NCPA Executive Update

NCPA Executive Update delivers insights on legislative, regulatory, policy, and industry developments from NCPA CEO B. Douglas Hoey, Pharmacist, MBA, to NCPA members and pharmacy leaders every Friday.

Penalty for Performance Programs? | NCPA Executive Update | June 17, 2016

by NCPA | Jun 17, 2016

Dear Colleague,

Doug Hoey

The farmer and the horse were both frustrated. The crop needed to be harvested and the farmer and the horse were pulling in different directions. The farmer tried to force the horse to do his bidding by beating him with a stick and, as a result, the horse took every opportunity he could to resist. The townspeople were counting on crops to be harvested so they had food to eat. Having had enough, the farmer and the horse both quit for the day hoping for a better experience in the morning.

The next day instead of the stick, the farmer offered a bunch of carrots to the horse for working with the farmer. That day the horse, the farmer, and the townspeople all had aligned interests and all were rewarded.

The government’s reform of the payment system for health care providers is anchored in payment for improved payment outcomes. It’s hard to argue with that premise, but in the last few weeks pharmacy was once again reminded that the message isn’t making it through.

NCPA has heard from a number of pharmacies about a Humana contract addendum that withholds $5 from each eligible claim (“eligible” as defined by Humana) and then allows the pharmacy to earn back part of its money if it is at least in the top 50th percentile compared to other pharmacies. How generous.

Actually, a pharmacy has to be in the top 20th percentile compared to other pharmacies based on patient medication possession for three different therapeutic classes—hypertension (RAS antagonists), hypercholesterolemia (statins), and diabetes—before it can earn the $5 that was taken from it plus an extra dollar if it is in the 20th percentile for all three measures.

NCPA sent members a fax earlier in the week to help you as you read through the six-page contract addendum.

Pay for performance programs have been a reason for optimism as one means of diversifying pharmacy services and revenue and taking one step closer to pharmacists practicing at the top of our training. Medicare’s star ratings and pharmacy quality measures have been promoted as the coming of an evolving day for health care and for pharmacy. NCPA has consistently expressed guarded optimism about these programs by asking the question, “Will these quality incentive programs be used as a stick, less of a stick, or a carrot?”

Based on the early response from PBMs and health plans, we have the answer to our question and, unfortunately, carrots are not on the menu and punishment is. The programs handed to pharmacies have similarities--force pharmacies to fund their own quality program and, what’s most galling, only return a fraction of the payments taken from the pharmacies back to them. Based on our math, it appears that only approximately 36% of the payments withheld from pharmacies in the Humana program would make their way back to the pharmacy. Some “quality incentive” programs might return even less.

We have a lot of questions about where the rest of the money is going and are seeking answers from the appropriate sources.

Humana doesn’t contract with the majority of PSAOs, so pharmacies that receive the contract addendum have to decide individually if they want to contest the addendum or participate (it’s an “opt-out” so participation is automatic unless the pharmacy makes the decision to contest). You have to make your own business decision taking into account factors relevant to your business.

These performance contracts aren’t going away. You will want to stay in close touch with your PSAO to determine which agreements are acceptable to you. We continue to believe that it’s important for pharmacies to score well on today’s quality measures so they are well positioned as quality measures evolve to better measure pharmacies’ role in improving patient outcomes, which may lead to actual performance rewards.

It’s very unfortunate that PBMs and health plans have chosen to roll out “penalty for performance” programs rather than programs that align the interests of the patient, payer, and pharmacy. There is plenty of potential to incentivize pharmacies in a way that rewards the value they contribute to patient health.

For example, in my initial quick read of Humana’s addendum, I mistakenly read that the pharmacy would be rewarded if its individual PQS quality measure scores were 80% or higher—a reasonable goal that pharmacies have some control over. Alas, upon further inspection, I saw I mistook the carrot for the shaft.

Doug Hoey