After CMS Releases Chargemaster Data, Hospitals Mull Price Changes

Few big moves expected…

Days after the Centers for Medicare & Medicaid Services released hospital chargemaster data for dozens of the most common procedures performed, providers are mulling whether to cut their prices or do nothing at all.
Bruce Lamoureux, chief executive officer of Providence Alaska Medical Center, told Kaiser Health News he was reconsidering the prices his facility charges. “There are some instances where our charges for a particular procedure are, in one case, half of a different provider’s, and in a different case, twice a different provider,” he told Kaiser. Lamoureux added that listing prices gives consumers more bargaining power.

By contrast, Rick Davis, CEO of Central Peninsula Hospital in Soldotna, Alaska, told Kaiser he believes his prices are fair and doesn’t expect them to change.

C. Duane Dauner, president of the California Hospital Association, observed in a statement that since Medicare is paid based on DRGs and the state’s Medicaid program is paid on negotiated contracts, the chargemaster data release by CMS is “less relevant and may confuse patients as well as the public.”
And on a national level, hospitals indicate it would be a gargantuan effort to change their prices so they’re in line with Medicare payments.
“I can promise you that if you got into the weeds here, you would immediately discover that it ain’t as easy as it sounds,” Chip Kahn, CEO of the Federation of American Hospitals, the lobby for for-profit facilities, told the Huffington Post. “If someone decided tomorrow to do it, everybody could do it. But I’m telling you, it would cost billions of dollars–probably small billions, not big billions–because it’s not a minor task.”
May 13, 2013 | By 

A Federal Agency (CMS) has Requested Copies of our Purchase Invoices for Wholesale Prescription Drugs

The Centers for Medicare & Medicaid Services, the largest purchaser of prescription pharmaceuticals, is eliminating or at least leveling the playing for itself and patients.  CMS is collecting wholesale invoices from pharmacies across the country (see below).  
CMS will use a combination of calculus, statistics and probability to determine a national average acquisition cost for every prescription medication on its formulary.  It will then send out an RFP stating these are the prices (based upon the calculated acquisition costs) we’re willing to pay for prescription drugs listed on our formulary – take it or leave it!  
If you’re a self-insured employer or a broker this is exactly what you should be doing for clients and employees alike.  It doesn’t matter the size of your organization.  If you pay for PBM services accept nothing less than full transparency.  
In this case, that means paying only true acquisition costs for all prescription drugs and not a penny more.  If you need help in calculating and/or verifying acquisition costs get off your butt and send me an e-mail I’ll be happy to help.  In the meantime, read the letter sent to us by CMS. 
Information asymmetry occurs when one party has significantly more information than another.  More important, the party with more information takes advantage of its position.  In business, this often leads to a lack of transparency and abhorrent price disadvantages for purchasers.  
It’s quite simple, don’t do business with any PBM that isn’t willing to: (1) share all their price lists/wholesale invoices and (2) provide full audit rights.  If you would like a copy of the original letter simply send me an e-mail and we’ll get one out to you.

New Report Shows Drugstore Lobby Agenda Raises Rx Costs for Small Businesses and Government Programs

Federal and state policymakers should avoid enacting laws that undermine payers’ ability to use mail-service pharmacies, preferred pharmacy networks, and other innovative pharmacy benefit management (PBM) tools, the National Center for Policy Analysis (NCPA) asserts in a new report,”Unnecessary Regulations that Increase Prescription Drug Costs.”

“This report shows policymakers that appeasing the drugstore lobby means higher prescription drug costs for small businesses, consumers, and government programs,” said Pharmaceutical Care Management Association (PCMA) President and CEO Mark Merritt.

Click here to read the NCPA report which highlights a number of regulations and laws that could increase prescription drug costs, including:

Barriers to Competition: State Boards of Pharmacy Conflict of Interest Background: The report highlights how some states are seeking to transfer regulatory authority of drug plans from the state’s insurance commissioner to the state’s Board of Pharmacy.

NCPA: “Because state pharmacy boards are controlled by pharmacists, giving them authority over drug plans creates conflicts of interest that could undermine drug plans’ ability to negotiate lower prices with pharmacy networks.”

Barriers to Lower Cost Mail-Service Pharmacies Background: Employers and payers use a variety of incentives to encourage patients to use efficient mail-service pharmacies to address chronic illnesses, such as diabetes. Mail-service pharmacies will save Medicare seniors, employers, unions, government employee plans, consumers, and other commercial-sector payers $46.6 billion in prescription drug costs over the next ten years.

NCPA: “Unfortunately, some states are enacting laws that interfere with the ability of drug plans to reward enrollees that use the plan’s mail order option by barring drug plans from offering lower prices for mail-order dispensing. This unnecessarily raises costs for consumers, insurers and employers. Obviously, these laws mostly aim to benefit local community pharmacies rather than consumers.”

Barriers to Competitive Pharmacy Networks Background: A new study finds that the extraordinary number of pharmacies in the United States offers an opportunity to save $115 billion over the next decade through the greater use of preferred and limited pharmacy networks. However, some states have in place so-called “any willing pharmacy” laws and regulations that force plans to contract with pharmacies that don’t meet their quality standards or geographic access needs.

NCPA: “These any-willing-pharmacy laws are costly to taxpayers, employers and patients alike. The Federal Trade Commission notes that these laws reduce the drug plans’ bargaining power, leading to higher drug prices and higher premiums for consumers.”

Barriers to Efforts to Combat Fraud Background: Health care fraud is a problem that increases overall health costs and is especially burdensome in Medicare and Medicaid. Billions of claims are submitted to millions of providers, making fraudulent claims easy to disguise. PBMs and companies processing electronic payments are effective at discovering irregularities that lead to fraud.

NCPA: “Regulations requiring Medicare drug plan administrators to pay claims within 14 days make it difficult to detect fraud before a claim has been paid. At the very least, drug plans need the authority to delay paying questionable claims to providers suspected of fraud. Plans also need greater authority to exclude or suspend suspected fraudulent providers from networks and conduct routine audits of participating pharmacies.

“Congress and state legislatures should avoid well-meaning, but ill-conceived, regulations intended to protect consumers, which often have the opposite result. A better way to ensure desirable outcomes is to promote a competitive environment free of market distortions that favor one party over another.”

Barriers to Lower Cost Dispensing Fees Background: Dispensing fees paid to drugstores and pharmacists that are mandated and set by states are much higher than in commercial drugs plans. The average Medicaid dispensing fees range from $1.75 in New Hampshire to $10.64 in Alabama, averaging about $4.81 per prescription across the country. By contrast, privately managed Medicare Part D plans negotiate fees with pharmacies of about $2 per prescription.

NCPA: “Dispensing fees in state-managed, conventional Medicaid plans are set by the state. State officials and state legislatures often yield to political pressure and set dispensing fees that are much higher than what private drugs plans could negotiate if allowed to do so. When the fees are set too high, taxpayers pay pharmacies more than they would in a competitive market.”

PCMA represents the nation’s pharmacy benefit managers (PBMs), which improve affordability and quality of care through the use of electronic prescribing (e-prescribing), generic alternatives, mail-service pharmacies, and other innovative tools for 215 million Americans.

SOURCE: Pharmaceutical Care Management Association