What is the DIR Fee Apocalypse? Everything You Need To Know.
DIR Fees are the bane of any pharmacy owner. Make sure you are ready for the changes coming in 2024.
If you’re a pharmacy owner, you know DIR fees and how they can negatively impact the cash flow of your pharmacy. What many pharmacy owners are not aware of yet, is the DIR changes coming in January 2024. Let’s go through the changes and how in the long run it is a better system AND it will produce excruciating low cash flow months at first.
What Are The Changes Coming In January 2024?
Dir Fees will be applied at the “point of sale” or at the moment of paid claim. This is different from how it is now. Currently, a claim is paid without regard to the DIR fees. then weeks or months later, you are back-charged for the DIR fee. This lead to huge clawbacks and lots of uncertainty for pharmacy owners.
The Good
Having the fees applied at the time of dispensing will bring much needed transparency in our industry. Pharmacy owners will be able to determine the actual revenue from a prescription when dispensing rather than a completely made up number. Smarter decisions will be able to be made with accurate data. This is a good step to helping pharmacies better manager and mitigate their DIR fees.
The Bad
The typical DIR Fee range is anywhere between 9 to 14% of the revenue (or even higher). When the DIR rate is applied to claims, the highest of the range will be applied to all claims. This will significantly reduce your revenues immediately. With reduced revenue comes lower cash flow. Most pharmacies already experience a razor thin cash flow. Any reduction in cash availability will cause major problems for pharmacy owners.
The Ugly
For prescriptions you fill in 2023, you will still be retroactively charged for the DIR fees. This means as we transition into 2023 you will begin to pay DIR fees immediately for 2024 claims AND you will still be having money taken back for 2023 claims. essentially resulting in paying double DIR fees for the first part of 2023.
The double dipping into your cash flow at the beginning of 2024 is what creates the 2024 DIR Fee Apocalypse as we call it. Reduced revenues will constrict your cash. But when you add on also paying 2023 fees on top of that, it becomes downright strangulating.
Get prepared now. We know this storm is coming. There is time to make changes and stockpile cash so you can thrive during the storm.
What Is Your Strategy For The DIR Fee Apocalypse?
Now that we’ve discussed the impact of DIR fees on your cash flow, it’s also important to outline a strategy for countering this situation. We all know that building up cash and increasing profitability doesn’t happen overnight, especially in pharmacy. It is something that takes time, and you need to dial-in your strategy right now.
There are 2 main areas in your pharmacy you should be focusing on.
1. Increase Profitability
2. Increase cash flow
But, how can you increase profitability and cash flow? This is a common question amongst most pharmacy owners. we wish there was a simple answer that would work for everyone. Unfortunately, there is no magic wand in pharmacy ownership
Here are some of our favorite strategies. Feel free to reach out at anytime to info@diversifyrx.com for follow up on any of these tactics.
Increasing Profit:
- Bill work comp claims directly through StreamCare
- Optimize your pricing tables with Pricing Systems
- Add profitable hospice scripts with BetterRx
- Reduce your COGS by buying from secondaries
- Sell profitable items like Clemastine
- Sell niche supplements
Increasing Cash Flow:
- Buying from wholesalers with long payment terms such as through RxCherryPick
- Reduce your expenses (including payroll!)
- Reduce your inventory levels
- Use other people’s money (lines of credit, credit cards, longer payment terms)
We have tons of free resources for you and your staff. Checkout other blogs or download free items. Reach out to info@diversifyrx.com with any questions. We are here to help.
