Section 31.5: Implementation of First Claims and Reconciliation Metrics

31.5.1 The “Why”: The Contract is Signed, But the Real Work Begins Now

You have survived the credentialing gauntlet (31.1), crafted a winning value proposition (31.2), deciphered the arcane economics of DIR and GER (31.3), and successfully negotiated a payer contract (31.4). The ink is dry. It’s time to celebrate, right? Not quite. Signing the contract is like getting your driver’s license; it grants you permission to operate, but it doesn’t guarantee you’ll reach your destination safely or efficiently. Now comes the equally critical, highly technical, and often underestimated phase: implementation and operationalization.

A perfectly negotiated contract is worthless if it’s not loaded correctly into your Pharmacy Management System (PMS), leading to incorrect claim adjudications. It’s dangerous if you don’t submit test claims to verify accuracy before processing thousands of dollars in real prescriptions. It’s financially fatal if you don’t have a robust process to reconcile the payments you *actually* receive against what the contract *promised* you would receive, including all those hidden DIR/GER fees.

This section is the operational capstone of Module 31. It bridges the gap between the signed legal document and the day-to-day reality of submitting claims, getting paid, and ensuring your pharmacy remains financially viable under the terms you negotiated. Errors in this phase can lead to:

• Massive Revenue Leakage: Submitting claims with incorrect pricing or billing codes, resulting in underpayments you may never recover.
• Compliance Nightmares: Failing to adhere to specific billing requirements outlined in the contract, leading to audit failures and clawbacks.
• Cash Flow Crises: Inability to accurately predict or reconcile payments, making financial planning impossible.
• Damaged Payer Relationships: Constant billing errors and disputes erode the trust you worked so hard to build.

Mastering contract implementation and reconciliation is not glamorous, but it is the bedrock of a sustainable specialty pharmacy. This requires a different skillset than clinical management or negotiation—it requires meticulous attention to detail, strong IT system knowledge, and rigorous financial discipline. This section will provide the playbook for building these essential operational muscles.

31.5.2 Deep Dive: Loading the Payer Contract into Your PMS

Your Pharmacy Management System (PMS) – whether it’s a large commercial system like CPR+, Therigy, or WellSky, or a custom-built platform – is the brain of your operation. It handles everything from patient intake to claim submission to inventory management. One of its most critical functions is the contract management module. This is where the complex terms you negotiated are translated into the software logic that will adjudicate claims in real-time.

“Garbage In, Garbage Out” applies tenfold here. A single error in loading the contract can lead to thousands of claims adjudicating incorrectly, resulting in potentially millions of dollars in lost revenue or compliance failures. This process requires meticulous attention to detail and robust quality assurance.

Masterclass Table: Key Contract Elements & PMS Implementation

Contract Element	Where to Find It	Critical PMS Fields to Populate	Implementation Pitfall & QA Check
Payer Identification	Contract Cover Page, Plan Listing Appendix	Payer Name Processor Control Number (PCN) Bank Identification Number (BIN) Group Number(s) – *Crucial!* Often dozens or hundreds per contract. NCPDP Payer Sheet reference	Pitfall: Missing or incorrect Group Numbers. A single typo means claims for that group will reject or pay incorrectly. QA: Cross-reference every BIN/PCN/Group from the contract appendix against the PBM’s official Payer Sheet and your PMS database.
Brand Reimbursement Formula	Reimbursement Appendix, Fee Schedule	Benchmark (AWP, WAC) Discount Percentage (e.g., AWP – 18%) or Markup (e.g., WAC + 4%) Dispensing Fee (Brand Tier) Effective Date	Pitfall: Incorrectly applying the discount (e.g., entering “18” instead of “-18”). Using the wrong benchmark source file (ensure AWP/WAC prices are updated regularly). QA: Manually calculate expected reimbursement for 5-10 high-cost brands based on the formula and current AWP/WAC. Compare to PMS calculation.
Generic Reimbursement Formula	Reimbursement Appendix, MAC Policy Section	MAC Pricing Logic (Often just “Use PBM MAC List”) Lesser Of Logic (e.g., “Lesser of MAC, U&C, AWP-X%”) Dispensing Fee (Generic Tier) GER Target Rate (For tracking, not adjudication)	Pitfall: Failing to load the PBM’s specific MAC list file correctly or update it frequently (daily/weekly). Incorrectly configured “Lesser Of” logic. QA: Manually calculate expected reimbursement for 5-10 common generics based on the current MAC list and compare to PMS adjudication.
Dispensing Fees (DF)	Reimbursement Appendix	DF Amount(s) Tiering Logic (e.g., Brand vs. Generic vs. Specialty tiers) Effective Date	Pitfall: Incorrectly assigning tiers (e.g., applying generic DF to a brand drug). Failing to update DF if it changes during contract term. QA: Verify DF applied during test claims matches the contract tier.
Specific Drug Overrides / Carve-Outs	Drug List Appendix, Reimbursement Exceptions	NDC-specific reimbursement formulas (e.g., “Drug X pays at WAC + 0%”). Exclusion from MAC pricing for certain generics. Special Dispensing Fees for LDDs.	Pitfall: Missing these critical overrides. Relying only on the general Brand/Generic formulas will lead to massive underpayments on these specific NDCs. QA: Create a specific test claim for *every single* NDC listed in the override appendix.
Formulary / Network Status Flags	Formulary Files, Network Drug Lists (often external)	Flags indicating if a drug is Covered, Non-Formulary, requires PA, has Step Therapy, or is in a Limited Network.	Pitfall: Using outdated formulary files. Your PMS must accurately predict PA requirements and coverage status during intake to avoid claim rejections and delays. QA: Ensure regular (ideally weekly or daily) automated updates of formulary files from the payer or a third-party vendor (e.g., MMIT, CoverMyMeds).

31.5.3 Critical Validation: Submitting Test Claims

You wouldn’t launch a rocket without running simulations. Similarly, you must not submit real, high-dollar specialty claims under a new contract without first verifying the system’s accuracy with test claims. This is your final “pre-flight check” to ensure the contract was loaded correctly and the PBM’s system is interpreting it as expected.

Test claims are submitted electronically just like real claims, but they use fictitious patient information and are flagged in a way that the PBM knows not to actually pay them (though they still process the adjudication logic). The goal is simple: Does the adjudicated amount returned by the PBM match the amount your PMS calculated based on the contract terms?

The Test Claim Protocol: A Step-by-Step Guide

1. Develop Your Test Script: Don’t just submit random claims. Create a structured “test script” covering a representative sample of scenarios. Your script should include:
   • High-cost brand drugs (using current AWP/WAC).
   • Common generic drugs (using current MAC prices).
   • Every single drug with a specific NDC override/carve-out.
   • Claims using different BIN/PCN/Group combinations from the contract.
   • Drugs requiring Prior Authorization (to test PA flags).
   • Drugs that should be Non-Formulary (to test rejection).
2. Create Dummy Patient Profiles: In your PMS (ideally the sandbox environment), create fictitious patient profiles. Use standardized names (e.g., “TEST, PATIENT ONE”). Ensure you have profiles covering different plan variations if applicable.
3. Enter & Adjudicate Test Prescriptions: Using your test script and dummy profiles, enter prescriptions into the PMS and submit them electronically to the payer. Ensure you are using the correct test claim flags (often specific values in the NCPDP “Submission Clarification Code” field – consult the PBM’s payer sheet).
4. Document Expected vs. Actual: For each test claim, meticulously document:
   • Expected Reimbursement (calculated manually or by your validated PMS sandbox build).
   • Actual Adjudicated Reimbursement (returned by the PBM).
   • Adjudicated Patient Responsibility (Copay/Coinsurance).
   • Adjudicated Status (Paid, Rejected).
   • Rejection Codes (if applicable).
5. Analyze Discrepancies: Investigate every single mismatch.
   • If the PBM paid *less* than expected: Was your PMS contract load incorrect? Is the PBM using a different AWP/WAC source? Did they apply an unexpected fee?
   • If the PBM paid *more* than expected: Equally concerning! This could indicate a setup error that might lead to overpayments and future recoupments.
   • If a claim rejected unexpectedly (or paid when it should have rejected): Is the formulary file loaded correctly? Is the BIN/PCN/Group mapping accurate?
6. Troubleshoot & Correct: Work with your PMS vendor and the PBM’s provider relations or technical support team to resolve all discrepancies. Update your PMS contract load as needed. Do not proceed to live billing until all major test claim discrepancies are resolved and understood.
7. Retest After Corrections: After making fixes, re-run the relevant test claims to confirm the issue is resolved.

31.5.4 Building the Engine: Establishing Robust Reconciliation Processes

You’ve loaded the contract and validated it with test claims. Now, the real financial work begins: reconciliation. This is the process of matching the payments you *actually* receive from the PBM against the payments you *expected* to receive based on your contract and adjudicated claims. It is the only way to catch underpayments, verify DIR/GER fees, and truly understand your pharmacy’s profitability.

Reconciliation is not optional. It is a fundamental financial control. Without it, you are flying blind, trusting the PBM to pay you correctly – a trust that is often misplaced, not necessarily due to malice, but due to the sheer complexity of the system.

Manual vs. Automated Reconciliation

How you perform reconciliation depends on your volume and resources.

• Manual Reconciliation (Spreadsheets):
  • Process: Export adjudicated claims data from your PMS. Export payment data from Electronic Remittance Advice (ERA) files (also known as 835 files) sent by the payer. Manually match claims to payments in Excel or Google Sheets using functions like VLOOKUP or INDEX/MATCH.
  • Pros: Low software cost (requires spreadsheet skills).
  • Cons: Extremely time-consuming, prone to human error, not scalable beyond very low volume (< 100 specialty claims/month). Becomes impossible with DIR/GER complexity.
• Automated Reconciliation (Specialized Software):
  • Process: Use third-party reconciliation software (e.g., solutions from Net-Rx, Proxsys Rx, FDS Amplicare, or built-into some advanced PMS platforms). These tools automatically import claim data and ERA files, perform the matching, flag discrepancies, and generate reports.
  • Pros: Fast, accurate, scalable, specifically designed to handle DIR/GER complexity, provides robust reporting for disputes.
  • Cons: Significant software cost ($$$$ per month). Requires setup and configuration.

Recommendation: For any serious specialty pharmacy, automated reconciliation software is a mandatory investment. The cost of the software is minuscule compared to the potential lost revenue from missed underpayments or unmanaged DIR/GER fees. Manual reconciliation is simply not sustainable or reliable at scale.

The Reconciliation Cycle: Daily, Weekly, Monthly, Quarterly

Reconciliation is not a one-time event; it’s a continuous cycle.

Masterclass Table: Essential Data Points for Reconciliation

Your reconciliation system must track and compare these key fields for every claim:

Data Point	Source(s)	Purpose in Reconciliation
Prescription Number (Rx#)	PMS	Primary unique identifier within your system.
Claim ID / Transaction ID	Adjudication Response, ERA	PBM’s unique identifier for the claim transaction. Needed for matching.
Patient Name / ID	PMS, ERA	Verify payment is for the correct patient.
Fill Date	PMS, ERA	Critical for DIR/GER timing and look-back periods.
NDC	PMS, ERA	Verify payment is for the correct drug. Essential for NDC-specific rates.
Billed Amount	PMS (Claim Submission)	The amount you submitted based on contract terms.
Expected Reimbursement	PMS (Calculated based on loaded contract)	What your system *predicted* the payer would reimburse (excluding patient portion).
Adjudicated Reimbursement	Adjudication Response	What the PBM *said* they would pay at the point of sale (excluding patient portion).
Paid Amount	ERA (835 File)	What the PBM *actually* paid you via EFT (excluding patient portion).
Patient Responsibility (Copay/Coinsurance)	Adjudication Response, ERA	Amount collected (or billed) from the patient. Needed for full reconciliation.
Adjustment Codes / Amounts	ERA (835 File)	Codes explaining any difference between Adjudicated and Paid (e.g., DIR clawbacks, sequestration, penalties). Crucial for DIR/GER tracking.
Check / EFT Number	ERA (835 File)	Links the payment back to your bank deposit.
Payment Date	ERA (835 File)	Needed for cash flow tracking and DSO calculation.

31.5.5 The Fight for Your Money: Identifying & Disputing Discrepancies

Your reconciliation process *will* uncover discrepancies. It’s inevitable. Underpayments, incorrect DIR fees, and denied claims are common. Having a systematic process for identifying, documenting, and disputing these errors is critical to protecting your revenue.

Common Causes of Payment Discrepancies

• Contract Load Errors (Yours or Theirs): Incorrect reimbursement formula, DF, or NDC override applied.
• Outdated Pricing Files: PBM used an old AWP/WAC file, or your MAC list wasn’t updated.
• Incorrect DIR/GER Calculation: Wrong performance data used, incorrect formula applied, claim included/excluded incorrectly.
• Bundling/Unbundling Issues: PBM incorrectly grouped or separated claims for payment adjustments.
• Patient Eligibility Issues: Claim paid but patient was later found to be retroactively termed.
• Coordination of Benefits (COB) Errors: Incorrect primary/secondary payer information.
• Simple PBM Processing Errors: Glitches happen.

31.5.6 Beyond Reconciliation: Tracking Key Metrics for Success

Contract implementation and reconciliation provide a wealth of data. Your final step is to harness this data to actively manage your pharmacy’s financial health and demonstrate your ongoing value to the payer. You need a dashboard of Key Performance Indicators (KPIs) that go beyond simple prescription volume.

Masterclass Table: Essential Post-Implementation Pharmacy Dashboard

Metric Category	Specific KPI	Calculation	Why It Matters	Target / Trend
Financial Health	Gross Profit per Rx (Pre-DIR/GER)	(Adjudicated Reimbursement + DF – Drug Cost) / # Rx	Measures initial profitability before clawbacks.	Track trend by payer & drug class. Ensure it’s > CoD.
	Net Profit per Rx (Post-DIR/GER)	(Paid Amount + DF – Drug Cost – Actual DIR/GER) / # Rx	Your *true* profitability.	Must be positive! Track trend closely.
	DIR / GER Accrual Accuracy	(Actual DIR/GER Clawback / Accrued DIR/GER Estimate)	Measures how well you are predicting clawbacks.	Target: 90-110%. Adjust accrual rate if consistently off.
	Days Sales Outstanding (DSO)	(Average Accounts Receivable / Total Revenue) x # Days in Period	Average number of days it takes to get paid.	Target: < 45-60 days. High DSO indicates cash flow problems or collection issues.
Billing & Collections Efficiency	First-Pass Claim Acceptance Rate	(# Claims Accepted on First Submission / Total Claims Submitted)	Measures initial billing accuracy. High rate reduces rework.	Target: > 98%.
	Reconciliation Rate	(# Claims Reconciled / Total Claims Paid)	Measures completeness of your reconciliation process.	Target: 100%.
	A/R > 90 Days	($ Value of Claims Unpaid > 90 Days / Total A/R)	Measures effectiveness of collections. High % indicates serious payment issues.	Target: < 5-10%.
	Dispute Success Rate	($ Value Recovered via Disputes / $ Value Disputed)	Measures effectiveness of your dispute process.	Track trend. Low rate may indicate poor documentation or invalid disputes.
Payer Relationship	Payer Audit Findings / Clawbacks	$ Amount Clawed Back via Audits	Direct measure of compliance risk and audit performance.	Target: $0. Any findings require root cause analysis.
	Performance Score / Network Tier	Score/Tier Assigned by Payer (Based on DIR metrics, etc.)	Directly impacts future DIR rates and network status.	Target: Preferred / Tier 1. Monitor quarterly reports from payer.