Chad Hammerstrom, Net-Rx CEO, started out in pharmacy working as a box boy for Hi-School Pharmacy in Vancouver Wash. Hammerstrom, who grew up on the systems side of the business, reports originally being more IT focused.  Hammerstrom has built Net-Rx into a company with a broad portfolio designed to provide pharmacies with operational support in areas such as pricing and claims reconciliation. ComputerTalk senior editor Will Lockwood caught up with Hammerstrom recently to find out what tools pharmacies are looking to now in order to manage their data and their businesses as efficiently as possible.

CT: Chad, tell us how you got started with Net-Rx.

Hammerstrom: We started Net-Rx back in 2002, primarily to address the new HIPAA security regulations during a time when a number of pharmacies were also starting to use Internet connections without necessarily having the appropriate safeguards in place for being connected to a public network like the Internet.  We found that the independent and smaller regional chains hadn't really leveraged the connectivity power of the Internet to connect the essential business and office applications the were using in their pharmacies.

So, our core focus originally was to connect pharmacies and leverage the technology that they had already purchased to allow them to centrally manage their stores better.  In the course of this, we developed connectivity to a number of independent pharmacies and small chains that allowed us to work on their behalf, as if we were in that pharmacy. Out of this grew a number of services.

CT: What sort of services are these?

Hammerstrom: Our goal was to simplify back office processes and alleviate some of the pain points for our pharmacies. One example is our pricing services, which help pharmacies identify what cash pricing is in their competitive area. We also offer various business reporting tools that provide information on areas that pharmacists don't usually have the time to manage.

While Net-Rx was in it's early stages, the pharmacist shortage really became acute. A lot of the business owners we worked with found that they then had even less time to focus on the business because they were spending more time behind the counter focused on filling prescriptions and interacting with patients.  We started to hear from our customers that they didn't have time to look at the various business reports we provided, and we thought how can we help them? This is where, in the evolution of Net-Rx, we moved from offering mostly technical services into offering operational services leveraging technology. One result is that we've grown to be a leader in our third-party claims reconciliation offering.

CT: So you moved away from simply providing reporting services? What's the practical impact of this change, from the pharmacist's perspective?

Hammerstrom: It means we are here to try to resolve issues on behalf of our customers. We always try to go the extra mile. Even when there's an issue that isn't addressed by one of our services, we'll work on behalf of the customer - contacting another vendor, for example. Our model is highly customer-centric. We don't have a phone system that you have to navigate to get to the right person. Every call is answered by a live person who knows our products and who can resolve the issue motivating the call.

It also means that we want to give our customers a solution that allows them to focus on exceptions, instead of searching for a needle in a haystack.  We want to review claims for them and give them exception-based issues, so they are focusing on resolving the problems rather than searching for them.  We want to give them tools that provide them peace of mind that they're not leaving dollars on the table. There may be months that go by when we don't see a significant issue, but then maybe a payment cycle gets missed - we do know this happens - and physical payment does not make it to the pharmacy. We want to give our users the ability to quickly identify that and give them actionable information so that they can respond to the payer.  In addition we want to give them a better handle on  their accounts receivable  A focus of ours going forward is building out additional financial analytics for our pharmacies.

CT: Let's talk for a minute about what the MHA acquisition means for Net-Rx.

Hammerstrom: Sure. For some background, we sold the business to MHA in 2010. MHA is a health services company focused on alternate site pharmacy - long-term care, home infusion, etc.  It's been a great fit for us. We've expanded into the LTC class of trade significantly since then. We are still more heavily focused on retail, in terms of numbers of sites that we serve, but many of our tools that we've built recently are designed to address challenges in LTC pharmacy.

CT: What are those challenges?

Hammerstrom: The biggest topic right now is short-cycle dispensing and what the impact is going to be.  It's the topic everyone is concerned about. Where we come in is that with the volume of claims LTC pharmacies are processing today, it's difficult to manage all the potential pitfalls that may occur to ensure that you are submitting the claim correctly and you are being reimbursed properly. That's a tough task right now in itself. Then you look at short-cycle dispensing and you see four times the number of claims for that segment of the business. It means you have to have a solution that gives you the ability to audit your claims and verify you're getting paid correctly.

CT: What are the most popular services you offer?

Hammerstrom: Our third-party claims reconciliation is by far our most popular service. More recently we've developed a new service we call our reimbursement services suite, where we've combined third-party claims reconciliation with a claims-analysis product called Edit Rx. What we do is, instead of just providing another report, is we assign an analyst to a pharmacy. Our analysts will make bi-weekly calls to our customer and they'll have indentified particular issues that the customer may want to review. This can reduce hundreds of claims to the 30 items, for example, that really merit the customer's attention because they could have a significant impact on the business - either financially or in the case of an audit.  It could be discontinued NDCs, for example. These might have a limited financial impact, but could be more significant during an audit.

CT: Tell us about these analysts. What's their background?

Hammerstrom: We hire technicians who are typically the best technician in their pharmacy. They know the business already and then they go through a pretty intense training process here. It can be difficult for a pharmacy to keep someone on staff with the level of expertise and training our analysts have.  We give our customers the peace of mind that they have someone who's an expert in claims analysis.

CT: So what's a service that you think pharmacies should use more?

Hammerstrom: We still see that nine out 10 pharmacy opportunities that we work with are not using an automated claims reconciliation tool at all. This tells me that there's still a very large segment of the business that's either not reconciling or is trying to do it manually. There's a great cost-benefit balance to having a service that's going out and capturing the remittance advice electronically and helping manage that.

CT: What about from a general business perspective, what should pharmacies focus on more?

Hammerstrom: I think pharmacies also need to focus on pennies to find the dollars.  There are some pharmacies out there that operate on a bill and pray model, and they don't have the services in place to audit claims.  A common mistake is to assume that your cash business isn't important because it's only 5%, say, of your overall revenues.  But this cash business has a big impact on the other 95% based on how you price it.  So when you make the decision how to price a prescription for someone who may be a long-time customer, you have to consider what you can afford to let the prescription go out the door for, because it will have an impact on all the other prescriptions paid by third parties, which are the bulk of your business.

We try to price our services and view them as insurance policies.  We know issues are going to come up that can cost pharmacies thousands of dollars if they aren't identified and corrected. Sure, there's a lot of value you'll see right away from using data services like we offer. Our goal is to make it work to keep up the services once we've caught the major problems and cleaned them up. Going back to the analogy of an insurance policy, the idea is that the cost of these services are minor when compared to that one claim that will come up that represents thousands of dollars. You want to have the tools to capture that and recover those dollars.

CT: So there's little doubt that the kinds of services we've been talking about will come into play for a pharmacy. It's really a matter of time.