Medical vs. Pharmacy Billing: A Guide for Providers
Key takeaways:
Pharmacy billing refers to sending a prescription to the pharmacy and the pharmacy then billing a patient’s drug insurance and dispensing the medicine either directly to the patient or to the provider’s office.
Medical billing refers to the provider’s office billing a patient’s medical insurance for the drug and then purchasing it through a drug distributor or pharmacy.
Medical billing can be more profitable for a provider’s office but also comes with added administrative time and the cost of purchasing and storing expensive medications.
Providers who work in fields with a high number of specialty medications, like rheumatology or gastroenterology, for example, are likely going to face insurance barriers to their patients receiving the medications they need.
Many of these medications are administered in the office, and there are two primary ways of billing the patient’s insurance for them. The provider can send a prescription to the pharmacy, who can bill the patient’s drug insurance or medical insurance directly. Sometimes, insurance requires either medical or pharmacy billing. Other times, the provider’s office can choose.
When should you use pharmacy billing?
Pharmacy billing refers to providing a patient with a prescription for the medication that can then be taken to a pharmacy to be filled. After they pay any applicable copays and receive the medication, the medicine will be administered in the provider’s office.
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When using pharmacy billing, it’s best to look for a specialty pharmacy with URAC accreditation, which demonstrates a pharmacy’s competence in handling the complexity of these medications.
There are two approaches to pharmacy billing: brown bagging and white bagging.
What are 'white bagging' and 'brown bagging'?
Brown bagging refers to the practice of the pharmacy billing for the medicine and collecting payment, and the patient then picking it up or receiving it in the mail and taking it to the provider’s office for administration.
White bagging refers to a practice where the provider sends a prescription to the pharmacy, and the pharmacy bills the medication and collects payment — but rather than sending the medicine to the patient, it’s sent directly to the provider’s office or other site of administration.
Pros and cons of pharmacy billing
Pharmacy billing simplifies the clinic’s workflow but also comes with some downsides.
Pros:
Allows eligible patients to use copay cards or free-trial cards to reduce their out-of-pocket cost. At times, these savings can be substantial.
Saves the clinic a considerable amount of time handling the billing for the medications. Most specialty pharmacies have staff who will complete prior authorizations on the provider’s behalf. In the case of formulary restrictions or required step therapy, they will find the solution before sending a message to the prescriber to request a change of therapy.
Allows the pharmacist a chance to double-check for drug interactions, dosing, and appropriateness of therapy. It also gives them a chance to counsel the patient on the medication.
Cons:
Increases the risk of temperature excursions because most of these medications have special storage requirements, like refrigeration, and the patient receives the medication and stores it at home.
Increases the risk of waste, because the medicine must be discarded if it was already dispensed and the patient then requires a therapy or dose change.
When should you use medical billing?
Medical billing refers to the practice of the provider billing the medication under the patient’s medical insurance, purchasing the medication directly through either a wholesaler or a pharmacy, and then administering it in the office.
While state law varies, the clinic can sometimes order the medicine through a pharmacy for office use. In this case, the pharmacy is acting as a distributor and is providing the medicine without a patient-specific label.
Pros and cons of medical billing
Medical billing gives the provider the chance to earn additional revenue, but it is not without additional time commitment and work.
Pros:
Prevents the patient from needing to be involved in receiving the medicine and taking it to the clinic. That not only prevents storage and handling issues but also is easier for the patient.
Allows the patient to start therapy immediately after the billing is completed, rather than having to wait on a package to arrive in the mail — as long as the clinic has the medicine in stock.
Cons:
Increases costs because purchasing and stocking these medications, which medical billing requires, can be expensive and boost office expenses.
Puts the responsibility on the provider to resolve a problem with a medicine — like a temperature excursion or a drug delivery device malfunction.
Which is more profitable: medical or pharmacy billing?
In both cases, the provider is allowed to bill the patient’s medical insurance for the administration fee.
Pharmacy billing prevents the clinic from administering medications that they won’t be reimbursed for. Many of these medicines are thousands of dollars per dose, so not getting paid for even a few can really add up. With pharmacy billing, though, the pharmacy will keep all of the profits from the drug, so the provider will only earn the administration fee. This is in spite of the fact that the office will still need to receive and store the medications properly, which will require a medical refrigerator.
With medical billing, because the provider’s office can keep the profits from the drug, they can increase their revenue potential by shopping around to find a lower purchase price on each medicine. However, because it comes with added expenses and administrative time, medical billing adds financial risk to the office. It must be managed well in order to be profitable, and that might not be something that all providers are interested in or have the available staff to handle.
Medical billing can be a source of revenue for provider offices, but it is not guaranteed to be. It comes with additional risk and time commitments that must be taken into consideration before deciding to use medical billing whenever possible.
The bottom line
Pharmacy billing occurs when a prescription is sent to the pharmacy to bill a patient’s drug insurance, while medical billing occurs when the provider submits the claim to the patient’s medical insurance.
Sometimes, insurance requires a specific type of billing, but, at other times, the provider can choose. Pharmacy billing frees up administrative time because the pharmacy takes care of all the billing, while medical billing gives the provider the opportunity to earn additional revenue but with additional financial risk.
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