Focus on DIR Fees: 3 Ways to Manage Them
When investing in the future profitability of your pharmacy, here are 3 ways to help manage and mitigate the bottom line impacts of DIR fees.
When looking at the profit and losses of many independent and community pharmacies, direct and indirect remuneration (DIR) fees are now the third largest expense to affect store cash flow and profitability. Although more and more third party reconciliation systems are reporting monthly DIR fees and related adjudication costs to the pharmacist, it may not be immediately evident what the data mean or what to do with it to manage those costs.
It’s time to find out.
On average, most pharmacies can fall in the 2% to 4% range of total annual revenue for DIR fee and adjudication costs. If you can lower those total fees by increments, it can mean thousands of dollars in cash savings to the pharmacy each year. This is not a simple or short-term approach. It requires focus on monthly reports, increased STAR ratings and accurate, up-to-date financials to support any significant change. It may also involve investment in new processes and technology that improve the performance metrics of the store (eg refill rates, generic dispensing rates, preferred product rates, and other quality measures).
When investing in the future profitability of your pharmacy, here are 3 ways to help manage and mitigate the bottom line impacts of DIR fees.
Analyze Your Numbers
Do you know what percentage of revenue your pharmacy is paying in DIR fees right now? This is an important number, and your third-party reconciliation software system should be capable of pulling that data for you each month. It’s one of the most important numbers to track, right behind your gross margins and payroll related benefits costs.
Remember, too, that third party reconciliation services can only report on what the insurance providers tell them, and DIR fees are just one component. Claims adjustments can be another component, as well as transaction service fees. So it’s not just the “true up” DIR fees that they’re deducting from your reimbursement, and you may only be getting a net amount of all fees under the general term “DIR.”
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