Understanding Pay For Performance and DIRImpact to Pharmacy Reimbursement

A Public Service Announcement brought to you by…

Melanie Maxwell, MHPVice President RxSelect Pharmacy Services

Please Don’t Shoot the Messenger…

PBMsPBMs

Why Plans/PBMs Embrace Pay for Performance?

Increased market pressure to control costs and increase profitability.

How Do Plans/PBMs Benefit From Pay for Performance?

Increased Beneficiary Enrollment 5‐Star Rated plans have certain marketing and enrollment advantages over lower rated plans. Members in a low‐rated plan can switch to a 5‐star rated plan at any time throughout the year, not just during open enrollment. CMS star ratings have been shown to influence Medicare beneficiaries’ choice of a plan. 

Increased Revenue MA‐PD Plans achieving star ratings of 4 (“above average”) or 5 (“excellent”) receive quality bonus payments, which can potentially represent millions of dollars in revenue.

Let’s Take A Look at Some P4P Contract Examples

Example A: Pay for Performance

Performance Payment – How the Performance Score is Measured

Diabetes PDC Measure              Target: 81%

Pharmacy Performance Score

Percentile Ranking

MeasurePerformance 

Score

81.27%

=>90% to  100%=>80% to <90%=>70% to < 80%=>60% to < 70%=>50% to <60%=>40% to <50%=>30% to <40%=>20% to <30%=>10% to <20%=>  0% to <10%

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RASA PDC Measure                     Target: 85%

Pharmacy Performance Score

Percentile Ranking

MeasurePerformance 

Score

83.2%

=>90% to  100%=>80% to <90%=>70% to < 80%=>60% to < 70%=>50% to <60%=>40% to <50%=>30% to <40%=>20% to <30%=>10% to <20%=>  0% to <10%

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Cholesterol PDC Measure         Target: 83%

Pharmacy Performance Score

Percentile Ranking

MeasurePerformance 

Score

84.4%

=>90% to  100%=>80% to <90%=>70% to < 80%=>60% to < 70%=>50% to <60%=>40% to <50%=>30% to <40%=>20% to <30%=>10% to <20%=>  0% to <10%

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Example A: Pay for Performance

Performance Payment – How the Dollars WorkMeasure Measure 

Performance Score

# of patients by Measure

Weighted Performance Score

Diabetes 10 40 400

RASA 9 50 450

Cholesterol 10 35 350

Total 125 1200

Overall Performance Score 1200/125 = 9.6

Overall Performance Payment 

Pharmacy Overall Performance Score

Overall Performance 

Score

MeasurePerformance 

Score

9.6

=>9 to  10=>8 to <9=>7 to < 8=>6 to < 7=>5 to <6=>4 to <5=>3 to <4=>2 to <3=>1 to <2

1

$15.14$13.79$12.44$11.09$9.74$0.00$0.00$0.00$0.00$0.00

Performance Payment Calculation

Measure PerformanceScore

$15.14

Multiplied by Patient Count

125

Total Payment Available $1,892.50

Less MTM Payments [$200.00]

Performance Payment Due Pharmacy

$1,692.50

Example B: Pay for PerformanceCommercial and Medicaid Plans (Optional Plan Participation)

Performance Payment – How the Performance Score is Measured• Diabetes PDC• Congestive Heart Failure • Non‐RASA Hypertension• Respiratory PDC

• RASA PDC• Coronary Artery Disease PDC• Breast Cancer PDC• Depression PDC

• Cholesterol PDC• Osteoporosis PDC• Behavioral Health PDC

Each Measure is evaluated individually and then weighted by number of patients by pharmacy.

Pharmacy Performance Score(Each Measure)

PharmacyScore

Measure Target

Percentile Ranking Measure Performance Score

DiabetesCongestive Heart Failure                            Non‐RASA HypertensionRespiratory                                                    RASA                                                               Coronary Artery Disease                            Breast Cancer                                                Depression                                                    Cholesterol                                                    Osteoporosis                                                 Behavioral Health                                        

81.7%66.5%66.6%75%83.2%40%83.2%51.7%84.4%78.4%100%

81%

84%70%85%86%

81%83%

78%

=>90% to  100%=>80% to <90%=>70% to < 80%=>60% to < 70%=>50% to <60%=>40% to <50%=>30% to <40%=>20% to <30%=>10% to <20%=>  0% to <10%

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Example B: Pay for PerformanceCommercial and Medicaid Plans (Optional Plan Participation)

Performance Payment – How the Dollars WorkMeasure Measure Perf.

Score# of patients by Measure

Weighted Perf. Score

Diabetes 10 40 400

CHF 8 50 400

Non‐RASA 6 35 210

Respiratory 10 30 300

RASA 8 40 320

CAD 2 50 100

Breast Cancer 8 10 80

Depression 2 10 20

Cholesterol 10 50 500

Osteoporosis 6 20 120

Behavioral Health 10 20 200

Total 355 2650

Overall Performance Score 2650/355 = 7.46

Overall Performance Payment 

Pharmacy Overall Performance Score

Overall Performance 

Score

MeasurePerformance 

Score

7.46

=>9 to  10=>8 to <9=>7 to < 8=>6 to < 7=>5 to <6=>4 to <5=>3 to <4=>2 to <3=>1 to <2

1

$11.50$10.45$9.40$8.35$7.30$0.00$0.00$0.00$0.00$0.00

Performance Payment Calculation

Measure PerformanceScore

$9.40

Multiplied by Patient Count

355

Total Payment Available $3,337.00

Less MTM Payments [$200.00]

Performance Payment Due Pharmacy

$3,137.00

Example C: Pay for Performance

A New Type of Network Performance Program has been developed.It contains three components:1. Performance Payment – Performance scores for key adherence measures

2. DIR Fee Reduction – individual pharmacy performance determines level of DIR assessed.

3. Re‐Credentialing and Attestation Requirement – pharmacy must complete re‐credentialing requirements AND complete Medicare program attestations by end of year. 

Performance Payments by Reduced DIR Fees

What is DIR?......Direct and Indirect Remuneration

Paraphrased Definition from CMS 42 CFR Section 423.308

• “any and all rebates, subsidies, or other price concessions from any source “Including manufacturers, pharmacies, enrollees, or any other person or entity) that serve to decrease the costs incurred by the Part D sponsor (whether directly or indirectly) for the Part D drug.”

• “-includes price concessions from manufacturers received by subcontractors of Part D sponsors, such as PBM.”

• “May include risk-sharing arrangements, generic dispensing incentive payments made after the point-of-sale.”

What is DIR?......Direct and Indirect Remuneration

The Real Reason Plans (PBMs) like DIR –

When calculating a Plan’s risk share with CMS:• Higher percent of the DIR fee is used to reduce a Plan’s   administrative costs instead of being applied directly to drug cost.

Example C: Pay for Performance

Performance Based DIR Fee Reduction – How Performance Scores are Measured

Category Weight

• ACE/ARB• Statin • Diabetes • GAP Therapy (statin)• CMR Completion Rate• % High Risk Meds• Formulary Compliance

20%20%20%25%5%5%5%

Performance Score DIR Fee (% of IngCost Paid)

5 3.5%

4 4.0%

3 4.5%

2 5.0%

1 5.5%

NOTE:  DIR Fees are deducted from 835 Remittance Advice….You do not see DIR fees on the adjudicated claim response.  

Example C: Pay for Performance

Performance Based DIR Fee Reduction – How the Dollars WorkCategory Weight Pharmacy A 

PerformancePharmacy B Performance

• ACE/ARB• Statin • Diabetes • GAP Therapy (statin)• CMR Completion Rate• % High Risk Meds• Formulary Compliance

20%20%20%25%5%5%5%

5555555

1111111

Weighted Average 5 1

Example C: Pay for Performance

Performance Based DIR Fee Reduction – How the Dollars Work

Impact to Reimbursement Esomeprazole 40mg

Pharmacy A Performance

Pharmacy B Performance 

Ingredient Cost Paid $229.98 $229.98

Dispense Fee Paid $1.00 $1.00

Patient Copay $10.00 $10.00

Total Amount Paid $220.98 $220.98

DIR Fee $8.05 $12.65

Total Net Reimbursement $212.93 $208.33$4.60 variance on reimbursement 

due to performance

Example D: Pay for Performance

Performance Payment – How the Dollars Work

Generic Dispense Rate

Pharmacy Performance Score

GDR Target Range

MeasurePerformance 

Score

86.4%

87.9% 86% to 87.9%84% to 85.9%82% to 83.9%<82%

54321

Extended Day Dispense Rate

Pharmacy Performance Score

EDS Target Range MeasurePerformance 

Score

11.4%

18% 15% to 17.9%13% to 15.9%10% to 12.9%<10%

54321

High Risk Meds Measure

Pharmacy Performance Score

Target Goal MeasurePerformance 

Score

8.9%

7% 7.1% to 9%9.1% to 13%13.1% to 17%17.1%

54321

Example D: Pay for Performance

Performance Payment – How the Dollars Work• Retro DIR Adjustment• Lump Sum Adjustment on                                                                                                       

Remittance Advice

# of patients by Measure

Average Performance 

Score Calculation

GDR 4

EDS 2

High Risk Meds 4

Overall Performance 

Score3.33

Overall Performance Payment 

Pharmacy Overall Performance Score

Average Pharmacy 

Performance Range

DIR Fee

3.33

5.04.0 to 4.93.0 to 3.92.0 to 2.91.0 to 1.9

$2.00$2.50$3.00$3.50$4.00

Measurement Period Month DIR Payable

Q1 2016 (Jan‐Mar) June 2016

Q2 2016 (Apr‐Jun) Sept 2016

Q3 2016 (Jul‐Sep) Dec 2016

Q4 2016 (Oct‐Dec) March 2017

If Only……PBMs Were Paid for Performance

If Only……PBMs Were Paid for Performance

THANK YOU!