Providers

How can specialty practices survive a world with growing utilization management?

Syam Palakurthy

Syam Palakurthy

CEO, CoFounder

We are experiencing a sea change in the way payers manage medical benefit drugs. Payers used to use a lightweight approval process for these drugs, if any at all; but that paradigm has changed. Specialty drugs — often administered via injection or infusion — have rocketed to ~50% of all prescription drug spend [1]. Payers see the high cost and smaller patient populations for these drugs and are responding with more utilization management (UM) controls like prior authorization and step therapy. While these controls have a long history on the pharmacy benefit, their use on the medical benefit drugs has been more jarring. In this first part of a multi-part series, I’ll explore how these changes impact specialty medical practices and what they must do to survive under the new paradigm.

Every practice we speak to mentions that managed care burdens continue to worsen, which squares with physician survey data [2]. Practices consistently describe three factors that drive this growth in the managed care burden. First, many payers that already had PAs are adopting more rigorous PA and step therapy requirements. Second, many payers that did not have PAs or step therapy in the past are now instituting those requirements. Third, with the ~3x increase in the Medicare Advantage patient population in 15 years[3], more patients are moving into plans that use UM controls.

This growing burden carries significant challenges for practices, especially for provider-administered drugs. Multiple, constantly-shifting payer-and-drug requirements create complexity that requires practices to hire more non-clinical staff. Standardization in the medical benefit lags behind the pharmacy benefit, so practices have to use manual paper-and-fax methods or fragmented payer websites. Practices cannot turn to specialty pharmacies for help on provider-administered drugs. Finally, the high cost of specialty medications translates to financial risk for the practice. A single use of a medical benefit drug without obtaining prior approval can create a loss in the hundreds of thousands of dollars.

Yet it is possible for practices to emerge from these challenges stronger than ever. PAs can reduce financial risk by signaling a payer’s buy-in before using an expensive drug. PAs can enable better relationships (and contracts) with payers by serving as evidence that the provider follows best practices. To achieve these positives and avoid the pitfalls of PAs and UM controls, practices must develop three key capabilities.

First, successful practices will create standardized payer/drug-agnostic practice workflows. A practice with different workflows for each payer and drug will need ever more administrative staff and training to stay afloat. Standardization is especially important to achieve — and especially difficult — for PAs, given wide variation in payer processes and requirements. This does not mean ignoring variation, but designing consistent processes that can account for it.

Second, practices must curtail the potential for errors and delays. UM controls increase the litany of shifting and multi-step requirements before administering therapy. A mistake can result in a payer refusing to cover a therapy’s cost and a subsequent catastrophic financial loss. To avoid this, practices need to adopt tools and processes that reduce the chance of one of these errors.

Third, practices need to arm themselves with data to continuously improve their own processes and to push payers to do the same. Internal operations data can help standardize workflows and reduce errors by uncovering processes or payer interactions that create financial or operational risks. Practices can also use that data to prove adherence to guidelines or to highlight specific payer policies that burden the practice and its patients.

The changes to managed care will increasingly force providers to navigate a difficult course between outstanding patient care and financial solvency. Practices that use injectables or infusibles will feel these changes acutely because of challenges for medical benefit drugs. Unfortunately, not every practice will survive these changes; but those that build the capabilities to adapt will do more than survive: they will thrive.

Sources and Notes

[1] http://lab.express-scripts.com/lab/insights/specialty-medications/specialty-medications-nearing-50-percent-of-spend

[2] https://www.ama-assn.org/system/files/2019-02/prior-auth-2018.pdf

[3] https://www.kff.org/medicare/issue-brief/a-dozen-facts-about-medicare-advantage/

Providers

How can specialty practices survive a world with growing utilization management?

Syam Palakurthy

Syam Palakurthy

CEO, CoFounder

We are experiencing a sea change in the way payers manage medical benefit drugs. Payers used to use a lightweight approval process for these drugs, if any at all; but that paradigm has changed. Specialty drugs — often administered via injection or infusion — have rocketed to ~50% of all prescription drug spend [1]. Payers see the high cost and smaller patient populations for these drugs and are responding with more utilization management (UM) controls like prior authorization and step therapy. While these controls have a long history on the pharmacy benefit, their use on the medical benefit drugs has been more jarring. In this first part of a multi-part series, I’ll explore how these changes impact specialty medical practices and what they must do to survive under the new paradigm.

Every practice we speak to mentions that managed care burdens continue to worsen, which squares with physician survey data [2]. Practices consistently describe three factors that drive this growth in the managed care burden. First, many payers that already had PAs are adopting more rigorous PA and step therapy requirements. Second, many payers that did not have PAs or step therapy in the past are now instituting those requirements. Third, with the ~3x increase in the Medicare Advantage patient population in 15 years[3], more patients are moving into plans that use UM controls.

This growing burden carries significant challenges for practices, especially for provider-administered drugs. Multiple, constantly-shifting payer-and-drug requirements create complexity that requires practices to hire more non-clinical staff. Standardization in the medical benefit lags behind the pharmacy benefit, so practices have to use manual paper-and-fax methods or fragmented payer websites. Practices cannot turn to specialty pharmacies for help on provider-administered drugs. Finally, the high cost of specialty medications translates to financial risk for the practice. A single use of a medical benefit drug without obtaining prior approval can create a loss in the hundreds of thousands of dollars.

Yet it is possible for practices to emerge from these challenges stronger than ever. PAs can reduce financial risk by signaling a payer’s buy-in before using an expensive drug. PAs can enable better relationships (and contracts) with payers by serving as evidence that the provider follows best practices. To achieve these positives and avoid the pitfalls of PAs and UM controls, practices must develop three key capabilities.

First, successful practices will create standardized payer/drug-agnostic practice workflows. A practice with different workflows for each payer and drug will need ever more administrative staff and training to stay afloat. Standardization is especially important to achieve — and especially difficult — for PAs, given wide variation in payer processes and requirements. This does not mean ignoring variation, but designing consistent processes that can account for it.

Second, practices must curtail the potential for errors and delays. UM controls increase the litany of shifting and multi-step requirements before administering therapy. A mistake can result in a payer refusing to cover a therapy’s cost and a subsequent catastrophic financial loss. To avoid this, practices need to adopt tools and processes that reduce the chance of one of these errors.

Third, practices need to arm themselves with data to continuously improve their own processes and to push payers to do the same. Internal operations data can help standardize workflows and reduce errors by uncovering processes or payer interactions that create financial or operational risks. Practices can also use that data to prove adherence to guidelines or to highlight specific payer policies that burden the practice and its patients.

The changes to managed care will increasingly force providers to navigate a difficult course between outstanding patient care and financial solvency. Practices that use injectables or infusibles will feel these changes acutely because of challenges for medical benefit drugs. Unfortunately, not every practice will survive these changes; but those that build the capabilities to adapt will do more than survive: they will thrive.

Sources and Notes

[1] http://lab.express-scripts.com/lab/insights/specialty-medications/specialty-medications-nearing-50-percent-of-spend

[2] https://www.ama-assn.org/system/files/2019-02/prior-auth-2018.pdf

[3] https://www.kff.org/medicare/issue-brief/a-dozen-facts-about-medicare-advantage/