Chairman Michaud, Ranking Member Brown, and members of the Subcommittee: thank you for your kind invitation to discuss Department of Veterans’ Affairs (VA) procurement practices and, specifically, how the VA might benefit by incorporating certain cost containment strategies within their pharmacy benefit management (PBM) and Nursing Home Care programs.  I am accompanied today by Lorraine Lachapelle, RN, Goold Health Systems’ Director of Community Assessments.

Goold Health Systems is a national health care management company that specializes in meeting our clients’ specific health care objectives with a special emphasis on cost containment.  At all times we are driven by evidence-based medicine and achieving clinically effective outcomes.  We manage certain health benefits as directed by our clients in a very detailed, granular level so that health care costs are contained and, in many cases, reduced on a per user per year (PUPY) basis. 

Our work is accomplished in “clinical-analyst teams” that are lead by Goold doctors, pharmacists and nurses who team with our data analysts, software developers, database administrators and project managers to achieve effective cost-containment strategies for our clients.  Our primary clients are the State Medicaid Agencies.  We have offices in Augusta, Maine; Atlanta, Georgia; Cheyenne, Wyoming; and Des Moines, Iowa.

GHS provides four major business offerings to our clients: 1) pharmacy benefits services administration; 2) community assessment services; 3) medical prior authorizations; and 4) business outsourcing services.  My testimony today will be focused on items 1 and 2 above.

I would like to preface my remarks by stating that the VA does a very good job at providing pharmacy services.  They purchase in a very cost-effective manner, have a modern and effective dispensing network and have deployed many effective technical and clinical solutions so that our nation’s veterans receive the services they require.

My testimony focuses on three ways in which the VA can enhance the monitoring and evaluation of certain health benefits so that veterans receive their services:

• Medication Management
• Pharmacy Program Integrity
• Long-Term Care Assessments

1. Medication Management

The U.S. Department of Health and Human Services’ (US DHHS) Centers for Medicare and Medicaid Services (CMS) recommends Medication Therapy Management (MTM) – a program that sets out to ensure optimum therapeutic outcomes, reduce the risks of side-effects when using medications and must be coordinated as part of a care management plan.  GHS then expands upon MTM by using predictive modeling to analyze pharmacy and medical claims data to measure the probability of exceeding set cost parameters for high cost users and complex medical conditions.  Problematic patients are ultimately placed in an Intensive Benefits Management (IBM) or Chronic Pain Management (CPM) program.  We utilize regression analyses that correlate chronic conditions with total drug cost; we then identify individuals who would benefit from our targeted interventions.  Once in IBM or CPM the patient is linked to one physician/prescriber and one pharmacy/dispenser for management of complex medical conditions and chronic pain issues, ensuring that those patients receive appropriate drug therapies.  We provide educational materials and monitoring services to those individuals to help them better understand their medical conditions, as well as work with them on medication adherence and potential drug interactions.  We also work with their providers to help ensure that optimal clinical outcomes are achieved.  Savings accrue to our clients because of the intensive involvement of the provider, patient and GHS clinical team.  Examples of health conditions we focus on for IBM have been narcotics use, asthma & Chronic Obstructive Pulmonary Disease (COPD).

Other examples of Medication Management strategies involve formulary management, which uses our clinical and analytical expertise to most effectively manage the drug benefit, including:

Formulary Management: 15 Days Supply Limit

GHS performs extensive analyses to identify drugs that have high discontinuation rates shortly after the onset of therapy. It was reasoned that limiting the number of days supply of these first scripts would result in savings from reducing waste. About thirty drugs were identified that met our criteria. These drugs tend to have high discontinuation rates due to either significant side effects or relative lack of efficacy. Targeted areas for this effort include long-acting narcotics, stimulants, psychiatric medicines, urinary and continence products, and smoking cessation drugs (e.g, Chantix).

Formulary Management: Dose Consolidation

Many existing drugs now only need to be taken once per day. There is a considerable amount of savings available if these drugs are not allowed to be used more frequently without good clinical cause. Examples of targeted dose consolidation are Zyprexa and Risperdal, two anti-psychotic drugs that have allowed our state clients to save over 1% of their pre-rebate expenditures annually by aggressively pursuing dose consolidation.

2. Pharmacy Program Integrity

Program Integrity by definition should ensure that our tax dollars are not put at risk through fraudulent violations of the rules or abuses of the system.  It should ensure that appropriate payments are paid only to legitimate providers for services only to eligible beneficiaries.

Like many other health care managers, we have significantly expanded our Program Integrity efforts over the last few years.  Some health care expert’s have found that as much as 10% of all payments in healthcare can be attributed to fraud, waste or abuse.  The National Health Care Anti-Fraud Association estimated that 3% of the health care industry’s expenditures in the United States are due to fraudulent activities.  This calculates to an annual amount of approximately $51 billion.

In a recent analysis for one of our state clients we created a “Monthly Outlier Report” on pharmacy expenditures and trends.  The analysis was performed for each drug filled in the previous month, a review of the average amount spent per drug and the average quantity per days supply based on quantity limits was undertaken.  Those drug claims that fell outside established guidelines were flagged for audit.  This resulted in claims being reviewed as a result of improper use of override codes and, subsequently, many of these outlier claims were reversed.  For this one State client with a pharmacy budget of approximately $200 million per year, we expect the results of this specific audit to yield between $500,000 to $1 Million dollars in savings.

By way of example I have listed below two other areas of pharmacy practice that are prime candidates for Program Integrity review:

Automatic Early Refills

In pharmacy benefit programs like the VA, where there is a heavy reliance on mail order, it is important that the mail order provider be monitored to ensure that mail order pharmacies wait for the patient to ask for their medication to be refilled.  This doesn’t preclude a mail order pharmacy from making outgoing calls to ask a patient if they would like their next dose of medication sent, but it would not allow a mail order pharmacy from automatically sending the prescription to them in all cases. 

Near Duplicates

Each medication intended for human use is assigned a number called an NDC (National Drug Code).  It is a unique product identifier that, for example, distinguishes an Oxycodone 10 milligram (mg) tablet from an Oxycodone 20 mg tablet.

“Near duplicates” can occur with generics when a different NDC of the same drug/same strength is used a few days after that patient’s first prescription was filled.  In many cases, this is an appropriate fill due to the legitimate loss of medication.  However, these can also be billing errors or inappropriate dispensing such that these claims should be reversed.  Monitoring utilization at this level can yield additional savings to the VA if it is not being done now.

3. Long-Term Care Assessments 

Through the early 1990’s Nursing Facilities (NF) Medicaid costs were increasing at annual rates far exceeding the general inflation rate or even the higher rate at which health care costs were increasing.   Eligibility determinations for Medicaid NF care were determined by the provider, leading to much higher utilization rates than otherwise supported by independent review.  As a result Maine State Government instituted an independent, objective Maine Medicaid eligibility screening process with the following objectives: to create a single entry for medical/functional eligibility assessments for long-term care (LTC) programs; to increase consumer participation and control; to educate consumers about in-home long-term care programs and other alternatives to nursing and residential facility care; to identify and address caregiver needs; to reduce the long-term costs of services by requiring greater emphasis on rehabilitation and health promotion; and to reduce the number of unnecessary admissions to, increase the number of discharges from, and decrease the length of stay in, nursing facilities.

Within strict time parameters set by our client, the GHS Intake Screener’s job is: to provide accurate prescreening to determine the need for a medical/functional assessment, maintain a waiting list for assessment as needed and refer consumers to appropriate resources.

When an evaluation is indicated, the GHS Registered Nurse (RN): conducts an accurate, objective medical/functional eligibility assessment using the automated Medical Eligibility Determination (MED) tool in a way that is always based on sound clinical judgment and in compliance with appropriate policy; and provides timely information about all long-term care service options, including a thorough explanation of consumer-directed options, regardless of payment source.

GHS employs approximately 35 nurses who perform the LTC assessments on-site with the assistance of a laptop, portable printer and cell phone. 

In State Fiscal Year 2010 (ending June 30, 2010), we performed over 15,000 assessments.  The State’s share of the Medicaid NF expenses in 2010 are more than 35% lower than their SFY 1994 peak in nominal (non-inflation adjusted) dollars.  This is the result of some policy changes made by Maine State Government and the LTC Assessment process.  Comparing where the unmanaged NF budget was headed to where it actually is today has yielded annual state savings that exceed $100 million.

It is important to point out that the State of Maine has invested some of the annual cost-savings toward a stronger network of Home-Based Care (HBC) services so that those clients determined to be eligible to remain in their home setting would have the supporting services available to them.

Conclusion

Mr. Chairman, the VA is a very effective provider of important pharmacy and medical benefits to our country’s veterans.  The strategies described above have been proven to be very effective in containing health care costs for our Medicaid clients.  We believe that these clinical management approaches can assist the VA in further containing costs.

Thank you again for the opportunity to testify. My colleague and I would be pleased to answer any questions you may have.