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Dealing with rejected claims analysis

A CMS best practice for identifying Medicare Part D formulary and transition issues

Bre Tirado
Bre Tirado, Director of Pharmacy, TRICAST

If you work in a Medicare Prescription Drug (Part D) plan most likely you have felt some anxiety over the thought of a CMS (Centers for Medicare and Medicaid Services) compliance audit. You have spent a significant amount of time interpreting HPMS (Health Plan Management System) memos and referencing the Medicare Prescription Drug Benefit Manual to ensure the CMS guidance is appropriately implemented within your plan, but the question always looms: “What have I missed?”   

Most plans place a lot of faith in their Pharmacy Benefit Manager (PBM) to code formularies and utilization management edits to accurately reflect what the plan submitted to CMS for approval. Plans also place a lot of faith in their PBM that the CMS-mandated Transition Process also is coded accurately. 

However, if you look at the February 2016 civil money penalty (CMP) and sanction letters posted on the CMS website, you will see that despite the fact we all have a deep understanding of CMS regulations, formulary and transition issues are still among the most common findings from CMS audits. 

Failure to properly administer its CMS-approved formulary by applying unapproved quantity limits, Failure to properly administer its CMS-approved formulary by applying unapproved prior authorization edits, and Failure to provide enrollees transition supplies of medications are phrases commonly found in many of the CMS-issued letters.

However, the million dollar question still remains.  How does a plan effectively and efficiently monitor its formulary and transition process as coded in the PBM system? CMS has recommended daily monitoring of rejected claims as a best practice for overseeing formulary administration, but that is time consuming, and many plans do not conduct it consistently because of the manual nature of the work. It takes numerous hours each day for health plan team members to manually review spreadsheets of rejected claims in order to find formulary and transition coding errors.  However, the cost of not doing this type of review is also high given the CMPs that CMS has imposed.

We agree with CMS that monitoring rejected claims daily is truly the best way to find formulary and transition issues. However, our team also realized early on that Part D plans most likely do not have sufficient resources to dedicate to a daily manual process for reviewing rejected claims; therefore, other more automated, software based solutions need to be implemented to streamline the process. The plan’s CMS-approved formulary submission file as well as its eligibility data should be incorporated into the automated process to identify inappropriate formulary rejections and transition issues. In addition, every rejected claim that requires action should be tracked and resolved. 

Unfortunately, CMS penalties are steep and manual resources are overburdened.  However, today’s plans cannot afford to not monitor their claims properly.  To ensure your plan overcomes these issues, more automated solutions need to be considered and implemented.  The results of doing so will be astounding.  Extra dollars, time and stress will be easily eliminated.