One of my favorite methods for increasing pharmacy profitability is direct billing for workers’ compensation.
Over the years, I’ve made numerous videos and blogs on using direct billing for workers’ comp to increase pharmacy profitability. In fact, it is the first tactic I always ask about when speaking with a pharmacy owner who is struggling with low profits.
What Direct Billing Means For Pharmacy Profitability
Direct billing means not using a PBM to bill the claim—going ‘old school’! Why should you bypass the PBM? Other than we all generally hate them, and their goal is to put us out of business… It is to get paid the full amount allowed by your state.
Each state has a formula for calculating work comp rates, and in most cases, they are full AWP reimbursement. However, if you bill to a PBM, you agree to get paid their rates, which are often AWP minus 87%. So where does that 87% go? Right into the PBMs’ profits, not your bank account.
The state or work comp insurer pays the exact same amount regardless of who sends the final paper bill to the adjuster. If you send the bill, you get the full amount. If a PBM sends the bill, you get pennies on the dollar.
I have been a fan of direct billing since I stumbled onto it in my own pharmacy over 15 years ago. My favorite company to help pharmacy owners with direct billing to work comp is Streamcare. I have been working with them for the past 8+ years. They are aggressive and will fight for your right to direct bill.
Understanding the Landscape
Most states have laws protecting your right to direct bill yourself (or have Streamcare do it on your behalf). If you aren’t sure where your state stands, feel free to chat with Streamcare or send your question to me HERE.
What happens if you are in a bad state? One that isn’t so friendly to direct billing.
It doesn’t mean all is lost. Unless you are in New York, then, sorry, you’re screwed. It just means that you are going to have to do more legwork. Now, in my pharmacy in California, where I first learned of this, I had a technician who was more tenacious than a dog with a bone. He loved solving problems. If you have someone like that, then give this project to them.
Getting Started with Direct Billing
If you can’t use a billing company like Streamcare in your state, you can still handle direct billing yourself. Here’s how I did it in California, where I first discovered the benefits of direct billing:
1. Identify a Ruthless Employee:
Find an employee who is persistent and detail-oriented. This person needs to be someone who won’t give up easily. For me, that was Rick, an invaluable team member who would keep pushing until he got results. They will get told no and sometimes treated rudely, but you want someone who will keep going anyway!
2. Initial Contact with Adjusters:
Start by calling the adjuster handling your workers’ comp patient’s case. You might get lucky and work with a friendly adjuster. Simply ask for the remittance advice address. That is all you need to get started. Sometimes, they will answer with, oh, bill X. Just reply nicely that you do all your own billing in-house and just need the address to send the invoice to. I do wish they would all go easily, but at this point, it can get argumentative. Don’t be shy; keep calling back. Ask for supervisors. Ask for accounts receivable. Anybody to get you the information you need.
3. Prepare Your Invoice:
Use your pharmacy management system (PMS) to print out an invoice that includes the drug’s AWP, NDC, quantity, directions, days supply, prescriber, dispensing fees, and your pharmacy’s tax ID. If you aren’t sure how to do this, you will need to call your PMS support. Your invoice should have a payment address, phone number, person to ask for, and a signature spot. If your PMS just can’t do this, you can create invoices in Excel or Google Drive.
4. Persistence Pays Off:
When I first tried this, I was amazed to receive a check for the full amount billed. Full AWP people!!! This was mind-blowing. This success led me to try direct billing for every subsequent workers’ comp patient. Some adjusters were just power-hungry, a**holes and would force you to use their preferred PBM. It won’t be 100% successful. That’s okay! The juice is definitely worth the squeeze here to boost your pharmacy profitability.
Overcoming Pushback
You will often encounter resistance from adjusters who are used to working with PBMs. Here are some tips for handling these situations:
1. Firm Yet Polite Persistence:
Adjusters might initially direct you to bill the PBM they contract with. Politely but firmly insist on direct billing. You can say something like, “I’d prefer to cut out the middleman and handle the billing directly. Can you please provide the billing remittance address?”
2. Legal Knowledge:
Familiarize yourself with your state’s laws regarding workers’ comp billing. If any legal grounds support your right to direct bill, mention them during your conversations with adjusters. Streamcare and some quick Google searches will help you. Also, don’t forget to enlist the prescriber’s office for support. They will often know the right person or address you need.
Key Insight:
You won’t win every time. In fact, you might only succeed in direct billing 30% of the time. But even that 30% can significantly boost your pharmacy profitability, making it well worth the effort.
Streamlining the Process
Once you get the hang of it, direct billing becomes easier. Here are some steps to streamline the process:
1. Build Relationships:
Over time, you’ll get to know the adjusters and their processes. Building a rapport can make future interactions smoother.
2. Document and Track:
Keep detailed records of your interactions, billing submissions, and payments. This helps you stay organized and follow up on unpaid claims.
3. Continuous Learning:
Each interaction can teach you something new about the process. Apply these lessons to improve your approach and increase your success rate.
Working Hard or Getting Lucky?
If you’re in a state where direct billing is particularly challenging, it might be worth reaching out to a company like Streamcare for advice. Even if they can’t handle the billing for you, they can offer valuable insights into the legal landscape and best practices for your state.
I often refer to my first payment for a direct-billed work comp claim as lucky. Because it was, sort of. We were doing the hard work of billing work comp claims. We happened to be getting nowhere and no help from the prescriber’s office. So we called all the numbers we could find for the insurer and got lucky in getting a super-friendly adjuster. In order to get lucky, you have to be willing to do some work.
Member Case Study:
One of our members was struggling with direct billing in California. I advised her to follow these steps, and even though she initially faced resistance, she eventually succeeded in direct billing for several prescriptions. The extra income from those successful bills significantly improved the pharmacy profitability of those 3 prescriptions. She went from making about $20 to $870!!! Yes, wowzer!
Leveraging Your Team
This process can be a great project for a technician who enjoys problem-solving. They should also have what I call a high “figure-it-out” factor. The right person won’t need you to tell them every step they need to complete. They should have the type of personality that they can figure it out on their own. Their perseverance can turn a time-consuming process into a profitable endeavor.
Maximizing Pharmacy Profitability
Direct billing workers’ comp can transform your pharmacy’s profitability. Here’s why it’s worth the effort:
1. Higher Reimbursement: By eliminating the PBM, you receive 100% of the reimbursement instead of a small fraction.
2. Increased Revenue: Even if you only succeed in direct billing a portion of your workers’ comp prescriptions, the additional revenue can add up quickly, opening up new possibilities for your pharmacy’s growth and success.
3. Enhanced Patient Care: By managing the billing process, you can provide a higher level of service to your workers’ comp patients, ensuring they receive their medications without unnecessary delays and fostering a sense of trust and care in your pharmacy.
If you need any help or have questions about increasing your pharmacy profitability, feel free to reach out. We’re here to support you in any way we can, providing the guidance and assistance you need to succeed. Let’s work together to turn independent pharmacy ownership into a rewarding and profitable venture.
You can also always send your questions to drlisafaast.com. We’re dedicated to helping independent pharmacy owners thrive. Until next time, keep pushing forward and maximizing those profits!
