AH049 - Pharmacy Benefits 101: Pharmacy Audits

Transcript

Lightly edited for clarity.

[00:27] Justin Venneri: Hello and thank you for joining us for this episode of the Astonishing Healthcare Podcast. This is Justin Venneri, your host and Director of Communications at Capital Rx. And with me in the studio today, I have two returning guests: Heidi McKinnon, Head of Compliance here at Capital Rx and Symara Schmidt, Director of Compliance Programs. We're going to be talking about pharmacy audits, so we'll make this as fun and interesting as we can make a discussion about audits.  

To start off, how about Heidi, you go first. Can you share a little bit about your career journey? How did you go from working in retail and digital pharmacy to your current role at Capital Rx?

[00:59] Heidi McKinnon, PharmD: Sure. First, I want to say thank you for having me back on the show. My career started in pharmacy over 20 years ago. I started in retail pharmacy where I developed a strong foundation in patient care. Over the years I transitioned into regulatory roles, including serving on the Washington State Board of Pharmacy, which provided me with a deep understanding of the regulatory landscape and the importance of compliance in protecting patient safety.

From there I went back into the industry, first in roles as a pharmacist in charge, overseeing operations and ensuring adherence to both clinical and compliance standards. My transition into digital pharmacy, and eventually to Amazon's PBM audit team, allowed me to marry my clinical expertise with my regulatory knowledge.

Now as Head of Compliance at Capital Rx, I leverage this holistic experience to develop programs that prioritize transparency, fairness, and protecting both patients and providers.

[01:56] Justin Venneri: Excellent. Symara, how about you?

[01:58] Symara Schmidt, PharmD: My career started off similar to Heidi's. I've been a pharmacist now for 11 years and also started in the retail setting, so working directly with patients, clinical hands-on relationships with folks, and I remember having the phones ringing, having people needing counseling, and then you've got a claim that just is not paying; it’s stuck in adjudication.  

But I really at that point became interested in the whole claim adjudication process and became a SME in getting claims to pay. I worked retail for about 10 years and then I just decided at that point why not make a career change. And so, I ended up working at Amazon Pharmacy, more in a traditional role, but that's where I really pivoted into program management and risk management and then also met up with Heidi, working on third party pharmacy audits.

So that's where I really got involved in the PBM space again, again in claims adjudication and understanding kind of the why behind claims would reject and the impact on how overriding claims or making adjustments can impact the member, could impact payment.

And then coming here to Capital Rx, things have really come full circle now. I've kind of seen all aspects of how claims pay and that really has kind of shaped my view and opinion on how there's opportunity to make things better.

[03:14] Justin Venneri: Cool. Both of your experiences and your paths obviously crossed at Amazon and now you're here. How has that experience in retail pharmacy influenced the way you now approach your work in compliance and audits for a PBM?

Heidi, do you want to take that first?

[03:29] Heidi McKinnon, PharmD: Yeah. My experience in retail pharmacy, I mean really has given me a deep understanding of the day-to-day realities and challenges that pharmacists face. I've been in their shoes, juggling patient care, managing inventory personnel, trying to decipher PBM rejections to get a claim to go through. And this background helps me approach audits from a place of empathy and practicality.  

There is a difference between desk audits and onsite audits. An onsite audit can be extremely disruptive to your day-to-day operations. And I really view audits not as a gotcha moment, but as an opportunity to improve processes, reduce risks and ultimately support our mutual patients. Having lived the operational pressures of retail pharmacy, I'm keenly aware that most errors are unintentional. 99% of us do not wake up in the morning and go, what can I do to mess up my work today?

[04:21] Justin Venneri: Right, yeah.

[04:22] Heidi McKinnon, PharmD: We are all trying to do the right thing and this perspective drives me to ensure audits are fair and transparent.

[04:30] Justin Venneri: That’s good to hear. Symara, anything you'd add to that?

[04:32] Symara Schmidt, PharmD: Yeah, absolutely. At the end of the day, you know, having seen all sides of things here, there's still a patient, a human at the end of the line of an audit, right? And that's why we do what we do -- to make sure that the member is not getting impacted. If they didn't get enough medication or if they paid too much, potentially, there's a lot of ways a member can be impacted. And that's why we need to assess the integrity of claims and how they've been billed.  

And then having worked here at Capital Rx, even for a short time, I've had the opportunity to do some onsite audits. And in doing that and talking to pharmacists and being back in the field, kind of how Heidi already stated, people have the best intentions. They maybe just don't have the knowledge on the “why” behind how a claim should be billed.

So folks were very interested in being educated, getting tips and tricks. So I think that's where there's a real opportunity for impact, is just sharing knowledge and helping people do the right thing.  

Related Content

• AH023 - Compliance Matters, with Heidi McKinnon, PharmD, CHC
• AH025 - Empowering Pharmacists, with NASPA's Krystalyn Weaver, PharmD, JD

[05:25] Justin Venneri: That makes sense. Heidi, you mentioned how disruptive these can potentially be. I assume time and bandwidth are issues and just, you know, what were some of the biggest challenges you encountered in performing audits? And how does your experience inform your current perspective on compliance?

[05:44] Heidi McKinnon, PharmD: Having worked on the front lines in retail pharmacy, I understand the pressures pharmacists face from juggling patient care to navigating those complex billing systems. I believe audits shouldn't be a punitive process. Again, we're all trying to do the right thing every day, and we're all human, so we all make errors. And I think that having that perspective gives me the insight so that I can also -- and having my investigative background also helps me in kind of determining are these claims in error but with good intentions, or are these claims in error and I should be looking at fraud, waste, and abuse?  

And so that's where education comes in versus, oh, we might need to, like, look a little bit harder at these claims, but always from a perspective of altruism. We go in assuming that everybody has tried to do the right thing.

[06:38] Justin Venneri: Got it. Symara, over to you. What are some misconceptions that pharmacies might have about PBM audits?

[06:44] Symara Schmidt, PharmD: Yeah. Well, I would think most people who have been through an audit would say that we're only there to take back money, and PBMs are evil, and how do they know that this is not just a mistake, right?

But as Heidi touched on, really, the main purpose of an audit is again, to ensure that there's no fraud, waste, and abuse occurring, that folks are in compliance with the regulations, both federal and state, that there's proper medication usage. Again, it's all really tying back to quality of care and member impact, or patient impact.  

What some folks might not realize about pharmacy audits, we've talked a lot about good intentions and people trying to do the right thing. And not all audits end up being punitive, right? So, there are educational opportunities. Once a clinician has reviewed the claim, made their determination, some of these might not have any money taken back, but rather are indicated as an educational opportunity, allowing the pharmacy to make corrections to their processes and not have that financial impact.

[07:45] Justin Venneri: And I'll link this in the show notes. There's an interesting whitepaper you supplied, and Heidi, you mentioned these different types of audits. Can you review the couple of main buckets and then we can get into some more specifics about them?

[07:58] Heidi McKinnon, PharmD: Sure. The first type of audit is what could be termed as a concurrent or prepay audit. These are daily claims reviews that the PBM might perform. Not every PBM necessarily does daily claims reviews, but what they're looking for are true quantity day supply issues. And what they'll do is when they flag these claims, the auditor will actually call the pharmacy to confirm whether or not that claim was adjudicated correctly.  

More often than not, the claim was in error. It might be a fat finger in typing, right? Instead of 30 we tried to bill for 300. And so, it gives an opportunity to immediately adjust that claim and then we don't have to audit the claim later and have more disruption.

Outside of that, it's called a retrospective audit. And so those might be what is termed either a desk audit or could end up being an onsite audit. Desk audits, there might be a handful of claims, maybe up to a hundred claims, that get reviewed and that is all either via fax, through electronic means. And then those onsite audits can be performed maybe once a year. Every state has -- well, 47, at least -- have fair audit laws to where the PBMs must meet a certain threshold.

Because again, we want to maintain a lack of disruption in the pharmacy. So, we don't want to show up unless there is a large number of claims that need to be reviewed.

[09:35] Justin Venneri: Okay, how does modern technology help with this process? I know we have JUDI®, our adjudication platform. We talk about JUDI all the time as the brains of our organization. I would think having this modernized platform and all of the alerts and the different messaging functionality, especially around the adjudication of claims, would be helpful. Could you just expand upon that?

[09:59] Heidi McKinnon, PharmD: I would say we here at Capital Rx are really beginning to build out some opportunities. And many other pharmacy audit vendors have incorporated AI opportunities into claims reviews. And what we're looking for, again, as Symara has touched on earlier, is the outliers. We're looking for fraud, waste and abuse potential. Something that is catching our eye -- either geographic location if we're talking about opioids. We might be talking about an abnormally high number of a high dollar amount NDC coming out of a pharmacy that doesn't normally have that NDC as one of their claims.

So sudden high dollar value NDC, especially if you're using a coupon, could indicate what's called phantom billing. That's where there's no true prescription, no true patient, and the provider is, like, picked out of the phone book, essentially.

[11:02] Justin Venneri: So is that one of like a quote unquote trigger for an audit?

[11:05] Heidi McKinnon, PharmD: Exactly. That could be.

[11:06] Justin Venneri: Okay, and then are there other types of triggers or is it all around, like unusual activity, so to speak, that just kind of sticks out like a sore thumb? Or maybe not, maybe it's more subtle in the data.

[11:19] Heidi McKinnon, PharmD: Yeah, we're looking for the patterns, right? So we're looking for anomalies and patterns. It could be the prescriber, it could be the member, it could be the pharmacy, it could be the drug. And so we have to be cognizant of what is current.  

And so it's important to keep up on industry standards, what's happening out in the industry, attending conferences, talking to peers. So a lot of that happens to help us start looking at different variabilities that might occur in the claims.

[11:51] Justin Venneri: Okay. And Symara, how often is there -- oh, sorry, go ahead.

[11:55] Symara Schmidt, PharmD: Couple things I would add to that. So not only are we looking for trends, but typically audits are going to check medications that are high cost, if there's potentially variable directions or directions that are prone to error. So anything other than take one tablet once a day, usually your insulins have a little bit more complex calculations or directions where you need a minimum and a maximum dose, excessively high quantities, which kind of goes back to looking for outliers, looking at package size appropriateness -- so are we giving a patient a jug of lotion where maybe a smaller tube would have been appropriate based on the area they're applying it to?  

Those are all some kind of red flags, which really, if anyone was looking for tips on how to prevent audits, I would recommend reading the [Capital Rx] provider manual. So that's where some of these flags would be indicated. Or best practices for billing recommended day supplies could be located.

[12:50] Justin Venneri: Got it. And then how often is there a positive outcome versus a negative outcome? And what are those if we take a step back?

[13:00] Heidi McKinnon, PharmD: So I would say a positive outcome is when the pharmacy has maybe one or two claims that ended up being processed in error. It becomes more educational. It's where the pharmacy, you know, is trying to do the right thing. But again, we're not perfect and not.  

A not so positive outcome would be the pharmacy is combative. The pharmacy is closing down. The pharmacy does not want to provide documentation. The pharmacy tells you to, you know, hit the bricks when you show up to an onsite audit.

And unfortunately these things do occur. You know, an onsite auditor is going to reach out to the pharmacy, give them notification prior to arrival. But there are still times where the auditor shows up and the staff become combative, and they are not helpful to the auditor and that can put your agreement with the PBM in jeopardy.

We need to work together, the PBM and the pharmacy. We are not here, again, as Symara stated, to come back and take your money. We're here to ensure that proper dispensing is occurring and that members are safe going to your pharmacy.

[14:14] Symara Schmidt, PharmD: I think there's another really positive outcome or use of daily claim reviews, or concurrent claim reviews, or prepay, whatever we might call them. Basically any audit that occurs before the pharmacy has been paid for the claim, right? So, as Heidi talked about, we might call the pharmacy, we might send a fax. With technology, if some folks have email set up, you can get them that way.

Long story short, if we are able to detect that potentially a claim has been billed incorrectly before it's been even dispensed, the pharmacy can go ahead and correct that claim, and then we are not recouping or taking money back for that error. It's also stating the pharmacy on multiple fills, right? So if they continue to refill that prescription incorrectly over its life cycle for four or five more times, that's even a potential multiplier of monies that could have been taken back.  

So I think there really is a positive outcome that comes from those immediate claim error detection practices and the opportunity to work with pharmacies to get them corrected on the front end.

[15:12] Justin Venneri: Got it. And so we've talked a little bit about triggers. You've shared some proactive sort of steps or tips that pharmacies could pay attention to reduce the risk of being audited, I guess. Could you kind of take a step back? How does it start? Or what would a pharmacy owner expect during an audit? Do you just approach them? Do they get an email or a call? Like, how does it, how does it kick off? And then what's that, you know, life cycle like?

[15:37] Symara Schmidt, PharmD: So it really depends on the type of audit. With desk audits and prepay audits, usually those notifications come through fax or phone. The pharmacy will get a list of prescriptions and the required documentation we need to understand the correct billing of the claim.  

So basically, pharmacies are usually asked for a prescription hard copy, because when the claim is billed, we can see the quantity and the day supply, but we can't see the directions to assess if the claim has been billed properly.  

So that's just an example of why a certain piece of documentation is often requested to validate that claim.  

I think more of what you're asking is, will a PBM or a rep just show up to the pharmacy out of the blue? The answer is usually no. There are fair audit laws in place where most states require, I think, a week or two weeks notification in advance. So we work with pharmacies to schedule audits at a time that's convenient for them, or at least less disruptive to them, right? So typically not during the first week of the month, not on a weekend. You're trying to do it when there's support staff available.  

So there is notification in advance for most on site audits, sometimes a list of prescriptions will be sent in advance so the pharmacy can pull documentation and kind of prepare for that. And then during the audit, the auditor will review the prescriptions, ask the staff if they have any questions, or read further documentation. And usually at the end we're able to give kind of a recap of any potential errors that might undergo further review.  

Past that point, there's what's called an initial audit finding report, where we are saying, here are the claims that we found that do not look like they've been billed properly. The pharmacy has an opportunity to provide additional supporting documentation or overturn our findings. And then once we've reviewed it again on a secondary basis, there's a final audit report issued where we say, this is our ultimate decision. Here's the claims that are still built improperly, and here's the ones we've let go.  

So hopefully a pharmacy, once they've worked through that process, a list of 200 claims potentially becomes only two claims that were billed properly.  

[17:48] Justin Venneri: Nice. I only have two more questions for you, Heidi. Are there areas where you think PBMs and pharmacies could work together more effectively to improve transparency or simplify or streamline the audit process?

[18:00] Heidi McKinnon, PharmD: I do, and for me collaboration is key. From the PBM side, we are constantly working to be able to provide pharmacies with real time POS alerts for potential errors. Well, pharmacies can use these insights to adjust their processes. However, we need to strike a balance to avoid alert fatigue, because as pharmacists checking prescriptions, there are so many different types of alerts that you might have to get and review. And you know, you're trying to get prescriptions out as fast as possible.  

And so we want to be very cognizant that we're not over sharing information. But building trust and open communication between PBMs and pharmacies can benefit everyone: patients, the PBM, and the pharmacy themselves.

So I would say that what we do, and what we are planning on doing here at Capital Rx, is really trying to build that relationship. Use a POS alert.  

We're also wanting to build out tip sheets to provide to pharmacies. They’re kind of gentle reminders if you will on especially if we're starting to see trends, right? If we're starting to see mis-adjudicated claims and it starts to become a trend. Or sometimes a new drug might come out on the market that is prone to somehow either quantity, day supply error, people aren't quite sure how to adjudicate this yet.

So those kinds of sharing of information I'm hoping becomes like a two way door.

[19:30] Justin Venneri: Would GLP-1s fall in that category? Something just high cost, high volume, new class, shocking. Sorry, what was that? Symara?

[19:38] Symara Schmidt, PharmD: I said, should we address the elephant in the room?

[19:40] Justin Venneri: Yeah, we might as well. And Symara, if you could give one piece of advice to a pharmacy on maintaining compliance and avoiding audits, what would it be?

[19:50] Symara Schmidt, PharmD: I would really recommend being aware and understanding any of the federal and state laws that apply where you're practicing. I think that's a really good foundation for getting started.  

Getting involved with NCPDP is another great group. They are the ones that are laying the grounds for the standards on claim transactions and there's a lot of information there as far as fields that are available during a claim transaction if you just want to understand what those options are.  

And then lastly, if you have access to a provider manual, read it, understand it. That's going to give you some really great tips on how claims should be adjudicated.

And yeah, be involved with the claim transaction process. When you're reviewing a DUR, not only are there going to be clinical messages, but if you're billing a claim through insurance, there's also going to be information surfaced from the PBM, right? So really understanding that if it's flagging for high dose, go back and check the quantity and day supply. If it's flagging for low dose, same thing. Maybe the claim was billed improperly or the wrong day supply got entered.

So really take notice of everything that's coming up in front of you. Even though there's a lot of alerts and there's definitely some fatigue associated with that.

[21:02] Justin Venneri: Got it. And last question, Heidi -- well two questions. One quick one -- any resources, tools or support networks aside from what Symara mentioned? You know, I mentioned linking some stuff in the show notes here. What would you recommend for pharmacies who want to strengthen their compliance programs?

[21:20] Heidi McKinnon, PharmD: I would say go to your conferences, the new laws, new CE courses. Most state pharmacy associations will give that, you know, a few times a year.

Your state pharmacy associations will also have like best practices, tips. I also encourage pharmacies, having again built my career around pharmacies, there is an association called PAAS that supports pharmacies in PBM audit. I know, right? I'm encouraging people to actually go and find your resource, but it's very educational, right?  

Again, we're all here to help each other and every PBM has their own provider manual. But I will tell you that I would say at least 80% to 90% of it is the same. So we're all trying to provide the same information, give the same level of detail, and it's really what's holding your pharmacy accountable to the contract.

[22:23] Justin Venneri: Got it. Well, thank you both so much for spending time with us today and sharing your knowledge about pharmacy audits. Have a great rest of your day.

[22:31] Heidi McKinnon, PharmD: Thank you so much, Justin.

[22:33] Symara Schmidt, PharmD: Thank you, Justin.

Reference Materials

• The Capital Rx Pharmacy Provider Manual
• PHARMACY AUDITS, An Important Tool for Fighting Fraud, Waste, and Abuse and Protecting Patients
• PAAS National - Home Page

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