Receipt of Payment for Pharmacy Services
There are basically two ways in which the pharmacy can receive payment for
services. One is self-pay, in which the patient pays the pharmacy directly. The
second is payment by a third-party payer. The third-party payer can be used
in two ways:
1. The patient can pay the pharmacy and be reimbursed (out-of-pocket),
in which case the pharmacist must fi ll out an insurance affi davit
stating the drugs received, price, and other information required by the
insurance company.
2. The patient can pay a small amount (co-payment or co-pay) and the
pharmacy bills the insurance company for the balance of the charge.
Third-Party Payers—Health Plan Benefi ts and Exclusions
The technician needs to be familiar with the billing of third-party payers.
These payers may include:
• traditional insurance companies, such as those received under an employee
benefi t package
• government plans such as Medicare and Medicaid
• private insurance companies
Each health care plan has specifi c benefi ts and may or may not include
payments for medications. Those plans that cover prescription medications
may limit coverage in various ways, such as exclusion of outpatient prescriptions,
limitation of outpatient coverage to oral dosage forms, exclusion of
proprietary drugs, or limitations on quantity. Some health care plans have a
“closed” formulary. This means that they will only pay for specifi c drugs for
specifi c diagnoses. Exceptions may be considered, but often the patient ends
up paying the difference between the cost of what they (health care plan)
would cover and the exception drug requested.
Insurance coverage must be verifi ed at the time the prescription is
received. Specifi c coverage information may be contained in the pharmacy’s
computer database. It should be noted that some insurance plans allow only
generic drugs to be dispensed. If the patient or prescriber requests a brand
name (proprietary label), the patient would have to pay the difference in
price. Exceptions to plan policy may be made by the insurance company
under certain circumstances (e.g., the condition is life-threatening or there is
no generic brand marketed).
Once the insurance coverage or method of payment has been established,
the forms to be submitted to the insurance company must be identifi ed and
completed and the price of the medication calculated.
The technician must
be familiar with the
various insurance
plans and what they
cover.
Each health care plan
has specifi c benefi
ts and may exclude
certain drugs, or limit
quantities dispensed.
Institutional Pharmacy Billing—Role of the Medication Administration Record
In an institutional pharmacy setting, charges are billed to the patient’s
account based on information from the medication administration record
(MAR). Normally, charges are billed to the patient’s account at the time the
medication is dispensed, which simplifi es the billing process and improves
billing accuracy. Medications that are dispensed but not administered are
returned to the pharmacy and appropriate credit issued to the patient’s
account.
Insurance coverage verifi cation and billing in a hospital setting are
normally done by a separate billing or accounting department within the
institution.
In an institutional setting,
charges for medications
are billed to
the patient’s account
as the medication is
dispensed.
Calculation of the Price of the Medication
The selling price of a medication begins with the cost of the medication to
the pharmacy (cost price). This is then increased by a certain percentage or
dollar amount to the selling price.
The Dispensing Fee
All medications dispensed by prescription will also include a dispensing fee,
This may be either a percentage of the price or a fl at fee added to the cost of
the prescription.
Profi t and Markup
The markup rate or percentage of a drug is normally expressed as a percentage
of the cost. For example, a markup of 100% would mean that the increase
in price would be equal to the cost. (Since 100% is the same as multiplying a
number by one, the markup is the same as the cost.)
EXAMPLE
The cost of a drug is $10. The markup is 100%, so $10 1 $10. $10
(cost) $10 (markup) $20.
The cost of a drug is $10. The markup is 50%, so $10 0.5 $5.
$10 (cost) $5 (markup) $15.
The markup of a drug is not the same as the net profi t that is made on the
drug, as the cost of storing, inventory, and general overhead expenses must
be taken into account when calculating the actual profi t made. A discussion
of the calculation of profi t and markup may be found in Chapter 19.