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Executive Summary

The Health Care Financing Administration plans to ask processors for the outpatient drug benefit program to handle all paper claims generated in their regional areas of coverage, HCFA Bureau of Program Operations Deputy Director Frank Derville told a recent conference on the catastrphic care benefit. "Our plans are that we will have the paper claims go to each processor," and not a central processor for paper claims, Derville told the National Council for Prescription Drug Programs meeting. "It will be those claims that are in the area that ]the processors are[ responsible for." HCFA feels that having the processors handle paper claims will provide a stimulus to encourage processors to do a better job in converting pharmacies to electronic claims submissions. Derville pointed out that the processors "are going to get a lot more paper claims" if they are not successful in signing up pharmacies. The agency is concerned about the participation rate because current data indicates that many fewer pharmacies are likely to join the program than had been originally anticipated. HCFA had previously estimated a 90-95% rate of pharmacy participation in the point-of-sale program. With an anticipated 700 mil. claims in 1991, the number of paper claims would be kept down to 35-70 mil. Based on comments submitted to the agency, HCFA is now estimating a participation rate more in the 65% range, which would leave roughly 250 mil. paper claims to process. Derville commented that "if, in fact,. . . we get a participation rate of 60 or 65% . . . we will need to rethink the point-of-sale process because that amount of paper is really going to innundate us, and we'll have to come up with a different way of doing that." One issue that is apparently contributing to the reluctance of pharmacies to participate in the program is the cost of transmitting data to processors. Derville noted that, in response to the agency's request for information in Commerce Business Daily, HCFA received a number of comments objecting to pharmacies and/or processors having to pick up the costs of data transmission. Derville explained that HCFA's "normal posture on all these programs is that ]the administration[ does not pay for the transmission of a claim." Derville said the agency still holds that view; however, he implied that the government may be willing to bend. "We certainly are open to consider that as we talk to you more and more," Derville said. As HCFA puts "together a participation program for pharmacists, it has to be an attractive program that will make you want to ]be part of it[." The feasibility of providing full-scale drug utilization review at the point of sale is also causing concern in industry and at HCFA. Louis Hays, HCFA Associate Administrator for Operations, acknowledged at the NCPDP meeting that the drug utilization review program is unlikely to provide all the utilization functions that are called for in the legislation when the program begins in 1991. "There may be unrealistic expectations in certain quarters about our ability to immediately embark upon a massive program of drug utilization review -- not just the traditional utilization review that looks at overusage and fraud and abuse situations, but the quality utilization review business looking at the problems of mismedication, overmedication, ]and[ drug reaction and interaction in the elderly population," Hays said. The "quality" utilization review "is certainly an area that we're extremely interested in, but people are going to have to understand that there is a limit to how much we can do on Jan. 1, 1991," Hays explained. An internal HHS study by the autonomous Inspector General's office has suggested that HCFA consider a demonstration project for drug utilization review before trying to start it all at once ("The Pink Sheet" Feb. 20, p. 9). Organized pharmacy has also questioned the ability to get a utilization review system up and running that would provide clinical information for point-of-sale review. The American Pharmaceutical Association, for example, "contends that the point-of-sale system currently envisioned to carry out the primary function of prescription and claims information processing will have insufficient operating capacity, speed and technical sophistication to support even basic clinical information and support systems, such as drug interaction screening." APhA State Liason Thomas Menighan restated the association's position at the NCPDP conference. Similarly, the Pharmaceutical Manufacturers Association wrote to HHS on March 2 to express concerns about the feasibility of a drug utilization review (DUR) program. "Experts in the DUR field," PMA said, "have raised serious questions about the ability of the point-of-sale system envisioned by HCFA to accomplish prospective DUR." PMA said that prospective DUR raises concerns about "safeguarding patient confidentiality and avoiding unnecessary interference in the patient/physician and patient/pharmacist relationship" (see related T&G this issue). APhA also is questioning whether Congress intended the point-of-sale system to "serve this additional function of clinical data management." There "is no linkage in the legislative language between the agreement of participating pharmacies to offer to counsel on potential drug interactions (or other aspects of appropriate drug use) and the use of the point-of-sale system to submit information for data and claims processing," Menighan maintained. Like the HHS Inspector General, APhA is recommending that HCFA arrange for demonstration projects to test the feasibility of having clinical information capabilities in the point of sale system. Mennighan suggested that the demonstration projects be developed after the point-of-sale system "has become fully operational in its primary purpose of claims and information submissions to processors." HCFA is planning, at least initially, to have separate software systems for the processors instead of one central system, Derville told the NCPDP meeting. The HCFA official explained that although one universal system would be less expensive and more centralized, the agency "really does not have enough time to run a procurement for software and then run a procurement for processors." Secondly, Derville said, "we don't have a standard system or canned system and can't really find one that exists throughout the country." However, Derville said that HCFA might choose a standard system on its "second round of procurements." On the pharmacy side, Derville reported that HCFA is not planning to have software packages developed for all the existing pharmacy systems. "Our thought is that the people who are in that business right now, the ones who are supporting the systems that are sitting out there, would be those who would upgrade those systems and provide that to their customers -- the pharmacists," Derville said. HCFA, however, is planning to seek a change in the law that would allow for funding to upgrade existing pharmacy systems. "The law . . . does not allow ]HCFA[ to pay people ]to upgrade pharmacy software system[ -- it only allows ]HCFA[ to contract for it or to provide a terminal." Derville explained. "We need to go back and see if we can get some legislative change there . . . so that we really can let the people who are good at doing that, that's the people who support you now, actually change their packages and make them available to you." HCFA has said that it plans to audit 25% of pharmacies that participate in the outpatient drug program to monitor compliance with the program's rules ("The Pink Sheet" Nov. 28, p. 3). Derville said that the audits will most likely be conducted by the processors. HCFA received a number of comments cautioning that "processors ]could[ be compromised if they had to process and also be the auditor," Derville noted. However, he said, "our current druthers is to have them do that." He said HCFA has two reasons for leaning that way. He noted that HCFA does "have those tasks married with our current contractors, and our intermediaries are also our auditors in a different segment." He also noted that "if we don't do it that way, then we ]will[ find ourselves expanding greatly the number of contracts we have to either amend with current contractors . . . or issue to another entity other than processors." Derville also clarified that the central drug repository for beneficiary data that has been planned by HCFA ("The Pink Sheet" Jan. 23, T&G-4) will be the responsibility of one of the processors. Noting that HCFA received comments objecting to the use of a separate entity for maintaining data on all beneficiaries, Derville explained that "our thought there was that we would not have a separate prime drug center, but instead, one of the processors would be assigned to that task also or contracted for that task." Through its Bureau of Quality Control, HCFA has been working on methods for integrating state Medicaid programs with the outpatient drug benefit. The Bureau, which serves as the interface between the states and HCFA, has come up with a number of suggestions for how Medicaid could be used in conjunction with the outpatient drug benefit. Derville said that HCFA plans to adopt most of the recommendations made by the Bureau. However, he predicted that the two programs are unlikely to be operationally joined by the 1991 starting date. "It will take significant coordination amongst us and the states" to ave the Medicaid claims joined in the Medicare processing system, Derville said. "I'm not so sure we can ]bring[ it all to fruition by Jan. 1, 1991. In fact, I have doubts ]about[ that. It's large project for us." At a Jan. 15 meeting, HCFA Systems Development Director John Van Walker explained that the agency would like to have Medicare and Medicaid programs integrated in the Medicare electronic point-of-sale system ("The Pink Sheet" Jan. 23, T&G-3). Walker pointed to the state to state variations in Medicaid (i.e., different pricing structures) and said HCFA was hoping to be able to offer the states a number of options for integrating the programs. One option he presented would be to have Medicare coverage and payment rules apply, with HCFA handling the billing and administrative functions. Under that procedure, HCFA would then bill the states for their portion of coverage. Derville also addressed the problem of financing under an integrated Medicare and Medicaid drug program. "As we work with our friends in the states, one of things that will have to come out of that is a methodology where they pay a fair share, not an incremental share, for the services that our providers make for them," Derville said. "I think that can happen . . . but it's something we need to work on ourselves too."

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