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The reimbursement war: report from the LTC pharmacy front; medication costs and administration have been key issues in the struggles over government reimbursement to providers. (Feature Article).

When Barry Hart, a general manager and pharmacist for PharMerica in Indianapolis, entered Purdue's pharmacy school almost two decades ago, he envisioned owning a store but found the practice of long-term care pharmacy more compelling. Larry Lemchen, a general manager and pharmacist for PharMerica in Washington, was immersed in the molecular structure, preparation and manufacture of pharmaceuticals during his pharmacy education more than 30 years ago.

All that has changed.

Today, Lemchen and Hart are two of the many pharmacists nationwide who have set aside traditional roles and moved into unfamiliar territory--politicking to help curb reimbursement cuts for pharmacy services that impact not only pharmacies, but all providers and patients in long-term care.

Lemchen, Hart and others spend their time these days tracking legislation, working with lobbyists, attending legislative meetings, talking with lawmakers, testifying to legislative committees and helping to educate state decision makers about the crucial role LTC pharmacy plays.

One particularly troubling issue they grapple with, says Lemchen, is "the cost of drugs. With our insurance system, medications are rarely covered, particularly for nursing home residents. So, when lawmakers target pharmacy for cuts as a short-term budget fix, we need to be vocal and stand up for adequate reimbursement."

One of the primary messages that pharmacists, such as Hart and Lemchen, have worked to deliver to state and national lawmakers is that continued cuts to reimbursement will diminish pharmacists' ability to perform their core patient- centered functions. They've also worked hard to teach policymakers that senior-care pharmacy is unique.

Explains Mary Jo Garden, director of government affairs for the American Society of Consultant Pharmacists (ASCP), a national organization representing more than 7,000 consultant pharmacists, "While drugs are critical to improving patient outcomes and quality of life for older Americans, seniors are susceptible to medication-related problems: Physiological changes; higher incidence of multiple chronic conditions and diseases; a greater use of prescription and over-the-counter [OTCI medications; under-use, overuse or use of the wrong drugs; adverse reactions to medications; and not properly following a drug regimen are but a few of the common problems the elderly encounter."

Across the country, states strapped for money because of a lagging economy, growing numbers of Medicare and Medicaid beneficiaries, and overall higher drug costs have targeted aggressive pharmacy cuts to balance their budgets. In particular, Medicaid drug expenses and pharmacists have been targeted in many states. While pharmacists understand that the burden must be shared by all interests to help states meet their fiscal responsibilities, many also warn that the cupboard is bare, that cuts being made will jeopardize patient well-being in long term care facilities.

But that's going to take some educating of legislators. "Few persons realize that not all pharmacies are alike," says David Cole, general manager of several PharMerica pharmacies in Kentucky. "In reality, retail pharmacies bear little resemblance to their specialized institutional counterparts. In managing along-term care pharmacy, I work with a skilled team responsible for 2,500 elderly patients (60%) of whom are on Medicaid). We make daily and 24-hour emergency deliveries to nursing homes, provide staff training, maintain patient data, advise physicians and focus on the endless details necessary for safe, effective drug therapy in this setting. Service of this quality involves alot of time and money."

That is documented by a recent study conducted by BDO Seidman and commissioned by the Long Term Care Pharmacy Alliance, a coalition of some of the largest long-term care pharmacy companies. The study found that dispensing fees for the major national operators of long-term care pharmacies average $11.37 per prescription. This contrasts sharply with estimates by the National Association of Chain Drug Stores that it costs chain pharmacies an average $7.05 to dispense each prescription in the retail environment.

In explaining the added costs, BDO Seidman cited specialized packaging systems, 24/7 delivery service, intravenous medication preparation, higher levels of Medicare and Medicaid patients, and onsite consultation service in LTC facilities. These are facts that legislators in several states are just beginning to absorb.

Issues States Face

Meanwhile, state lawmakers nationwide are discussing such steps as reduction in Medicaid pharmacy payments, cuts in dispensing fees, brand-drug limits, prescription limits, preferred drug lists (PDLs)*, state maximum allowable costs, generic substitution, prior authorization and assisted-living-related medication management, among others.

Medicaid took the legislative spotlight this year, in particular, because it has grown to almost a fifth of all state budgets. With 44 million Americans now insured through Medicaid, it will likely dominate the conversation next year, also. Bellwether states for Medicaid pharmacy-related issues include:

* California. Lawmakers in Sacramento face a $24 billion budget shortfall and are seeking dramatic cuts in reimbursement rates as a result.

* Massachusetts. Although pharmacy was successful in receiving an exemption granted by the state legislature earlier this year from proposed rate reductions, Gov. Jane Swift vetoed that exemption and placed the pharmacy reimbursement issue up for a hearing by the state's Health Care Finance and Policy Commissioner. The proposed rate would reduce pharmacy reimbursement by 12%, giving the state the lowest reimbursement rate in the country.

In many cases, pharmacists have offered solutions to help state Medicaid agencies achieve enormous savings. For example, in Indiana pharmacists successfully convinced officials to split brand-name arid generic drugs into separate categories for reimbursement, a move that saved the state $14 million. In the state of Washington, the pharmacy community proposed changes in policies and procedures to save taxpayers almost $50 million in just a few months; solutions included:

North Carolina. The state will move to a PDL by the end of the year. The North Carolina program will be set up like Michigan's, where a "reference price" for each therapeutic drug category is established.

* empowering pharmacists to help educate prescribing physicians on less-expensive generic medications.

* using generic medications as soon as the generic versions are available. At present there is a mandated but costly 180-day delay.

* using the state's schools of pharmacy to help review and reduce the average number of medications certain Medicaid patients are taking. Some patients take 30 or more prescription medications in addition to OTC medications. Simply eliminating unnecessary or duplicative medicines would achieve an estimated $11 million in savings.

* With PDLs, states Create a list of prescriptions that Medicaid providers can prescribe to patients without receiving prior authorization. For drugs not on the list, prior authorization must be obtained.

Michigan and Florida: The Pioneers

Two of the more watched states for pharmacy-related reimbursement issues are Michigan and Florida. In addition to having very large Medicaid enrollments, they were two of the first states to implement PDLs.

Florida's Agency for Healthcare Administration, which houses its Medicaid agency, implemented a PDL in 2001 but subsequently exempted LTC for reasons advocated by the LTC pharmacy industry. Through the implementation of the PDL, Florida expects to save almost $200 million in Medicaid drug expenses this year. In Michigan, David Viele, deputy director of the state's Medicaid agency, estimates that since the implementation of the PDL in his state, average weekly pharmacy costs have dropped by nearly $500,000. Michigan has been problematic for LTC pharmacy providers, however, because exemptions do not yet exist for many of the most highly prescribed drugs for nursing home residents.

It should be noted that the pharmaceutical manufacturing industry, unhappy with the restrictions placed on prescribing patterns by the PDLs, has filed several lawsuits to block their use. So far, the courts have backed the states and validated their use.

Time to Speak Out

Not only pharmacists--but administrators of nursing homes and assisted living facilities, directors of nursing, medical directors and caregivers--can take some very important and influential steps in fighting reimbursement cuts and promoting funding increases for long-term care. You should:

* Stay informed. If you have access to the Internet and e-mail, there are many excellent free sources of information for keeping abreast of national and state funding issues in this field. For example, ASCP delivers a weekly e-newsletter, The Senior Care Advocate, and The Henry J. Kaiser Family Foundation offers several free healthcare newsletters at Industry publications such as Nursing Homes/Long Term Care Management are also reliable sources of information.

* Call or write your elected officials regarding critical legislative or agency issues affecting long-term care. A letter is typically given extra weight by legislators, but a call or e-mail will serve, too, if your time is limited. Speak out at legislative hearings or functions. While this can seem intimidating at first, there are a few simple guidelines to increase your effectiveness: (1) Go to the meetings. Those who do so "get counted" and are heard. (2) Use real-life stories. Let legislators know what you really know. (3) Keep your comments short and sweet, avoid industry jargon, and provide a written copy of your remarks. (4) Be clear on your points and, if possible, use visual aids. (5) Don't lose your cool. Politeness goes along way to ward being heard.

* Open your doors. Some of the most successful organizations in our business--from nursing homes to assisted living facilities and pharmacy providers--take the time to invite key groups to their places of business. By inviting legislators, you gain an opportunity to educate them on the nuances of our challenging business, the importance of adequate funding and the vital work we do for our nation's elderly and disabled.

* Invite the media. While many healthcare veterans are cautious about inviting the media onto the premises, many find it to be a critical part of the educational process. Some tips for successful media visits include preparing for the visit, defining core messages that you want to convey, sticking to these messages and, as much as possible, controlling the interaction by being clear on what you are trying to accomplish. For the most part, a media interview is a good conversation during which you have the opportunity to educate.

* Thank your legislative friends. Lawmakers are pushed and pulled in many ways during the legislative session. For those who support our issues, it's important to thank them and let them know we appreciate their support. An informal "thank-you luncheon" with constituents at a local restaurant lets lawmakers know that their support and help have made a difference.

Usually, for those of us involved in governmental affairs, there is a pause as legislative members go home to their districts fir summer break. That didn't happen this year. With drastic cuts being discussed at many levels this year, the ongoing struggle for adequate funding will be fierce. For everyone in healthcare, getting involved and participating in the process goes a long way toward ensuring that we are heard and receive fair compensation for the services we provide.

Jon Rawlson is vice-president of governmental affairs for PharMerica, based in Tampa, Fla. For further information, phone (800) 237-7676. To comment on this article, please send e-mail to
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Author:Rawlson, Jon
Publication:Nursing Homes
Date:Oct 1, 2002
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