The 340B drug pricing program was created to help hospitals and health systems care for vulnerable patients by improving access to vital medical services while cutting government spending.
But like most Federal programs, its spending is frequently called into question and today is the subject of intense investigation.
However, one could look at the fact that hospitals receive between 20-50 percent discount for drugs when they participate in 340B, but the hospitals are not obligated to provide those discounts to the eligible patients they are serving. However, hospitals invest these savings into providing new and improved coordination of care or investment in technology that will benefit their community at large while serving the patients and care delivery that require these high cost drugs.
Recently in a 14-3 vote, the Medicare Payment Advisory Commission (MedPAC) recommended a 10 percent cut to Part B drug payments for hospitals participating in the 340B Drug Pricing Program, with the intention of redistributing an estimated $300 million in funding to hospitals based on their volume of uncompensated care, rather than their share of Medicaid patients.
According to a recent study by 340Bhealth.org, "Not only do 340B DSH hospitals treat a more vulnerable population...[they] have lower Medicare spending per patient for Part B separately billable drugs than patients who receive care at non-340B covered entities," the study concludes.
"The 340B program gives hospitals with high volumes of low-income and other vulnerable patient's discounts on pharmaceuticals," said Ted Slafsky, President and Chief Executive Officer of 340B Health, the hospital association that sponsored the research. "This study confirms that hospitals accessing 340B savings are treating significantly higher numbers of vulnerable patients and that 340B hospitals are not providing more drugs or more expensive drugs than non-340B providers."
There is a dearth of compliance, reporting, audit and validation for hospitals that participate in 340B programs to ensure their adherence to the multitude of stringent guidelines and policies. Maintaining records for inventory replenishment and accurate reporting of national drug codes (NDC) on claims is paramount to the integrity of the 340B program.
Here are three areas to focus on to assist with managing rising drug costs and declining reimbursements:
1. Compliance:
An area that is often overlooked but integral to the managing of the 340B program is understanding the complexity of how the National Drug Code (NDC) and drug cost gets reported on the claim during the claim adjudication process.
Many providers and ACO's have invested heavily in technology to move data through their systems to create patient bills. The information that is communicated to the bill rests heavily on the accuracy of the cost and other essential data in these enterprise work flow clinical systems. In today's world, accuracy is vital to the data analytics for quality reporting, clinical efficacy and outcomes. Consumers are demanding pricing transparency, having the ability to properly manage drug costs and defensible pricing policies will be the key in providing the information to the community of care at large while also enabling the provider environments to be fiscally responsible. Being able to truly provide the best outcomes at the lowest cost is driven by the data and content that resides in the formulary systems and communicated to the patient bill via the chargemaster or financial accounting system. The process and culture by which healthcare providers pursue quality patient outcomes & optimal financial performance is directed through the management of clinical, operational and financial assets that form the foundation of the value cycle. The chargemaster or financial system and its data integration with the pharmacy formulary are two essential clinical and operational databases that drive the capture of charges necessary for claim adjudication.
For example, if a similar drug is purchased but sold by different manufacturers, which NDC actually is reported on the claim? Often times, the similar drugs are "stacked" in the formulary database; meaning that similar drugs are grouped to enable more efficient management of the formulary. The parent of the stacked group is the NDC that is likely reported since it is the drug identified with the charge code from the chargemaster. The other similar drugs that are part of the parent group may get dispensed in automated cabinets or via outpatient settings. With the implementation of various key requirements in 2015 for the Drug Supply Chain Security Act which looks to improve tracking and traceability, pharmacy data accuracy for National Drug codes for wholesale distributors and pharmacies is key to managing the process to capture and investigate suspect, illegitimate or counterfeit drug products.
2. Quality analytics to improve outcomes:
Taking a much larger analytical step, when your data scientists examine and analyse your enterprise data warehouses, clinical effectiveness and costs are driven by the NDC reported on the claim collected by the cost data in the formulary and the charge code in the financial accounting system. Electronic Health Records (EHR) capture the NDC dispensed at the bedside or to the patient in the clinic; but the EHR may be a separate and disparate technology tool that does not send data to the claim. How confident is pharmacy leadership that audit and validation processes are in place to ensure compliant and accurate analysis? Is the drug reported on the claim equivalent to the drug dispensed? If different drugs are reported on claims and your enterprise warehouse utilizes this big data for analytics, there is a potential that the wrong drug may be analysed for specific procedures or treatment outcomes. Ensuring reliable data is provided for efficacy studies and research will support initiatives for improving clinical care guidelines and documentation.
3. Rising drug costs
With prescription drug spending in the U.S. around $457 billion in 2015, or 16.7 percent of overall health spending and $20 billion spent on outpatient drugs administered by physicians and hospital outpatient departments for Medicare Part B in 2015, managing the complexity of the 340B program along with delivering cost effective quality care, investing in technology to improve community of care and the coordination of that care is underlying premise of the value cycle. Investing in technology, people and processes to ensure that formulary systems are proactively updated with accurate costs allows institutions and provider environments to continue to benchmark their pricing policies and provide transparent defensible pricing for their educated consumer population. Without constant monitoring and management of costs for drugs, providers risk receiving legitimate reimbursement and a loss of consumer trust in their patient billing process.
Community environments that invest in the value cycle, the clinical, financial and operational assets and the accuracy of those assets will be those best aligned for delivery the best care at the lowest cost.
Kathy Schwartz is the Solutions Owner & Associate Vice President of Strategic Messaging at Craneware. Prior to joining Craneware, Kathy enjoyed 20 years of experience in the healthcare setting where she was engaged in usage of cost accounting programs for surgical quality initiatives and physician incentive analysis.
The views, opinions and positions expressed within these guest posts are those of the author alone and do not represent those of Becker's Hospital Review/Becker's Healthcare. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.