Electronic processing options confuse Rx'ers - curtail third-party paperwork, rejected claims - includes related article

Electronic processing options confuse Rx'ers

New options for electronic transmission of third-party claims are now available to pharmacy, yet the choice is confusing some pharmacists.

Should pharmacy operators choose point of sale terminals (referred to in the industry as "black boxes"), or should they incorporate on-line adjudication capabilities in software added to their current computer systems?

The advances in electronic claims processing have unfolded rapidly due, in part, to a desire by third-party administrators to cut their administrative costs of handling the more traditional paper claims. Also, pharmacists have become increasingly unhappy with the poor timeliness of reimbursements and rejected claims through paper claims processing.

With the government gearing up for the Medicare Catastrophic Coverage Act, both third-party administrators and pharmacists are realizing that they must incorporate the latest technology into the pharmacy or risk opportunities to participate in the growing third-party prescription marketplace.

First there was paper. It was cumbersome. It was time consuming. It was a headache.

Then came computers. While computers all but eliminated the handwritten claim forms, the computer still printed claim information on paper claim forms. The accuracy of reimbursements for third-party claims was only as good as the pharmacy's computer data.

Growing headaches

As the percentage of third-party business grew, so did the pharmacists' headaches from keeping track of suffocating paperwork, plan eligibility and contract reimbursement changes. Although some pharmacists still process claims on paper, electronic "tape-to-tape" processing, in which claims are recorded and sent in a batch electronically, directly into third-party processors' computer banks, became a better alternative.

The system, however, is not without its share of problems--problems which could worsen as third-party plans become more complex.

"The issue of upgrading third-party claims processing started as a cost containment issue from our standpoint," said Charles Pulido, vp, professional relations at PCS, an Arizona-based claims processor. "Originally the idea of having a customer with an identification card with an expiration date worked well enough as long as the card was good and the drug was covered. Then the picture got more complex. Third-party insurers want to make sure that the customer as well as the drug is covered and they are not willing to pay for mistakes anymore."

The result is that pharmacists are plagued by rejected claims. To make matters worse, cost cutting measures by third-party insurance companies have made it increasingly difficult for pharmacists to determine exactly which drugs are covered under a program's formulary.

"Pharmaceutical Card System, Inc. (PCS) has over 400 sub-plans and those plans vary from state to state," said Kevin Browett, vp-pharmacy operations for Peoples Drug Stores. "We generally would take an average of those reimbursement levels and estimate the amount we would receive. It causes problems with our profit and loss statement."

Rejected claims

Browett said rejected claims are another problem. "Forty to 50 percent of rejects in our industry occur because of eligibility problems. Either the drug is not eligible for reimbursement or the customer has lapsed eligibility. It's a real problem," he said.

One way to eliminate the paperwork headaches and the question of drug and customer eligibility is to verify and process claims electronically. Experts say that most pharmacy computer systems have the capability to handle on-line claims verification, which would virtually eliminate rejects and therefore increase cash flow. Pharmacists who don't have computer systems have the option of leasing or buying point-of-sale verification terminals.

Point-of-sale verification terminals ("black boxes") have been around for some time to verify credit cards. PCS was the pioneer in on-line adjudication with its Recap system introduced two years ago, according to Pulido. Recap offers POS terminal which can be bought or leased. Claims verifications are assessed a fee (which can cost pharmacist 12 cents a claim if the box is leased or purchased, or 20 cents if PCS provides the box for free).

As Ken McClaine, executive vp of marketing for General Computer Corporation (GCC), another company which provides electronic claims transmission equipment, puts it, "Statistical surveys showed that it was cheaper for pharmacists to throw away rejects than to resubmit them."

Pharmacists fear that other third-party claims processors will also introduce their own versions of the boxes, and they will once again find themselves with a new kind of headache.

"We deal with 400 carriers, said People Browlett, the next thing you know, I'd have 20 boxes on my counter."

With limited counter space and a proliferation of black boxes, how does a pharmacist juggle it all?

Mike Winkelman, vp, pharmacy operations for Perry Drug Stores said that the boxes make more work for the pharmacist. "We are involved in PCS Recap and are not happy with double entry. It takes time to enter the information at point of sale and then match that information in the pharmacy computer."

Peter Rapp, MIS director for Rix-Dunnington, said the Massachusetts chain has examined a number of black boxes but is not satisfied with any yet. "It is confusing," Rapp said. "I've been following this for over a year and they come and go."

With the Medicare Catastrophic Act looming and no players yet named to supply a box for the government program, many chains are reluctant to choose a unit they feel may be outdated the minute it's purchased.

"We are waiting for the Utopian system which will do it all," said Larry Stenberg, director of pharmacy operations for the Seattle-based Bartell chain. Bartell, according to Stenberg, does only 25 percent of its prescription business with third-party customers. "We can bide our time instead of buying something now, and then having to buy something six months from now."

Some industry experts don't see the black box question as an important one. "We see the black box as a bridge for pharmacists to upgrade their pharmacy computers or for pharmacists who have not yet computerized," said PCS's Pulido. "The advantage is that pharmacists who are not yet computerized can participate in sophisticated programs with the use of the box."

GCC's Cash Flow

Other companies, like General Computer Corporation (GCC), are offering black boxes which act as an actual modems for the computer. The system, called Cash Flow, has the capability of interfacing with an existing pharmacy computer system, or can stand alone as a black box. The system analyzes claims, formats them and then sends them to the proper third-party processor.

GCC's Cash Flow eliminates the need for data to be switched from the company which analyzes it to the company which will process the claim, according to Ken McClain, executive vp, marketing for GCC.

"We wanted Cash Flow to fit into an environment where there was no computer as well as one which could interface directly with an existing system," said McClain. "Because more carriers are going online and have more detailed requirements, we don't want the pharmacy to have to adjust constantly. We designed a matrix of 600 to 1,000 carriers with all information requirements so that every third-party claim filled can be transferred to Cash Flow."

GCC's Cash Flow has its fans. Ken Mono, director of MIS for Bill's Drugs, a 25-store chain based in Lafayette, Calif., said the system has virtually eliminated rejects for the chain.

Bill Lockwood, publisher of ComputerTalk and executive director of the American Society for Automation in Pharmacy (ASAP) feels that black boxes, which unlike Cash Flow, do not interface with the pharmacy computer, are nothing more than first generation personal computers and that most pharmacy systems can handle the software involved to directly link with third-party carriers.

"We did a study which showed that 65 percent of pharmacists preferred to go directly out the back of their computers to the carriers," he said. "In my opinion the mechanisms are already in place for pharmacies to go directly online. In terms of Medicare catastrophic, all the government has to do is select a protocol."

A small step

David Sackett, president of PAID Prescriptions, Inc., said that 90 percent of the claims PAID processes come from pharmacies with computer systems. "The technology already exists to go online," he said. "Pharmacy is the most automated branch of medicine today. "The step from using a computer to produce claim forms to actually submitting the claims by computer is a small one."

"Existing computer companies are providing networks to smaller chains and independents. The larger chains are moving to centralized data processing capabilities (See sidebar). A majority are developing direct links with processors," he said. "Upgrading is attractive to pharmacists because it is a communications device which enables them to know more about their business."

Indeed, the chains are receptive. "There is an opportunity for computer companies who can sell us an entire network," said Perry's Winkleman.

Another problem which will plague the claims submission process is the standardization of data. The universal claim form was developed by the National Council for Prescription Drug Programs (NCPDP). Yet GCC's McClain reports there are 30 to 40 variations on the universal claim form being used.

"The basic framework of a universal claim form is there," said Lockwood, "but everyone does their own dance. It drives the industry crazy."

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