Life Sciences

Medicare & Reimbursement Advisor Weekly, April 29th, 2009

Medicare & Reimbursement Advisor Weekly, April 29, 2009


Part D plans likely to use prior authorization following Medicare policy

CIGNA cost of care

Messaging to case managers should address integrated models

LTC affects product selection, site-of-care decisions

Part D plans likely to use prior authorization following Medicare policy

Managed care readers have confirmed our report from the April 22 MRAW about how Part D plans will use a hard prior authorization (PA) instead of a step edit in response to Medicare’s new fail first/step policy. The goal of the hard PA is for these plans to control utilization of approved, branded products when they have the same indication as an off-label drug. The CMS policy involves plans participating in the program in 2010. Plans will not be allowed to require enrollees to try and fail off-label indicated drugs before providing access to an on-label drug, unless the off-label indication is supported by widely used treatment guidelines or clinical literature. The literature, according to CMS, must represent best practices. Of the eight plans (three national, five regional/local plans) we reached for comment about the likelihood of a hard PA to be used in situations when the step 1 drug (used off-label) has the same indication as the step 2 drug, four rated the likelihood of a hard PA an 8 out of 10 (on a 10-point scale in which 10 equals highly likely, and 1 equals highly unlikely). Two plans (both national) rated the likelihood a 7. One plan rated it a 10, and another plan rated the likelihood a 6.

CIGNA cost of care

Will a new cost-of-care calculator change product selection decisions? The tool is now available to 550,000 doctors, hospitals, and clinics as a way to help patients calculate their share of the cost of care before they get services and treatment. The itemized, real-time estimates, based on a member’s specific health plan, explain how the insurance will be applied and what the patient would owe. (Note: I work in Connecticut near CIGNA and will be interviewing the plan about this and other issues next month. Contact me with any questions you have for this interview at

Click here to access the story: www.,0,6353683.story.

Medical costs spike for Aetna

Aetna has higher-than-projected medical costs in its commercial business that serves employers. Those who are losing their jobs and taking COBRA post-employment insurance are using more medical services than expected, a medical officer told us. Members are using more services, such as getting more tests, when they visit the doctor. Is there a pharmacy opportunity here? We’ll be discussing this with Aetna directors soon. Let me know if you have questions. Click here for the story: marketsNews/idUSN2832644820090429.

Express Scripts proposal

Bruce Roberts, RPh, executive vice president and CEO of the National Community Pharmacists Association has written the Federal Trade Commission chair Jon Leibowitz regarding the potential anti-competitive effects of Express Scripts’ proposed acquisition of WellPoint’s PBM business.

Messaging to case managers should address integrated models

Editor’s note: Case managers in the acute care setting are becoming more involved with health plan case managers and are an important influencer for messaging. The following story is about a developing trend in case management involving medications.

As a utilization review nurse in the psych unit of Fulton County Health Center in Wauseon, OH, Tina Leach, RN, CCM, regularly sees that a lack of integrated care management can cause problems on a hospital floor. Although Leach admits the need she sees for integrated case management is amplified in the psych unit, the former emergency department nurse says the need is pervasive and affects each unit of the hospital. The pressure is on for case managers to reduce readmissions and prolonged length of stay (LOS), which may be caused by a lack of integrated care management.

“Ohio Medicaid is looking a lot now at readmissions. Fifteen years ago, that wasn’t the hospital’s problem, but now we’re looking at denials … I expect issues with Medicare reimbursement will come around too,” Leach says.

For the past two years, Becky Perez, RN, CCM, CPUR, CPUM, an independent hospital case manager, and Roger Kathol, MD, adjunct professor of internal medicine and psychiatry at the University of Minnesota, have studied the benefits of an integrated case management program. According to their study, 5% of patients are complex and use half or more of a facility’s healthcare resources. More than two-thirds of this small group has concurrent physical and mental health/substance use disorders, yet a lack of communication about clinical assessments and treatment can result in an upsurge of issues. “Interaction is limited … this disintegrated care leads to poor clinical outcomes, high total healthcare costs, and reduced productivity,” says Kathol.

According to the study, an integrated case management solution can save a typical hospital an average of 115 days and $2.9 million over a two-year period. “When a patient falls through the cracks, you look at prolonged length of stay, inappropriate discharge planning, and readmissions,” says Kathol.

Perez and Kathol created a relationship-based evaluation tool that assesses the complexity of each patient. (For a copy of the tool, contact Editor Bryan Cote.) “By identifying four domains, we hope to identify barriers to improvement. How a patient is scored will lead to action by the case manager, medication decisions, and a care plan will develop from documentation in this grid,” says Kathol.

Integrated training allows case managers to proactively help hospitalized patients by increasing their ability to:

Flag and interview high-risk patients for complexity during admission evaluations

Link multi-domain (e.g., biological, psychological, social, insurance, and health system) barriers to improvement with specific management activities

Reduce the occurrence of adverse hospital events and shorten LOS

Prepare complicated patients for discharge

Improve access to complexity-based post-discharge community services


Managed markets need to figure out how their products and programs can help hospitals reduce readmissions and meet their growing need for integrated case management, says Leach. “With mentally ill and, especially, chronic mentally ill patients, you need to start their plan of care with an understanding of their issues,” she says. “Follow-up is important: Do they have issues with staying on their meds? Do they have issues at home? When you let one issue fall through the cracks, you see it multiply as a problem.”

Integrated health management requires a willingness to look at the whole patient—not just the physical illness, says Perez. Hospital case managers can obtain a baseline for the integrated care management plan and, by assessing the patient’s additional needs, make referrals to the appropriate providers, refine the patient’s medication plan, and inform existing providers of what is needed to better manage the patient’s illnesses and behaviors.

The business of LTC

LTC affects product selection, site-of-care decisions

Various LTC-setting billing policies can affect what patients take for medications as they move into other care settings, such as rehab, home health, hospitals, or when they move back into the community.

The business of running a nursing home is complicated, but it is so crucial to patients. Payment policies affect how nursing homes interact with your payer customers (like an Aetna), as well as community physicians and hospitals.

These issues are shared in conversation with Lynn Veith, RN, administrator of care coordination at McLean Nursing Home, an independent continuum of LTC in Connecticut.


In a nursing home, a patient’s care is based on a consolidated billing structure that pays the home a “per diem” for the first 100 days of his or her stay, and it’s all-inclusive. This fact affects how a home views clinical decisions, particularly for independent facilities that are more likely to take a financial hit from a high-cost regimen versus a chain (e.g., Manor Care) that may be able handle one facility that is in the black.


The per diem is set based on checkpoints at the 5th, 14th, 30th, 60th, and 90th day of a resident’s stay. A different rate is set at each checkpoint based on a complicated system: facilities enter data based on certain resource utilization groups (RUG) and these RUGs, tracked into the MDS, ultimately determine the rate per resident for the period. Each county is paid differently, and payment may vary based on utilization during the specific period, so McLean could be paid like the following:


Every day and week, Veith reviews each patient, in terms of what the nursing home is receiving in its Medicare Part A per diem and what it’s paying out in therapy, medications, and other services. “If we receive a patient, and the prescribing physician has ordered Neupogen, for example, for a chemo regimen, we must, by law, follow that order, even though we have to pay for the chemo,” she says.

Some homes will try to coordinate discharges, if appropriate, so a patient would receive an IV or medication at home. For example, consider a patient who recently had hip surgery and was projected to be at McLean for 14 days. The Neupogen was due to be administered on day 10 and, because McLean does not administer the regimen, the facility would be responsible for the costs to transport the patient to the oncologist, the drug, and the return trip to the nursing home, Veith says. “So sometimes, we will call the practitioners to see if the patient can adjust the medication schedule, only if appropriate,” to shift costs to other facilities, she says.

Given the mission of LTC facilities and state law, this is difficult. An assisted living resident at McLean recently needed hyperbaric oxygen, ordered by the resident’s surgeon. “We couldn’t not admit her back,” Veith says, and the procedure cost McLean $22,000. If Medicare feels you are denying admission based on payment, that’s not allowed. The only way to manage it is is to have clear admission criteria. For example, McLean won’t administer IVs or palliative care, as is written in a policy.


Once per quarter, McLean has a medical director meeting with Omnicare and they review formulary, actual, and potential savings. McLean, along with most nursing home facilities, has a Part A formulary, all but necessary to manage the per diem costs. Some drugs on the formulary—created by Omnicare and the medical directors—have prior authorizations (PA). Adopting a new drug for a patient is not so simple, even if the drug is just as or more effective, because the facility has to look closely at costs. If the drug might help the patient improve activities of daily living versus an existing formulary product and to make occupational therapy sessions as scheduled, there are some financial benefits for switching to the new drug, says Veith.

Clinical decisions about medications can often be put into buckets of short- and long-stay patients and their medication regimens. Unexpected costs also arise, and although they may not affect medications directly, they do affect how a home would view a patient’s overall stay, and possibly affect medication decisions. For example, McLean recently dealt with a woman who had a car accident and needed arm and leg surgeries. She had an orthopedic surgeon work on her leg, and a different doctor for her arm. Each trip to the hospital and doctor offices for consultations and surgeries cost McLean about $250 because Medicare won’t pay for transportation, unless the patient is on a stretcher. The hospital did not have to pick up those costs.


McLean’s formulary is mostly open. For new drugs, the home will conduct clinical comparisons and product cost comparisons. “We would have to write a new policy to add it to the formulary, so there has to be a good case for it,” Veith says. In some cases, McLean has negotiated a deal directly with the managed care plan, particularly for higher-cost medications, such as those that may involve a PA. “We would agree to use the medication if the plan can agree to paying us a higher rate,” she says.


MRAW has conducted a study on nonmedical switching in LTC. (Results are available in the November 2008 American Journal of Managed Care.) Veith, who assisted with this project, says switching is often difficult, not just if the resident is tolerating a drug, but also because of the continuum-of-care issues that result.

Often, a patient may go from the community where he or she is taking one drug; then to the hospital, where the facility’s formulary dictates a switch to a generic; and then to the nursing home. “This can lead to errors and to confusion and to adherence problems. For short-stay patients, especially, we often will follow the hospital’s formulary decision to bring back some consistency,” says Veith.