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):

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:

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 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.

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.

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 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 75^th percentile, allowing for winsorization and comparative performance, will be penalized after FY 2023 by a 1% payment reduction.   

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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