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Doctors Like Rite Aid Pilot

In response to health care reform, Rite Aid Corp. has selected five doctors groups – including two in the San Fernando Valley – for a pilot program to help patients self-manage long-term conditions such as diabetes or hypertension. The national pharmacy chain based in Camp Hill, Pa., said this month that Heritage Provider Network, a doctors group in Northridge, would join its Health Alliance program. A Rite Aid in Woodlands Hills served as the location for the announcement. In March, Rite Aid announced Apollo Medical Holdings Inc., a doctors group in Glendale, had joined the program. The Health Alliance targets patients with chronic conditions such as congestive heart failure, diabetes, lung disease or high cholesterol. Under the agreement, the doctors refer their patients to Rite Aid where “care coaches” in selected pharmacies help the patient learn to live with the disease and coordinate medications. Dr. Warren Hosseinion, chief executive at Apollo, said that for a doctors group, it’s a low-risk proposition because Rite Aid bears the costs. The care coaches are hired by Rite Aid, and the chain also pays to remodel pharmacies so the coaches have an office to meet with customers. Currently, Apollo is working with coaches at five Rite Aid locations. Primary care doctors recommend patients for the program. For doctors, it helps them comply with the new health reform law that requires them to keep data about their patients’ prescriptions from other doctors as well data on their exercise habits, tobacco and recreational drug use and Body Mass Index. Under the program, Rite Aid collects and keeps such data. Hosseinion noted that even though Rite Aid pays for the program, his group had significant say in setting it up. “L.A. is a different market because there are Chinese, Armenian, Spanish, Tagalog and other patient segments,” Hosseinion said. “We told Rite Aid we needed native speakers and they took our input into account.” Robert Thompson, executive vice president of pharmacy at Rite Aid, said the company picked two doctors groups in the Valley because of their geographic coverage. “Southern California is a very important market for Rite Aid, and we have hundreds of stores across the region,” he said. The key element of the program is the care coach, who begins by performing an audit of all medications a patient takes to identify overlaps or conflicts. After that, the coach serves as a motivator and monitor for medication regimens, diet, exercise and other healthy practices. Thompson said the advent of national health care reform served as a catalyst for the alliance program by getting pharmacists more involved with health decisions. The reform will bring an influx of newly insured patients, and it encourages hospitals and doctors groups to team up with pharmacists, labs and other facilities to care for Medicare patients. “Rite Aid Health Alliance represents the future of health care delivery,” Thompson said. “Programs like Rite Aid Health Alliance achieve the goals of health care reform by improving access to high-quality healthcare.” Revenue model? However, so far it’s unclear how the program will contribute to the top or bottom line at Rite Aid or the doctors groups. “These are pilot programs designed to drive health improvements; we are currently in the process of refining the business model,” Thompson explained. “Over time, we do expect the program to contribute business through increased revenues.” Bing Lum, owner of AM Pharmacy Consulting in Montebello, said that a new California law could provide part of the answer for the revenue question. The law, which went into effect in January, classifies pharmacists as health providers, meaning they can bill the state for consulting and management services in addition to the drugs they sell. “Their role has been expanded by the legislature, and now those services are fully reimbursable,” Lum said. That implies state taxpayers could be on the hook. Janet Chin, spokeswoman for Sen. Ed Hernandez of West Covina who sponsored the new law, said the question of cost for taxpayers didn’t figure in the legislative discussions. The main opposition came from doctors who were concerned about whether the pharmacists would impinge on their authority. An analysis of the law prepared by the Senate Committee on Business declared its fiscal effect “unknown.” Lum said the big challenge for pharmacies is always getting people to take their medications. Again, the care coach could provide the answer – and more revenue – for Rite Aid. “The person who is intervening with the patients directly and in close contact with them can assure compliance,” Lum explained. “If they say, ‘You need to refill your prescription,’ that’s a refill Rite Aid will get that they never got before. Unless you remind them, they won’t do it.” For the doctors groups, the main benefit so far has been compliance with new rules from the Centers for Medicare and Medicaid Services, or CMS. The health reform law requires an audit of a patient’s medications, and the Rite Aid program has helped Apollo meet that requirement. “That’s one of the metrics the health plans and CMS are looking at,” Hosseinion said. While Apollo has about 700 doctors in its network, Heritage has more than 32,000. In the Valley region, it operates through subsidiaries Regal Medical Group, Coastal Communities Physicians Network and High Desert Medical Group. Heritage did not make an executive available for comment. Investor impact Since the beginning of 2013, Rite Aid’s share price has climbed more than 430 percent. For fiscal 2014 ended March 1, it reported net earnings of $249 million, compared to a loss of $369 million just two years before. Lower interest payments and renegotiated leases contributed more to the turnaround than the recently launched Health Alliance program. In fact, analysts’ reviews of the program are mixed. John Ransom, health care analyst at Raymond James & Co. in St. Petersburg, Fla., observed that competitors such as Walgreens Co. and CVS Corp. have more developed clinic business models inside their pharmacies. “This initiative by Rite Aid is interesting but it is too small in its current form to move the needle,” he said. But in a research note on July 2, Zacks’ Investment Research said it was “impressed by Rite Aid’s sustained focus on enhancing pharmacy and clinical services through the recently initiated Rite Aid Health Alliance and its Wellness+ customer loyalty program. … We believe that such measures will enable the company to broaden its customer base and boost top and bottom line performances.” For Apollo, the alliance has yet to affect the share price. But Hosseinion feels the program has benefited the company because patient motivation is a major factor in treating a chronic condition, and it’s the one ingredient that the Rite Air program adds to traditional doctoring. “We’ve learned more about the role of pharmacists, and also how the care coaches can add value for patients,” he said. “It’s the non-clinical stuff like diet, exercise, and motivational interviewing that really works, and that’s what the care coaches do.”

Joel Russel
Joel Russel
Joel Russell joined the Los Angeles Business Journal in 2006 as a reporter. He transferred to sister publication San Fernando Valley Business Journal in 2012 as managing editor. Since he assumed the position of editor in 2015, the Business Journal has been recognized four times as the best small-circulation tabloid business publication in the country by the Alliance of Area Business Publishers. Previously, he worked as senior editor at Hispanic Business magazine and editor of Business Mexico.
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