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iQ Conference 2020




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View Points

Performance Networks

Tim Kosty, R.Ph., M.B.A. and Don Dietz, R.Ph., M.S.

Humana’s recently released amendment for its Humana Pharmacy Solutions Rx Quality Network for 2017 for Medicare Part D has generated intense scrutiny in the industry. Humana plans on using the Pharmacy Quality Alliance’s EQuiPP performance scores to grade and rank network pharmacies. Pharmacies will be eligible to receive a performance payment greater than the claim withhold if they are in the top 20% in a quality measure, as compared to their peers.

Before reviewing the tactics behind the Humana offering to illustrate one type of performance network, we will review the types of performance networks and the different strategies employed to drive measurements designed to improve patient outcomes.


Pay-for-Performance Approaches


Performance networks focus on metrics that are proxies for improving patient outcomes. Using only pharmacy data, there is no assurance that there will be a causal relationship between the metrics and patient outcomes. Studies have identified a correlation between these metrics and patient results. The Medicare Part D star rating metrics are the most familiar and focus on patient adherence in chronic disease states and comprehensive medication review completion rates. Improving the proportion of days covered (PDC) should lead to improved patient outcomes, as long as the patient is taking the medication appropriately. Obviously, automatic refill programs can skew these results.


There are two broad types of pay-for-performance networks: those that motivate by benefits and those that impose penalties, i.e., the carrot and stick approaches. A hybrid approach is possible using a combination of the two. For illustration purposes, we will use examples of the incentive and penalty approaches to highlight the differences.


Inland Empire Health Plan — Incentive Approach


The Inland Empire Health Plan (IEHP) is a nonprofit managed Medicaid health plan based in southern California. IEHP partnered with Pharmacy Quality Solutions (PQS) to help administer the IEHP Pharmacy Home Program. Pay-for-performance (P4P) payments will be proportioned by prescription volumes and evaluated based on whether or not the pharmacy has met 50% of its benchmark score or target.


Every six months, pharmacies will be awarded bonus payments when they exceed the benchmark goals set using PQS’ EQuiPP star rating metrics. For example, adherence is measured based on the percentage of patients who are 18 years and older that fill their hypertension, diabetes, or statin medications 80% of the time. This program took effect in July 4, 2016, and will run until July 31, 2017.


The IEHP program takes a carrot approach to encourage pharmacists to improve patient outcomes through face-to-face consultations, comprehensive medication review, and guidance on taking the medications correctly. Pharmacies will not be penalized if they don’t meet the program objectives.


Humana Pharmacy Solutions — Penalty Approach


In May, Humana offered a new contract addendum to pharmacies participating in its 2017 Humana Part D standard network for PDPs with eligibility to be preferred providers in Humana’s Medicare Advantage Part D (MAPD) plans. Pharmacies that declined participation are considered “out of network” for the standard PDP plans and will not be preferred pharmacies for Humana’s MAPD plans.


Humana will evaluate the pharmacies’ performance on three disease states for medication adherence: diabetes medications, statins, and renin-angiotensin system (RAS) antagonists. The CMS star ratings will be used, subject to variations in the EQuiPP program. There will be two measurement periods, January through June and July through December. Humana will withhold $5 from the amount due to the pharmacy for all eligible claims.


The pharmacy will have an opportunity to earn back none, some, or all of the $5, with a bonus based upon the percentile performance, which is based on the number of adherent members it has in each quality measure. The percentile is determined by evaluating the pharmacy’s results against other network pharmacies. Only pharmacies in the top 20% will receive more than the $5 per claim withhold. All other pharmacies will receive only a portion or none of the $5 withhold, based upon their performance.


Market Direction and Challenges


While we prefer the sharing of rewards (incentive approach), the market appears to be moving to the penalty approach to incentivize pharmacies to perform additional services. This is a conundrum for pharmacy owners faced with the continued decline in reimbursement rates, i.e., lower profit dollars per prescription. They are now expected to fund additional clinical services to improve quality metrics. This may be the new normal, where lower financial returns will be realized for providing greater services. We expect these trends will lead to further consolidation in the industry.


It is hard to assess the qualitative role that pharmacy plays in the healthcare system by only looking at pharmacy data. Often the benefits of the pharmacist’s intervention are realized on the medical side, while increasing pharmacy costs. This has been one of the reasons the Medicare Part D PDP medication therapy management (MTM) programs haven’t been as robust, since they add cost without the corresponding reduction in medical expenses, as seen by the MAPD programs.


Furthermore, we all know patients who won’t respond to requests for them to be adherent with their medication therapy, for reasons outside the control of the pharmacist. We would like to see the payers expand the use of benefit designs that incentivize patients to be adherent with their medication protocol.


Future Direction


Payer Community


Payers will focus on quality metrics to drive provider behavior, especially if risk-based healthcare financing models, such as ACOs, gain additional traction. Payers must consider whether it is worthwhile to squeeze the last few basis points out of their reimbursement rates or enable providers to innovate. From a return on investment (ROI) perspective, increasing the Medicare Part D plan’s star ratings will generate far greater returns for the plan than further reducing pharmacy reimbursements.


We expect payers to continue to experiment with P4P plan designs to identify the right mix of incentives and punishments that drive the best results. A challenging issue in the design of these programs is that once the easy improvements have been made, how difficult will it be to show year-over-year improvements in the quality metrics? This scenario has played out in the CMS accountable care organization (ACO) demonstration programs, where the organizations with the best incremental improvement in quality metrics received the highest incentive payments. This strategy punished the highest-performing organizations that entered the program with minimal room for improvement. Not surprisingly, these organizations have discontinued participation in subsequent years.


Pharmacy Community


Pharmacy will need to focus on improving quality metrics at the lowest possible operating costs. Complimentary clinical services, to augment the dispensing activity, will not likely generate the same “rate” of return as dispensing. The services will be necessary to remain in pharmacy networks and to prevent exclusion for nonperformance.


When offered a punitive P4P program, pharmacists may have to pass on these programs or expose their pharmacy to the financial risk for participating. It will be challenging to evaluate the risk associated with saying yes and keeping the prescription volume at a drastically reduced profitability or lose the patients when declining participation, assuming the patients remain with the program. This will pose a huge challenge where most of a pharmacy’s overall sales are in the prescription department. Independents (over 90% in prescription sales) and traditional chains (approximately 70%) will find this a much more difficult decision than a supermarket chain (10%) or mass merchandisers (5%).


We believe that the innovations in healthcare financing are driving the changes in the P4P programs. Pharmacy needs to participate, where feasible, to determine what tactics are effective in improving quality metrics and patient outcomes, and enabling pharmacies to remain profitable. CT


Tim Kosty, R.Ph., M.B.A., is president and Don Dietz, R.Ph., M.S., is VP at Pharmacy Healthcare Solutions, Inc., which provides consulting solutions to pharmaceutical manufacturers, PBMs, retail pharmacy chains, and software companies on strategic business and marketing issues. The authors can be reached at tkosty@phsirx.com and ddietz@phsirx.com.