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Taking on the  Big Guys

Taking on the Big Guys: How can Independent LTC Pharmacies Compete with Chains?

If you run or own an independent long-term care (LTC) pharmacy in 2017, you’re probably wondering how your independent LTC pharmacy will compete with chains. There are many things to consider as you look toward the future.

First and foremost, think about who LTC customers are and, of that segment, who your potential customers are. LTC is defined as post-acute care and/or extended care. LTC is not always facility based. It’s as much a care model as a facility. Several of the various facility types and care models include:

  • Skilled Nursing Facility (SNF)
  • Assisted Living Facility (ALF)
  • Group Home
  • Hospice Model/Facility
  • Medical at Home Model
  • Adult Day Care
  • Personal Care Facility
  • Mental Health Facility
  • Prison/Jail

Challenges Abound

LTC is one of the most highly regulated industries in the United States. With that level of regulation comes a myriad of challenges. The regulations alone provide significant challenges. The ability to understand, comply and continue to provide high- quality care to residents furthers the conundrum. The Centers for Medicare & Medicaid Services (CMS) Mega-Rule provides an entirely new level of regulatory challenges as well. It is in your best interest to familiarize yourself with this rule.

Opposition doesn’t end with regulations. Reimbursements are highly dependent on documentation. The criteria and amount of documentation continue to increase, while reimbursements have become more and more variable. Staffing in the LTC industry continues to be arduous. Labor costs are one of the larger expenditures for any LTC care model. Balancing staffing requirements/ratios to provide quality care, while considering the financial impact, is very difficult.

Physician assistants (PAs) and mid-level nurse practitioners (NPs) are needed more today than ever. The liability insurance crisis still exists in many states. Many facilities are faced with aging structures that require significant amounts of capital to update them. Capital in today’s financial marketplace is often hard to acquire. SNFs especially, but the LTC marketplace in general, continue to fight negative publicity about poor care.

The LTC Customer is Looking For…

A partner! The word partner is often overused and ill-defined. However, think of the purest definition of the word as defined in Merriam-Webster: “one of two or more people, businesses, etc., that work together or do business together.

Areas of Interest

  • New Admissions
  • After-Hours Services/Emergency Drug Supplies
  • Creative Compliance Packaging
  • Consulting Pharmacists
  • New Admission Assessments
  • Short-Stay Assessments
  • High-Cost Medications
  • Fall/Change of Condition Assessments
  • Real-Time Pharmacy Practice

Listening is a skill that is often talked about but not put into action. It’s critical that pharmacists listen to their customers and are open to new opportunities. Baby Boomers are providing a marketplace for senior care. Just listen to them.

What Can I Do With My Pharmacy?

Make a couple of assessments up front. Are you already providing pharmacy services to one or more LTC customers? If so, how many and what kind? If not, have you decided what kind of customers you want to target?

There are two basic LTC pharmacy models: combo-shop and closed-door. Combo-shop has a retail base that also provides services to some LTC customers. Generally speaking, a combo-shop doesn’t have enough LTC business to move to a closed-door model. To maximize your LTC reimbursement, you need the following:

  • Two NCPDP/NPI Numbers
  • One DEA Number
  • Two Wholesaler Accounts
  • Separate LTC Inventory

A closed-door LTC pharmacy has no business other than LTC. LTC pharmacy is considered a specific class of trade. You have a single NCPDP/NPI number and a single DEA number.

A common question is how many beds are needed for a successful and profitable LTC closed-door pharmacy. The correct answer is, “it depends.” It depends on the type of LTC facilities you are servicing, the number of beds, census of the facilities, regional/state reimbursement, automation and geography.

Key Parts of a Successful LTC Pharmacy

  • Drug Wholesaler: A typical pharmacy spends at least $0.65 cents of every revenue dollar. Make sure the wholesaler has LTC expertise. Do they have high service levels and delivery times that meet your business needs? Do they stock larger package sizes for tablets and capsules? Do they understand infusion therapy and specialty drugs? Do they have relationships with other business partners that can add value to your business?
  • Pharmacy Operating System: This is the backbone of your pharmacy. The system should help you drive prescriptions through a workflow model that ensures optimal payment, accurate filling and timely delivery. A few key system items include the ability to support multiple payors, multiple sites, formulary management, short-cycle dispensing and location printing. A key component is the ability to successfully interface with various electronic health record systems. Connectivity with consulting software is also important. To optimize your operation, every phase of prescription billing, filling and delivery should be barcode driven.
  • Document Management System: This system can virtually eliminate paper in your pharmacy. It also allows for outbound faxing for corrections and additional information.
  • Accounting/Billing System: Involve your accounting team from the beginning, when choosing your LTC systems. Being part of the process early allows them to better understand pharmacy workflow and allows them to ask financial questions that may help make decisions. Today’s customer is looking for some type of customer portal where they can access data. The ability to retrieve real-time financial data is often important to SNFs.
  • Pre- and Post-Editing Company: The company can provide a combination of automated partner services that take care of any problems and submit claims along with robust reporting that identifies where your potential issues lie.
  • 835 Reconciliation Company: These companies help you reconcile what was billed with what was paid and then help account for those dollars. This type of reconciliation can identify issues, such as $0.00 payment, underpayment or if the claim is recognized at all. They also recognize appropriate payments and reconcile them.
  • Group Purchasing Organization: These organizations provide several key business functions for LTC pharmacies, including:
    • Part D Networks: They negotiate with Part D plans to achieve a group rate for various Part D plans. This eliminates the need for the individual LTC pharmacies to do this solo. These negotiations yield better LTC reimbursement for Part D claims. The difference between retail reimbursement and LTC reimbursement for Part D claims can be as much as $3-5 per claim in dispensing fees alone. There are often better AWP/WAC discount rates in addition to the dispensing fee differential.
    • Brand Contracts: They negotiate brand drug contracts with manufacturers for LTC pharmacies.
    • Other Services: They provide contracts with other service companies that can be utilized by LTC pharmacies (Ex. cell phone, rental car, fixtures, etc.).
    • Reporting Capabilities: They provide significant reporting capabilities across a particular member’s purchases.
    • Advocacy: They represent LTC pharmacies in a variety of lobbying/advocacy capacities.

Why Are LTC Pharmacy Reimbursements Better?

CMS identified 10 criteria that LTC pharmacies must provide to be reimbursed by Medicare Part D (Refer to CMS’s Long Term Care Guidance from March 16, 2005). These criteria represent special services that LTC pharmacies are required to provide. Typically, this set of 10 CMS Services is not routinely provided in the traditional retail pharmacy environment.

Final Thoughts

LTC pharmacy practice is very rewarding, though today’s practices are as complicated as ever. LTC customers are in a bind as are those that service them. The good news is there are many business partners in the LTC pharmacy marketplace that can help new or established LTC pharmacies successfully manage and grow their business. Please seek them out.

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