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Pharmacists' Incentive Program Benefits Ohio Medicaid

Kate Traynor

An innovative incentive program in Ohio is increasing Medicaid payments to participating long-term care pharmacies while simultaneously saving money for the state.

The two-year project, known officially as the Long-Term Care Pharmacy Best Practices Management Incentive Program, established an inflation-adjusted, monthly drug expense target for participating long-term care pharmacies. Pharmacies that keep patients' drug costs below this target split with the state the total savings, defined as the difference between the target value and actual pharmacy expenditures.

According to the Ohio Department of Job and Family Services (ODJFS), which oversees the state's Medicaid program, long-term care pharmacies can use strategies such as promoting the use of generics, eliminating unnecessary or duplicative therapy, and returning appropriately packaged unused medications to the pharmacy to cut drug costs for Medicaid beneficiaries.

ODJFS Director Tom Hayes, in a May 6 report to the state legislature, estimated that the state saved $1.2 million during the first six months of the program.

Chad Worz, Pharm.D., director of pharmacy for Skilled Care Pharmacy of Mason, Ohio, was the driving force behind the incentive plan. He said the idea for the program was "stimulated by Ohio Medicaid desiring to cut our reimbursement formula."

Worz said a reduction in the Medicaid reimbursement rate would hit his "closed-door pharmacy" especially hard.

"All we do is [serve] nursing facilities and assisted living facilities, and all we do is provide medications," he said.

So Worz and fellow members of the Institutional Providers Association, a lobbying group that represents independent long-term care pharmacies in Ohio, contacted state Medicaid officials.

"We sat down and talked to them about ways that we could help them reach their goal, which is obviously to lower their cost burden, and at the same time kind of preserve how we're paid," he said.

Worz said the Medicaid officials refused to consider any proposal that involved an outlay of money for the state, including payment for pharmacists' medication-management services. To get the officials' attention, Worz said, the pharmacy group instead had "to find a way to save the state money."

According to figures from July 2002, Worz said, the state had spent an average of $377 per month on medications for each institutionalized Medicaid beneficiary. He said that state officials expected that amount to climb about 10 percent, to $417 per patient per month, over the course of the fiscal year.

So Worz and his colleagues proposed that the state use the $377 figure as a baseline and adjust it for inflation using the U.S. Bureau of Labor Statistics producer price index for pharmaceutical preparations, which, Worz said, has typically "bounced between 3 and 5 percent" annually. Long-term care pharmacies could then voluntarily enter into an agreement with the state to keep drug spending for Medicaid beneficiaries at or under the target value. Any savings generated under the target value would be split between the state and the pharmacies that had stayed under budget.

The state accepted the proposal and enacted the two-year program as retroactive emergency legislation last August. According to ODJFS, 31 long-term care pharmacies that serve about a third of Ohio's institutionalized Medicaid patients initially signed up for the program.

Worz said that Skilled Care's approach to the incentive program was to increase the number of pharmacists responsible for managing the medications of patients in the approximately 2,700 "Medicaid beds" the pharmacy handles. The pharmacists worked closely with physicians to assess patients' medication needs and make recommendations about drug therapy.

"In our experience, a lot of our elderly are overmedicated," Worz said. He explained that patients "get started on one product, and that may cause an adverse event...[but] instead of identifying that as the problem drug, we add more drugs to deal with the side effects."

At Skilled Care, Worz said, pharmacists worked with physicians to ensure that therapy was halted when appropriate. "We saw a lot of overutilization of things, like proton-pump inhibitors [and] ferrous sulfate, that had already done what they needed," he said. Worz added that discontinuing iron supplementation when medically appropriate allowed patients to stop using other drugs to treat iron-related constipation, further reducing the number of prescriptions dispensed.

The pharmacists also made recommendations for managing undertreated conditions. Worz said that each recommendation to add a new drug to a patient's regimen was generally offset by the removal of about three unnecessary drugs at the same time.

He noted that physicians remained in charge of patient care, preventing the overzealous trimming of drug regimens.

"The success in the program is demonstrated by the relationship you have with the physician and how you can work together as a multidisciplinary team to curb utilization appropriately," Worz said.

At the end of the program's first fiscal year, Worz said, "pharmacies that participated held the average drug cost per month per patient to $383." Nonparticipating pharmacies, in contrast, spent an average of $409 per month on medications for Medicaid beneficiaries.

According to Ohio state law, incentive payments for the first year of the program will be distributed to the eligible pharmacies by the end of the third quarter of the 2004 state fiscal year.

Although the incentive program did not directly pay for pharmacists' services, Worz said the program was "a first step" toward that goal.

The incentive plan, he said, created "a better relationship and dialogue with Ohio Medicaid so that we can make a transition to...a system where we are paying for intervention."

He described the plan initially as a gamble but said "We took the bite. We increased our pharmacists out in the field...and now we have a program that allocates money back to us" to cover those pharmacists' services.

"What this program was able to demonstrate was that we have made an impact in Ohio," Worz said.