Jaymie WilsonI think it’s safe to say we have all been confused at some point when trying to understand how pharmacy pricing works.
This article addresses the two different pricing structures that a pharmacy may employ and will hopefully help you to understand how it all works next time you are talking Per Diem vs. Fee for Service.
In today’s hospice environment of ever increasing medical costs, hospices are looking for ways to balance their bottom line against the constant increase in CMS requirements.
One way hospices are hoping to do this is by creating expected drug cost. This is the idea behind Per Diem pricing.
Per Diem
Per Diem Pricing requires a standard daily rate for each patient.
Per Diem is very attractive to hospice administrators, and on the surface it appears to be the perfect way to predict drug costs. But, is it really?
The Per Diem fee is only for drugs listed on the formulary contract. The contract will include language about drug utilization and drugs not listed on the formulary. This is where many of the hidden costs may be found.
What other drugs do you frequently use that are not listed on the formulary?
Have you ever had your formulary revised by your PBM and discovered that a drug that was previously on formulary is no longer available under the Per Diem pricing?
The increase in prices of generic drugs may exclude medicines that were once the mainstay of a hospice formulary. This may cause them to be “carved out” and no longer a covered benefit. (Example: phenobarb 65mg/ml injection box of 25-1ml vials once cost the pharmacy a few dollars and now has a pharmacy cost of nearly $500.)
This is a trend that will not likely reverse.
Questions to ask yourself before going Per Diem:
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Does your staff have access to a clinical pharmacist to help you utilize the most cost effective alternative, while still maintaining excellent care? Will you have to pay extra for that access?
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Are you charged a premium for poor drug utilization patterns?
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Are you charged delivery fees?
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Does your pharmacy provide PCA pumps? Is that outside the Per Diem fee? How does that add in to your overall costs?
Fee For Service
Fee for Service requires paying only for the drugs their patients receive.
A hospice may achieve better overall results by changing to a Fee for Service model and working closely with a clinical pharmacist to reduce drug costs.
Here are some of the perks of going Fee For Service:
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You will be able to set your own formulary.
By working with your Medical Director, the clinical pharmacist and clinical managers you will have the flexibility to create a formulary that reflects only the medications you use.
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You will have more opportunity work with your pharmacy on drug costs.
(For example: Our pharmacy has been able to offer better deals on certain high use generic drugs.)
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You can review your monthly bill and have a clearer picture of where your money is being spent.
This will highlight your most expensive patients. Many times they are expensive because they are not well controlled on the plan of care. This will provide an opportunity to work with your physician and clinical pharmacist to make a better plan.
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Your case managers will be more encouraged to actually look at their patient’s medications at each visit and evaluate the need for any updates to the patient’s drug requirements.
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You will be more likely to stop medications that are no longer useful to the patient or where the risks outweigh the benefits at this time in their disease progression.
We often hear “The patient is no longer swallowing pills so we want to change all medications to liquid.” Perhaps it is time to stop and switch to comfort medications.
All of these things are considerations in your choice to choose a pharmacy that has Per Diem pricing as opposed to a pharmacy that is Fee for Service.
The goal is always better care at a fair price.
The more the pharmacy and the medical staff work together, the better outcome for the patient and the more cost effective the care will be.
