How to maximize the total return on MTM


Brad Tice, RPh, PharmD, MBA, FAPhA

Product Leader
Medication Therapy Management
Cardinal Health

When a new solution benefits everyone in the healthcare system, yet still isn't being adopted, it's time to ask: What's holding the parties back?

Medication Management Therapy (MTM) has established itself as mutually beneficial for payers, patients and pharmacists, yet its adoption has been slower than expected. Why? I believe the reason is because the impressive return on investment MTM can have for payers is not easily measured or fully understood. This article seeks to remedy that. I will explain what's needed for a full accounting of the financial value and benefits of MTM.

As I stated in a previous article on this topic, a pharmacist delivering a 30-minute MTM consultation can be an extremely cost effective way to reduce medical costs, both today and in the future. It's a bit of a puzzle why MTM isn't already a routine part of all health plan offerings aimed at this important patient group.

I believe that one explanation for slow MTM adoption is that the complexity of the healthcare system can obscure MTM's proven value. The three main obstacles to measuring the full impact of MTM programs are:

  • Timing issues related to when savings and health benefits are realized
  • Cost allocation, as the MTM program is often viewed as a pharmacy program, yet drives tremendous benefits with medical claims
  • Financial incentives surrounding MTM programs

Failing to measure the full impact of MTM programs is difficult to do, yet not doing so is a fatal analytical error.

It's About Time

Health plans that focus on MTM's total return on investment — the big picture — will gain an essential competitive advantage in the marketplace. Today, the cost of MTM is quantified immediately even though the some of the savings it delivers are not.

Generally, a key chunk of savings generated from MTM services tend to be realized in outer years — as patients remain healthy, over time — while the program costs are incurred immediately. The MTM consultations immediately help improve medication adherence and can reduce preventable hospital readmissions. However, as the patient continues to stay healthier over time, the benefits of the MTM consultation accumulate and grow substantially. As such, it is easy to overlook the benefits from long-term health improvement when considering the value of the MTM consultation. Another timing issue — the delay in medical claims adjudication — also impacts the ability to measure the immediate value of MTM services.

Allocating Costs and Tracking Savings

Most MTM savings appear outside the pharmacy benefit — in fewer hospital readmissions, a drop in emergency room visits, improvements in how physicians are utilized, and so on.

Because these savings from MTM are largely realized outside of the pharmacy benefit — on the medical claims side — this poses barriers to capture both the pharmacy and medical benefits of MTM. For stand-alone Prescription Drug Plans (PDPs), that's a problem, because they focus only on the drug utilization and do not track savings or improvements derived from physician office visits, hospital admissions, etc.

One question that needs to be answered is, "Is it acceptable for a PDP to focus on only paying for interventions that are going to lower drug spend (e.g. getting patients off of high-risk medications, using lower-cost medications)?" Or, can the incentives be aligned for them through carving MTM programs out of the Part D benefit or enabling PDPs to share in the savings generated on the medical side of the ledger? For Medicare Advantage Prescription Drug Plans operating in a managed care system, this is less of an issue because the same payer is responsible for all costs and enjoys the benefit of all savings. Yet even for these payers, fully measuring ROI is still a work in progress.

Tracking Savings to Reveal a Total ROI

What is the true impact of MTM consultations in the aggregate?

Consider a hospital visit by a patients suffering from asthma. The average cost of such a visit is $24,5111. Medications for these conditions are available and effective, yet often fail because patients are taking the wrong or contradictory medications, or don't adhere to the recommended medication regimen. Furthermore, asthma patients who receive MTM services are six times less likely to have an ER/hospital event2. A prevented $24,511 hospital stay cannot be ignored when calculating MTM's long-term ROI, especially when research now supports the cost avoidance that MTM delivers.

Consider two real-life cases of MTM services at work:

  • A 37-year-old female taking 18 medications. The patient suffered from uncontrolled asthma, plus depression, pain and nausea. A 30-minute MTM visit found five problems, including a duplicate therapy and overuse of a short-acting inhaler. Three medications were added, one subtracted. The annual medication costs: $3,092. Cost reductions from avoiding an asthma-related hospital stays: $24,511. Net savings:$21,419.
  • A 54-year-old man taking 12 medications. The patient was a smoker who has diabetes and other problems. The MTM check-up identified four problems, including adherence issues and a missing ACE-I therapy. Three medications were changed; adherence was improved. Net savings: $9,567.

Aligning Incentives

While financial incentives for Medicare Part D bidding and payment of MTM services could be better aligned — the third piece to the MTM puzzle — this is a problem that can be readily corrected, especially in Medicare Part D.

The government considers MTM services as a "cornerstone" benefit in Part D. Yet bidding rules haven't quite mastered how to make this expectation a reality. Currently, the cost of delivering MTM services is supposed to be baked into the health plans' total Part D bid. Yet because health plans are under enormous pressure to make bids low and competitive year-over-year, it's challenging to add the expense of new programs, like MTM, to their annual bids. This is especially true when the service costs money in the short term while most savings occur later. A better approach for the Centers for Medicare & Medicaid Services (CMS) would be to encourage or require plans to separate the MTM portion of the bid. This will level the playing field for all plans by making costs — and benefits — more transparent and measurable.

One financial incentive is already in place: STAR ratings, the government's most important measure of how much value health plans provide. These carrot-and-stick measures belong in every ROI calculation. Today, more than 40% of health plans have a STAR rating of 3.5 or lower (out of a maximum of 5 stars). These lower-rated plans often get penalized for failing to reach CMS' thresholds for medication adherence. Members suffering chronic conditions present enormous challenges for health plans trying to climb the STAR ratings ladder. It's been estimated that a half-point increase in a STAR rating is worth $15 to $50 per member per month. MTM helps plans go after this money aggressively.

Watching the Bottom Line

Non-adherence costs an estimated $290 billion annually3. This is an attractive target for health plans. However, as in comedy, accounting, and life, timing is everything. While some MTM ROI can be immediate, it can take a while to accurately measure MTM’s total return. A prevented hospital readmission stay may show up immediately, but longer-term savings, like avoided chronic disease progression, may show up down the road, even though the initial MTM expense shows up today. There can be a timing gap. Health plans that understand the gap and value it properly will maximize their ROI.


1Agency for Healthcare Research and Quality. Mean Expenses per Person with Care for Selected Conditions by Type of Service: United States, 2012. Medical Expenditure Panel Survey Household Component Data. Generated interactively. (October 14, 2014)
2Bunting BA, Cranor CW. The Asheville Project: long-term clinical, humanistic, and economic outcomes of a community-based medication therapy management program for asthma. Journal of the American Pharmacists Association: JAPhA. Mar-Apr 2006;46(2):133-147.
3The Network for Excellence in Health Innovation (NEHI). Improving Patient Medication Adherence: A $290 Billion Opportunity (2009).