The Basics of Pharmacy Claims Adjudication

From Payer to Patient: The Ins and Outs of Pharmacy Claims Adjudication

Prescription use is on the rise, a trend attributed to both increases in medical treatment options and the aging population. At the same time, the cost of healthcare — including medications and treatments — is also increasing. Pharmacy claims adjudication has become more relevant than ever to healthcare organizations because of its ability to reduce administrative costs.

Pharmacy claims, much like dental and medical claims, are adjudicated before the Payer processes them; adjudication assesses claim validity, relevancy, and accuracy. In the case of prescriptions, this process determines whether or not a treatment may be granted to the patient. 

Often, auto-adjudication is used to ensure the timely, accurate processing of claims while reducing the impact of human error. By partnering with a technology solutions provider with expertise in healthcare, Payers and Providers can better prepare claims for auto-adjudication upstream. Auto-adjudication saves time and resources and ensures patients receive their treatments as planned.

Digging into the Details of the Pharmacy Claims Processing Workflow

Once a Provider prescribes a treatment to a patient, the prescription is sent to the pharmacy, where it enters the pharmacy claims processing workflow.

If applicable, the prescription will first be subject to prior authorization. Prior authorization is the process of sending a prescription to the Payer in advance of, or prior to, filling it to ensure the prescribed treatment is the best course of action. At this point, the Payer reviews the treatment options and, if necessary, recommends alternatives based on potential interactions, available formulations, known effective dosages, and so on.

If no prior authorization is required, the prescription is returned to the pharmacy, where patient data is collected and entered into the pharmacy database to prepare for adjudication.

At this point, adjudication takes place. Again, this process is similar to healthcare claims adjudication or dental claims adjudication. The pharmacy claim is entered into the system, where the information is validated and the treatment is compared to the patient’s benefits. The claim determination is made and returned to the pharmacy, which shares the determination with the Provider and patient.

Applying Auto-Adjudication to Pharmacy Claims

The adjudication process is vital to healthcare claims processing and helps ensure patient benefits are dispensed in an accurate and timely manner. However, when done entirely manually, the process can be laborious and time-consuming. Auto-adjudication can help speed the adjudication process by flagging keywords and routing claims for next steps without requiring manual inputs.

Pharmacy claims are often associated with faster turnaround times and near-instant acceptances or denials. To meet user expectations, pharmacy claims adjudication must be rapid, accurate, and completed at scale. Auto-adjudication supports faster processing time and improved accuracy.

A pharmacy claims processing partner like Smart Data Solutions (SDS) can apply intelligent automation to validate and check claims data in advance of adjudication. This further supports turnaround times and accuracy, while also freeing up internal resources to work on higher-value projects.

What Are Potential Pharmacy Claims Adjudication Outcomes?

Pharmacy claims adjudication has three potential outcomes: accepted, declined, and reversed.

• Accepted claims move forward in the workflow, meaning the Payer will process and pay their responsibility for the claim. This is the ideal outcome for a claim, as it allows patients to receive their treatment.
• Denied, or declined, claims are put on pause, and returned to the Provider. A Provider who receives a declined claim has three options: to prescribe an alternative treatment and restart the process, to appeal the determination, which often requires further documentation, or to do nothing.
• Reversed claims are effectively undone for the pharmacy and Payer. These claims often occur when a patient does not pick up their prescription in the allotted time frame. By reversing claims, patient treatment information can be more accurately tracked. This allows for benefits data to be more accurate and pharmacy inventory to be logged correctly.

Of these outcomes, a denial requires the most explanation.

Reasons Pharmacy Claims Are Denied

Pharmacy claims adjudication can result in a denial for numerous reasons, but there are four reasons that are the most common:

• Not Covered or No Prior Authorization —These claims are declined because the prescription is not covered under the patient’s plan, or because a specific treatment requires a prior authorization but one was not submitted. On occasion, prior authorizations can be backdated to avoid this outcome.
• Incorrect or Inaccurate Information — When a claim is processed, all the data provided by the patient and the Provider must be accurate. Preparing claims for adjudication upstream with a technology partner like SDS can reduce the likelihood of this outcome, as data is checked in advance of adjudication.
• Incorrect Daily Quantity or Supply — If a prescription is written with inaccurate dosages over a time period, such as per day or per month, the claim will be denied. Often, medications that have non-traditional dosing methods, such as inhalation or topical application, experience this, as do medications that require frequent refills, rather than a larger initial supply.
• Refilled Too Recently — Similar to incorrect supply, many prescriptions may only be refilled on a certain timeline. This is particularly important in medications that may be abused. Patients must take their medications as prescribed to avoid needing refills too soon.

Being accurate throughout the pharmacy claims processing workflow, including preparing claims for adjudication and using auto-adjudication, can reduce the chances a claim is denied for any reason.

How Pharmacy Claims Adjudication Varies from Medical and Dental Adjudication

The principles behind pharmacy, medical, and dental claims adjudication are the same: check member data and verify the validity of the claim before processing it. Despite their similarities, some aspects of pharmacy claims adjudication are unique.

Prior authorization is one of the more unique features of the pharmacy claims process, because it may change the outcome of the treatment. When a treatment requires prior authorization, adjudication occurs before the patient receives the prescription, as opposed to after the services have been rendered. While some medical and dental procedures require pre-approval, prior authorization in pharmacy claims processing is more likely to result in changes to a treatment plan or prescription, such as by providing a generic formulation for treatment.

In pharmacy claims, the treatment expectations are also unique. In medical and dental claims, the services themselves are covered, such as a doctor’s visit or a teeth cleaning. In pharmacy claims, however, only the treatment is covered. Similarly, the prescriptions covered by pharmacy claims are self-administered, such as medications or self-injectables. For other types of claims, healthcare Providers administer the treatment.

Despite their differences, all three types of claims are important to the overall healthcare claims processing system and the care of patients.

Improve Upstream Processes with SDS

SDS can support your pharmacy claims adjudication workflows by using intelligent automation to prepare claims for auto-adjudication, validate them, and check the data. With 20+ years of experience in healthcare claims processing, we understand the nuances of medical, dental, and pharmacy claims.

If pharmacy claims processing workflows are a pain point for your organization, contact us to learn more about the benefits of upstream processing to prepare claims for auto-adjudication.