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Expect More From... Delegated Responsibilities!

Writer's picture: Christine JohnstonChristine Johnston


This week I watched one of Eric Bricker’s videos about University Hospitals in Cleveland (Kelly's hometown).  The video is about how University Hospital looked at their span of control and assessed what they could do to manage their expenses to the amount Medicare was reimbursing them.  Rather than worrying about what they couldn’t control, they started focusing on what they could control and took steps to bring down their administrative costs and removing old, inefficient systems without compromising clinical care. Short-term tough decisions were required, but these actions will allow them to launch into the future. 

While I was listening to this video, I started thinking about the employers that we work with and their span of control.  The more I thought about it, I realized there is a lot they can do and should do.


Related, I have been hearing a new PBM buzz word “Fiduciary”. It has caused me to think about what really a fiduciary is and should a PBM have fiduciary responsibilities to a benefit plan.  The Consumer Financial Protection Bureau defines a fiduciary as:


Someone who manages money or property for someone else. When you’re named a fiduciary and accept the role, you must – by law – manage the person’s money and property for their benefit, not yours.


Given the amount of benefit dollars that PBMs manage it seems to me that a PBM should be a fiduciary, but ERISA doesn’t specifically call out PBMs as having fiduciary responsibilities.  ERISA stipulates that a fiduciary is based on the functions performed for the plan, not just a person’s title.  Using discretion in administering and managing a plan or controlling the plan’s assets makes that person a fiduciary to the extent of that discretion or control.  Fiduciary responsibilities have historically applied to the employer’s retirement plan, but the Consolidated Appropriations Act (CAA) has extended these responsibilities to the benefit plan.


In the linked article, PBGH stated that:


Implementing an effective health plan oversight and audit framework, with documented procurement processes, can substantially reduce corporate exposure for companies and individual directors, officers and employees. Many employers currently lack adequate controls in their existing service agreements, have historically tolerated unreasonably high fees and costs and often rely upon financially conflicted intermediaries for advice.


The PBM industry is riddled with lack of controls and conflicted intermediaries.  I started questioning why PBMs are so resistant to act as fiduciaries.  Although PBMs are not responsible for the entire benefit, they do have fiduciary duties.  They should be held accountable to manage a plan’s money and property for the plan’s benefit, not theirs. Why are employers not holding their PBMs accountable for the functions that have been delegated to them? I can’t tell you how many PBM contracts that I have read that result in the PBM having no responsibility to actually “manage” the pharmacy benefit.  One easy way employers can start expanding their span of control is to start holding their PBMs accountable to perform the services they provide in a fiscally responsible manner (and I don’t mean cost effectively for the PBM).  I am not sure that PBMs should be deemed full fiduciaries, but at a minimum they should treat their clients like they are willing to be responsible for the services they provide.


Okay, I will get off my soapbox now!

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