Paying for MTM: Act one, scene one

In a welcome development, payers are introducing new ways to reimburse pharmacies for delivering Medication Therapy Management (MTM) services.  These innovations don’t solve all of MTM’s reimbursement challenges, but they are noteworthy early steps toward recognizing (and paying for) MTM’s economic and medical value.  Specifically, two new payer programs are designed to align financial incentives in ways that – in theory at least – encourage pharmacies to optimize prescription drug use, especially for patients who take multiple medications.

That’s the good news. Still, these are fledgling steps. The maxim about “needing to walk before you can run” has seldom been truer. A mature MTM reimbursement system requires much more work on some thorny questions.  Whatever the mechanism, the bottom line is: MTM needs to be profitable for pharmacies … and it needs to reflect the value of the service and the cost of providing it.

Act I, scene I:  Sharing bonus payments

The first payer program deserving attention is CVS Health’s SilverScript health plan.  SilverScript, on its own initiative, has become the first payer to essentially share some of its Center for Medicare and Medicaid Services (CMS) Star Ratings bonus payment with pharmacists who deliver MTM effectively to Medicare patients. After reviewing SilverScript’s plan, David Nau, president of Pharmacy Quality Solutions, summed up the concept well in Pharmacy Today: “There are additional dollars available if you can perform well on these quality measures.” CMS values MTM highly – calling it a “cornerstone” of the Medicare prescription drug benefit – but CMS has not yet established detailed rules on how MTM should be implemented and reimbursed.

How pharmacies get reimbursed is an important question, but how much pharmacies are paid and the number of opportunities to provide services are even more important. The initial SilverScript bonus payments don’t seem to be large, partly because the bonuses are offset by reductions in direct payments for MTM services.  This illustrates how the balance between bonus payments and direct payments for services should be worked out over time.

Act I, scene 2:  Value-based pricing

The second notable innovation is a different approach taken by Express Scripts, a large pharmacy benefit manager (PBM). The PBM recently announced it has started to negotiate with pharmaceutical companies to price drugs – notably expensive cancer drugs -- based on a medicine’s value to specific patient groups. Value-based pricing should be a positive development for pharmacies delivering MTM. “Paying for performance of a therapy should align with the value that therapy delivers to each individual patients,” says Steve Miller, Express Scripts chief medical officer. 

Few things in health care deliver as great a return on investment as a pharmacist optimizing a patient’s medication use.  Express Scripts won’t start value-based pricing until 2016, so it’s hard to predict exactly how the effort will connect to pharmacy reimbursement.

As value-based drug pricing is in its infancy, it’s not possible to fully understand how it will work. Currently, the “value” conversation seems to be entirely between insurers, doctors and pharmaceutical companies. This doesn’t reflect the importance of pharmacists in the value chain or the reality of patient care. Patients visit pharmacies 13 billion times a year; whereas patients visit doctors just 470 million times.  Further, each pharmacy visit costs a fraction of the price of a trip to the doctor’s office. Pharmacists need to be equal partners in the value movement.

Washington State just passed a groundbreaking law to require health insurers to consider pharmacists as network providers. Pharmacy trade groups (and Cardinal Health) have been working hard at the federal level to get provider status under Medicare for pharmacists. These are crucial developments.

Act I, scene 3:  Three possibilities for a tricky issue

MTM is an untapped wellspring of value. The reimbursement issue is tricky largely because MTM’s cost is recorded in the pharmacy while MTM’s financial benefits are reaped elsewhere in the health system. We have an incentive alignment problem, not a shortage of value. 

How should the incentive alignment quandary be solved? Nobody has all the answers. However, the latest reimbursement innovations raise several possibilities about what the future may hold. 

  • Standardized rules. CMS, peer organizations or a combination of the two may need to provide detailed guidelines about MTM services and reimbursement.  A big picture view may be needed to get the incentives right in our fragmented health care system.
  • Higher reimbursements. The current system of direct payments and bonuses could evolve naturally into a structure that provides balanced reimbursement. Ultimately, this means paying pharmacies more so that more patients get the MTM services needed to reduce costs and improve outcomes.  It’s impossible to say how much reimbursement needs to increase, yet enough money for a pharmacy to fund a full-time pharmacist (for MTM and other tertiary care) may be a sufficient rule of thumb to use as a starting point.
  • A DRG system. Medicare has used the diagnosis-related group (DRG) reimbursement system since the 1980s to pay hospitals a fixed fee to treat specific conditions. A fixed fee to cover all drugs for a patient with a specific diagnosis could encourage all parties to maximize value and get the most out of MTM. Could a DRG system work in the retail setting?  It needs further study, yet it’s a provocative and interesting question.

Intermission:  What’s next?

The take-away from these new developments is that payers – both government and private – recognize that reimbursement practices need to change, and MTM services are in the middle of that change. How to share the financial returns that MTM services generate is a tough question. SilverScript and Express Scripts are pushing health care where it needs to go. Their innovations make for a good first act, and warrant our applause.  Yet the second and third acts are still to come. Hold your standing ovation until then.

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