Independent Pharmacy Accounting

Factors in Determining Star Ratings

As you probably already know, DIR fees are the third largest expense in any independent pharmacy. Did you realize that Star Ratings have a direct impact on these fees? In this video, Ollin Sykes, CPA discusses what factors impact your Star Ratings and some ways you can work to improve these ratings in your independent pharmacy.

Discuss your DIR fee challenges with Sykes & Company, P.A. counselors and advisors. Our pharmacy advisory services team can help to assess your unique situation and provide strategies to help.

For more about this topic, see our video about how you can manage DIR fees in your independent pharmacy business.

If you prefer to read this content, the video transcript is below.

With DIR fees being variable, what factors determine Star Ratings?

Well, there are a number of factors that determine what the Star Ratings are. And while we don’t work behind the bench, what we’re hearing, what we’re seeing, at trade shows, various seminars, and things of that nature that we attend is that compliance packaging, med syncing, things of that nature have a very large bearing on what their Star Ratings are with various third parties.

Keeping in mind, that there are systems in place like through the eQuip software system that can monitor what your Star Ratings are. But, we have clearly seen in the real world where those pharmacies that are med syncing a substantial number of their patients, say 50-60% of their patients, those that are using compliance packaging, whether it’s robotic or whether it’s other kinds of compliance packaging, clearly have a better Star Rating. And their Star Ratings are directly impacting, we’re noticing, the financial dollars that are withheld from the third parties with respect to the payments to be made back to the pharmacists.

Of course, in addition, you’ve got regular adjudication type of costs, you’ve got claim adjustments that come into play at the same time. But we’ve seen many situations where typical pharmacy does four million dollars in this country, a 1% difference there is $40,000. And of course, we have a lot of pharmacies that have volumes greater than that. And clearly, if you can reduce your Star Ratings, I mean your DIR fees by one to two percentage points. And in some cases, we see pharmacies that have done just that behind either an experienced tech or a pharmacist, and putting them on just this project. You might say, “Well, you’re bringing on incremental costs.” The answer is, yes, but if you’re bringing on incremental costs, let’s say it’s $50,000-60,000 a year with a cheap type tech, and they can reduce your DIR fees $150,000 to $200,000 a year, you’re going to be far above the curve. And we’ve seen that in reality with pharmacies that we’re dealing with in the field. So, we would suggest that you consider that as you go about trying to deal with this wonderful world of DIR fees that we have.


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