This article is sponsored by SRX. In this Voices interview, Senior Housing News sits down with Scott Taylor, Founding Principal & CEO at SRX, to discuss the benefits of ARC, an employee benefits prescription drugs solution for the marketplace. He talks about ARC’s impact on the skilled nursing industry as a whole and explains how operators can use it to reduce costs.
Skilled Nursing News: You previously joined us for the Voices series at the end of 2019. What are the most interesting ways in which SRX has adjusted and evolved since then?
Scott Taylor: Starting at the end of Q1, 2020 was a radically challenging time for the industry. Thankfully for SRX, when we expanded our company, we did so with a lot of loyal clients. Our core services continued, despite the impact on technology and the manufacturer drug market. Still, we had to take a step back and do a couple of things differently.
One, we realigned our resources, particularly at the beginning of COVID, to help our industry any way we could. We provided PPE and rapidly created our Bridge technology, and on an even more fundamental basis, we recognized the skilled payer evolution from part A to managed care plans. I think Skilled Nursing News has done a lot of articles on the projections for the next several years — it will be 50% or more of skilled days covered by managed care.
We talked to many of our clients about the exclusions in managed care contracts, which allow buildings to separately bill above their per diem for a number of drug-related issues. They’re written in such a way that it’s exceptionally difficult for facilities to capture this revenue opportunity. We realized we were in a unique position to develop something while everyone in the industry was laser-focused on cutting costs.
We also developed the managed care application so our clients could increase their reimbursements. SRX hit it on both ends by taking a step back and focusing on the most important thing: taking care of the skilled care population during the pandemic.
What is ARC and what was the catalyst for its creation?
Taylor: ARC is an employee benefits prescription drugs solution for the marketplace. The catalyst for its creation has been several years of our clients coming to us and acknowledging our impact on bending the curve and providing tools to manage drug spend for their resident population. Every year, they sit down with their benefits broker and choose a third-party administrator for plan changes on the medical side.
Naturally, many of our clients are paying millions of dollars, if not tens of millions, in prescription drug benefits on their employee benefit plans when they self-insure. They said, “Can you help us?” For the last couple of years, we honestly said, “We’d love to but we can’t.”
We said that because while we have amazing technology and great in-house clinical resources, our business was geared toward the specific management of resident population drug spend dynamics. We didn’t have the ability to print benefit cards or construct and manage step therapy solutions for certain chronic conditions to bend the cost curve for benefit plans. It’s not part of the ecosystem of resident populations.
That said, the pandemic also allowed us to focus on the assets that we at SRX could bring to the table in partnership with the largest independent PBM (pharmacy benefit manager) or privately held PBM in the country: ProCare RX. We put our assets together and bring to market an innovative and truly world-class platform focused on the global economy of middle-market businesses, which unfortunately have not seen a lot of innovation, value or transparency on the employee benefits piece.
What are the most exciting ways that ARC has impacted the industry so far?
Taylor: I think relative to the last point, if you operate 10, 20, 40 homes, even 70 homes, you are a small- to middle-market-business. These businesses are not seeing the type of innovation, intelligence and transparency that define SRX. I think it’s the first time many of them have felt they were on the same side of the table, educated and capable of participating in a real decision with a full understanding of how to really drive down costs.
Why are pharmaceutical costs such a concern right now for long-term care operators?
Taylor: They’re expensive, they continue to be expensive and they continue to experience 10%, 12%, 14% year-on-year price increases. For long-term care operators, we know that the largest, non-overhead item on their P&L is their facility-responsible drug costs for the skilled population.
Those same dynamics are also happening on the employee benefit side because there are more issues within an employee base that can drive the usage of specialty drugs. At this point, the dynamics on the employee benefit are something like 1% to 1.5% of script volume driving 50% of total costs coming from specialty drugs, and all of these dynamics are affecting the industry.
How do employee prescription benefits impact operators?
Taylor: At ground level, they’re impacted in the same way that all employers are impacted. Employee prescription benefits have to be factored into the total cost of employment. If you’re offering medical benefits to your employee base, the operator pays part of the premium, and the employees pay for the prescription drug coverage, regardless of whether you self-insure or you buy an insurance plan.
For self-insured operators in today’s market, the labor pressures and P&L pressures are significant. The importance of being able to deliver distinctive and value-added prescription drug benefits for a cost that makes sense is more important now than ever.
What are the key areas of opportunity for operators to reduce costs on employee prescription benefits?
Taylor: For one, they are coming up with comprehensive and cohesive strategies for the specialty drug spend. As I mentioned before, 1% to 1.5% of the scripts are driving 50% of the costs. The actual costs of the program are growing, so the ability to explore — whether it’s utilizing variable co-pay structures to take advantage of drug manufacture coupon programs or copay assistance programs — is a huge driver.
Having the ability to create concierge services that allow the employer to carve out coverage for certain drugs while shifting the cost burden back to the industry is huge. Maximizing the utilization of those various options with the operator is probably the most impactful way to bend the curve.
Additionally, there are a lot of PBMs out there selling themselves as a transparent platform that does not utilize spread. On the contrary, we provide a truly transparent platform that’s auditable. Folks can see that any dollar amount they pay for a drug is the dollar amount that goes to the pharmacy. We are making sure that every bit of the value chain on that side is truly transparent, and that any of the embedded project tools or revenue tools still present in the marketplace bend the curve a bit more.
Lastly, we are utilizing some of the same technologies and market relationships that SRX has been able to build for its rebate administrative program. Making sure we are maximizing the total gross rebates going back to the employer and affecting the net cost is the primary focus.
Those three things together are the dimension that can drive costs downward.
What other ways are ARC and SRX helping operators lower costs?
Taylor: SRX’s core business, which continues to grow, is making sure that the relationship between operators and their pharmacy partners are managed to achieve the greatest clinical outcomes at the lowest net cost possible. Our core services focus on formulary management, and our auditing and analytics tools give SNFs the ability to manage to an outcome in real-time versus retroactively reviewing the pseudo-managed last quarter. Rebate administration maximizes each of those pieces to drive down the net cost.
Additionally, SRX is now widely rolling out our managed-care exclusion management platform, which works with operators on a fully-automated basis to get information into the hands of managed-care coordinators and the billers in real time. Whenever a prior authorization is needed, there is an opportunity for an exclusion to be billed or anything else, and our platform can help.
Lastly, SRX and ARC are coming together to help manage both resident-specific and employee-specific drug spend exposure for a post-acute operator.
Entering this year, no one knew fully what to expect in the skilled nursing industry. What has been the biggest surprise to you, and what impact do you believe that surprise will have going into 2022?
Taylor: I think we’ve been pleasantly surprised with how quickly the skilled populations have rebounded. While we’re happy and heartened at the continued march upward for overall occupancy, the rate of rebound has been a little disappointing. That said, I’m also hopeful for the industry that we keep marching upward at an accelerating pace. Quite clearly, I didn’t expect the pandemic, therefore I don’t think I ever would have expected that the combination of a health crisis and a staffing crisis would happen simultaneously.
On a positive note, I have been wildly impressed by operators figuring out how to take the available clinical resources and deliver care to everyone in the facility. Everyday, they’re struggling with P&L, occupancy, regulations and resources, yet they continue to deliver quality care. I’ve been wildly surprised by the innovation and creativity they’ve used to weather the storm.
Editor’s note: This interview has been edited for length and clarity.
SRX was established by a group of experts in the LTC and skilled nursing space who wanted to develop solutions that address the complexity involved in managing drug costs for LTC operators. To learn more, visit srx-tech.com.
The Voices Series is a sponsored content program featuring leading executives discussing trends, topics and more shaping their industry in a question-and-answer format. For more information on Voices, please contact [email protected].