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Pharmacy Case Studies from Parkland Health & Hospital System
Michael T. Inzerillo, MBA, RPh
Corporate Director of Pharmacy - Business Development
Continuum Health Partners
New York, NY

Rose Babbitt has her hands full. As Associate Director of Pharmacy for Government Reimbursement and Logistical Support at Parkland Health & Hospital System in Dallas, Texas, Rose is responsible for a vast landscape of pharmacy services. Things you might find her working on include all pharmaceutical contracts and negotiations with manufacturers, management of the 340B Program for Dispropor-tionate Share Hospitals, maintenance and expansion of patient assistance programs and the Texas HIV/AIDS Medication Program (THMP), Medicare Durable Medical Equipment (DME) reimbursement and planning and integration of the Medicare Part D prescription drug benefit.

"I've been with Parkland 12 years," says Babbitt. "Nothing has occupied my time as intensely as trying to find accurate information on the Medicare Part D benefit. That alone is a full-time job." To understand her concern, we need to review Parkland and its impact on the community it serves.

While it may be famous for receiving our fallen president on November 22, 1963, Parkland Hospital has grown into an expansive health system. The Dallas County Hospital District, doing business as Parkland Health & Hospital System, is a public, tax-supported institution with 10 community health centers located throughout Dallas County. It is the primary teaching and research hospital for the University of Texas Southwestern School of Medicine.1 Parkland Hospital, licensed for 985 beds, has over 43,000 admissions, 7,000 inpatient surgeries, 1 million outpatient visits, 7,300 outpatient surgeries, 140,000 emergency room visits and almost 16,000 births annually.2 It is often listed in the U.S News & World Report ranking of Best Hospitals, achieving 2005 Top 25 ranking in gynecology, hormonal disorders, kidney disease, orthopedics and urology.3

Pharmacy services at Parkland are just as comprehensive. With a $71 million annual drug budget, the department has 318 employees, including 140 pharmacists. "We fill over 1.6 million prescriptions a year at our Outpatient Clinic Pharmacy, the Parkland Prescription Center and the Community Oriented Primary Care (COPC) clinics, serving over 600,000 patients in the process," says Babbitt. "If there's a reimbursement avenue to follow that will help us reduce our costs, we'll follow it. We don't deny care to patients if they cannot pay, but we will work with our patients to help reduce the cost to the institution."

Reimbursement Depends on Perspective
When asked what advice she would give other pharmacists seeking to maximize their institution's outpatient reimbursement, Babbitt says, "Reimbursement depends on perspective. With what perspective of the reimbursement spectrum are you concerned? On an outpatient basis, there are infusion clinics, such as Oncology or HIV, DME and ambulatory prescriptions-your community pharmacy perspective. To understand reimbursement in this setting, you need to be aware of the various payors, including Medicare, Medicaid, other state or regional programs and private payors. You also need to be aware of and concerned with other programs that, while technically not reimbursement programs, can significantly reduce your hospital's costs. These programs include the Federal 340B Program and drug manufacturer's patient assistance programs. We've been in the 340B program since its inception in 1993, and we've made great strides in maximizing reimbursement through patient assistance programs."

Medicare Reimbursement
"There are three aspects of Medicare reimbursement that have me burning the midnight oil-the new Medicare Part D prescription drug benefit, the provision for Medication Therapy Management reimbursement, and the change to average sales price plus 6% for hospital-based outpatient infusions. It's sort of a triple whammy," says Babbitt with a smile. Let's take a look at these programs in detail.

Medicare Part D
The Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 was signed into law on December 8, 2003. The law includes a Medicare-endorsed, privately-run prescription drug discount card program beginning in 2004, with the new Medicare Part D prescription drug coverage beginning in 2006. The drug benefit is administered through a private entity, such as a health plan, an insurer or a pharmacy benefit management company.

"There are currently 47 Prescription Drug Plans (PDPs) available in Texas. We can't possibly participate in all 47 plans. If a current Parkland patient enrolls in a PDP that we don't contract with, we might be able to offer them a 90-day cross over period allowing them to choose one of our participating plans, or we could lose the patient. We are very interested in maintaining continuity of care," says Babbitt with some concern. "Overall, we see Medicare Part D as a good thing. We should see reimbursement for some drugs we dispense at the Tax Support Program's expense."

"However, we also have to keep close tabs on patient migration to PDPs with which we don't contract. Being a disproportionate-share hospital participating in the 340B program, our Medicare percentage of patients served may be reduced if too many patients with Part D coverage go elsewhere to have their prescriptions filled. This could impact our pharmacy residency program reimbursement. Remember-every action has an equal and opposite reaction," says Babbitt with a sigh.

Medication Therapy Management
Under MMA, each drug plan sponsor is required to establish a medication therapy management program with the assistance of a pharmacist and a physician to ensure that covered Part D drugs are used appropriately for targeted beneficiaries, including individuals with multiple chronic conditions, such as asthma, diabetes, hypertension, hyperlipidemia and congestive heart failure.4

"We are looking forward to this," says Babbitt. "We have the pharmacists in place and we've been providing the service. It's just a matter of letting the PDPs know and, hopefully, receiving reimbursement."

As described by Meyer and Cantwell, "(MMA) legislation creates immense challenges for pharmacists to ensure that private plan sponsors properly value and reimburse pharmacists' services. Also, implementing these benefits will be labor-intensive and time-consuming for the frontline practitioner, particularly with respect to helping beneficiaries understand the changes and maintain the continuity of care."4

Average Sales Price
MMA includes provisions affecting Medicare's payment policy for providers in various practice settings. Many of these provisions are an attempt to move Medicare to a rate that more closely reflects the actual acquisition cost of medications.4

"Physician office-based practices were moved from an average wholesale price-based reimbursement to ASP-based reimbursement in 2005. This change will affect hospital-based outpatient departments in 2006, when we will be paid ASP plus 6%," says Babbitt. "Average sales or selling price means half of us will be paying less than that price, half will be paying more. It will be very important for you to know which half your hospital is in."

"Under Medicare Part B, when physician's offices were moved to ASP plus 6% reimbursement, there was a lot of hallway discussion that this might force them to move patients back to the hospital setting due to lost reimbursement. Overall, we haven't seen that happen at Parkland. There is one important exception, however, and that is with IVIG," says Babbitt.

A recent news article in the American Journal of Health-System Pharmacists echoed this concern. As of January 1, 2005, payments to physicians for IVIG products dropped to $40 per gram (106% of the ASP) from $66 per gram. This increased to $56.72 per gram on January 18, 2005. Until January 1, 2006, hospital-based reimbursement for IVIG was $80.68 per gram.5 In addition to unpredictable IVIG supplies in 2005, with increasing shortages expected in 2006, it appears MMA has contributed to patient-shifting to the hospital setting in 2005.

Other Programs While Medicare reimbursement is an integral component of any hospital's reimbursement portfolio, let's examine other programs that affect Parkland and, potentially, your hospital or health system.

340B Program for Disproportionate Share Hospitals
The 340B Drug Pricing Program resulted from enactment of Public Law 102-585, the Veteran's Health Care Act of 1992, which is codified as Section 340B of the Public Health Service Act. Section 340B limits the cost of covered outpatient drugs to certain federal grantees, federally qualified health centers and qualified disproportionate-share hospitals. A disproportionate-share hospital: (1) is owned or operated by a unit of state or local government, is a public or private nonprofit corporation that is formally granted governmental powers by a unit of state or local government or is a private non-profit hospital which has a contract with a state or local government to provide health care services to low-income persons not entitled to benefits under Title XVIII of the Social Security Act or eligible for assistance under the state plan under this title; (2) had a disproportionate-share adjustment percentage of uninsured or under-insured patients greater than 11.75%; and (3) does not obtain covered outpatient drugs through a group purchasing organization or other group purchasing arrangement.6

"While the qualification criteria and the details may seem burdensome, the 340B program is definitely worthwhile if you qualify," says Babbitt. "We estimate our annual outpatient savings approaches 30% under this program. If you meet or exceed the 11.75% threshold, you should give the 340B program a good, hard look."

Drug Manufacturer's Patient Assistance Programs
Like other organizations, Parkland has turned to pharmaceutical-industry sponsored patient assistance programs (PAPs), to help meet their uninsured or underinsured patients' medication needs. PAPs have been in operation for several years and are not expected to be terminated in the future. They are available to qualified adults of all ages but are intended only for patients with financial barriers to obtaining medications.7 According to the Partnership for Prescription Assistance, more than 475 industry-sponsored assistance programs provide access to more than 2,500 medications. In 2004, an estimated 22 million prescriptions were filled via these programs, with an estimated wholesale value exceeding $4 billion.8

"We have 12 full-time employees working on patient assistance programs," comments Babbitt. "They are pharmacy employees with business service backgrounds. It will be interesting to see if Medicare Part D has any impact on the number and type of patient assistance programs available. I hope they don't disappear."

Other Advice "One of the most important things we've done to ensure appropriate reimbursement is to create a Revenue Cycle Management Team," says Babbitt. "This is a multidisciplinary team with representatives from Patient Financial Services, Radiology, Laboratory, Emergency Department, Medical Records and Pharmacy. The team examines and works to eliminate all potential billing errors. It is critically important to submit a clean and accurate claim if you want to get paid," says Babbitt. "If a pharmacist wants to make an immediate contribution to successful reimbursement, find out who maintains the charge drug master, or CDM, at your institution. Work very closely with that person to ensure the CDM is current and correct, particularly as new medications are added to your formulary. You can also consider joining the Healthcare Financial Management Association. This organization consists of an array of individuals, from chief financial officers to patient admission and registration specialists, who are involved with the revenue cycle at hospitals and other health care systems. In addition to the reimbursement information, it's a great way to network with other people working on these reimbursement issues," says Babbitt. You can find out more about the Healthcare Financial Management Association at

"While our total annual drug budget is $71 million, we save about $20 million per year by taking advantage of every opportunity to reduce costs, maximize reimbursement or receive replacement product by participating in every program possible. This ranges from 340B to AIDS Drug Assistance Programs and the Ryan White Project. You've got to know the community you serve, and you have to maximize the programs available to you," says Babbitt knowingly. "Do the math-$20 million saved on a $71 million budget is 28%. That's a great start!"

Babbitt's favorite quote-"I hate quotations. Tell me what you know" (Ralph Waldo Emerson)-says a great deal about her and the way she manages her ever-growing responsibilities. It's this no-nonsense approach that has brought Babbitt and Parkland great success in meeting the healthcare needs of their community-success that can be duplicated within your organization by a lot of hard work, diligence, caring and commitment. Just follow Rose's example.


  1. Parkland Health & Hospital System. (accessed 2005 November 20).
  2. U.S. News and World Report. (accessed 2005 November 20).
  3. U.S. News & World Report. (accessed 2005 November 20).
  4. Meyer BM and Cantwell KM. The medicare prescription drug, improvement, and modernization act of 2003: Implications for health-system pharmacy. Am J Health-Syst Pharm. 2004;61:1042-51.
  5. Thompson CA. Changes in IVIG marketplace challenge pharmacists. Am J Health-Syst Pharm. 2005;62:2329-32.
  6. U.S. Department of Health and Human Services, Health Resources and Services Administration. (accessed 2005 November 26).
  7. Duke KS, Raube K, Lipton HL. Patient-assistance programs: Assessment of and use by safety-net clinics. Am J Health-Syst Pharm. 2005;62:726-31.
  8. Partnership for Prescription Assistance. (accessed 2005 November 26).

Volume 20
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