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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Many healthcare advocates are suggesting that placing restrictions on health insurers' medical loss ratio (MLR) would save millions in healthcare costs—money that could be better spent expanding health coverage and reducing premiums. At least 15 states have implemented MLR laws so far and others are exploring the idea.
In California, one of the more outspoken groups on the topic is the California Medical Association, which says "healthcare administration costs are one of the biggest challenges physicians and patients face." California Gov. Arnold Schwarzenegger vetoed a bill that would have set an 85% MLR on all health plans last year. The law would have been the strictest in the nation.
I wrote about the push in many states to place a floor on how much health insurers pay on direct medical care in the April edition of HealthLeaders magazine. On the surface, increasing direct medical care payments and limiting health insurers' profits and administration costs sounds like a sensible idea. Why should health insurance executives get to pocket profits or pad their reserves? Shouldn't that money go to medical care?
Well, it's not that simple.
I dislike the million-dollar salaries paid to health insurance executives just as much as the next guy, but I question whether an MLR regulation would actually affect executive pay.
While it's true that non-medical care dollars could go to padding bonuses, administration funds also cover care coordination, disease management, health information technology, and customer service. Alan Katz, blogger and past president of the California Association of Health Underwriters and National Association of Health Underwriters in Los Angeles, told me that health insurers would cut those programs if MLR restrictions were implemented in California.
Many states with MLR laws have sliding limits depending on the type of plan. For instance, individual health plans, which have more customer service, marketing, and member outreach than large group plans, have lower MLR limits than the large groups.
The differences in health plans go well beyond individual vs. large group plans too. There are smaller group plans, PPOs vs. HMOs, and non-profits vs. for-profits. Each of these types of plans are unique and may have trouble competing at the same MLR levels.
There is also the issue about reserves. If health insurers were limited on what they could put into reserves because of MLR limitations, they wouldn't be able to properly prepare for an economic downturn. For this year, that would have meant healthcare premium increases even more than 6%. Restricting MLR would also force health insurers to drop more expensive plans, such as small groups and individual plans, which would result in more uninsured.
As with most legislation and changes, there are always unintended consequences and that is surely the case with MLR restrictions. Creating sliding MLR restrictions depending on health plan type would create a fairer system than a blanket MLR, but supporters of these restrictions must also realize that creating these limitations will not bring huge savings and improve care.
Most healthcare executives who completed the 2009 HealthLeaders Media Industry Survey understand that health plan administration costs are a factor, but not the factor in rising health costs. When asked to rank the top driver of healthcare costs, government laws and mandates finished number one with health plan overhead ranking a distant fourth.
The only way to enjoy huge savings and improve patient care is by tackling direct medical costs. Health plans have been largely unsuccessful in that endeavor, but medical care is where most healthcare costs come from and is also the place for the most possible savings.
MLR restrictions are an easy target, but they don't tackle the real causes behind rising healthcare costs.
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When it comes to the Red Flags Rule, the Federal Trade Commission's mandate that creditors establish an identity theft prevention program, an expert says facilities should not sound the sirens.
"Our plan is to train staff to look for red flags and to bring it to the privacy officer's attention," Chris Simons, RHIA, director of UM & HIMS and the privacy officer of Spring Harbor Hospital in Westbrook, ME, tells HealthLeaders Media.
"We certainly don't want registration staff confronting patients or getting in the way of providing medical care when patients need it."
Spring Harbor is ahead of the game. It established its Red Flags Rule program before the FTC's original May 1 deadline. Last week, the regulators pushed compliance back to August 1.
"This is good training any time, so I am fine that we are ahead of the curve," Simons says.
The rule forces any organization considered to be a "creditor" to implement programs to identify, detect, and respond to patterns, practices, or specific activities that could indicate identity theft. "Creditors," the FTC says, are agencies that regularly extend or renew credit–or arrange for others to do so–and includes all entities that regularly permit deferred payments for goods or services. Simons and Spring Harbor followed the FTC guidelines to a tee. It wrote a policy that included potential red flags, established protocol when a red flag surfaces, and presented the program to its board of directors for approval.
It also rolled out a PowerPoint training presentation that included:
Admissions staff
Registration staff
Patient accounts staff
HIM
Clinicians
IS staff
In the training, the hospital identified potential red flags, such as:
Patient presents documents for identification that appear to be altered or forged
Patient's photo, identifying characteristics (e.g. ethnicity, sex, age) or signature does not appear to match what is on file
Social Security number or other identifier (e.g. insurance policy number or date of birth) is inconsistent with external information sources
Address/phone number or other demographic information is inconsistent with other sources of information
Medical records show treatment inconsistent with current presentation
Spring Harbor's Red Flags policy also identifies the privacy officer as the point of contact for any staff member who spots a red flag. The privacy officer then notifies the patient if the case was indeed determined as identity theft and acts accordingly to protect the victim.
Spring Harbor's policy also asks registration staff members to request picture IDs or at least two other forms of patient ID.
The key for your facility, just like it as Spring Harbor, is to identify discrepancies and refer to your policy when it happens.
"We focused on this from a patient safety point of view," Simons says. Simons says most facilities should have already had checks in place like these. It's just that now, the FTC has made enforcement formal through a regulation, which is similar to HIPAA through the HITECH Act.
"This is very timely," Simons says. "Every time you turn around, there's a breach."
The findings add to the "growing body of evidence that there's much more to health than healthcare," says Paula Braverman, co-author of the study, Reaching America's Health Potential: A State-by-State Look at Adult Health, and director of the University of California at San Francisco's Center on Social Disparities in Health.
"Medical care is clearly important, but education, along with income and other factors outside the healthcare system, exert a powerful influence on how well we live," Braverman said.
Almost half of all surveyed adults, ranging in ages from 25 to 74, reported being in less than very good health—and that rate "differed depending on level of education," Braverman says.
For example, adults who did not graduate from high school were more than 2.5 times as likely to be in less than very good health than college graduates. Even those who had graduated from high school, but had not gone to college, were nearly twice as likely to be in less than very good health as college graduates.
The health gaps related to education can be observed within states. For instance, in Mississippi, nearly three-quarters of adults who had not graduated from high school reported being in less than very good health, compared with 37% of college graduates. In Vermont, which fared the best in overall health of adults, 68% of adults who had not finished high school said they were in less than very good health compared with 22% of college graduates.
In the data reviewed by researchers, adults who reported being in poor, fair, or even good health had rates of diabetes and heart disease that were more than five times as high as the rates for adults in very good or excellent health, says Sue Egeter, a study co-author and co-director at the University of California at San Francisco's Center on Social Disparities in Health. "That's a huge difference in risk for two very serious health conditions."
Racial and ethnic minorities were more likely to report being in less than very good health. However, differences in health status by education level were still seen within every racial or ethnic group. Nationwide, for example, 44% of African-American college graduates said they were in less than very good health compared to 55% of those with some college, 62% of high school graduates, and 73% of those who had not completed high school.
Insurance companies have offered to end the practice of charging higher premiums to women than to men for the same coverage. Karen M. Ignagni, president of America's Health Insurance Plans, made the offer in testifying before the Senate Finance Committee. It was the latest concession by insurers as Congress drafts legislation to overhaul the $2.5 trillion healthcare industry. In November, insurers said they would accept all customers, regardless of illness or disability, if Congress required all Americans to have coverage. In March, insurers offered to stop charging higher premiums to sick people.
President Obama asked Congress to spend $63 billion over the next six years on a new global health strategy that would reshape one of the signature foreign policy efforts of his predecessor, George W. Bush. Bush made combating global AIDS a centerpiece of his foreign agenda, creating the President's Emergency Plan for AIDS Relief. But the plan Obama outlined envisions a more far-reaching approach to global health that would focus not only on AIDS, but also on tropical diseases and other treatable and preventable illnesses that kill millions each year.
WellCare Health Plans Inc. agreed to pay $80 million to settle a Florida Medicaid fraud investigation that has embroiled the company since the fall of 2007. The settlement resolves federal and state criminal probes into allegations that WellCare defrauded Florida benefits programs for low-income adults and children of about $40 million by improperly inflating what it spent on care. WellCare administers medical benefits for about 2.5 million enrollees in government-sponsored plans in several states.
The World Health Organization's (WHO) Alliance for Patient Safety Tuesday officially kicked off its "Save Lives: Clean Your Hands" initiative to encourage hospitals and healthcare facilities worldwide to raise awareness of hand hygiene to reduce often preventable healthcare-associated infections.
With the kickoff, the alliance has released a set of tools for system change, training and education, evaluation and feedback, workplace reminders, and institutional safety climate. The tools emphasize that healthcare providers and workers at all levels of experience should be familiar with the importance of hand washing and hand hygiene. The tools, along with a guide to implementation, can be downloaded for free from the WHO Web site.
WHO also has released a 270-pages of guideline designed for use by hospital administrators and healthcare workers that reviews current evidence addressing hand hygiene in healthcare. The guidelines, which have been in development since 2004, also are available at the Web site.
To date, nearly 4,800 hospitals in 117 countries have made formal statements to the WHO alliance pledging their support to implement actions to reduce healthcare-associated infections within their countries through better hand hygiene. In addition, these hospitals are being asked to share their experiences and expertise online on how to improve hand hygiene with other organizations around the globe.
Premier, a healthcare alliance with more than 2,100 hospitals and 54,000-plus other healthcare sites, has been promoting the WHO initiative to hospitals participating in its Quest performance and quality improvement collaborative.
"We want to piggyback on these efforts and say there is no tolerance: Not washing your hands is a never event," says Leslie Schultz, RN, PhD, who is Premier's director of knowledge transfer in Charlotte, NC.
Not surprisingly, Premier, which also promotes hand hygiene through its Safety Institute, has had "a lot of activity and a lot of education going out there" in light of the recent news about H1N1 flu (also called swine flu). In certain conditions, surgical masks may be appropriate, "but the foundation—the basic thing—is wash your hands, people," Schultz said.
The WHO initiative emphasizes the "five moments for hand hygiene" approach that defines the key moments when healthcare workers should perform hand hygiene. This approach recommends workers clean their hands: before touching a patient; before performing clean/aseptic procedures; after body fluid exposure/risk, after touching a patient; and after touching patient surroundings.
Recent data gathered by WHO shows that only about 40% of workers worldwide comply with the "five moments."
Healthcare reform is the top priority for the U.S. government this year, and the momentum is there to achieve it, Health and Human Services Secretary Kathleen Sebelius said. Sebelius said there was "unprecedented" bipartisan cooperation to speed through reforms this year. "In the Senate, Democrats have been working closely together and with their Republican counterparts. Key chairmen have committed to passing reform legislation out of their respective committees in June," Sebelius said.
Protesters pushing for a government-run health system were thrown out of a Senate hearing room after disrupting a meeting of a Senate Finance Committee. Finance Committee Chairman Max Baucus has said that a so-called single-payer system is not on the table. Many liberals favor that approach but Baucus and others say it's not practical or politically feasible.
