Third-party payers Flashcards
______ _is a public or private organization that reimburses for ALL or PART of the patients RX DRUG COSTS.
Third-party
T/F?
Third- party patient payments are made DIRECTLY to the PHARMACY
True
What type of patient has all or part of RX drug cost paid by an ORGANIZATION.
Third-party patient
Name the 2 types of 3rd parties.
Public and Private
T/F?
PRIVATE 3rd parties government entities.
False
PUBLIC
ex. Medicaid and Medicare
_______ 3rd parties are INSURANCE COMPANIES that pay for RX cost.
Private
ex. Manufacture’s w/ patient assistance programs
___ ___ Patients’ are responsible for 100% of the payment for all prescription drug costs at the time of service.
Private Pay
Private Pay patients are also referred to as ___ .
Cash patients
Payment is made directly to the pharmacy by the patient for which type of 3rd parties?
Private Pay
Indemnity
T/F?
Private pay patients do not have any health insurance coverage or an insurance plan that does not cover prescription drugs.
True
Name the 3rd Party
Patients’ are responsible for 100% of the payment for all prescription drug costs at the time of service.
Indemnity Insurance
What’s the difference between Private pay patients and Indemnity patients?
Indemnity patients
pay for their prescriptions and are later reimbursed by the insurance company
What are the 2 types of Private Pay methods?
Indemnity
No insurance
What are PBMs?
Prescription benefit mangers
-hired to by third-party payers to provide prescription claims processing and establish pharmacy networks
What are the 4 other services provided by PBMs?
- Rebate negotiation with manufacturers
- Formulary development
- Drug utilization management
- Disease state management
How does 3rd party payments effect pharmacy management?
Private-pay= pharmacy determines what price to charge patient Third-party= reimbursement is determined by a contract between the 3rd party and the pharmacy.
T/F?
Level of reimbursement from 3rd party contracts VARIES.
True
What needs to be considered when signing a 3rd party contract?
Gross margin
- the difference between reimbursed price and the cost of goods sold
T/F?
PHARMARCIES determine network participation.
False
-PBM
T/F?
Cost of dispensing is greater for cost of 3rd party RX in opposed to Private-pay RX.
True
Is net profit greater for Private pay RX or 3rd Party Rx?
Private pay
T/F?
Third party RX net profits have lower reimbursement and increased cost of dispensing.
True
Reimbursement Rate is typically the lower of the two:
- price from RR formula
- usual and customary (cash price)
AWP
average wholesale price (MRSP)
WAC
wholesale acquisition cost (what did the wholesaler pay for the drug)
EAC
estimated acquisition cost (what do we think pharmacies paid for this drug)
MAC
maximum allowable cost
T/F PBM dispensing fees are intended to cover the “cost of dispensing”
TRUE
Things to consider when evaluating Financial Impact of reimbursement rate?
- cost of dispensing
- average net profit comparison
- differential analysis
Average dollar amount it costs for a pharmacy to dispense a prescription over and above the cost of the drug product
cost of dispensing
Why is cost of dispensing important? (2)
- establishing adequate pricing structure
- evaluation of third party insurance
costs associated with providing prescription services?
direct cost (salaries associated with Rx activities, rx packaging)
costs SHARED within the business?
indirect cost (proportionate to the size of Rx dept and proportionate to rx sales)
Fixed COD or Variable COD expenses?
Rent, utilities, security, advertising, computer support, advertising, “other”
FIXED COD expense (do not change when RX volume increases or decrease)
Fixed COD or Variable COD expenses?
Rx vials, Rx transmission fees, delivery costs, credit card fees
Variable COD expenses (Expenses DO change when RX volume increase or decrease)
Is labor a fixed or variable expense?
difficult to determine may be different depending on the scenario and change in rx volume
T/F Rule of Thumb, RX volume has to change about 20% before you make a “labor change”
TRUE
T/F If the contribution margin is NEGATIVE, then it suggests that the contract should be accepted
FALSE: POSITIVE
Last step in determining the effect a third-party contract will have on ______
pharmacy financials
What is the effect of the decision to accept / decline a third-party contract on CUSTOMERS? (2)
- Customers will be forced to go elsewhere in network to obtain their prescriptions
- Customers may not “understand” why they have to go elsewhere
What is the effect of the decision to accept / decline a third-party contract on the PHARMACY’S IMAGE? (2)
- Customers may view the pharmacy as one that “doesn’t accept a lot of insurance plans”
- Customers may view the pharmacy as one that provides exceptional service and avoids “every contract out there”
What is the effect of the decision to accept / decline a third-party contract on remaining private-pay customers?
If a pharmacy accepts lower RR, then it may make-up lost revenue by increasing private-pay prices
________: requires pharmacies to extend their lowest price or reimbursement rate to the third party
“most flavored nation” clause
_________:requires pharmacies to participate in ALL of the third party’s plans if it wants to participate in any one plan
“all products” clause
What are possible strategies for pharmacies to maintain profit? (3)
- increase RX volume
- diversify sources of revenue (MTM, DME, Specialty services)
- decrease expenses
________ pharmacy agrees to charge the patient no more than the amount specified by the contract
accepting assignment
T/F Pharmacy CANNOT “balance bill” the patient
TRUE
