Provider Status Explained: Why do pharmacists need provider status?

Provider status has been such a focus of the pharmacy profession for decades. However, before we talk about how to advocate for provider status, it’s important to understand why something needs to change. 

It’s all about that product

My grandfather was a community pharmacist in the Cleveland, Ohio area for nearly 50 years. I remember hearing about how when he graduated pharmacy school in 1959, the practice of pharmacy was (shockingly) different. When a patient came into the pharmacy to fill a medication, the pharmacist was not allowed to tell the patient what the medicine was, or provide much counseling information at all. In the eyes of the patient, the value being provided by the pharmacist was in the compounding and dispensing of this tangible product – and that is exactly what the patient paid for. In the 1980s, for example, a majority (70%) of prescriptions were paid out-of-pocket by the patient. Over the years, as the cost of prescription medication increased, insurance companies began covering more of the costs.  

Despite this shift in who is paying for the product, the way the pharmacist brings in revenue to the healthcare businesses they work for has remained largely tied to the dispensing of medications. This is fundamentally different than how other healthcare professionals bring in revenue to their healthcare businesses. In business terminology, there is a spectrum of the types of products that customers will purchase, called the goods-service continuum which can be important for us to understand how important this difference is. 

At one end is goods. Goods are completely tangible products that have no level of service associated with them. They are something that can be put on a shelf that a customer will purchase. Take, for instance: table salt. It is a completely tangible good that requires no additional service to the customer. On the other side of the spectrum is services. These are completely intangible and more aligned with a business providing an action that their customer is paying for. Think of education. Education is an intangible service that is offered by a teacher. You can’t put education on a shelf – it is provided by a skilled teacher to their students. In the center of this continuum are things that have a bit of both goods and services. For example, take a tailored suit. Customers are paying for the clothes, but also paying for a level of service to make the clothes fit just for them. 

When it comes to the way pharmacists bring in revenue to their businesses, through dispensing medications, what the pharmacist is offering falls in the center of this spectrum: a tangible good that has a level of service associated with it. Now, there is a significant level of service happening behind and in front of the counter (i.e. drug utilization review, counseling, consultations, etc.), however, this is largely not the services that are being paid for by the patient or payor. This is different from how other healthcare professionals bring in revenue to the healthcare businesses that they work for. For example, let’s look at the physician. The physician offers many things to their patients, however, what the patient is often purchasing (through the help of insurance) is the expertise of the physician. This is aligned farther toward the service end of the spectrum. 

This is similar to other healthcare professionals (think physician assistants, nurse practitioners, dentists, etc.). They provide expertise, or a service, to their patients, and that is what is paid for and how these professions bring in revenue to the healthcare businesses that they work for. 

Why is pharmacy different?

Our profession has significantly changed in its roles and responsibilities in the past century. In the 1950s, a community pharmacist’s responsibility was focused on compounding a medication and dispensing this to the patient. As healthcare continued to grow in complexity, it became obvious that healthcare teams required a medication expert… i.e. they needed a pharmacist. This new demand, coupled with the publication of landmark studies and calls from professional organizations, established the doctoral education as the baseline for new practitioners. With this new baseline, pharmacists were now able to provide fundamentally different services for patients. However despite these monumental shifts, there was no change in the business model. 

The current landscape

Since the pharmacy business model continues to be driven by medications, the pharmacist’s main responsibility continues to be the product.  It is no surprise that businesses follow where the money is. Without the ability for the pharmacist to directly bill for most of the patient care services they provide, they are forced to fit them in between their other responsibilities. In the past this was an issue because the pharmacist was not allowed their full time to do what they are trained to do: provide patient care and serve as the medication expert. This resulted in a lack of access to patient care for many, especially those in rural communities. However, dispensing fees were not in jeopardy at the time and pharmacists were able to continue practicing in this non-ideal environment.

The current business model is no longer viable! Declines in dispensing fees and anticompetitive practices of some businesses have made pharmacy practice significantly more challenging.  As dispensing fees have fallen, the businesses that pharmacists work for are asking pharmacists to do more with less in an attempt to maintain a sustainable business. This has resulted in a system of unrealistic community metrics that is squeezing everything out of the pharmacist to dispense as many products as they can, and we have seen the effects of this system. The New York Times detailed these risks in the excellent article, How Chaos at Chain Pharmacies is Putting Patients at Risk.

Because pharmacy payment models have not evolved, pharmacists’ responsibilities continue to be largely aligned with dispensing products. Although this is not optimal for patient care, the pharmacist is able to continue to function and provide care while also dispensing. Small advances have been made with the ability to bill for Medication Therapy Management codes, but these codes alone are not enough to create a sustainable business around them. In other settings, such as ambulatory care or in health systems, pharmacists are often hired with the expectation that there will be indirect cost savings that can justify their salary. Other methods have been utilized for pharmacists to bill incident-to the physician, however, there remain barriers to creating widespread sustainable pharmacist care clinics through these alternative billing methods.

Why now?

Now that the foundation of the dispensing model is collapsing, we are seeing the results in news stories across the country. Independent pharmacies are closing at an alarming rate, grocery stores are closing their pharmacies as well, and big-box stores are closing and slowing the opening of new stores. Because the business model of pharmacy did not shift with the roles and responsibilities of the pharmacist, the profession of pharmacy is now in crisis. 

As noted above, business practices follow the money. With the ability to directly bill for the patient care services that they provide, the healthcare businesses that pharmacists work for would allow them more time in their responsibilities to focus on the provision of patient care, which aligns with their training and expertise. Provider status moves pharmacists further toward the service end of the goods-service continuum and would be more aligned with how comparable healthcare professionals bring in revenue to the healthcare businesses that they work for. This would increase patient access to care and have numerous positive therapeutic and economic benefits for our communities.

Okay, so we now understand a little about the history and importance of why provider status is so essential – but there is still a lot left to unpack! What is the Pharmacy and Medically Underserved Areas Enhancement Act, why has the advocacy strategy been largely focused on public health insurers, and are we the only healthcare professional that has had to go through such a dramatic shift in our business model? All these answers and more coming soon in the next installments of our Provider Status Explained series!

Published by The Grassroots Pharmacist

We are pharmacists passionate about engaging pharmacists in advancing health policy

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