Hello. I am Wendy Sullivan, Director of Drug Informatics for RJ Health. I’d like to welcome you to today’s webinar-Creating Pre-Payment Controls for Medically Covered Drug Costs through Automation. Before we get started, I’d like to thank you for attending and to thank my colleagues who helped make this webinar possible. In terms of my background, I hold a Master’s in Public Health and have been working with healthcare information for over 30 years, primarily on the payor side. I have been with RJ Health for almost two years now and I am very excited to serve as the RJ Health Medical Drug Edit product owner.
So why are medically covered drugs such an industry challenge?
As you know, the pharmacy benefit was designed to manage and process drug claims. Medical claim and billing systems were not. Consequently, medical drugs claims require more data and structure than medical benefit systems were initially designed to process. Our industry’s recent attempts to solve this issue include increasing manual efforts, continually enhancing existing systems, implementing support procedures, such as prior authorization and manual review, and outsourcing to full-service vendors to manage the entire process.
Regrettably, these efforts often result in delays in processing which, along with partial payments or denials, can lead to provider agitation. There may also be limited visibility into as such things as therapeutic efficiency or administered doses. And, these, coupled with inaccurate payments, create an unsustainable environment for managing costs. Fortunately, automated prepayment review can limit your organization’s exposure to many of these challenges. Prepayment review is accomplished with the utilization of systems, including legacy medical systems, the leveraging of comprehensive, current medical drug data, and the application of logic through medical drug edits.
Before we continue, I want to define what medically covered drugs are. These are the Drugs included in medical benefit plans and are typically administered by a health care provider in a doctor’s office, an ambulatory infusion center, a patient’s home or a hospital.
While some medical drugs are orals, many are injectable or intravenous formulations and are used to treat a wide range of indications. Most of the costs associated with medical drugs are for specialty drugs which are used to treat illness such as autoimmune and inflammatory conditions, cancers, Multiple Sclerosis, HIV, and Hepatitis C. As a result, medical drugs have both high per-patient and aggregate costs.
As we see in this table, Medical drug costs and associated expenses continue to rise. From 2012 through 2016 commercial medical benefit drug spend increased 63% to $26 PMPM and the Medicare medical benefit costs increased 19% to almost $47 PMPM. Much of this increase was driven by Specialty drugs, which accounted for 94% and 96% of medical drug costs in the commercial and Medicare Advantage plans, respectively.
Unfortunately, the impact of specialty drug claims on the medical plan is not going away. It is expected that by 2020, more than 50% of specialty drug claim costs will increase under the medical benefit. And specialty pharmacy costs continue to grow due to price increases related to branded drug inflation and to the costs of innovative drugs. In fact, almost 80% of estimated 2019 inflation will be due to drugs without competition. In addition to costs, utilization is also growing and is partly driven by more people using these drugs as the population ages. There are also added indications for existing drugs, more new drugs being introduced each year, and many more in the drug pipeline.
We see this by this graph that the trend in FDA specialty drug approvals has increased 252%, from an average of 4.6 approvals a year in the 1990’s to 16.2 in the ten years ending in 2017.
This exhibit shows that 63 new specialty products had FDA review dates from just January through October 2018. The influx of drugs to market produces coding and pricing changes, creating more complexities within medical plan systems and processes. Therefore, both utilization and cost management strategies are essential within these plans.
In addition to new drugs and rising prices, there are three main reasons why medically covered drugs and their costs are difficult to manage:
- Reduced clinical visibility and control
- Medical system limitations
- Billing and reimbursement complexities
Let’s take a look at each of these in more depth.
First, Clinical Visibility and Control is reduced as payors may not be aware of drug administration until a claim is submitted. This diminishes the ability to initiate the limited clinical and utilization management programs that are available through the medical plan.
Additionally, cost effectiveness and clinical appropriateness, in terms of correct dosage and a specific drug’s therapeutic efficacy, are difficult to assess given the limited claim data that is submitted post drug administration.
Even when there is a advance notification of a drug claim through a prior authorization process, fewer than 40% of plans are able to verify that the approved drug and quantity of the drug billed are what was approved in the PA.
Other challenges you may experience managing medically covered drugs are due to medical plan system limitations. The fact that these claims are processed on legacy medical systems is problematic because the systems were not designed to accommodate the details related to drugs and their administration. The gaps between when the drug is administered, billed and paid do not allow for the immediate authorization and coverage feedback that pharmacy plans are able to provide. Another challenge is that medical drug coding and pricing data standards can be inconsistent in terms of quality and timely loads into systems which can create reimbursement issues. Medical benefit plans are more likely to have both paper and electronic claim submissions. The drug details, especially for NDCs, are often included in text fields which can make systematic manipulation difficult. NDC Mandates require the inclusion of NDC related drug data which most legacy medical claim systems were not designed to incorporate.
The last category of challenges you may experience in the management of medical drugs is related to billing and reimbursement complexities. Billing and reimbursement is complicated by such factors as coding, pricing, and updates to coding, pricing, new drugs and new drug indications.
Let’s begin with the coding challenges. Most of us know that pharmacy benefits use national drug codes (NDCs) which include both clinical and financial information. However, medical drugs are typically billed using HCPCS (usually J-codes) which do not include the information needed to both manage clinically and in terms of cost. For instance, J codes reference the chemical name of the drug but not the manufacturer, strength, or package size. J-codes often represent multiple drugs. This can lead to confusion as drugs within the same J code often have different strengths and package sizes. As a result, it is difficult to ascertain if the most efficient product or package size was utilized. Also, J-codes may not be assigned until up to 18 months after drugs are launched, forcing billing via an unclassified J-code, or Not Otherwise Classified (NOC) Code. Finally, there are many drugs permanently associated to NOC codes which do not have calculated code rates making accurate code level reimbursement impossible.
Pricing poses another challenge to controlling costs for medical drugs. Since the average cost for a medically covered drug is in excess of $200, errors associated with the processing of these claims have significant financial implications. Payments can be off due to Complicated HCPCS coding as we just discussed. Billable Unit errors are common primarily due to miscalculated NDC unit to HCPCS unit conversions and vice versa. There are also several standard pricing methodologies used. These include CMS’ Average Sales Price (ASP) and Manufacturers’ Average Wholesale Price (AWP) with variable adjustments to the base rate or pricing may be calculated as a percentage of billed charges. In addition to having different pricing methodologies, there are often varied Fee Schedules based on Plan, Network or Site of Care. Failure to properly keep track of fee schedules and pricing effective dates may mean that the Billed amount may not reflect the correct rate. Ancillary costs vary depending on the site of care and type of administration and are not accounted for in the J-code billing process. Incorrect pricing can cause a partial payment or denied claim which creates a cycle of appeal and review between provider and payor.
In addition to correctly providing the right code(s) and price for a medical drug, payors and providers must assure that these are correct on a given Date of Service. This task is complicated because of frequent updates to pricing and coding assignments. Changes occur both irregularly and frequently and payor updates may lag the provider market by up to 9-months. Additionally, new drugs and generic products are continually entering the market and multiple commercial and public sources for these data introduce variability. Disparity is inevitable and without rigorous governance over these drug innovations and updates the resulting impact to operations and payment integrity can create significant expense implications in a short period.
Medically covered drugs do present a host of challenges. While not all of them can be automated, prepayment claim review can. In fact, prepayment claim review can assure that appropriate unit rates are applied, while accounting for such variables as date of service, pricing methodology and fee schedules for various networks, sites of care, and products. In addition, HCPCS Code and or NDC statuses can be checked to verify that they were active on the date of service and, if submitted together, that they were aligned on the date of service as well. Checks can be conducted to verify accurate HCPCS unit to NDC unit conversion and that code units don’t exceed daily dosing maximums. Accuracy in just these areas will lead to reductions in appeals, delayed payments and improper reimbursements, including claims with NDC pricing and payment policies.
Here we see a visualization of an automated prepayment review process for a payor. First, claim data is submitted through the payor’s EDI gateway to the claim management system where claim lines containing medical drugs are flagged for review prior to adjudication. These claim lines are sent to a claim edit process which interrogates the claim data, maintained medical drug data and possibly payor specific formulary, fee schedule and policy data using logic to assess claim validity, which provide relevant values or generate error reasons. The claim line outcomes are returned to the claim management system for auto-adjudication, for routing to manual claim review or to trigger provider communications, including denials.
As we just discussed, the effective prepayment review of medical drug claims requires the application of normalized up-to-date data and logic in cooperation with an organization’s claim data. Therefore, those of you looking to automate will need to obtain, store, and maintain or have the ability to access this frequently updated data which is generated by multiple data sources. This data should include drug details such as pricing methodology rates, coding assignments, newly approved drugs, and generic entries. Other required data include unit conversion factors, on and off label indications, and dosing limits. Along with medical drug data, you will need access to expert clinical, business, and IT resources to create pre-scrub rules and logic which can be applied as part of the claim edit function.
In addition to the resources required for automation, a prepayment claim edit process requires certain functionalities in order to verify or correct submitted claim data. The process must be able to integrate claim data with medical drug data and stored organizational data including fees schedules, formulary, and other applicable policy data. Logic must be applied via claim edits to verify or provide values, to flag and or correct errors, to produce error reason codes, and to provide additional response descriptions. The resulting outcomes then need to be returned to or reintegrated with your appropriate systems for correction, adjudication, denial, or communication. Claim edit outcomes have to be stored to enable the production of reports and analyses.
Medical Drug Edits can create significant improvements in claim operations and payment accuracy. For instance, the edits can confirm that the appropriate pricing methodology was applied or that reimbursement policies, such as NDC mandates or formulary tiers, were followed. In addition, pre-payment edits enhance claim adjudication accuracy and efficiency by reducing time spent on delayed, denied or reprocessed claims. Furthermore, data analysis of medical edits identify opportunities for provider education to improve quality, policy compliance, as well as coding and billing accuracy. Medical drug edit returns can trigger communications with providers addressing claim status, including specific denial reasons. Medical drug edits can be used to evaluate adherence with prior authorizations.
Automating prepayment medical drug claim review can be a complicated process, requiring both resources and expertise. Those of you looking to implement automation need to decide if you would like to:
- Build It – (In-house)
- Outsource It
- License It – (API)
Of course, there are pros and cons to each option. For instance, desired outcomes for every approach are staffing or manual work reductions and claim and operational savings. The negatives you’ll seek to minimize in whatever approach you elect include the costs and effort related to the initial implementation of and ongoing efforts related to automation.
The first option that organizations may select is to develop and apply proprietary logic in-house. This requires that they obtain and maintain all of the data related to medical drugs. These organizations will also need a variety of subject matter experts who can decide what edits are needed, create the logic, and write code to apply the data and logic to medical drug claims. Other requirements include defining how the edit results will be integrated and used in the pre-adjudication or pre-submission process and other processes and systems. Finally, results must be stored and used in reporting and analytics in order to gain insight into trends and improvement opportunities.
While there are many pros and cons related to implementing in-house pre-payment review which are listed here for your reference, I will only highlight the most pertinent. The greatest benefit of an in-house solution is that it provides control in decision making and design. However, this choice could take a great deal of time to implement and requires in-depth expertise and the ongoing maintenance of medical drug data.
The cost and effort of an in-house solution may be more than some organizations want to take on so they choose to outsource. They must select a qualified vendor that has medical drug expertise and platform readiness. In addition, those outsourcing must determine what part or parts of the claim adjudication or billing process will be outsourced and if, and how, the results will be re-integrated into in house systems and processes. The organization needs to partner with the vendor in the development of requirements, during testing and implementation, and as part of the continued integration with their medical plan and systems as necessary. The payor or provider needs to obtain reports and analyses in order to have insight into trend and opportunities for improvements and to assess vendor value.
Outsourcing is an option which can relieve an organization of the burdens associated with implementing a pre-payment review process. While vendor expertise, systems and processes can be best in class, a degree of control is lost which is in direct proportion to the extent processes are outsourced. In addition, there may be challenges interfacing or integrating with vendor systems. Another significant downside is the perceived effort to reverse the decision to outsource, which may result in in-house resource reductions.
The third option that organizations may choose is to utilize a vendor offering an Application Programming Interface (API) to perform medical drug pre-payment review using medical drug edits and medical drug data. An API enables one program (or system) to make use of the functionality of another or data available within another. As you know, APIs are not new and are widely used. For instance, they allow us to find the best price for a flight when a travel site uses their system to contact airlines’ and other travel aggregators’ systems in order to access ticket price data. The main advantage of utilizing an API is that it enables prepayment claim review to occur in-process, providing real-time data validation, correction, and provision in order to minimize claim turnaround and maximize claim accuracy.
If an organization chooses to implement pre-payment review by the licensing of medical drug edits and data accessed via an API platform, the implementation process is very similar to outsourcing. Howver, there are fewer requirements and system integration issues to address as the process is much more simplified. Determinations are needed regarding how the API process, logic, and results will be used and when; whether before, after, or during the adjudication process.
Licensing medical drug edits and drug data via an API platform is another option that reduces operational burdens associated with implementing a prepayment review process. Again, vendor expertise can be best in class and solutions can be customized, however, they are typically easier and faster to implement. Additionally, responses are returned in real time so claim turnaround time is optimized. The key downside to licensing are initial implementation and integration costs though these can be quickly offset as licensing costs are much lower than cost for the building and outsourcing options. Return on investment can be realized much sooner.
Now I’d like to take a few minutes to tell you about the RJ Health Medical Drug Edit Solution for Pre-Payment review. RJ Health has developed a library of medical drug edit configurations that are accessed using our API platform prior to claim submission or claim adjudication. The medical drug edits are comprised of best in class algorithms to provide or verify Pricing, coding, Crosswalk and Unit Conversion data. The logic within the edits interrogates customer submitted claim data and generates returns which include data validation, corrected values, and reason codes for incorrect data submissions.
RJ Health’s Medical Drug Edits employ the industry’s most trusted and utilized medically covered drug data. Our database is comprehensive and up-to-date and includes but is not limited to:
- drug coding,
- drug pricing,
- unit conversion,
- diagnostic and dosing data.
The RJ Health medical drug edits apply logic using best- in-class algorithms to customer claim and policy data, including fee schedules and formulary tiers. The outcomes are:
- increases in coding accuracy,
- increase of appropriate payments,
- improvements in payment turnaround,
- improvements in formulary and fee schedule application,
- improved operational efficiencies.
Return on investment is realized through unit savings, price differentials and FTE allocations.
On this slide is a subset of results from an implementation which demonstrates decreases in invalid outcomes and increases in valid outcomes of 4 percentage points each. Denials, provider communications, and provider education drove the submission of accurate claims and re-submission of corrected claims as a result of the API process and Reason Codes.
The RJ Health Medical Drug Edits via our API can be easily integrated with your billing or claim management system. In addition, the automated claim edits are applied prior to your claim submission or adjudication process and provide near real-time responses to minimize claim turn-around time. These medical drug edit responses include data values, value confirmations, or failure reasons with corrected values when available and appropriate. More specifically, the RJ Health medical drug edit configurations can be customized to provide or confirm price, validate HCPCS to NDC alignment, perform unit conversion, compare dose to daily maximums, and assure that the administered drug is approved for the submitted diagnosis. Edit responses can also be customized to be used in your system notes as well as in provider letters.
In addition to real time responses to your claim data, the RJ Health Medical Drug Edit platform captures data to provide insight to improve your management of medically covered drugs. Our outcome reporting and analyses help to identify global and discreet trends related to drug classes, specific drugs, disease states, and conditions. Network analyses allow you to support providers where specific educational opportunities exist. Additionally, claim analyses can help you identify the types of claims that were submitted in accordance with the payor’s policy as well as claims where payments were challenged or adjusted. RJ Health’s outcome reporting and analyses can identify improvement opportunities in operations, contracting, and systems.
2016 Express Scripts Drug Trend Report http://lab.express-scripts.com/lab/drug-trend-report
IMS Health. The US Pharmaceutical Market: Trends and Outlook. Available at http://www.imshealth.com/files/web/United%20States/US%20 Files/Trends_Issues_Forecasts.pdf
CVS Enterprise Analytics, 2016. “Medicines Use and Spending in the U.S.” IMS, April 2016.
EMD Serono Specialty Digest™, 12th Edition, Managed Care Strategies for Specialty Pharmaceuticals