CCPP Module 6, Section 3: Revenue Streams: Fee-for-Service, Value-Based, Shared-Savings
MODULE 6: Business Planning and Financial Strategy

Section 6.3: Revenue Streams: Fee-for-Service, Value-Based, Shared-Savings

A deep dive into the diverse ways pharmacy services can generate revenue. We will explore billing “incident-to,” Chronic Care Management codes, and the mechanics of shared-savings models in ACOs.

SECTION 6.3

Revenue Streams and Reimbursement Models

From Cost Center to Value Generator: Mastering the Financial Language of “Getting Paid.”

6.3.1 The “Why”: Revenue as the Lifeblood of Sustainability

In the previous section, we undertook the critical task of building a budget, meticulously accounting for every dollar of investment required to launch and operate your clinical service. That process established the financial foundation of your plan, defining what it will cost. Now, we turn to the other side of the ledger, the one that excites executives and ensures long-term viability: revenue. This section is dedicated to answering the single most important question any stakeholder will ask: “How does this service pay for itself?”

For generations, the pharmacy department, particularly on the inpatient side, has been viewed as a massive “cost center.” It is seen as a necessary expense, a place that consumes enormous resources to procure and distribute medications. While this view is simplistic and overlooks the immense value pharmacists provide in preventing costly errors, it has shaped the financial culture of healthcare. Your challenge and opportunity as a collaborative practice pharmacist is to shatter this paradigm. You must learn to position yourself and your services not as a cost, but as a direct generator of revenue or a quantifiable source of cost savings that far exceeds your expense. Understanding the mechanics of revenue is the key to making this transition.

Just as you would never administer a medication without understanding its mechanism of action, you cannot build a sustainable service without understanding the mechanisms of reimbursement. How does money flow from a payer—like Medicare or a commercial insurance company—to your clinic or hospital in exchange for the clinical expertise you provide? The answer is complex and is undergoing a seismic shift. We are moving away from a world that exclusively rewards volume (Fee-for-Service) to one that increasingly rewards outcomes and efficiency (Value-Based Care). As a clinical innovator, you must become fluent in both languages. This section will provide you with a deep, practical masterclass in the dominant revenue models available to pharmacists, empowering you to choose the right strategy for your service and to articulate your financial value with confidence and precision.

Pharmacist Analogy: Revenue Models as Prescription Reimbursement

You have been navigating different revenue models your entire career every time you process a prescription. The complexities of billing payers for your services are a direct parallel to the complexities of billing for a drug product.

Consider the different ways a single prescription for lisinopril can be paid for:

  • Fee-for-Service (The Cash/Copay Patient): A patient pays a simple, fixed price for the drug. You provide the product, you get paid a set amount. The transaction is straightforward and based entirely on the dispensing event. This is Fee-for-Service (FFS) billing for clinical services. You perform a visit (the event), you bill a code, you get paid a set amount. It’s transactional and volume-based.
  • Managed Care Contracts (The PBM Patient): Another patient has a complex PBM plan. You submit the claim, and the reimbursement is determined by a negotiated contract. It might be AWP minus a large percentage plus a small dispensing fee. Your profit margin is squeezed, and you are subject to DIR fees based on your performance on quality metrics like adherence. This is the world of Value-Based Care (VBC). You are still paid for the service, but the amount is now tied to contracts and your performance on quality measures.
  • Shared Savings (The 340B Program): Your pharmacy is a 340B contract pharmacy for a local FQHC. You dispense a high-cost specialty drug. You purchase it at the deeply discounted 340B price but are reimbursed by the PBM at a much higher rate. The “spread” between your cost and the reimbursement is massive. Per your contract, you “share” a portion of this generated savings back with the covered entity. This is a Shared-Savings Model. Your pharmacy’s actions (dispensing the drug) helped the FQHC generate significant savings, and you get to keep a piece of it. This is exactly how an ACO works: your clinical service helps the health system save money, and your department shares in that financial reward.

You are already an expert in navigating these different financial pathways for products. This section will teach you how to apply that same thinking to the services you provide, transforming your clinical encounters into sustainable revenue streams.

6.3.2 Masterclass: The Fee-for-Service (FFS) Model

Fee-for-Service is the traditional and most widely understood reimbursement model in American healthcare. Its premise is simple: a provider performs a service, documents it with a corresponding code (a CPT® code), and submits a bill to the payer for that specific service. Payment is directly tied to the volume of services rendered. For decades, this has been the dominant payment methodology for physicians, and it represents the most direct path for pharmacists to generate billable revenue in the ambulatory care setting.

While the healthcare system is actively moving toward value-based alternatives, FFS remains a cornerstone of outpatient reimbursement and a critical revenue stream for many clinical pharmacy services. Mastering the nuances of FFS billing is an essential skill, particularly for pharmacists embedded in physician practices. The key to unlocking this revenue stream lies in a thorough understanding of a concept known as “incident-to” billing.

The Cornerstone of Pharmacist FFS Billing: “Incident-To”

Because pharmacists do not have “provider status” under Medicare Part B, we cannot independently bill Medicare for most evaluation and management (E/M) services using our own National Provider Identifier (NPI). “Incident-to” is a Medicare billing provision that allows certain services provided by non-physician practitioners (NPPs), including clinical pharmacists, to be billed under the physician’s NPI, as if the physician had personally performed them. This is crucial because it allows the service to be reimbursed at 100% of the physician fee schedule, rather than a reduced rate often applied to NPPs.

However, this powerful mechanism is governed by a strict set of rules that must be followed meticulously to ensure compliance. Failure to meet all “incident-to” requirements can result in claim denials and, in severe cases, accusations of fraudulent billing. You must know these rules inside and out.

The “Incident-To” Compliance Checklist

For a service provided by a clinical pharmacist to be legitimately billed “incident-to” a physician, all of the following conditions must be met for every single encounter:

  1. Location Requirement: The service must take place in a physician’s office or clinic (defined as Place of Service code 11). “Incident-to” billing is not permitted in a hospital inpatient or outpatient facility setting (like a hospital-based outpatient department, or HOPD).
  2. Physician Initiation of Care: The physician must initiate the plan of care. A new patient must first be seen by the physician, who establishes the diagnosis and creates the initial treatment plan. The pharmacist’s services must be an integral, subsequent part of that physician-directed plan.
  3. Direct Supervision: The supervising physician must be physically present in the office suite and immediately available to provide assistance and direction while the pharmacist is providing the service. The physician does not need to be in the same room, but they must be in the building.
  4. Physician Involvement: The physician must have some form of ongoing involvement in the patient’s care. This is typically demonstrated through periodic follow-up visits with the physician.
  5. Scope of Practice: The service provided by the pharmacist must be within the pharmacist’s state scope of practice and be a type of service commonly furnished in a physician’s office.
  6. Documentation: The pharmacist’s visit note must be clearly documented in the shared medical record, and the claim is ultimately submitted under the physician’s NPI.
Common “Incident-To” CPT® Codes for Pharmacist Services

Under “incident-to” guidelines, pharmacists most commonly bill for established patient office visits. The workhorse code for this is CPT 99211. However, several other codes may be applicable depending on the service provided.

CPT® Code Description Key Requirements & Use Case for Pharmacists Typical Medicare Reimbursement
99211 Established Patient Office Visit, Level 1 Commonly referred to as a “nurse visit.” This code is appropriate for brief, straightforward encounters that do not require a physician’s direct problem-solving skills. It is perfect for follow-up visits for a stable chronic condition.
Use Case: Blood pressure check and titration of lisinopril per protocol, INR check and warfarin dose adjustment, adherence counseling.		 ~$25 – $35
99212 – 99214 Established Patient Office Visit, Levels 2-4 While technically billable under “incident-to,” using these higher-level codes for pharmacist services carries a higher audit risk. The documentation must strongly support the level of medical decision-making (MDM) or time spent. Billing these codes typically requires a very robust CPA and close collaboration with the supervising physician. Many practices choose to only use 99211 for pharmacist visits to minimize compliance risk. ~$50 – $150
G0108 Diabetes Self-Management Training (DSMT) Individual or group training services for patients with diabetes. This requires the service to be an accredited DSMT program, but pharmacists are recognized providers.
Use Case: Teaching a newly diagnosed diabetic patient how to use a glucometer, inject insulin, and manage hypoglycemia.		 ~$40 per 30 min unit
98966 – 98968 Telephone Assessment & Management Time-based codes for telephone calls with an established patient. Billed based on the cumulative time spent by a qualified non-physician healthcare professional over a 7-day period. Not all commercial payers cover these codes. ~$15 – $40

A Powerful FFS Opportunity: Chronic Care Management (CCM)

Beyond individual office visits, Medicare has created a set of codes designed to reimburse providers for the ongoing, non-face-to-face work involved in managing patients with multiple chronic conditions. This is Chronic Care Management (CCM), and it is a service that clinical pharmacists are exceptionally well-suited to provide.

CCM services are typically provided under “general supervision” of a physician, which means the physician does not need to be in the same building. This provides greater flexibility than “incident-to” services. The core of CCM is providing at least 20 minutes of clinical staff time per calendar month directed by a physician or other qualified healthcare professional.

Masterclass Breakdown: CCM Billing Codes
CPT® Code Time Requirement (per calendar month) Description & Use Case for Pharmacists Typical Medicare Reimbursement
99490 First 20 minutes This is the base code for CCM. Pharmacist activities can include telephone calls with the patient to review medications, coordinating with home health agencies, ensuring refills are processed, and documenting in the EHR. This is a perfect fit for a pharmacist’s skill set. ~$60 – $70
99439 Each additional 20 minutes An add-on code for patients who require more intensive management during the month. You can bill this in addition to 99490. ~$45 – $55
99487 First 60 minutes (Complex CCM) For patients with more complex needs requiring substantial care plan revision and higher-level medical decision making. ~$130 – $140
99489 Each additional 30 minutes (Complex CCM) Add-on code for complex CCM services. ~$65 – $75
CCM Documentation is Paramount

CCM is a high-value service but is also subject to audits. Meticulous documentation is non-negotiable. For every minute of time billed, you must have a corresponding entry in the EHR that details:

  • The date the service was rendered.
  • The start and end time for the activity.
  • The name of the person performing the service.
  • A brief description of the activity (e.g., “5 min call with patient re: hypoglycemia symptoms,” “10 min chart review and communication with cardiology re: dose change”).

Many EHRs now have built-in CCM time-tracking tools to simplify this process.

6.3.3 Masterclass: The Shift to Value-Based Care (VBC)

For all its clarity, the Fee-for-Service model has a fundamental flaw that has driven up healthcare costs for decades: it pays for volume, not value. It incentivizes doing more things, not necessarily the right things. The Value-Based Care (VBC) movement is a direct response to this flaw. VBC is a broad term for reimbursement models that link payment to the quality and cost-effectiveness of care provided. In a VBC world, providers are rewarded for keeping patients healthy, preventing hospitalizations, and improving clinical outcomes. This is a paradigm shift that places the unique skills of a clinical pharmacist front and center.

In an FFS model, a pharmacist is often seen as a cost to be managed. In a VBC model, a pharmacist becomes a strategic asset, an investment that generates a return by improving the very quality and cost metrics upon which the organization’s reimbursement now depends. While VBC models are more complex than FFS, they represent the future of healthcare and the greatest opportunity for the pharmacy profession to demonstrate its indispensable value. The most prominent VBC model impacting pharmacists today is the Shared-Savings Model used by Accountable Care Organizations (ACOs).

The Engine of VBC: Shared-Savings & Accountable Care Organizations (ACOs)

An ACO is a group of doctors, hospitals, and other healthcare providers who come together voluntarily to give coordinated, high-quality care to their Medicare patients. The goal of coordinated care is to ensure that patients get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors.

The financial engine of an ACO is a shared-savings program. Here’s how it works:

  1. Patient Attribution: A specific population of Medicare patients is “attributed” to the ACO, typically based on where they receive the majority of their primary care.
  2. Financial Benchmark: Medicare analyzes the historical spending for this group of patients and sets a financial benchmark—an expected total cost of care for the upcoming year.
  3. Quality Gates: The ACO must meet or exceed a set of rigorous quality performance standards (e.g., A1c control, blood pressure control, cancer screenings, patient satisfaction).
  4. Generating Savings: The ACO’s providers work together to provide more efficient, coordinated care to keep their patients healthy and out of the hospital. This includes activities like care management, transitions of care, and, critically, comprehensive medication management.
  5. Sharing the Savings: At the end of the year, Medicare compares the ACO’s actual spending to the benchmark. If the actual spending is lower than the benchmark AND the ACO has met its quality targets, the ACO is entitled to share in the savings it generated. The ACO receives a percentage (e.g., 50%) of the difference between the benchmark and the actual cost.
The Pharmacist’s Role as a “Savings Generator” in an ACO

This is where your value becomes undeniable. An ACO’s success is almost entirely dependent on its ability to manage chronic disease and prevent costly hospitalizations and ED visits. Medication-related problems are a primary driver of these costs. Therefore, an embedded clinical pharmacist is one of the highest-yield investments an ACO can make.

  • You Improve Quality Scores: Your work in a diabetes or hypertension clinic directly improves the HEDIS and Medicare Star Ratings that serve as the quality gates for shared savings.
  • You Reduce Hospitalizations: Your transitions of care service prevents costly readmissions. Your polypharmacy reviews in high-risk seniors prevent adverse drug event-related hospitalizations.
  • You Optimize High-Cost Drugs: You ensure that expensive specialty medications are used appropriately and that patients are on the most cost-effective therapies, reducing the total pharmacy spend.

In an ACO model, your salary is no longer viewed as an expense on a P&L. It is an investment that enables the entire organization to access a multi-million dollar shared savings revenue stream.

Example: Calculating the Pharmacist’s Impact in a Shared-Savings Model

Imagine an ACO with 10,000 attributed Medicare patients. Their financial benchmark is $10,000 per patient per year, for a total expected cost of $100 million. The ACO invests in a team of 5 clinical pharmacists at a fully-loaded cost of $170,000 each, for a total investment of $850,000.

Metric Without Pharmacists With Pharmacists Financial Impact
Financial Benchmark $100,000,000 $100,000,000 –
Actual Total Cost of Care $98,000,000 $95,000,000 The pharmacists’ interventions (prevented readmissions, optimized meds) created an additional $3,000,000 in savings.
Gross Savings $2,000,000 $5,000,000 –
ACO’s Share (50%) $1,000,000 $2,500,000 The ACO earned an additional $1,500,000 in shared savings revenue.
Return on Pharmacist Investment ($1,500,000 in additional revenue) / ($850,000 in pharmacist cost) = 176% ROI

6.3.4 Strategic Synthesis: Choosing Your Revenue Model

You have now completed a deep dive into the two dominant reimbursement paradigms in healthcare: the volume-driven world of Fee-for-Service and the outcome-driven world of Value-Based Care. The critical question remains: which model is right for your service? The answer is rarely a simple “one or the other.” Most successful and resilient clinical services develop a hybrid revenue strategy, blending different models to create multiple, diverse streams of income. This approach provides stability and allows you to capture value in different ways from different payers and partners.

Your choice of primary revenue model should be a strategic one, based on your practice setting, your patient population, your organizational structure, and your tolerance for risk. The following masterclass table provides a head-to-head comparison to guide your strategic planning.

Masterclass Comparison: FFS vs. Value-Based/Shared-Savings Models
Attribute Fee-for-Service (FFS) Value-Based / Shared-Savings
Core Philosophy “We get paid for what we DO.” “We get paid for the OUTCOMES we create.”
Primary Goal Maximize the volume of billable encounters. Improve quality and reduce the total cost of care.
Key Mechanism “Incident-to” billing using CPT codes for discrete visits (e.g., 99211, CCM codes). Performance on quality metrics and total cost benchmarks within a defined population (e.g., ACO).
Revenue Cycle Relatively short and predictable. Bill for a visit today, get paid in 30-60 days. Long and variable. Shared savings payments are calculated annually and paid out months after the performance year ends.
Risk Profile Low financial risk. You are paid for your work regardless of the patient’s outcome. The risk is primarily in compliance and audits. High financial risk. You can invest heavily in services and receive no shared savings if cost or quality targets are not met. Some models even include downside risk (penalties).
Best Fit For…
  • Pharmacists newly embedded in a private physician practice.
  • Services where demonstrating a direct ROI from cost-avoidance is difficult.
  • Organizations that need a predictable, immediate revenue stream to offset initial costs.
  • Pharmacists integrated into large health systems, ACOs, or clinically integrated networks.
  • Services focused on high-cost populations (e.g., CHF, COPD, complex polypharmacy).
  • Organizations with robust data analytics capabilities.
The Hybrid Approach

A pharmacist in an ACO-affiliated primary care clinic provides an excellent example of a hybrid model. The pharmacist’s day-to-day work involves seeing patients for medication management, which is billed as FFS “incident-to” (99211) or through CCM codes (99490). This FFS revenue helps to partially offset the direct cost of the pharmacist’s salary throughout the year. Simultaneously, the clinical outcomes of this work—better A1c control, reduced ER visits, and prevented readmissions—are contributing to the ACO’s ability to generate a large shared-savings payment at the end of the year. The service is both a transactional revenue generator and a strategic value generator.