MEDICARE DRUG BENEFIT CLAIMS PROCESSING AND DUR TO BE HANDLED BY THREE REGIONAL CONTRACTORS UNDER HCFA DRAFT PROPOSAL; FINAL RFP PLANNED AUGUST 1

The Health Care Financing Administration plans to limit drug claims processing awards to three regional contractors, who will be expected to administer Medicare outpatient claims and provide a drug utilization review system under the catastrophic care drug benefit, the agency said in a draft proposal released May 15. The draft proposal notes that HCFA "intends to award three separate [drug bill processor] contracts to three organizations." Each of the three contractors will be responsible for one "jurisdictional processing and support facility," HCFA said. The processors would be contracted for up to eight years, from Jan. 1, 1991 to Dec. 31, 1997. One processor would also serve as the "Prime Drug Data Center" for the drug bill processing program (see following story). HCFA had previously said it expected to seek between three and five claims processors. The draft proposal, which includes a request for comments, outlines HCFA's plans for the implementation and administration of the program. Comments are due June 2. HCFA is targeting Aug. 1 for issuing the final request for proposals (RFP). The three geographic areas to be covered by the processors are: jurisdiction I, which includes the northeast states, Ohio, Virginia and West Virginia; jurisdiction II, which includes the Southeast, some Midwest states and Puerto Rico; and jurisdiction III, which extends from the Midwest to the West Coast states and includes Alaska. The three jurisdictions were set up according to the number of beneficiaries and pharmacies in each block of states. As of Nov. 2, according to HCFA, jurisdiction I had 12.5 mil. beneficiaries, jurisdiction II had 11.7 mil. and jurisdiction III had 12.1 mil. Based on data published in MediLog Plus 1988 by Business Mailers, Inc., the numbers of pharmacies in jurisdictions I, II and III, respectively, are 20,739, 23,048 and 22,928. Current Medicare carriers will continue to process immunosuppressive drug bills through 1990, HCFA noted. Although bills for home intravenous products will continue to be processed by current carriers, the new processors will be required to post the drug portion of the I.V. bills to the beneficiaries' histories." In general, HCFA explained, the "three processors shall be selected to provide [point-of-sale] POS, batch and paper transaction processing on a jurisdictional basis. They shall provide bill processing and payment, pharmacy enrollment, drug utilization review (DVR), compliance reviews, audits, hardware (including POS hardware) and software." "A workload of approximately 720 mil. Medicare prescriptions (based on the assumption of 25 prescriptions for each beneficiary during one year) are anticipated in the first year," HCFA said. The agency estimates that 10%, or about 72 mil. in annual prescription drug claims, will be paper claims. Processors should have the automated capability to "perform electronic batch processing for bills submitted on-line or on tape or disk," HCFA said. Processors would handle paper bills whether or not they appear in the "Universal Claim Form," the agency said. However, HCFA added, "beneficiaries/pharmacies who submit paper claims will be encouraged to utilize the UCF." The processors will be working with "computerized" and "non-computerized" pharmacies, the agency noted. HCFA pointed out that for pharmacies with computers, the processors would "provide the necessary equipment" to access the proposed system. For non-computerized pharmacies, the processor "shall provide a programmable POS terminal" with an internal modem, HCFA said. HCFA feels that having the processors handle paper claims in addition to electronic claims will spur the processors to recruit pharmacies into the electronic data system. At a March 9 briefing in Washington on the drug benefit, HCFA Bureau of Program Operations Deputy Director Frank Derville pointed out that processors "are going to get a lot more paper claims" if they are not successful in signing up pharmacies ("The Pink Sheet" March 13, p. 7). Processors will perform both prospective and retrospective DUR activities. "These activities shall include educational interventions with prescribers and dispensers designed to improve drug utilization," HCFA said. HCFA notes that "drug utilization review is defined as a structured, ongoing quality assurance process designed to ensure that drugs are prescribed and dispensed appropriately, safely, effectively and economically." The DUR will provide "a basis for patient counseling, prescriber/dispenser/beneficiary interventions, and health care delivery impact on quality and cost control," the agency added. HHS Inspector General Richard Kusserow suggested in testimony at an April 19 House subcommittee hearing that the Catastrophic Coverage Act's requirement for a DUR could be delayed until after an electronic claims processing system is in operation ("The Pink Sheet" April 24, p. 4). His suggestion was made to address concerns that a comprehensive system providing full-scale DUR at the point-of-sale may be difficult to put in place in time for the Jan. 1, 1991 startup date. The prospective DUR system, which would be used prior to dispensing, must be able to identify duplicate drug therapy, potentially severe drug reactions, excessive daily dose, excessive length of therapy and drug recalls, according to HCFA. The retrospective review, using billing information, should "identify inappropriate patterns of drug prescribing, dispensing and utilization." The review also should "examine the association between the actual prescribing of drugs compared to the 'ideal ways'" drugs should be prescribed. The processors will be required to audit participating pharmacies. The audits will include a process for identifying pharmacies with "billing patterns that appear to deviate from the norm," including a "high number of bills per beneficiary; high average bill cost; low rate of generic billings; abnormally high number of refills; [and] a typical number of beneficiaries." HCFA staffers said at a briefing on the drug benefit last fall that the agency is planning for annual audits for about 25% of all participating pharmacies ("The Pink Sheet" Nov. 28, p. 3). HCFA said it intends to use a "systems integration contractor" to act as agent "in all the life cycle phases of the drug bill processing system." The systems integrator "will develop and execute plans to test and accept all major components of the drug bill processors' systems," HCFA explained. Noting that "this phase is most critical," the agency said that "the use of a systems integrator to be accountable for the total system development and to bring together all the pieces into a functional entity will reduce the problems and delays which could be encountered during this period." Once the program is on-line, the systems integrator will "consolidate, analyze and review all reports from each" processor; manage and control "security measures and privacy matters" and "initiate renewal/modification/enhancements of system components throughout the system's lifetime."