To be or not to be : if you choose not to become a participating retail pharmacy under Medicare Part D, you may find it more difficult to get paid for Part D-covered drugs. There's the rub

Healthcare Financial Management, March, 2006 by Day Egusquiza, John Travis, Niobis Queiro

On Jan. 1, part of your world changed. Medicare Part D got started, and as recent news reports suggest, confusion has abounded. And the possibilities for confusion are not restricted to Medicare beneficiaries who are attempting to understand their options and coverage available through prescription drug plans. There's a possibility for confusion among hospitals, too, because the legislation and regulations were written with retail commercial pharmacies in mind, not hospitals.

From the time the Part D benefit was enacted into law, the question for hospitals has been, "How should we prepare for it?" And therein lies the chance for confusion.

Deciding what to do is not simple, and there are important points to consider, if you haven't already done so. For example:

* Did you know Medicare Part D presents you with a revenue opportunity?

* Did you know you will not be able to bill Medicaid for what is covered by the benefit?

* Did you know that only participating retail pharmacies can bill Medicare Part D?

The Nub and the Rub

If your organization has not already become a participating retail pharmacy, the pivotal question is whether you should do so. A "yes" decision may give you the best assurance of being paid for Part D-covered drugs. But there are also significant trade-offs to be considered, and the Medicare Part D law and regulations do not provide hospitals with much guidance in making this decision.

The coverage scope of Part D is generally defined under section 1927(k) of the 2003 Medicare Prescription Drug, Improvement, and Modernization Act. It includes prescription drugs, biological products, insulin, and vaccines licensed under the Public Health Service Act not already covered under Medicare Part A or Part B. In most instances, patients get their prescriptions for these drugs filled by a commercial retail pharmacy, which in turn bills the patient's PDP under Medicare Part D.

In the Medicare Part D statute and the regulations under the MMA, the regulations seemed designed with the assumption that most pharmacies billing Medicare Part D would be commercial ones such as CVS or Wal-Mart, and not hospital-based ones. What's not taken into account is that hospitals also regularly dispense covered Medicare Part D drugs, and that to be able to bill Medicare Part D for these drugs, hospitals may be forced to undertake significant operational and billing procedure changes.

Hospitals are used to reporting these types of medications as noncovered services on Medicare Part A or Part B outpatient claims, and then billing the patient for them. In essence, Medicare Part D gives them three options:

* Do nothing--continue with the status quo

* Elect to be "out of network" relative to Medicare Part D, and provide patients with adequate information with which to file claims themselves

* Become a participating retail pharmacy under Medicare Part D

The decision may be a little easier if you already have a retail pharmacy operation; then, it's a question of making sure you are able to participate in Medicare Part D. However, even so, there may be operational costs to consider in becoming a Part D participating retail pharmacy, just as there are customer satisfaction issues to consider if you choose not to go this route.

The crux of the decision is to determine whether becoming a participating retail pharmacy actually offers a better revenue opportunity, with a better chance of collecting payment for covered Part D drugs.

For a hospital, the easiest way to quantify the revenue opportunity represented by Medicare Part D is to identify billed charges accruing to revenue codes 253, 259, and 637--the codes that are used to identify the Part D covered medications. For this reason, you should begin your analysis by running revenue reports for these revenue codes. Then, armed with information on the scope of your revenue opportunity associated with these drugs, you should consider the operational cost and customer satisfaction concerns associated with each of the options outlined previously.

Option 1: The Status Quo

From an operational standpoint, doing nothing may be the easiest path. It requires no procedural changes on the surface nor information system configuration changes, it involves no additional costs to set up a retail pharmacy or establish electronic data interchange trading partner relationships with PDPs in accordance with the Health Insurance Portability and Accountability Act, and it poses no additional training requirements for your access management or business office staff.

However, doing nothing also can create ill will among your patients, because it puts the entire burden on them both to pay you for the noncovered services and to figure out on their own how to report a claim for Medicare Part D covered drugs to their PDPs.

Medicare beneficiaries are just getting to the point (if they are fortunate) of sorting out their coverage for initial enrollment in Medicare Part D. As anyone responsible for helping with the care of a mother, father, grandmother, or grandfather who is eligible for Medicare Part D knows, the process leading up to enrollment has been cause for anxiety among enrollees.