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Actions to Help Offset Fees and Adjustments

Pharmacy claims reconciliation plays a vital role in the efficient functioning of the healthcare system, particularly in the area of pharmacy claims processing. Reconciliation is the process of matching the point-of-sale adjudication, also known as the promise-to-pay amount, from the third-party payer to the amount actually paid. The electronic remittance advice (ERA), or 835, is the electronic transaction that provides detailed claims payment information, and can include information about adjustments and denials of payment for pharmacy services. It is an essential tool for pharmacies to use to reconcile their claims and ensure accurate reimbursement. Understanding the nuances of 835 fees and adjustments is crucial for pharmacists, pharmacy technicians, and other healthcare professionals involved in the pharmacy billing and reimbursement process, thereby allowing them to take proper action to follow contractual obligations, advocate for the health of the pharmacy industry, and have a firm knowledge of the financial strength of their business.

Learn more about Pharmacy Claims Reconciliation

What are Fees and Adjustments? The 835 transaction contains valuable information about fees and adjustments applied to pharmacy claims.

Fees refer to the amounts deducted from the original billed charges, which can include:

  • Contractual fees, negotiated between the pharmacy and third-party payer
  • Customer service fees
  • In-network and out-of-network fees

These fees are reflected as deductions, allowing pharmacies to reconcile their financial records accurately.

Adjustments on the other hand, represent changes made to previously paid claims due to:

  • Retroactive eligibility changes
  • Claim billing corrections based on contractual requirements
  • Ingredient cost, copay, and dispensing fee adjustments

Actions and Outcomes
Adjustments to a claim after the claim has been paid due to, among other factors, eligibility, contractual reasons, or copay adjustments, can impact the pharmacy’s financial reporting.  Accordingly, the pharmacy should take action to make sure that the claim is reconciled accurately.

For payment of a claim at the contractually agreed rate, reconcile and adjust ledger. When claims are denied or adjusted for reasons including the claim lacking information, eligibility, DIR fees, and overpayment recoveries or forward balances, the pharmacy should take action. Actions that the pharmacy can take to help strengthen the pharmacy’s financial health and build the foundations for its growth include the following:

Actions for Fees Adjustments chartLearn more about DIR Fees

Pharmacies can easily identify and act on fees and adjustments in three ways:  

  1. Using a reconciliation provider with an automated copay adjustment tool can save time and resources over manually identifying any copay adjustments.
  2. A business metric tool such as  Metric-Rx®  can provide insight and visibility into pharmacy claims data. The data can be used to identify areas where further development of operational practices can improve compliance, thus improving reimbursement rates.
  3. Pre and post-editing of claims as well as billing staff training are usually best practices to help eliminate takebacks.

Claim Adjustment Reason Codes (CARC)
835 fees and adjustments help pharmacies identify discrepancies in reimbursement. By comparing the original billed charges to the payments and adjustments recorded in the 835, pharmacies can ensure that they receive appropriate reimbursement for the services rendered. Additionally, claim adjustment reason codes within the 835 provide insights into the reasons behind payment changes, allowing pharmacies to address any issues or discrepancies promptly. This level of transparency facilitates effective communication and collaboration between pharmacies and payers, leading to improved billing accuracy and financial stability.

Below are some of the most common standardized pharmacy claim adjustment reason codes*:

*For a full list of CARC codes go to https://x12.org/codes/claim-adjustment-reason-codes.

Financial Impact On Your Business
To make the most of 835 fees and adjustments, pharmacies should establish robust processes for reviewing and reconciling these transactions. This involves regularly monitoring the 835 reports and matching them against the corresponding claims to identify any discrepancies. It is crucial to have knowledgeable staff who can interpret the adjustment codes and take appropriate actions to resolve any issues. By diligently managing 835 fees and adjustments, pharmacies can enhance their revenue cycle management, reduce claim denials, and maintain a healthy financial position.

Net-Rx Fee and Adjustment Report
A fee report will help provide the ability to search by check level adjustments or claim level adjustments, search by specific codes or code descriptions, and review payment details for a particular check. The Net-Rx fee and adjustment report does this and provides the ability to search by keywords, such as DIR. Depending on your business volume, it may be more efficient to work through your fee and adjustment reporting monthly rather than quarterly. There are monthly accounts receivable reporting that can help provide summary financial reporting that can be used to track trends and history throughout the year, enabling easier and more confident business decisions and saving labor on manually pulling reports. 

Be sure to pay attention not just to the net check amount but also to the gross. Even if you received a $10,000 check, how much  would  it have been without those fees? These fees and adjustments impact your bottom line and your cash flow.

835 fees and adjustments are essential components of the pharmacy claims processing system. They provide valuable information about payments, deductions, and adjustments applied to pharmacy claims, allowing pharmacies to reconcile their financial records accurately. Understanding these fees and adjustments is crucial for pharmacies to ensure proper reimbursement and address any discrepancies promptly. By establishing robust processes for reviewing and reconciling Pharmacy 835 transactions, pharmacies can optimize their revenue cycle management and maintain financial stability in an ever-evolving healthcare landscape.

Contact Net-Rx for a demo on solutions that can help you identify and take action on fees and adjustments to help your pharmacy capture missing revenue, protect earned revenue, boost profitability, and ensure accurate reporting.

Authors

Kathleen Skokan

Kathleen has started as an Reconciliation Analyst at Net-Rx in 2005 and is now a Manager on the Customer Success team.  Working in a pharmacy many years ago as a technician provided Kathleen with a unique perspective of the challenges our members face in billing and reimbursement from third party payers and helped frame her commitment to find workable solutions to those challenges.  As a Manager she is privileged to work with a team of knowledgeable individuals who care deeply about the success of our members which continues to be her source of motivation. She is a west coast girl from Portland, Oregon.  She loves the beautiful Cascade Mountains, the Oregon Coast and spending time with her very large family.

Vicki Nahorn

Vicki began her career in 2002 as Pharmacy Technician in a neighborhood retail pharmacy. Her passion for the field led her to Net-Rx in 2005, where she took the role of an Account Analyst. In this capacity, Vicki thrived as she delved into consulting with pharmacies on pricing strategies, identifying billing opportunities, and overcoming claim rejections.

After earning a Bachelor of Arts degree in Personnel Psychology and Human Resource Management, Vicki transitioned into the role of Operations Manager, where she skillfully led and oversaw various facets of the business for several years. Today, Vicki serves as a Human Resources Business Partner, bringing her wealth of experience and insights to HR. Her career in both the pharmacy and HR sectors stands as a testament to her dedication to the noble cause of helping people age with grace.

Outside of her professional life, Vicki finds joy in spending quality time with her family, exploring the great outdoors through hiking, and embarking on adventures to National Parks. 

Jennifer Gordon

Jennifer’s career in pharmacy began in 2009 as a CPhT technician. Her love of pharmacy operations drove her to work hard to ensure the pharmacy ran smoothly and patient care was held to the highest quality standard. To further her education, Jennifer earned her Associate of Science degree in 2012 and thrived on the knowledge and experience she gathered throughout the healthcare industry. She then acquired her billing and reimbursement certification from the Pharmacy Technician Certification Board.  She enjoys bringing technology solutions and services to the marketplace to provide for pharmacies’ business needs. Her philosophy is to learn as much as she can to improve the pharmacy business journey and better the health of the industry.