporting false claims. The process should include integration of point-of-sale accumulators to provide real-time true out-of-pocket (TrOOP) and drug spend reporting.
6. Apply ongoing process improvements. Since the PDE process overlaps into the next plan year, try to apply any knowledge or issue resolution to all PDEs your plan is addressing. These "lessons learned" will save significant effort in subsequent plan years.
7. Benchmark against external resources. Compare your plan's PDE performance to external resources, such as the industry-weighted average reports available through CMS' Health Plan Management System (HPMS) system. If you're using a pharmacy benefit manager (PBM), inquire about benchmarking against peer plan sponsors.
8. Know the reject codes. There are more than 130 reject codes that represent errors, which range from incorrect member data to drug codes that are not valid Part D drugs. Tracking rejects monthly, developing control charts, and utilizing CMS reports, such as MMR (Monthly Membership Report) and TRR (Transaction Reply Record), can help proactively identify issues upfront, improve claims payment accuracy, and reduce PDE rejections.
9. Monitor further changes to risk-corridors. Risk corridors are specified risk percentages above and below the target amount submitted in a plan's bid. They decrease a plan's exposure where allowed costs exceed plan payments for the basic Part D benefit. For 2008, CMS widened the risk corridor through plan year 2011 (rising from 2.5% to 5%). By doing so, CMS expects plans to more accurately plan for their claims experience.
CMS is considering a change to the risk corridor structure after 2011. Should CMS decide to eliminate the risk corridors completely, plans will no longer be able to rely on this "safety net" for bad claims experience, meaning the other subsidies and repayment mechanisms gain in importance—all of which depend upon accurate PDE processing.
10. Establish a PDE expert team with end-to-end accountability. The most effective PDE processing takes a two-pronged approach: leveraging the expertise and guidance of an expert, such as a PBM, and engaging an internal, cross-functional team that will work together to resolve PDE issues and improve ongoing operations.
The internal, cross functional team should include members from all impacted areas, including technology, eligibility, finance, and pharmacy. For example, a designated PDE team would spearhead PDE processing and data analytics, and the PDE business owners would likely function as the team lead. Enrollment specialists would research and correct any issues associated with eligibility rejects, while pharmacy operations might close any NDC reject issues. Each group must not only interface with peers within the organization, but also with any outside vendors that are involved in the process. This group would also provide updates to senior management and maintain a focus on critical issue resolution and resulting financial impacts to the bottom line.
Ensuring that you have appropriate PDE acceptance rates is integral to optimizing a plan's CMS reimbursement. Take time to review your PDE processing capabilities in light of your organization's acceptance rate and benchmark verses external resources. Consider working with an organization that has built efficient and accurate PDE processing. Plans that are looking for partners to help them process PDEs should consider a vendor's experience and knowledge of Medicare Part D Prescription Drug Plan operations.
Chris Merenda is senior director of Health Plans for the Retiree Solutions group, Medco Health Solutions, Inc., and Thomas T. Reinckens is executive director of Medicare PDE Enrollment and Reconciliation: Retiree Solutions, Medco Health Solutions, Inc. Merenda is responsible for Medicare Part D products and services for health plan clients and has been involved with the Medicare Part D Program since the spring of 2005. Reinckens is responsible for developing and overseeing the enrollment and reconciliation processes for Medco's various Medicare Part D offerings. His team directly oversees reconciliation of the Medicare benefit for prescription drug events, enrollment processing, and financial reconciliation.
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