Hospitals gearing up for new payment structure

June 18, 2007

Hospital pharmacists involved in Medicare reimbursement will have to think twice when purchasing drugs for their pharmacy departments. CMS has announced a separate, and a reportedly more accurate payment structure for single source and biologic drugs.

Hospital pharmacists involved in Medicare reimbursement may think twice when purchasing drugs for their pharmacy departments. The Centers for Medicare & Medicaid Services has announced a separate, reportedly more accurate, payment structure for single-source and biological drugs.

Essentially, this is a new billing system generated by the Medicare Modernization Act of 2003, which calls for a differentiation in payment among single-source, multiple-source, and biological products, said Robert Pellechio, R.Ph., director of contracts for Innovative Purchasing Concepts, a regional group purchasing organization (GPO) for the Northeast. With regard to the new reimbursement structure for multiple-source drugs, it appears that hospital pharmacists will need to be more prudent when purchasing generic drugs from wholesalers. "Because there's a reimbursement cap on these multisource drugs, pharmacists will have to try to get the lowest-priced generic agents and not automatically buy a higher-priced item because a wholesaler was momentarily out of stock on a less costly agent," he said.

"These reimbursement changes affect physician reimbursement for services and involve the use of relative value units for services and generalizations that are applied to the costs incurred by physicians," noted Michael L. Gallagher, M.S., R.Ph., assistant director of pharmacy and clinical coordinator at Union Hospital, Union, N.J. He believes this new structure is another way to complicate fair accounting for physicians' services and expenses. "The costs associated with hiring reimbursement personnel to decipher all the different payment structures adds to nonmedical activities and costs of health care," he said.

"Although this Medicare action generally affects drug reimbursement in outpatient clinics, hospital pharmacists will most likely be impacted; many of these outpatient centers are tied to hospitals and receive their drugs from the hospital's pharmacy department," Pellechio noted. Pharmacy directors will need to reevaluate the cost-efficacy of dispensing some of the more expensive products to hospital-affiliated outpatient clinics. While the pharmacy department cannot refuse to dispense a drug to a physician who requests it, it can call for a multidisciplinary pharmacoeconomic analysis of a particular therapy. "If a drug costs several thousand dollars and the pharmacy department either breaks even or reports a loss with this reimbursement structure, there would need to be some high-level decisions on whether there is a real clinical need to offer the treatment at the clinic rather than in a home care setting," commented Pellechio.