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Bridging the Gaps between Pharmacy and Finance

Posted By Administration, Thursday, March 3, 2016

By Kathy Schwartz, Solutions Owner, AVP Strategic Messaging, Craneware

Healthcare industry trends are squeezing provider margins through payment cuts and value-based reimbursement models. In response, these providers’ clinical teams are recognizing the need to collaborate and communicate more closely than ever before with their business office, finance and revenue cycle counterparts.
The pharmacy and its purchase history and formulary data can be low-hanging fruit for organizations looking to better manage cost, improve charge capture, and reduce compliance risk. But where to start? Both Heidi Larson, Pharm.D, Pharmacy Business Manager for Hennepin County Medical Center in Minneapolis and Tara Hunuscak, Business Director of Pharmacy Service for OhioHealth’s network of 11 hospitals and other health services in Ohio chose to partner with Craneware to help address these challenges.  
Hennepin knew that there were gaps and issues going undiscovered because of silos in their organization. “Like many organizations, pharmacy was viewed as separate from the hospital and clinics,” said Larson. “People didn’t communicate regularly and frequently across departments. Information was scattered, duplicative and unclear. The electronic health record (EHR) information needed ongoing review to be clean, current and complete.”

Prior to OhioHealth embarking on a major health information system (HIS) conversion for 7 of its hospitals, outpatient clinics and owned physician practices, it took the opportunity to ensure its revenue cycle and pharmacy charge processes were operating as a cohesive unit to minimize financial risks.  “We recognized the need to align critical business functions for optimal financial performance and risk mitigation as 55% of pharmacy charges were impacted by the HIS conversion changing from charge on dispense to charge on administration. Effective checks and balances for ongoing accuracy was paramount considering the complexities inherent to the pharmacy chargemaster and the revenue loss and/or costly penalties if billing units or HCPCS code assignments are incorrect,” said Hanuscak.

People, Process, and Technology

Both Hennepin and OhioHealth saw the need for technology investment to gain visibility across pharmacy and finance, prevent gaps and manage exceptions. Both organizations chose Craneware as the vendor to help them achieve their goals.

Hennepin brought together teams to validate information and educate physicians and staff about compliance and financial aspects of care. With everyone understanding their part in the larger process, Hennepin County Medical Center was able to identify and remove redundancies, obsolete NDCs, and other mismatches. “The Pharmacy and Therapeutics team are helping to educate about the impacts of formulary choice and the best practices during the occasional industry-wide drug shortages,” said Larson. “Building pharmaceuticals correctly into the EHR, and validating NDCs, billable units, and HCPCS helps to keep Hennepin current with coding changes and to ensure that compliance requirements are met ongoing.

OhioHealth hired a pharmacy charge analyst to serve as the primary end user of the Craneware software, followed by a pharmacist coordinator to focus on work requiring clinical expertise (e.g. diagnosis coding/ treatment indications; reconciling orders, and medical necessity.) Customized HIS training was provided for these individuals to ensure full access to relevant pharmacy, charge analysis and revenue cycle functionality. Finally an enterprise-wide, multidisciplinary advisory committee was formed to ensure successful HIS conversion in both short- and longer-term perspective, and to enhance net operating income amidst industry shift from volume to value based reimbursement.  

“With representation from pharmacy, revenue cycle, compliance, charge analysis, finance, coding, information services, internal audit and nursing, our group served as the decision making forum addressing pharmacy revenue items impacting the HIS build, testing and go-live. Among our objectives were to standardize price updates, align charge methods across hospitals, and automate data integrity process controls throughout the HIS conversion. This pharmacy led team complemented the system-wide focus on revenue integrity and helped build momentum for pre and post go-live initiatives,” said Hanuscak.

Craneware’s pharmacy validation software helped Hennepin and OhioHealth identify common issues with pharmacy reimbursements that often remain hidden and unaddressed:  

  • Incorrectly Coded Drugs
    In order to receive proper reimbursement, a hospital must enter the correct procedure and revenue codes for the drugs. Doing that completely and correctly is nearly impossible manually. Further complicating the task are constant changes to coding rules. For example, Medicare changes its pharmacy coding rules quarterly, and Medicare rules do not always align with commercial payor rules. Missing, inaccurate and incomplete coding is a common source of both missing revenue and compliance risk. Charge items missing HCPCS codes often go undetected and can pose a serious but hard-to-detect reimbursement risk.

  • Charge Capture Issues
    Volume reconciliation analytics – whether purchased from a vendor or built in-house – can shed light on often significant differences between the volume of drugs purchased and the volume of the same drugs billed. In some cases there are good reasons for discrepancies, but large discrepancies are usually traced to issues in charge capture. For example, a typographical error in an automated dispensing cabinet would go undetected without some form of automation to provide visibility into the missed or incorrect charges. A recent survey by Craneware identified that fewer than 5% of health systems can perform volume reconciliation. This is mostly because the way hospitals bill for drugs and how they dispense drugs is very different.

  • Newly Purchased Drugs Missing from the Formulary or Chargemaster
    With the volume of specialty and new drugs coming onto the market, it is imperative for providers to have visibility into these purchases. A provider must be able to quickly and accurately identify these drugs: descriptions, procedural codes, revenue codes and billable units of measure all ideally would be integrated into the chargemaster. Purchases not identified in the formulary build often lead to missed charges.

  • Incorrect Multipliers
    One complexity that is unique to pharmacy is the need to calculate the correct units of measure (UOM.) Medication dosages administered to patients are rarely the same units of measure allowable on claims. Because of this fact, pharmacy charge items require multipliers that translate dosage units to the correct number of billing units. The validation of these calculations can be difficult to perform manually, particularly across different clinical order systems and staffs. Unless a hospital has an automated method of tracking those multipliers, maintaining and applying them requires manual calculations that can result in over or underpayments. Using automation, Hennepin uncovered two ocular drugs that had mismatched purchases compared to volumes dispensed – accounting for $384,641 in missed charges that would have been lost revenue.

  • Inappropriate NDCs Captured on Claims
    Purchase and use of medications is an important aspect of managing costs, and accurate National Drug Codes (NDCs) improve cost management and claims processing. Often formularies are set up with a default NDC but gradually become out-of-sync with purchases, and NDCs reported on claims eventually do not match the drugs purchased and administered. What is purchased and used often isn’t what is billed, creating a substantial compliance risk as well as undermining the quality of data used for clinical efficacies in population health management. “Inaccurate documentation can lead to a double loss for your hospital. If you are not charging for the medications administered, you are losing revenue. And if you are not able to track accumulations in a split billing system, you end up purchasing on the more expensive wholesale acquisition cost (WAC) account,” notes Larson. “For 340B facilities like ours, there needs to be close management and communication on purchase practices and formulary changes.”

With frequent pricing changes and new drugs always being added to the market, it is increasingly difficult for provider organizations to stay on top of pharmacy charges, and many organizations wind up leaving significant revenue on the table. It’s never too late to start bringing together the right people, ensuring those people clearly understand the processes involved, and providing them with the tools and support needed to proactively identify and fix issues. While pharmacy has unique challenges, correctly aligning costs and reimbursement in pharmacy is an important first step for small hospitals to a larger health systems in navigating the transition away from fee-for-service into value-based reimbursement.

Tags:  AHVAP  Craneware  formulary data  Healthcare  Hennepin  history  hospitals  Kathy Schwartz  Minneapolis  OhioHealth  pharmacy  Tara Hunuscak 

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