PAAS National Articles

On-Line Billing for Custom Compounds: The Third-Party Payor
H. Edward Heckman, R.Ph.

Does it take a $30,000 audit recoupment to convince yourself that billing compounded prescriptions at your usual and customary price on-line is a bad idea? Nearly every week one or two compounding pharmacists come to me for assistance with just such a dilemma. Think again if you don?t believe that this can happen to you. Because you "trip" the compound indicator when you transmit a compound prescription you stick out like a sore thumb.You are a sitting duck!

The NCPDP (National Council for Prescription Drug Programs) protocol you use to transmit claims is not well suited to compounding. While there are changes on the horizon you are faced with submitting a claim with little or no information about the actual custom compounded prescription you just dispensed. At most, you only inform the third party that the patient received a compounded prescription and in some instances the identity of one of the ingredients. The third party doesn?t know the true contents, dosage form or the elaborate protocol you closely followed to put together this prescription. And, they have absolutely no idea at how you arrived at the price transmitted. The third party will initially approve the compounded prescription until they have a chance to audit your pharmacy. Then the trouble begins.

Compounding pharmacists must be alert and prepared for the latent liability they create by transmitting compounded prescription claims on-line at usual and customary prices. In an audit situation, third parties invariably revert back to the reimbursement language in the contract, undervaluing your ingredients and valuing your professional time at a paltry $2.00 or $3.00 fee.

Third parties typically devote sections of their provider plan manuals to describe their policies on compounded prescriptions. Some Pharmacists view the information in plan manuals as only suggestions or recommendations. A few pharmacists choose to ignore plan manuals completely. Keep in mind that in many instances plan manual paragraphs bear the same weight as the contract itself. Most third party contracts reference their plan manual, which in effect gives the plan manual the same weight as the contract.

Let us study a national contract and plan manual in the context of compounding.This is a nationally recognized pharmacy benefits manager (PBM).Their Pharmacy Agreement (provider contract) states, "Pharmacy Services Manual ("Manual") is incorporated herein by reference as if fully set forth herein. Pharmacy's nonadherence to any of the provisions of the Manual will be a breach of Pharmacy's Agreement."  The Manual then goes on to offer the following instructions.  "Compounded Prescriptions with a total cost of less than $1,000 are required to be submitted via" on-line adjudication" in accordance with the following:

1. Set the 'Compound Flag' to positive in accordance with the Pharmacy Software.
2. Submit the NDC number for the highest priced Federal Legend Drug.
3. Enter the metric quantity as the total amount of the finished product.
4. Enter the total cost of all ingredients, the professional fee and your  "usual and customary" price.
5. Enter patient and group information as you would any other "PBM" claim.
6. Collect from the "PBM" cardholder only the applicable Copayment/Coinsurance as indicated through the" on-line adjudication "System."

What are your options in billing compounds to this third party?  The contract references and incorporates the plan manual.  The plan manual states that you will transmit compounds to the PBM on-line and identify the claim as a compound.  It also requires you to enter costing information as well as your usual and customary charge.  And last but not least, you are instructed to collect only the copay/coinsurance amount from the patient.  You may be breaching this contract if you were to refuse to transmit the claim on-line.  You may be breaching this contract if you were to charge the patient the full usual and customary amount of the prescription.  Additionally, you are not guaranteed that the PBM will find it acceptable to reimburse your usual & customary price.  The language in item 4 is somewhat ambiguous and might be interpreted in different ways.  From very frequent audit experiences with clients, I know that this PBM carries a big stick when it comes to pricing compounds at your usual and customary price.

Do you really have any options? You have alternatives.

1. Negotiate an exclusion from the contract for compounds and bill the patient directly.
2. Negotiate a fee schedule specific to your compounding practice.
3. Terminate your provider agreement contract.

First, you might attempt to carve out or exclude compounded prescriptions from this contract.  If successful, you would then be able to directly charge the patient your usual and customary price.  It becomes the patient?s responsibility to file and collect a claim under their major medical insurance coverage.

This task could be accomplished by negotiating an amendment to the contract stating, “A Compounded Prescription is that which contains two or more ingredients that are weighed or measured and prepared according to the pharmacists art.  All references contained in the Pharmacy Agreement, Plan Manual, other attachments, amendments and any other alterations in effect now or in the future other than this amendment are null and void as they apply to Compounded Prescriptions.  It is further recognized that ‘Ajax Compounding Pharmacy’ may bill and collect from patients the full amount of their calculated usual and customary charge for such Compounded Prescriptions.”  This type of amending language would place the third party’s blessings on your avoidance of on-line adjudication for compounded prescriptions.

The strategy for arguing such an amendment is that your pharmacy is unique and far from the mainstream of typical community pharmacy practice.  While in a typical community pharmacy basic compounding is only an infrequent disruption, compounding is the heart and soul of your operation.  Along with this argument you would want to include a description of the specialized compounding equipment and facility housed within your operation.  Additionally, list the credentials of your staff as it pertains to compounding.

In opposition to your proposal, this third party might argue that the reimbursement language in the contract should apply to all prescriptions.  They may emphasize that even though you may loose from a time perspective on a compounded prescription, you make it up when you dispense prescriptions for generic drugs.  Your counter is to reemphasize that your practice is oriented and devoted to compounding.  While things might leverage out for a pharmacy that bills one compound a month to the third party, it won’t work for a specialized compounding pharmacy like yours.

The second avenue focuses upon negotiating fair and equitable compensation for your compounding up front, prior to actually billing prescriptions to the third party.  If successful, you would have the permission of the third party to bill certain compounds on-line at negotiated rates.  Accomplishing this task is actually much more work than simply getting the third party to exclude compounds from their contract.  You will need to develop written protocols for each of your major compounds.  You will also have to provide justification for the price you wish to charge.

You can be successful.  Included with this article is a copy of a Fentanyl Troche protocol (click here) I helped Bruce Roberts draft at Leesburg Pharmacy, Leesburg, Virginia.  This protocol begins with an overview of the Leesburg compounding practice.  By focusing upon the facility, equipment and people involved, credibility is created.  Then the medical necessity is established by comparing the compounded prescription to what comes close commercially.  The unique advantage of this compound is that it is dye-free and preservative-free.  The economic necessity is then highlighted.  Then the ingredients and disposable equipment are listed and valued at AWP (average wholesale price).  Note that NDC numbers are excluded because the active ingredients may be procured from a variety of sources over time.  A rental or space fee is added for the use of the clean room.  And finally, the compound preparation level is categorized and valued.  Leesburg was successful in obtaining approval for this protocol at their price.

As you can see, this can represent a lot of energy and effort up front but once you have the third party’s approval you gain peace of mind.

The last alternative is to terminate your provider agreement with the PBM.  If you reach an impasse in attempting one of the first two options, you should give serious consideration to terminating the agreement.  Weigh that which you might loose in not being able to bill manufactured products versus billing compounds at the huge discounts required by the contract.  It might be more favorable to terminate.  Or, when you weigh the risk created by billing the third party at your usual and customary price, it might be more favorable to terminate.

The bottom line is to select the option that is best for your business and your practice.  None of these choices are clean-cut or easy decisions.  By devoting some intellectual energy into the safe billing of compounds you may put more profit on your bottom line and avoid large audit repercussions.

FENTANYL TROCHE PROTOCOL
LEESBURG PHARMACY
LEESBURG, VIRGINIA

Fentanyl 200mcg Troche
Preservative-Free/Dye-Free Protocol
24 troches/tray

At Leesburg Pharmacy we operate a compounding specialty practice to address specific patient disease management, medication management and lifestyle enhancements not available commercially.  Compounding pharmacists Bruce Roberts, R.Ph. and Jeff Jackson, R.Ph. have invested time and money in obtaining compounding certifications from the renowned Pharmacy Compounding Centers of America.  Both are fellows and active participants in the International Association of Compounding Pharmacists.  The 30,000 member National Community Pharmacists Association named Bruce Roberts the 1998 Pharmacist of the Year.

FENTANYL TROCHES

MEDICAL NECESSITY:
The commercial product, Fentanyl Oralet (Abbott) contains preservatives and dyes that can irritate the mucosal lining of sensitive patients.  Our preparation, which is free of preservatives and dyes, neutralizes this negative drawback thereby improving compliance.

INGREDIENTS FOR 24 TROCHES

DISPOSABLE COSTS

CLEAN ROOM FEE

PREPARATION LEVEL

 TOTAL PRICE $295.00