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3 Places Where Excess LTC Drug Costs Are Hiding in Plain Sight

LTC operators could be missing out on significant savings

Aside from labor costs, pharmacy spend is one of the most costly parts of running a long-term care (LTC) or skilled nursing facility (SNF). It is also shrouded in complexity due to extensive invoices and dense contracts. As a result, there are many places where added fees and missed opportunities equate to bloated pharmacy spend.

The three ways to lower this major cost point are: 

  • Maximizing and automating the rebate process
  • Improving contract transparency
  • Outsourcing complex and tedious tasks

1. Missing Out on Drug Manufacturer Rebates

Drug manufacturer rebates offer long-term care and skilled nursing facilities an effective way to lower their overall operating costs. The problem, however, is that many facilities do not have a clear way to submit for these rebates, or they miss out entirely due to the sheer length of their pharmacy invoices. 

Over time, these missed drug rebates can amount to tens of thousands of dollars, or more, depending on the size of the LTC operator. By implementing software solutions that automatically scan invoices for current drug manufacturer rebates, operators can see significant savings in one of the costliest parts of running a LTC facility—pharmacy spend. 

Maximizing drug rebate submissions using automation results in the equivalent of free money for operators, enabling them to funnel this into improving care, paying for skilled staff, or purchasing upgrades, and ultimately making facilities more competitive in a tight market.

While engaging in the rebate process, some facilities may get notifications from manufacturers that they received duplicate submissions for some rebates. This is a sign that a third party is submitting rebates. Let’s address how this happens and talk about contracts with pharmacy partners.

2. A Lack of Transparency in Pharmacy Contracts

Transparency in your LTC pharmacy relationship is essential to lowering pharmacy costs. A lack of transparency can cause LTC operators to lose out on rebates and cause compliance issues. The Centers of Medicare & Medicaid Services (CMS) regulates rebate reimbursements and can fine operators who become non-compliant, sometimes through no fault of their own.

To avoid these issues, it is advised to clearly understand who is submitting rebates on behalf of the LTC operator. As Medicare Part A payers, LTC operators are eligible for drug manufacturer rebates and should have a rock-solid understanding of contract terms that designate a third party to submit on their behalf. These terms and conditions can be buried in lengthy contracts that require an educated reader to parse terms that delegate rebates away from the operator.

Another area that operators can look at to control pharmacy costs is around third-party fee and pricing structures. Empowered operators know what they are paying for and the value their pharmacy partners are adding. 

Every layer in a contract that adds vendors to provide additional services can grow net costs because of added fees. Operators must understand each service layer, associated pricing, and determine if fees are reasonable. This is the path to greater transparency and eliminating unnecessary costs.

3. Keeping Everything In-House

Outsourcing is increasingly becoming the most efficient and cost effective way for strained skilled nursing facilities to lower their costs without impacting care standards. Next to labor, drug costs are the most costly element of running a SNF. Reducing these costs should be the top priority when care costs are rising above reimbursements.

Reducing these costs in-house, however, requires hiring experts who then have to spend hours meticulously combing through pharmacy invoices, managed care contract terms, and staying on top of changing exclusions. Delegating this task to a third party with the technology and expertise to most efficiently tackle these complex tasks lightens the load for SNF staff and management to do what matters most: caring for their residents.

A Unified Solution to Lower Your Drug Costs: SRX

SRX provides comprehensive advisory services and health technology solutions to audit invoices, negotiate pharmacy contracts, establish effective formularies, ensure compliance, and identify managed care exclusions automatically. With our technologies, operators can analyze every item on pharmacy invoices for eligible rebates and automatically submit these to manufacturers. 

To date, we have helped multi-facility operators capture nearly $40 million in manufacturer rebates by automating their rebate process. 

Partnering with SRX’s advisors leads to transparent pharmacy contracts. We are available to renegotiate existing contracts to ensure operators are getting the best value from their pharmacy partners. We have helped multi-facility operators, large and small, improve contract terms and reduce unnecessary or unreasonable fees and services.

To learn more about the savings you could be achieving by partnering with SRX and our technology and expert advisors, contact us today.

Stay up to date with important announcements and insights from SRX and follow us on LinkedIn.

Related Articles:

Saving Costs Through Increased Transparency in Your Pharmacy Relationship

How to Maximize the Rebate Dollars You Put Back Into Your Long-Term Care (LTC) Facility

SRX’s Partnership has a ‘Trickle-Down Effect’ for LTC Operators

SRX is a technology and advisory company that helps LTC operators realize the lowest net cost on drug costs. We help our customers improve drug utilization, manage pharmacy relationships, reduce costs and waste, and maximize rebates. We are committed to transparency and accountability and guarantee our quarterly rebates are paid on time, every time. 

Learn more about our technology solutions.

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