billing for your professional services – what you need to ... · know to make the best business...

Billing for Your Professional Services – What You Need to

Know to Make the Best Business Decision Possible

Presented by:

Michael Rupp, PhD, RPh, Professor Pharmacy Practice, Midwestern University - Glendale

9:00 a.m. - 10:30 a.m., Saturday, October 13, 2007 Anaheim, California

Evaluation # 07-151-P

This program is approved by NCPA for 0.15 CEUs (1.5 contact hours) of continuing education credit. NCPA is approved by the Accreditation Council for Pharmacy Education as a provider of continuing pharmacy education.

Educational Objectives Program: Billing for Your Professional Services – What You Need to Know to Make the Best Business Decision Possible Presenter: Mike Rupp, PhD, Professor, Pharmacy Practice, Midwestern University Objectives:

1. List and explain the major operating costs that pharmacies incur to deliver professional services.

2. Classify service delivery costs as fixed or variable and explain the importance of this distinction for making sound pricing and contracting decisions.

3. Accurately calculate the cost of dispensing a prescription or delivering one unit (i.e., patient encounter) of a professional pharmacy service.

4. Complete a breakeven analysis for a new professional service. 5. Use the new CPT MTM codes to bill for your services.

Michael T. Rupp, PhD, RPh

Biographical Sketch

Dr. Rupp serves as Professor of Pharmacy Administration at Midwestern University College of Pharmacy in Glendale, Arizona. Throughout his academic career he has been active in developing, implementing, and evaluating professional pharmacy services, creating payment systems for pharmacists in the community practice setting, and evaluating the impact of new technologies in community practice. Dr. Rupp is the founder and managing partner of MENTORx, a professional services consulting firm specializing in research and demonstration projects in community pharmacy. He is the creator of PharmAccount® (www.pharmaccount.com), an Internet-based provider of cost analysis services for community pharmacies.

NCPA 109th Annual ConventionAnaheim, CA October 13, 2007

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© 2007 MENTORx 1

Billing for Your Professional Services:What You Need to Know to Make the Best

Business Decision Possible

Michael T. Rupp, Ph.D.Professor of Pharmacy Administration

Midwestern University – Glendale

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A good business model begins with a good practice

model, so . . .

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Medication Therapy Management (MTM) Model 1.0

Medication Therapy ReviewPersonal Medication RecordMedication Action PlanIntervention and/or ReferralDocumentation and Follow-up

Five “Core Components”

Source: APhA / NACDS Foundation, 2005


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Personnel Considerations

Aptitude

Interest

Knowledge

Skills

Time!!

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A management decision . . .

Situation: You have developed a service specifically targeting patients with hyperlipidemia.

Decision: What price should you set for the service? If covered by insurance, what is the lowest fee you should accept?

What do you need to know?

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Relationship between the Income Statement and Balance Sheet

Sales-COGS

GM -OE

NP

A = L + N W

reinvest

repay

build w

ealth

(retir

e!)

P&L Statement Balance Sheet


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What is the “Cost of Service?”

salary, wages and benefits of all service personnelnon-salary direct costs: special education/training, information resources, marketing and promotion materials and supplies routinely consumed during delivery of the serviceequipment used to support the servicefair share of overhead costs

The average cost to deliver one unit of a specialized pharmacy service (i.e., one patient encounter or episode of care):

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Why should you know your service delivery costs?

to make pricing decisions if a price makermake participation decisions if a price takerassess productivity/efficiency of staffevaluate new processes or proceduresassist your state and national associations to represent your interests!

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How is the Cost of Service Delivery Calculated?

Direct Costs – would not be incurred if the activity were not performed

Variable – fluctuate with volume (materials, supplies)Fixed – do not fluctuate with volume (education/training, information resources, marketing and promotion, capital equipment)What about Personnel?

Indirect Costs – would be incurred even if the activity were not performed (e.g., overhead)

each indirect cost in the operation must be allocated to the activity being costed using a reasonable criterion


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Okay, but . . .

“Make everything as simple as possible, but not simpler”

- A. Einstein

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So, what price should you set or accept?

What else would you want to know?

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Calculating Breakeven Volume

Sales - Variable exp - Fixed exp = 0At breakeven:

Variable expenses = $ 15.25 (Personnel)

+ 13.85 (Materials & Supplies)

Fixed expenses = $ 1.97 (Equipment)

+ 5.77 (Non-Salary Direct)

+ .43 (Rent & OH)

$ 37.27


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Calculating Breakeven Volume

If we were to set or take a price of $50 per encounter, and if N = number of encounters per year at breakeven:

$50N - 29.10N – (8.17 x 156) = 0

$20.90N = $1,275

N = 61 (i.e., 20 weeks @ 3/wk)

What could the manager do to reduce the number of encounters required to breakeven and/or to be able to price the service more competitively?

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Additional Considerations

Will offering the service require adding additional staff?Will it require diverting existing staff from other revenue generating activities?Can you substitute lower cost staff for some service delivery activities?Do you want this program (and price) in your book of business?What are your objectives for this Service?

Why are you doing this??

18www.pharmacist.com/mtm


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19www.pstac.org

Mission: Improve the coding infrastructure necessary to support

billing for pharmacists’professional services

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PSTAC Member Organizations

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New Pharmacist-only CPT Codes

Three (3) ‘pharmacist only’ CPT professional service codes to bill third-party payers for MTM Services delivered face-to-face between a pharmacist and a patient including, but not restricted to Medicare Part D:

99605 is to be used for a first-encounter service (up to 15 minutes) 99606 is to be used for a follow-up encounter with an established patient (up to 15 minutes) 99607 may be used with either 99605 or 99606 to bill additional 15-minute increments.

Initially approved as Category 3 (“emerging technology”or “tracking”) codes. Reclassified as Category 1 and will become eligible for use January 1, 2008.


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What is MTM?

Medication Therapy Management service(s) describe face-to-face patient assessment and intervention as appropriate, by a pharmacist, upon request.MTM includes the following documented elements:

review of the pertinent patient historymedication profile (prescription and non-prescription)recommendations for improving health outcomes and treatment compliance.

These codes are not to be used to describe the provision of product-specific information at the point of dispensing or any other routine dispensing-related activities.

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Sample Clinical Vignettes99605:

A 66 year-old female with pre-existing osteoporosis has been diagnosed with type 2 diabetes and hyperlipidemia. Initial medication therapy assessment and intervention is performed.

99606:A 66 year-old female with osteoporosis, type 2 diabetes, and hyperlipidemia is receiving follow-up reassessment after receiving a prior medication therapy management service.

99607:Intra Service OnlyThe service(s) continued for an additional 15 minutes with the same patient.

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ExampleInitial

ServiceSubsequent

Service

99605 99606Primary Code

Incremental Code

Example: 45-minute encounter with a new patient

Primary Code (99605) + Incremental Code (99607) x 2

99607


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Self Assessment Questions1. A cost attributable to a particular service that increases

in direct proportion to service volume is a (an)a. indirect fixed costb. direct fixed costc. indirect variable costd. direct variable cost

2. When calculating the cost of delivering a service, personnel time is typically considered to be a (an)

a. indirect fixed costb. direct fixed costc. indirect variable costd. direct variable cost

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Self Assessment Questions3. Indirect costs and overhead are not considered when

calculating the cost of delivering a professional service from a community pharmacy.

a. Trueb. False

4. Most pharmacies that implement MTM services will see their cost of delivering the service drop over time.

a. Trueb. False

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Self Assessment Questions

5. There are now codes that are specifically and exclusively for use by pharmacists to bill MTM services to third party payers.

a. Trueb. False

Learning Assessment Questions Program: Billing for Your Professional Services – What You Need to Know to Make the Best Business Decision Possible Presenter: Mike Rupp, PhD, Professor, Pharmacy Practice, Midwestern University Questions:

1. A cost attributable to a particular service that increases in direct proportion to service volume is a (an)

a. Indirect fixed cost b. Direct fixed cost c. Indirect variable cost d. Direct variable cost

2. When calculating the cost of delivering a service, personnel time is typically considered a (an):

a. Indirect fixed cost b. Direct fixed cost c. Indirect variable cost d. Direct variable cost

3. Indirect costs and overhead are not considered when calculating the cost of delivering a professional service from a community pharmacy.

a. True b. False

4. Most pharmacies that implement professional services such as MTM will see their cost of delivering the service decrease over time as they become more efficient service providers.

a. True b. False

5. There are now CPT codes that are specifically and exclusively for use by pharmacists to bill MTM services to third party payers.

a. True b. False

Learning Assessment Answers Program: Billing for Your Professional Services – What You Need to Know to Make the Best Business Decision Possible Presenter: Mike Rupp, PhD, Professor, Pharmacy Practice, Midwestern University Answers:

1. d 2. d 3. b 4. a 5. a

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