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Will nursing homes now be forced to use cheaper Rxs?

Consultant pharmacists are hoping that PPS doesn't stand for Penny-Pinching Scripts. The initials actually are the acronym for Prospective Payment System--a new, complicated, and largely uncharted way Medicare will start paying for nursing home residents on July 1.

Medicare now uses a "pass through" system. It pays for drugs and other services on a reasonable-cost basis after they are provided in one of the nation's 9,000 skilled-nursing facilities (SNFs). Under the new system, which will be phased in over three years, an SNF will get one tightly capped per-diem payment to cover all aspects of a resident's care--everything from pillows to prescriptions. It will be adjusted according to residents' clinical and functional characteristics or case mix. Medicare will, in effect, become a managed care payer.

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The concern is that nursing home administrators will be forced to hunt for savings to hold down costs and increase margins. One way to do that in the pharmacy is to embrace older, lower cost, and often less effective drugs instead of what is considered optimal drug therapy.

Pharmacy certainly will be seen as a cost center. "Because of that, there is the potential that patients will be denied access to needed and appropriate drugs ... to minimize the daily cost of care," Tim Webster, executive director of the American Society of Consultant Pharmacists (ASCP), told Drug Topics. "If you supply the drug therapy, you're going to try to limit utilization and look for cheaper alternatives."

The Department of Health & Human Services, which runs Medicare, estimates that the average SNF's reimbursement would be cut by 17% after the phase-in. But because Medicare accounts for only a small percentage of most SNFs' payments, HHS predicts that most will have their total budgets cut by less than 2%. That may be true, but Medicare policies usually have a ripple effect, especially where cost controls are concerned. "Whatever PPS policies emerge will be widely adopted by public and private payers in every state ... and shape the practice of pharmacy in all sorts of risk-based payment systems for many years," Jan Allen, ASCP's president, warned members at the annual meeting last year.

Congress ordered the switch to PPS as part of the 1997 Balanced Budget Act. It is counting on savings of $9.5 billion over five years. In 1989, SNF services accounted for 4.7% of all Medicare spending, or about $2.8 billion. By 1996, the total jumped to nearly $11 billion, or 9% of the Medicare budget.

"We can make Medicare dollars go further by being a more prudent purchaser of [SNF] services," said Donna E. Shalala, secretary of HHS, who unveiled 64 pages of proposed PPS regulations last month. "This new system will save money and, in some cases, provide increased access for patients who require more care in" SNF services, she said.

SNF patients will be classified into one of 44 resource utilization groups (RUGs), which identify the relative cost of providing care for different types of residents based on their use of nurse and staff time. The RUG rate will be adjusted for urban-rural area wage rates and case mix. For three years, SNFs will get a mix of a RUG rate and a facility-specific PPS amount. In 2001, PPS becomes fully effective.

Among ASCP's many concerns is the way pharmacy costs are incorporated into the nursing component of the PPS rate. But perhaps the group's biggest worry is that the PPS will place the frail elderly at risk of poor outcomes in order to control costs. When it became clear last year that PPS could not be derailed, ASCP lobbied extensively and successfully to have Congress tell HHS that it should consider the results of studies that examine PPS' impact. ASCP then began such a study, the preliminary results of which indicated that a PPS used by New York for Medicaid nursing home residents resulted in less use of optimal drug therapies than in four comparison states. But the study, by Abt Associates, could not say whether that resulted in poorer functional or clinical outcomes. There were some signs, though. "New York residents with Alzheimer's disease, other dementia, or behavior problems were more likely to have deteriorated cognitive status, behavior problems, worsening urinary incontinence," the study found.

ASCP's Webster sees both challenges and opportunities ahead. "Certainly, there is going to be interest in making sure that patient drug therapy costs are managed," he said. "That's what a risk-based payment system is all about. The challenge will be to balance costs with therapeutics. That creates the opportunity for long-term care pharmacy. In the equation of costs and therapeutics, you're really looking at the clinical side of long-term care pharmacy in terms of geriatric pharmacotherapy, and that will make clinically competent long-term care pharmacists and pharmacies very valued in the system."

 

 
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