Pharmacy Billing ServicesRevenue Cycle Management (RCM)

Understanding Prescription Insurance Claim Process

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After submitting a claim from the pharmacy, it will then hit a service that routes the claims to the proper insurance company or PBM based on the identifiers. These are known as ‘switches’; examples of companies that offer switching services include RelayHealth and Emdeon. Switches usually charge a fee for every transaction, although they might also charge a flat monthly rate. Of note, this price is independent of insurance payment, so if an insurance company rejects the claim and it needs to be reprocessed the switch fee will be charged again. Switches (and other companies) also offer a variety of services that are bundled in one package to improve a pharmacy’s reimbursement and reduce exposure to liability.

These are collectively known as pre and post edits (PPE), and examples include:

  • AWP resubmission:

    Average Wholesale Prices (AWP) will fluctuate on a regular basis. Unfortunately, if a pharmacy is only updating its drug record files in the computer system weekly or monthly, in times of rising drug costs they will submit an AWP to the insurance company that is lower than the current AWP of the medication. Often this can result in underpayment of claims; in order to correct this, the switch will automatically check for differences in AWP and resubmit with the higher AWP when there is a difference to maximize reimbursement.

  • DAW Code validation:

    Dispense as Written (DAW) codes are most often used to specify reasons to the insurance company why a branded medication was dispensed; the default, DAW 0, means that there was no product selection indicated. Other examples include a) the physician wrote brand name only, b) the patient wanted the brand name, c) the generic was not available on the marketplace, or 4) brand drug mandated by law. If a DAW code is selected that is inconsistent with the product chosen (ex. brand selected but DAW 0 used), the switch can reject that claim before it gets to the insurance company to avoid auditing issues.

  • Quantity and days’ supply validation:

    Checks for errors in days’ supply based on the product and quantity entered. A common example includes entering the wrong quantity for inhalers (entering it in the pharmacy software system as ‘1,’ when the correct quantity is the number of grams).

  • DEA Verification:

    The switch will automatically verify a prescriber’s DEA number to ensure it is valid and in good standing.

  • NPI verification:

    As with the DEA number, the switch will also validate the prescriber’s National Provider Identifier (NPI) and can send the claim back if it is not valid. Options to obtain the correct NPI include either calling the prescriber’s office or using the NPI.

  • NDC verification:

    This service will check for discontinued or outdated National Drug Codes (NDC’s) and reject the claim so that it can be resubmitted with a valid NDC.

If a patient is Medicare Part D eligible but is either unsure of coverage or does not have their coverage information with them the pharmacy can send an eligibility verification request, called an E1 transaction, through a Medicare Part D Transaction Facilitator (or just facilitator). The facilitator will check the Medicare database and return eligibility information to the pharmacy if there is a match.

Another relevant service the facilitator provides is to transfer the amount spent towards a patient’s True Out of Pocket Costs (TrOOP) to another insurance company in the event the patient switches plans in the middle of the year. It is important to note that if a patient does switch plans mid-year, all the TrOOP costs they have incurred so far in the year will be transferred to the new company – they do not need to start over again.

Finally, after the claim is submitted by the pharmacy, sent to the switch, and possibly sent through the Medicare Part D Facilitator, it arrives at the payer. Once the payer receives the claim it will make a coverage determination and send the claim back to the switch, where it ultimately gets routed back to the pharmacy. Payers generally also charge a fee, in addition to the fee charged by the switch, to process each claim submitted.

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