Impacting Pharmacy Performance Measures: The Need for Fair and Reasonable Compensation for Pharmacists

Pharmacy Practice in Focus: OncologyDecember 2015
Volume 2
Issue 5

New pay-for-performance strategies are being used by payers to improve quality by providing bonus incentives to providers based on their performance, forcing health care providers to focus on quality of care to ensure that patients are achieving positive health outcomes.

Take-Away Points:

After reading this article, the reader should be able to:

  • Realize the limitations of current pharmacy performance measures.
  • Explain the practice changes needed to affect pharmacy performance measures
  • Clarify the lack of financial incentives available to pharmacists who have integrated patient care services into their practices
  • Propose a new reimbursement model that provides fair and reasonable compensation for pharmacists’ performance


The Affordable Care Act (ACA) was signed into law on March 23, 2010.1 The purpose of the ACA is to lower health care costs, improve quality and system performance, and enhance patient access to health care services.2 As a result, newer integrated health care delivery models, including patient-centered medical homes and accountable care organizations, have been created to help promote enhanced care at lower costs.3 The ACA also prompted changes in how health care providers are reimbursed for their patient care services, moving from a fee-for-service model to a value-based purchasing system that shifts risk from payers to providers.4 New pay-for-performance (P4P) strategies are being used by payers to improve quality by providing bonus incentives to providers based on their performance, forcing health care providers to focus on quality of care to ensure that patients are achieving positive health outcomes.

Although P4P programs are being utilized by hospitals and physicians,5 pharmacies are also affected by the P4P initiatives. In 2007, Medicare instituted star ratings for health plans that provide Part C and Part D benefits.6 Pharmacy performance measures that can affect a plan’s star ratings are included in plans that provide Part D benefits. Currently, there are 5 pharmacy performance measures for which pharmacies are evaluated. Three are related to patient adherence, one to medication safety, and another to the completion rate for medication therapy management (MTM) comprehensive medication reviews.7 Another Part D measure that is currently a display measure is statin use in diabetes; this is expected to become a full measure in 2018.8 Initially star ratings and quality performance measures applied to Medicare Part C and D Plans, but these measures have expanded to and used by accreditation organizations, state insurance exchanges, and commercial insurance plans.6,9

Limitations of Current Pharmacy Performance Measures

The ACA affects community pharmacy practice in many ways. Community pharmacists are experiencing:

  • Reductions in overall reimbursement,
  • An inordinate amount of products being reimbursed below pharmacy cost (underwater Maximum Allowable Costs),
  • Loss of patients because of narrow networks and mail order, and
  • Direct and indirect remuneration fees.10-11

In addition, product distribution/dispensing continues to be commoditized, leading to reduced profit margins to the point where pharmacy owners may opt to close or sell.12 The overall effect of all of these factors is an economic crisis for community pharmacies, leading to a disruption to how community pharmacy is being practiced.

Keeping a practice static and not changing with the times is a formula for failure. Given the economic constraints affecting community pharmacies, it is absolutely essential that practices maintain access to patients and their daily lives. As pharmacy performance measures have been implemented in practice, community pharmacists have been guided by the supposition that quality performance in a community pharmacy improves the chances of being part of a narrow network which means access to patient lives.13 Thus, access to lives is just one component needed to survive.

In addition, pharmacists need to be paid fairly and reasonably for their performance and patient care services. Some health plans have initiated a P4P model for pharmacists, but these plans have been the exception and not the rule in practice. In other words, most community pharmacists have experienced a reduction in their reimbursement for dispensing, without a corresponding subsequent increase in reimbursement related to their clinical performance.

The current performance measures for pharmacy are a start, but to truly have an impact, pharmacists’ services should be tied to patient outcomes and health care spending. Medications are an important tool in medical care, but if they are not used appropriately, they can lead to adverse events, increased health care costs, and even death.14 The current pharmacy performance measures may be surrogate measures for clinical endpoints, but they do not tell the whole patient care story since the current measures are mostly limited to certain medication classes, not the whole patient. Medication management is complex and requires working effectively with patients as well as prescribers. Community pharmacists who have transitioned their practices to focus on patient care are spending their time:

  • Helping patients manage their medications,
  • Identifying and resolving drug therapy problems,
  • Educating and counseling patients,
  • Collaborating and communicating with other health care providers, and
  • Documenting their clinical activities so that they have complete patient histories.

These patient care services receive little recognition and/or payment (if any), although the community pharmacist is often the last line of defense before a patient receives a potentially life-altering (or life-threatening) drug.

As mentioned previously, product distribution has been commoditized, but pharmacists’ clinical oversight and management of drug therapy needs to be valued by payers and reimbursed sufficiently to ensure that clinical services are available, sustainable, and continuous. Therein lies the major limitation of the current health care system and pharmacy performance measures—a lack of recognition of the real value of community pharmacists. Reimbursement for pharmacists’ services needs to be drastically improved and should be the standard, not the exception.

Reengineering Community Pharmacy Practice

Community pharmacists are realizing that to keep their practice relevant and sustainable, they need to become more clinically focused. Many community pharmacists may need to reengineer their practices to incorporate clinical services, enhance drug therapy management, and improve patient monitoring. Reengineering a community pharmacy practice requires an investment of time, money, and resources. A community pharmacy practice that is focused on patient medication management requires staffing changes, such as hiring technicians responsible for dispensing functions including computer entry, prescription filling and labeling, and patient triage. An alternative is investing in technology such as automated dispensing. For state boards that allow it, community pharmacies may utilize a tech-check-tech medication verification process. Ultimately, the goal of a reengineered community pharmacy practice is to relieve pharmacists from dispensing functions so that they can provide medication management and monitoring services to their patients, to ensure that patients are achieving their clinical outcomes which should lead to improved quality metrics being evaluated by payers.

In community pharmacies that have transitioned their focus from dispensing to patient care, pharmacists concentrate on overseeing patient medication management to identify and resolve potential or actual drug therapy problems. Pharmacists must focus on ensuring that their patients achieve their therapeutic outcomes with safe and effective drug therapy. If any of these conditions are not met, pharmacists need to intervene and provide clinical recommendations to patients, caregivers, and/or prescribers.

Documentation of drug therapy problems, clinical interventions, and outcomes of clinical activities is an essential and necessary component of the patient care process. Because most dispensing systems were not created to support clinical services, investments in newer pharmacy systems may be needed to achieve these goals. Working with patients and prescribers requires a clinical documentation system that integrates with the dispensing system, reformats patient data into usable and efficient clinical records, and allows pharmacists to document their clinical activities.

To support their clinical activities, community pharmacists may need to remodel their pharmacies so that prescription and clinical workflows are integrated and efficient and so that pharmacists have the necessary space to review patient records and provide semiprivate or private patient consultation/care. If technologies such as automation or robotics are integrated into the practice, structural remodeling of the pharmacy may need to be considered as well. The remodeling changes implemented should have the net effect of increasing practice efficiency in order to maximize the pharmacists’ time with patients. Ultimately, these changes should help pharmacists optimize the care of their patients ensuring positive therapeutic outcomes with safe and effective therapy which in turn improve outcomes of the payers in terms of healthier patients and reductions in total health care spend.

Lack of Financial Incentives

All of these changes come at a cost to community pharmacies. As mentioned previously, a major issue affecting community pharmacy practice is the loss of revenue due to insufficient reimbursement on the product side without an adequate generation of revenue on the service side. The rapid decline in product reimbursement has not coincided with an increase in reimbursement for services. The little that has been paid to community pharmacies for P4P outcomes has been a trickle compared with the loss of revenue. Obviously this model cannot continue indefinitely; it has resulted in community pharmacy closings, often in rural areas where access to pharmacists’ services will be missed.15

The current system also does not reimburse pharmacists for ongoing clinical services or patient outcomes. Pharmacists are paid to provide MTM services to select Medicare Part D beneficiaries, but the numbers of patients who have participated in MTM services been low due to a variety of reasons including eligibility of patients (drug spend) and patient participation.16-17 However, the Center for Medicare and Medicaid Services (CMS) recently announced a Part D Enhanced MTM model to encourage Part D plans to invest in MTM strategies to optimize medication use and improve care coordination,18 and this may encourage prescription drug plans to expand their MTM offerings in the 5 regions announced by CMS.

In addition to this CMS announcement, federal legislation recognizing pharmacists as providers under the Social Security Act has been introduced.19 This legislation highlights that a common reason for lack of pharmacist reimbursement is that pharmacists are not recognized as providers by CMS. Pharmacists have been able to bill for clinical services as “incident to” the physician. This practice has its challenges and limitations, one of which is lower reimbursement due to a lower coding of care.20 The Pharmacy and Medically Underserved Areas Enactment Act, if passed, will allow patient access and coverage to pharmacists’ services in medically underserved communities. This legislation may improve patient access to important services.

A New Reimbursement Model

Ultimately, payers will decide what they believe is of value to them and their beneficiaries. Depending on the patient population, diseases that are costly to manage or the cost of medications may determine the mix of services that payers deem necessary and pay pharmacists. It is important for community pharmacists to be reimbursed fairly for products and patient care services. Prospective payment for providing a standard base of patient care services is important because, as mentioned previously, there are costs associated with patient medication management and monitoring services. In addition, a share-savings model can be simultaneously implemented so that pharmacists who help payers reduce total health care costs through their patient care services will share in the savings with the payer.

From a pharmacy perspective, this may require a tiered approach to managing patients in order to increase practice efficiency and effectiveness. For example, the lower tier of patients represents all the patients who are beneficiaries on the health plan. For these patients, pharmacists provide an enhanced model of care whereby all patients receive standardized care including prospective drug utilization services, patient education and counseling, identification and resolution of drug therapy problems, ongoing patient drug therapy monitoring, and documentation of all clinical services performed by the pharmacists.

The next tier represents patients with medical conditions that are costly to the payer. Pharmacists may need to use additional services to appropriately manage these patients. Disease-state management services enter into this tier along with health coaching and motivational interviewing. The goals for these patients are to ensure that they are appropriately treated with medications and lifestyle management, that medications are appropriately monitored and managed, that regular collaboration and communication with other health care providers occurs, and that patients achieve their therapy goals, which in turn should result in positive therapeutic outcomes with reduced health care costs.

The upper tier represents the higher-risk patients who have comorbidities and multiple prescriptions. These patients can be the most costly plan beneficiaries, and pharmacists need to spend more time with them to appropriately manage their therapies and ensure that all medications are safe and effective. These are the patients who should receive MTM services at regularly scheduled visits (eg, monthly to quarterly). Community pharmacists will need to provide these MTM services in semiprivate or private rooms separate from the dispensing area. After each visit, community pharmacists will document their clinical activities, communicate with the patients’ prescriber(s), and ensure that patients are effectively managed and are achieving their therapeutic goals.

In this model, prospective payments ensure a certain standard of care and shared savings encourage community pharmacists to ensure that their patients are achieving their therapeutic goals with safe and effective medications. Prospective payments can come from the drug side of the benefit; shared savings, from the medical side. In this model, drug costs may increase because patients are closely managed and optimally treated to reach therapeutic outcomes, but total health care spending should decrease because of reductions in hospital admissions, emergency room visits, and unnecessary use of health care resources. Payers, health care systems, and pharmacists all benefit from this model, but ultimately the patients benefit the most.


The Affordable Care Act has moved providers from a fee-for-service system to a value-based purchasing system. This includes community pharmacists who are being paid less to dispense medications. Community pharmacists are being driven to provide patient care services that will impact patient outcomes. Unfortunately the reimbursement for patient care services has not kept pace with the declining product reimbursement. Although P4P programs have been implemented, it is not consistently being done by all payers or in all markets. A new reimbursement strategy is needed that pays pharmacists reasonably and fairly for their clinical services. One suggested reimbursement model provides pharmacists with prospective payment for a standard base of services along with a shared savings program determined by the plan. In this model, pharmacists provide a tiered approach to patient care—standard baseline services, disease-state management, and case management. Pharmacists who provide these services help the patients achieve positive therapeutic outcomes with safe and effective therapy which leads to improved health outcomes and reduced total health care spend.

Randy P. McDonough, PharmD, MS, CGP, BCPS, FAPhA is the Co-Owner/Director of Clinical Services at Towncrest and Solon Towncrest Pharmacies, Towncrest Compounding Pharmacy, and Innovative Pharmacy Solutions.


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  • 2016 Star Ratings Fact Sheet. 2016 Part C and D Medicare Star Ratings Data (v10 06 2015). Accessed on November 25, 2015.
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  • Institute of Medicine. To Err is Human: Building a Safer Health System. Washington, DC: The National Academies Press; 2000. doi:10.17226/9728.
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  • CMS announces Part D Enhanced Medication Therapy Management model [press release]. Baltimore, MD: Centers for Medicare & Medicaid Services. Published September 28, 2015. Accessed November 25, 2015.
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  • Pharmacy and Medically Underserved Areas Enactment Act, HR 592, 114th Cong, 1st Sess (2015). Accessed November 25, 2015.
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