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Pharmacy Benefit Management (PBM)

Does Your Plan’s Performance Align with Your Pharmacy Strategy?

Does Your Plan’s Performance Align with Your Pharmacy Strategy?

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The Centers for Medicare and Medicaid Services (CMS) National Health Expenditure (NHE) data
highlights the excellent healthcare spending growth year over year. Up nearly 10% from 2019, the U.S.
spent $4.1 T on healthcare costs in 2020, and prescription drugs accounted for 8% of the total spend
(roughly $348B).

As stricter regulations, innovations and other drivers rise, plan sponsors should evaluate their strategy
and key priorities regarding pharmacy benefits and prescription drug costs. The ever-changing pharmacy
landscape supports the importance of a tailored pharmacy strategy.

What does your current pharmacy strategy look like? Is it a robust plan with a clear direction? Are the
appropriate levers in place to meet quality standards and optimize plan performance?

You could be leaving money on the table by not having a defined strategy. This gap opens the door for
poor member experience, unoptimized clinical programs, over-utilization of prescription drugs, and a
lesser quality of care. It ultimately impacts the financial and operational performance of your plan’s
pharmacy offering.

Below we explore pharmacy strategy considerations in three areas, along with how market trends are
driving many plans to reconsider their strategic priorities.

Pharmacy Benefit Management (PBM)

Pharmacy Benefit Management (PBM):

The Pharmacy Benefit marketplace continues to evolve through plan benefit design, innovative pricing
strategies and more educated purchasers of PBM services. Many plan sponsors are reevaluating their
approach and priorities for managing prescription drug spending. The renewed priorities are improved
cost containment strategies and pricing transparency. Recent findings from audits of pharmacy benefit
pricing practices in several state Medicaid programs have uncovered considerable opportunities for cost
savings to the plans. These findings have created an opportunity for plan sponsors to evaluate the
appropriateness of their potential pricing efficiencies and PBM contract performance.

Many traditional PBM contracts are written with somewhat vague and complex language, creating
ambiguity. By framing your pharmacy benefit strategy through transparency and accountability, your
plan becomes better positioned to work with a PBM that shares aligned incentives. Performing a
contract review and assessing how your PBM contract is performing against adjudicated claims serves as
a practical exercise for identifying pricing inefficiencies and determining your future strategy.

Specialty Pharmacy Optimization

Specialty Pharmacy Optimization:

Prescription drug costs continue to be a concern for plan sponsors. The past ten years have brought revolutionary, life-sustaining and life-changing treatments to market; however, it has brought higher price tags.

Moving forward, plan sponsors seek innovative approaches and solutions to review the costs associated with these specialty therapies. One key strategy for approaching specialty treatment costs is value- based arrangements. This has been somewhat controversial over the past few years but remains a hot topic and key priority for many plans. Getting the best price on the wrong drug is a bad deal for everyone. Therefore, plans must gain the ability to measure the effectiveness of these treatments and member outcomes.

One market trend to watch in 2023 is biosimilars. Biosimilars have the opportunity to be the gateway to value-based outcomes. Though biosimilars exist today, several are scheduled to come to market and contest the world’s top-selling prescribed therapy, Humira, in 2023. To date, we’ve seen mixed reactions on biosimilars' uptake or interchangeability, but Humira's biosimilars can change this narrative and create enhanced price modeling for future therapies.

In the meantime, plan sponsors are evaluating their current specialty strategy. One example is assessing benefit designation for high-cost specialty treatments. A plan can identify potential cost-saving opportunities by comparing reimbursement determination with differing benefits. Typically, this approach is deployed for high-cost therapies being managed under the medical benefit and assessing the clinical and economic value of transitioning them to the pharmacy benefit.

Medicare Part D Enhancement

Medicare Part D Enhancement:

Medicare Part D spending has grown faster than the rest of Medicare due in part to increasing prescription drug prices. Estimates show that approximately $111B will be spent by the program to provide coverage for more than 2 billion prescriptions in 2022.

Amending the design of the Medicare Part D benefit, the Inflation Reduction Act of 2022 (IRA) Prescription Drug Provisions are being considered a milestone achievement for lowering prescription drug costs. Several vital provisions were included in this act to reduce prescription drug spending by Medicare. At this time, the most publicized achievement limited the price of insulin products to no more than $35 per month in all Part D plans. In addition, the act will allow the Secretary of the Department of Health and Human Services to negotiate the price of some drugs covered under the Medicare D plans, leading to additional realized savings to plan beneficiaries.

The Inflation Reduction Act will financially impact health plans. More responsibility will be shifted to Part D plans and drug manufacturers for beneficiary coverage in the catastrophic phase. Drug manufacturers will be required to pay a rebate to the federal government if the prices of medications covered under Part D outpace the inflation rate. A cap will also be placed on out-of-pocket drug spending by eliminating the 5% coinsurance requirement of the beneficiary in the catastrophic phase.

Health plans should begin developing strategies to address the potential loss of revenue associated with the Inflation Reduction Act. Resources should be utilized to focus on total patient care and appropriate disease state management with the most cost-effective medications for beneficiaries. The understanding of how well Part D meets the needs of Medicare patients will be highly scrutinized, with these rolling provisions starting as early as the calendar year 2023.

Contact Us

ProspHire is dedicated to helping clients across the country to provide the solutions needed to execute their strategic pharmacy vision. We understand the dynamic nature of the pharmacy landscape and have experience in solving unique healthcare and pharmacy challenges. Contact us here to learn more about how ProspHire can help your organization deliver on its pharmacy strategy.

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Need help identifying ways to improve clinical care and performance metrics?

Need help identifying ways to improve clinical care and performance metrics?

Each year most hospitals in the United States are subject to significant impacts on their revenues based on their performance in three Centers for Medicare and Medicaid programs. These programs are based on the concept of moving from volume to value-based reimbursements. The programs include the Hospital-Acquired Conditions Reduction Program (HACs), Hospital Readmission Reduction Program (HRRP) and the Value-Based Purchasing Program (VBC). These performance-based programs require hospitals to report specific quality and cost metrics yearly. Their numbers are weighted against the performance of all other hospitals required to participate.

CMS changed the program requirements for reporting and performance during the COVID-19 pandemic, but many of these supportive changes will expire for future performance years. As hospitals struggle with maintaining revenue, now is the time to revisit historical and future performance opportunities to ensure that penalties are avoided and potential additional revenue can be secured.  This focus must persist despite hospitals’ staffing and patient care challenges in the post-pandemic environment.

Baseline Performance Evaluation is the best place to start

Baseline performance evaluation is the best place to start with a deep understanding of the program benchmarks, methodology and reporting structure. Hospitals should examine their pre- and post-pandemic performance to gauge future performance improvement opportunities.  The programs are designed to reward based on both current evaluation period performance and improvement in some cases. The information is available in hospital-specific reports provided to the facility. 

The second step in improvement should focus on each program and developing an in-depth understanding of how the data is governed, captured and reported in the facility. The first program to review is the Hospital-Acquired Conditions (HAC) program that involves understanding the reporting of the CMS Patient Safety and Adverse Composite score (PSI-90) and infection measures, including Central Line Associated Blood Stream Infections (CLABSI), Catheter-Associated Urinary Tract Infections (CAUTI), Surgical Site Infections (SSI), Methicillin-resistant Staphylococcus aureus bacteremia (MRSA) and Clostridium difficile infection (CDI). Hospitals that perform above the 75th percentile, allowing for winsorization and comparative performance, will be penalized after FY 2023 by a 1% payment reduction.   

The second program to focus on it the HRRP

The second program to focus on is the Hospital Readmissions Reduction Program (HRRP). It is based on a 30-day risk-standardized unplanned readmission ratio that includes acute myocardial infarction (AMI), chronic obstructive pulmonary disease (COPD), heart failure (HF), Pneumonia (excluded in FY 2023 payment), coronary artery bypass graft surgery and total hip and knee arthroplasty (THA/TKA). Payment penalties are calculated based on peer performance and can represent a 0-3% payment reduction. Much of the program is also about ensuring that the provider is capturing and coding all comorbid conditions that could impact the readmission risks. 

The third program to analyze is the Value-Based Purchasing (VBP) program. It is divided into four categories, including:

  • Clinical Outcomes 25%
  • Person and Community Engagement 25%
  • Safety 25%
  • Efficiency and Cost Reduction 25%

The VBP program is the only program that may allow a hospital to gain greater reimbursement than is withheld from the facility at the beginning of the fiscal year.  If the facility’s performance values are higher than the benchmark, achievement thresholds may receive more than the 2% withholding from the facility. The VBP metrics include some metrics utilized in the other programs along with performance on measures from the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) and the Medicare Spending per Beneficiary (MSPB) measure. 

Once the historical and current performance is understood, the task of developing performance improvement plans for each area could potentially impact scoring in the three programs. This involves bringing together multidisciplinary teams from across the hospital and educating the team members on the metrics, performance and opportunities for improvement. It is common for a facility to involve several workgroups to brainstorm, test and implement performance improvement projects in each critical area. While a significant undertaking, the financial impact of successful improvement can make a substantial difference in the hospital’s bottom line. 

The team at ProspHire has worked with hospitals on performance improvement in these areas. Our deep clinical knowledge, clinical staff experts and project management specialists have helped hospitals realize substantial enhancements tied to CMS programs. We can help your hospital focus on improving clinical care and performance metrics in the future. To connect with a ProspHire professional, fill out the form in the right column.    

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What to know about contracting with a Pharmacy Benefit Manager

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What is a PBM and what are their roles and responsibilities?

PBMs are intermediary companies that administer and manage pharmacy benefits

Pharmacy Benefit Managers, or PBMs, are intermediary companies that administer and manage the pharmacy benefits (prescription drug plans) within the healthcare ecosystem. Pharmacy Benefit Managers work on behalf of Payors such as Medicare Part D Plans, Employer Sponsored Plans, Managed Medicaid Plans and Health Plans. 

Without stringent oversight, pharmacy spend can rise uncontrollably, which is why PBMs have become a necessary stakeholder in healthcare. Operating behind the scenes, PBMs are tasked with controlling prescription drugs costs, which they can accomplish in a variety of ways.

What is a PBM and what are the ir roles and responsibilities?

In managing the pharmacy benefit plan, PBMs’ core responsibilities include:

  • Development of formularies, drug lists, utilization management (UM) strategies and prior authorization (PA) criteria – all of which have influence in determining members out-of-pocket costs
  • Negotiating discounts and rebates from drug manufacturers
  • Negotiating with the large matrix of the pharmacy network to ensure best pricing for Plans and pharmacies and improved access to care for members

These require coordination across many stakeholders and are often complex in nature.

There are several items to be considered when a PBM bears these responsibilities.

What are the Types of PBM Contracts?

The marketplace has shifted dramatically in the past few years as more health insurers and health plans move their attention to challenging status quo and seek greater accountability, more transparency and superior performance from their PBM. It’s important to note that a one-size-fits-all approach is typically not in the best interest of the clients. Each plan has varying mix of demographics and aging populations, as well as risk-tolerance.

What are the types of PBM contracts

The types of pharmacy contracts include:

  • Traditional PBM Contracts
    Most agreements existing today fall under this bucket and often require the most oversight for measuring contract adherence due to the lack of transparency. Traditional PBM contracts focus on delivering higher rebates to drive “cost savings”. Additionally, under this model, administrative fees are not collected from the client by the PBM. However, masked under the terms of the contract is something called “spread pricing”, which is a large revenue driver for PBMs. Spread pricing can be defined as the difference between what the PBM reimburses the pharmacy that provided the drug to a given member versus the amount a PBM charges the client for that same transaction. Noteworthy is the potential conflicts of interests under this type of arrangement.
  • Pass-through Contracts 
    In a pass-through contract, the PBM transitions to a fully transparent model that may benefit the client via the (full) pass-through rebates and other cost savings. Pass-through PBMs thrive on showcasing their transparent nature; therefore, any or all fees or charges are typically disclosed up front. Under a pass-through arrangement, one may experience a greater depth of customization for utilization management strategies and formulary control.
  • Hybrid Contracts
    A hybrid contract offers a blend of pass-through and traditional modeling. PBMs may still earn revenue through spread pricing and charge fees; however, they disclose these practices in a more visible manner. That stated, clients are better positioned for receiving a portion of the revenues generated from, for example, rebates passed on from the manufacturer to the PBM. It’s worth noting that incentives may remain somewhat misaligned under a hybrid model by not offering full transparency into true cost-savings potential.

PBM Contracts

PBM contracts can quickly become overwhelming and managing them carefully is no small task. It’s critical to the Plan’s performance to ensure the contract is explicit and does not include potentially damaging loopholes. Understanding the entire agreement is essential for the Plan’s protection. Often these contracts contain lengthy sections filled with nuances that dictate the type of arrangement the Plan and PBM are entering. Definitions are one key section that requires complete understanding and agreement. Sometimes vague, the definitions enable many levers that can result in unnecessary spend. It is essential to ensure definitions align in the Plan’s favor and are best described to protect the Plan. 

Financial and performance guarantees are additional contractual focal points that require attention. Whether financial or performance based, clients need to A) understand exactly what the guarantees entail/cover, B) understand how exactly these will be measured and monitored and C) ensure the client has full control for auditability. This degree of oversight enables the PBM to assume more of the accountability and risk-sharing.

Financial and performance guarantees are additional contractual focal points that require attention.

PBM Contract Lifecycle

The healthcare industry is rapidly changing and much of this is driven by the pharmaceutical industry.  As such, it’s imperative for Plan Sponsors to approach their PBM contract with the fluid nature of the industry in mind. Lengthy contract terms may limit the ability for Plans to renegotiate when changes in the market occur. 

The PBM contract contains procurement or monitoring. Ideally, the contract also contains flexibility for optimization as the industry evolves over time.

  • Procurement can be very involved and is typically a lengthy process. Plan Sponsors in the Medicare or Medicaid space have significantly more considerations to evaluate in the RFP process as compared to Commercial or Employer sponsored plans – compliance and reporting to name a few. However, the complexity and details of the process should not overshadow the need for flexible contract provisions that allow both monitoring and optimization. This requires the inclusion of certain language, as well as the elimination of loopholes that protect PBM interests.
  • Monitoring of plan performance could arguably be as important as the negotiated terms. Just because a PBM agreed to certain terms does not mean that they will deliver in their performance. It is incumbent on the Plan Sponsor to hold their vendor accountable to the agreed upon terms and rates. Success here is entirely dependent upon access to timely information and once that data is obtained – having systems to review performance.  As claim volumes increase so does the possibility (and likelihood) of errors in processing and payments. It may seem obvious but Plans should never assume that claims are processing as planned.
  • Optimization should not occur strictly at contract renewal. There is simply too much innovation in the marketplace to not take advantage of it in “real time”. With an understanding that significant changes cannot occur in the middle of a plan year, Plan Sponsors should not be limited to grow and evolve with the market around them. 

Whether you are still within the walls of your current agreement or are in the marketplace for a new PBM, it’s important to understand the lifecycle of PBM contracting. Understanding that procurement of the contract is the just a starting point and not the finish line empowers the Plan to deliver better results to all stakeholders.

How Can ProspHire Help?

The complexity involved when evaluating an agreement with a Pharmacy Benefit Manager is no small task and there are many nuances that dictate real-life outcomes. One bulletproof method to improving value within your Pharmacy Benefits plan is understanding the strategies available, along with having a playbook to deploy during the different phases of the contract lifecycle.

ProspHire has the expertise to augment and support you to ensure all blind spots are covered when it comes to PBM contracting. Regardless of the stage in the PBM contract lifecycle, we will meet you where you are. Get support by filling out our form below.

Contact us for help with PBM contracting

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CMS Final Rule Stars Program Update

Overview: Changes to STARS Program

On Jan. 15, The Centers for Medicare and Medicare Services (CMS) announced changes to Calendar Year (CY) 2022 Medicare and Medicaid Programs. On Jan. 19, the Federal Registrar published the Final Rule detailing those regulatory and measure level updates for the Stars program beginning in Measurement Year (MY) 2022. These changes will force health plans to reevaluate their Stars intervention strategies and better communicate to both providers and members. The recalibrated measure weighting toward CAHPS will also put more emphasis on member experience and prove pivotal to overall contract success. The final rule also includes changes to the Quality Bonus Payment Rules. The methodology outlined by CMS clarified that the enrollment figures used in the enrollment weighted QBP rating calculations are the Nov. enrollment in the year the Star Ratings are released. This new methodology will take effect during in the 2023 Quality Bonus Payment period. It’s important to remember that success in Stars is a continuous effort. But the health of a Stars program is critical to a health plan’s growth and sustainability. These new measures are complex and can require adjustments to your in-flight strategies. But don’t worry, you are not alone! ProspHire is adept at helping our clients quickly assess the impacts of CMS measure updates and developing strategies for continuous improvement. The recent changes are summarized below:

MeasuresDescription of Change
• Improving or Maintaining Physical Health
• Improving or Maintaining Mental Health
These measures will be retired to the Display Page for at least two years (beginning in MY2022); These measures will be retired at least for SY2024 and SY2025, with the earliest return to Star Ratings in SY2026 at a weight of 1, and Star Ratings in SY2027 and beyond will be a weight of 3
Medication Reconciliation Post Discharge (MRP)This measure will be retired as a standalone measure in MY2022, SY2024
Follow-up after Emergency Department Visit for Patients with Multiple Chronic Conditions (FMC)This measure will be added in MY2022, SY2024, with a permanent weight of 1 as a process measure
Controlling Blood Pressure Measure (CBP)This measure will be added beginning in MY2021, SY2023 with a 1x-weight, increasing to 3x-weight in MY2022, SY2024
Plan All-Cause Readmissions (PCR)This measure will be added in MY2022, SY2024 with a 1x-weight, increasing to a 3xc-weight in MY2023, SY2025
  1. MY = Measurement Year, the calendar year the measures are tracked and calculated for Star Ratings; SY = Star Year, the year that the official Star Ratings are received
  2. Source: CMS-provided information and documentation

ProspHire Is Here to Help

Unlike other improvement programs, when Stars interventions are executed, they do not always create savings. Many require reinvestment to drive continued improvement. Stars is also graded against a curve. What was good enough last year, may not be good enough the next. ProspHire excels at driving continuous improvement to optimize Stars performance. Through data driven analyses and clearly defined strategies, our team of seasoned subject matter experts implement interventions to increase Stars ratings and maximize rebate potential. Our practitioners have years of experience helping large MCOs enhance quality improvement programs. If you would like to learn more about the Stars Program or have any additional questions about how ProspHire can assist, let’s have a conversation!

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ProspHire Named to 2020 Inc. 5000 List

The woman-owned, national Firm is one of the fastest growing private companies in America.

PITTSBURGH, PA., Aug. 12, 2020 – ProspHire has made the 2020 Inc. 5000 list of the fastest-growing private companies in America. The Pittsburgh-based, national healthcare consulting firm ranks #790, landing in the top 16% of companies for its continued exponential revenue growth.

The Inc. 5000 award ranks companies by overall revenue growth over a three-year period. This prestigious list of the nation’s most successful private companies has become the hallmark of entrepreneurial success and the place where industry superstars first make their mark. ProspHire now stands alongside companies like Microsoft, Vizio, Patagonia and numerous other big industry names.

“We are thrilled to receive renowned national recognition for our commitment to sustainable growth,” said Lauren Miladinovich, ProspHire’s Managing Principal and CEO. “While many companies lost serious footing due to the COVID-19 global pandemic, ProspHire was tested but refortified by the challenge. We let our core values and commitment to our people guide us. We stayed true to our value proposition and worked with our clients who were going through financial difficulties and we came out stronger for it. I don’t have many peers who can say they grew their companies during a pandemic.”    

Christopher Miladinovich, ProspHire’s Principal and SVP of Consulting, said, “We have been honored twice by Inc. as a Best Workplace and are very pleased to now be recognized for our exponential growth. For five years, ProspHire has grown by more than 600% and now clears nearly $10m in annual revenue. We have created 80+ jobs across the state of Pennsylvania, achieved 49% diversity and currently have 50+ practitioners.  It’s hard to say what the future holds, but we plan to continue to grow our headcount and to diversify our already national client base. We are truly proud of our responsible growth and have no plans to slow down.”

ProspHire is no stranger to workplace accolades. The Firm was just named one of Modern Healthcare’s Best Places to Work (2020). In 2019, the Pittsburgh Business Times ranked ProspHire #4 on their Fast 50 list of the fastest growing private companies in western Pennsylvania, and #1 mid-size company on their Best Workplaces list. ProspHire was also named one of Inc. Magazine’s Best Workplaces for two consecutive years (2018 and 2019).

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