Is Your Pharmacy located in a HEAT Zone? Be prepared to feel the heat!

NO, we don’t mean is your pharmacy basking in warmth and sunlight (well maybe, depending on where you are located). HEAT zones are far cry from a pleasant beach-like setting. If your pharmacy is located in a HEAT zone or you are contemplating opening a new store, geographic location can translate into a myriad of issues that require special attention and knowledge of experienced professionals to navigate.

What are HEAT zones and where are they located?  HEAT zones, as they are commonly referred to are zones of concentrated enforcement of the Medicaid Fraud Strike Force. Medicaid Fraud Strike Force (MFSF) is a combined force of several law enforcement agencies operating under the umbrella of the Office of Inspector General (OIG) of the Center of Medicare and Medicaid (CMS). The purpose of the MFSF is identify, prosecute, and recover funds from health care fraud schemes around the county.

CMS and OIG first established Medicaid Fraud Strike Force in March of 2007. Initially, the objective was to combine the federal resources along with local assets and knowledge to prevent and combat health care fraud, waste, and abuse (FWD) in highly populated areas or areas of high fraud activity. Currently, Medicaid Fraud Strike Force operates in many major metropolitan areas as well as rural communities effected by the Opioid epidemic. Regions included within Medicaid Fraud Strike Force are Miami, Florida; Los Angeles, California; Detroit, Michigan; Houston, Texas; Brooklyn, New York; Baton Rouge and New Orleans, Louisiana; Tampa and Orlando, Florida; Chicago, Illinois; Dallas, Texas; Washington, D.C.; Newark, New Jersey/Philadelphia, Pennsylvania; and the Appalachian Region.

Question that arises most often from current or prospective owners is how location in a HEAT zone affects my current or potential business. Well, the answer is a complicated combination of factors. Some of the most important factors are access to payer networks (both government and PBMs) and increased audit scrutiny. Geographical location of the pharmacy can mean outright denial of payer contracts, or an extensive credentialing process meant to possibly deter potential applicants.

In the past, some HEAT zones have outright refused new pharmacies’ admission to its Medicaid networks and have even reduced the number of enrolled providers. Currently, with the rise of national PBMs handling most of states managed Medicaid business, it’s been up to the PBM to credential potential pharmacy providers.  There are generally three types of HEAT zone-related credentialing hurdles that pharmacies must overcome.  First, certain PBMs, most notably Express Scripts, require that pharmacies post large performance bonds ($500,000 and the like), which can be very expensive to acquire.  Second, certain PBMs (notably, OptumRx) require that pharmacies undergo an extended credentialing process involving a complete reconciliation of prior purchases and claims, with no discrepancies, regardless of PBMs, prior to being allowed in the network.  Third, several PBMs do not admit pharmacies in the network until they have been in business for a number of years prior to credentialing.   There are numerous variations on these common themes depending on the geographical location and other circumstances.

OptumRx’s credentialing process presents a particular challenge.  During the credentialing process, a pharmacy is asked to submit a dispensing report of prescriptions for a specific time period. Also, the pharmacy is asked to contact wholesalers to provide inventory purchase records. Presumably, data is then analyzed and reconciled and findings, most often adverse are used as a crucial component of admission process. In most cases, presence of large amounts of inventory shortages are detected and the pharmacy is denied admission into the network based of Fraud, Waste and Abuse practices.

Unfortunately, PBMs often ignore common sense and established business practices when performing credentialing analysis. For instance, most pharmacies that apply for credentialing into this network are established and have significant inventory amassed over time. The credentialing process, and specifically inventory analysis completely ignores the fact that a working pharmacy routinely makes bulk purchases that may not show up in purchase records requested for the credentialing period. Furthermore, PBMs have relied only on specific NDC matching to analyze purchases, this practice ignores that possibility or differences in package sizes and manufacturers.

Since credentialing processes are extensive and time consuming, its important to utilize experts that are familiar with credentialing to help navigate the process. Denial of entry into the network is not final and allows for appeal and re-application. Utilizing expertise of consultants can greatly increase chances of success. Utilizing proper record collection and analysis processes can best prepare your pharmacy for appeal or initial application.

PharmPilot Inc. along with our legal partners MDRXLaw, have helped pharmacies navigate the credentialing processes, appeal and overturn denials and handled a number of other HEAT and CMS OIG related issues. Contact our experts for a consultation.