October 16, 2020
When it comes to maximizing savings, the key is in the details of the Administrative Fee model.
When trying to pick the best Third Party Administrator (TPA) for your 340B program, the cost is always among a Covered Entity’s top 3 concerns. It can be quite a tall task trying to compare pricing from one TPA to another, even if they all have what appears to be the same pricing models. This article will review some of the most common fee models’, their pros and cons, and review questions that you can ask to help create a more accurate comparison.
The flat fee model covers all administrative charges in a single monthly cost per contract pharmacy relationship. This model’s pros are that it is easy to budget, and the model caps the exposure of the entity. But there are cons to consider. In most cases, the flat fee only covers the administration to match claims. Others, such as switch fees or gateway pass through fees may not be covered.
Questions to ask the TPA are: What tasks or functions are considered part of the administration fees? Should I expect any other charges in addition to this? If so, what are they? Do you charge to pass funds from pharmacy to entity? When does billing start?
The transactional model charges the Covered Entity generally on a per match basis. If it’s a low volume store, this can be advantageous because the fee should be less than the flat fee model. Another pro is that the rate is variable, and lower priced than other options. But the definition of a match for one TPA may not be the same as another. Some consider an eligible patient or encounter with an eligible provider to be a match, while others only utilize patient data to determine a chargeable match. Another area to review is reversals or overrides. This model differs the most from TPA to TPA. It’s essential that you ask the right questions and read the contract related to pricing.
Questions to ask the TPA include: How is a match defined? Do you charge on member-only or member and provider? Do you charge for blocked claims (i.e., Medicaid)? Will I receive a credit if a claim is reversed or unwound?
The switch model charges the Covered Entity for every claim the pharmacy submits via point of sale system. This model is suitable for low volume pharmacies because it usually has the lowest fee. The switch model’s disadvantage is that it generally includes all claims, whether they are for entity patients or not. A pharmacy may resubmit a claim over two times on average before it gets paid. This model generally has the highest variability due to the number of claims a pharmacy can process from month to month. A typical pharmacy has anywhere from 5,000 to 20,000 switch transactions a month.
The reimbursement model charges the entity for claims that are replenished. This model tends to have a higher fee per claim at first but, when you consider the majority of items replaced are Brands, it can become very advantageous. The average number of matches to replenishment can be anywhere from 1 to 5 to 1 to 20 depending on the match rules of the TPA and PSA of the pharmacy. While the potential cost to the entity could be higher than some, this model could have the lowest risk knowing you are only paying for claims which get replenished.
As you can see, to fairly compare one TPA’s price to another, there are many nuances within the pricing model itself to identify. Be sure you are asking the right questions to ensure you are getting the best option for your situation. If ever in doubt, you could also send sample data of your current program and ask the TPA to estimate their costs based upon your current data.
Interested in learning more? Join our Experience Verity 340B Lunch & Learn Webinar, Fee Models in the 340B Space on Tuesday, October 27 from 11:00 AM to 11:30 AM PST.