Managing medication costs is a critical priority for skilled nursing facilities (SNFs), particularly because of Medicare Part A’s reimbursement model during a resident’s stay. During the first 20 days, full coverage is provided by Part A. From days 21 to 100, a coinsurance structure is established to split costs. Throughout this period, drug spend significantly impacts a facility’s margins. Implementing a robust drug cost management strategy can be the difference between profitability and financial strain in an SNF environment.
Why Drug Costs Matter for Skilled Nursing
Drug expenditures can rapidly accumulate, as SNFs often care for patients with complex medical profiles and multiple comorbidities. Since reimbursement under Medicare Part A does not differentiate medication costs from other operational expenses, overspending on pharmaceuticals eats into profits. A well-planned drug cost management approach helps ensure quality care while safeguarding financial health.
Formulary Management
An expert-designed and managed formulary is one of the most effective ways to control medication costs. Identifying the net cost difference between generic or brand name drugs can reduce spending at SNFs without compromising clinical outcomes. Formulary adjustments should be driven by clinical evidence, resident population needs, and collaborative input from pharmacy partners. Regular reviews keep the formulary current and help identify opportunities to streamline or replace higher-priced medications.
Real-Time Adjudication & Claims Review
Real-time adjudication allows SNFs and their partner pharmacies to verify patient coverage, track contract rates, and preemptively correct errors before claims are finalized. This reduces denials, eliminates unnecessary billing complexities, and creates transparency around actual medication costs. By spotting potential issues early, facilities can prevent minor billing discrepancies from snowballing into large, unreimbursed drug expenditures.
Drug Manufacturer Rebate Optimization
Manufacturer rebates can reduce net medication costs significantly. However, navigating the rules, formats, and deadlines associated with submitting rebate claims is time-consuming. Many SNFs find value in working with partners who can automate this process, aggregating claim data and ensuring that eligible prescriptions trigger the appropriate rebate. This data-driven, systematic approach to drug cost management enables SNFs to capture savings that often go unclaimed.
Collaboration with Expert Pharmacy Services
Collaborating with long-term care (LTC) pharmacy partners is essential for streamlining operations and controlling net costs. These experts can advise on therapeutic interchange options (where available, since regulations vary by state) so that lower-cost, clinically equivalent medications are used. They can also help handle the complexities of Medicare Part A’s billing processes, thereby supporting both quality of care and fiscal responsibility.
Ongoing Education and Review
Staff engagement is key to controlling drug costs in skilled nursing. Encouraging clinicians and nursing teams to stay current on formulary updates fosters a culture of cost-aware prescribing. Regular training on process changes, data analytics, and performance metrics ensures staff alignment with organizational cost-containment goals. Monitoring key performance indicators, such as per-resident drug spend and off-formulary usage, can provide valuable insights that identify potential process improvements.
Summary
For skilled nursing facilities, financial success increasingly depends on effectively managing medication spend under bundled Medicare reimbursements. By embracing a holistic drug cost management framework that incorporates formulary oversight, real-time adjudication, rebate optimization, and strong pharmacy partnerships, SNFs can safeguard both their financial viability and the quality of resident care.
