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Battling Big Pharma |
August, 2006
One of the challenges that face many medical providers across multiple specialties from pediatrics to oncology is getting a handle on the profitability of drugs. In a maze of HCPCS codes, NDC numbers, ASP, AWP, fee schedule amounts, and contract amounts, the complexity of managing and administering medication obscures the practical issue of reimbursement.
“Most physicians have at least a general grasp on their fixed costs… their operational costs. They can often speak on what a particular procedure costs to perform versus what they will receive and therein the overall profitability of that procedure,” says MBC Systems’ Billing Administrator, Pamela Atkinson. “But trying to apply the same hard and fast rules to medication is like trying to pinpoint a moving target.”
Atkinson alludes to the general malleability of the world of pharmaceuticals in where costs shift quarterly and ASP plus 6% may account for Medicare fee schedule but 80% of that accounts for what will actually be paid on any given medication. With federal regulatory bodies changing policy almost daily, and requirements that vary from carrier to carrier, reimbursement itself is often the most unknown variable.
Business intelligence tools seem to be the key to defining the undefined. “Providers have expressed a great lack of information when it comes to their medication costs. You have to track down invoices, identify the real costs, build cost tables for reporting,” commented Atkinson. Often medical A/R software lacks the flexibility and robust design to provide solutions for such multi-layered questions.
“You have to work outside the box of your A/R software and pull contracts from carriers to ask, ‘What are we supposed to be paid on these medications?’ and create contract files that outline contracted rates,” according to Atkinson. “Then, if you’re even more adventurous, you trend the data by carrier, compare rates with what was paid. Most importantly, you use this data to appeal the carriers, to challenge your suppliers.” MBC Systems has identified that many of their providers are getting paid at cost and at times below cost.
Such reporting and information allows providers to recognize these losses and gaps in profitability. Perhaps one equally sound regimen of drugs and administrative codes produces better reimbursement, perhaps certain carriers are globally denying the use of certain medications in combination, advanced business intelligence tools provide physicians with data to recognize the critical areas and address them.
Atkinson discusses the value of having this information available, “Whether it was one provider that renegotiated his medication pricing with his wholesaler or another that obtained a more equitable contract with better contract rates, the bottom line is that that information empowered them to steady the target and achieve some real fiscal goals.”
For more information, please contact David S. Conrad, President/CEO, MBC Systems, Inc. & MBC Financial Services, at 800-333-5240.
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