What is Buy-and-Bill?
Buy-and-bill is a distribution and payment model in healthcare, particularly common in the U.S. for drugs and medical devices, where healthcare providers (such as physicians or hospitals) purchase drugs or medical devices directly from suppliers or manufacturers, then bill patients or insurers for those products when they are administered to the patient.
This model applies to medications and therapies covered under the medical benefit, rather than the pharmacy benefit. Most physician offices and clinics prefer to maintain an on-site inventory of provider-administered drugs.
The Role of Group Purchasing Organizations (GPOs)
Group Purchasing organizations (GPOs) play a critical role in the buy-and-bill landscape by leveraging the collective buying power of multiple healthcare practices. By pooling orders across many offices and clinics, GPOs can negotiate more favorable pricing and payment terms with manufacturers—often securing discounts not available to individual practices.
Beyond better prices, GPOs often arrange flexible payment schedules, allowing practices to align payments with reimbursement timelines. This can ease the burden of upfront costs while navigating prior authorization and claims processes.
For practices within specialty-focused GPOs, there are often additional benefits such as rebates or volume-based incentives, tailored to specific treatment areas or prescribing patterns. By analyzing purchasing data, GPOs also provide valuable inventory management support, helping clinics maintain the right stock of provider-administered medications without overextending budgets.
How the Buy-and-Bill Model Works
- Purchase: The healthcare provider buys the product (such as a medication, infusion, or device) from the manufacturer or distributor, typically at a wholesale price.
- Administration: The healthcare provider then administers the drug or device to the patient, usually in an outpatient or clinical setting, such as a doctor’s office, outpatient clinic, or hospital.
- Billing: After administering the product, the healthcare provider bills the patient or their insurance for the cost of the drug/device, along with the associated medical services (e.g., administration fees, consultation fees).
- Reimbursement: The provider receives reimbursement for the product and the service provided from either the patient’s insurance, Medicare, or Medicaid. The reimbursement is typically based on a percentage of the Average Wholesale Price (AWP) or a negotiated rate.
Managing Inventory and Purchasing Effectively
Because providers carry the financial risk in this model, staying on top of inventory is key. Partnering with group purchasing organizations (GPOs) or distributors—like Cardinal Health or McKesson—can be especially helpful. These collaborations give practices access to up-to-date purchasing trends and usage data.
Healthcare practices can further streamline their inventory by:
- Reviewing regular reports: Leverage data analytics from distribution partners to spot changing demand or seasonal variation in use.
- Setting par levels: Define minimum and maximum stock levels to prevent overstocking (and wasted resources) or running out of critical products.
- Automating reorder points: Use tools and software that trigger orders when inventory gets low.
- Conducting frequent audits: Schedule regular physical inventory checks to match records with actual stock, catching discrepancies early.
Being proactive and data-driven not only reduces excess costs but also ensures you have the right therapies on hand when patients need them.
Role of Group Purchasing Organizations (GPOs)
For many practices, partnering with a Group Purchasing Organization (GPO) can be a strategic advantage. GPOs negotiate with manufacturers and suppliers on behalf of multiple healthcare providers, leveraging the collective buying power of their member practices. This often results in access to medications at reduced rates, as well as eligibility for additional rebates or discounts that individual practices might not be able to secure on their own.
By participating in a GPO, practices may also benefit from extended payment terms, which can help smooth out the reimbursement process and provide more financial flexibility when managing the administrative requirements around prior authorization and billing.
Effect of GPO-Negotiated Payment Terms on Drug Pricing
Group Purchasing Organizations (GPOs) often play a significant role in determining the payment terms for provider-acquired drugs. The timing of payment—whether a healthcare provider pays quickly after receiving a product or benefits from an extended payment window—directly impacts the price negotiated.
In many cases, manufacturers and distributors are more likely to offer discounts or better pricing to providers who agree to shorter payment terms. By committing to pay sooner, providers can often secure lower costs for drugs or devices than those who opt for lengthier payment arrangements. Conversely, longer payment terms may limit the ability to negotiate additional discounts, since suppliers take on more financial risk.
Ultimately, the payment structure negotiated by GPOs can be a key lever for healthcare organizations seeking to balance inventory needs and cost savings within the buy-and-bill model.
Advantages of Buy-and-Bill
- Flexibility for Providers: Healthcare providers can offer specialized treatments that may not be available through the retail pharmacy model.
- Patient Access: Patients can access complex or high-cost treatments directly from their healthcare provider without needing to go through multiple distribution channels.
- Clinical Integration: The model allows treatments to be integrated into the patient’s care plan, facilitating close monitoring and coordination of care.
Clinical Decision-Making and Provider Autonomy
One key benefit of the buy-and-bill model is that it empowers healthcare providers to make treatment decisions based fully on clinical need rather than being limited by external distribution or pharmacy constraints. Since providers manage their own product inventory, they have the ability to select and administer the most appropriate therapy for each individual patient at the point of care. This direct oversight supports tailored treatment plans, timely administration, and adjustments in real time, helping to ensure patients receive the most effective therapy based on current best practices and the provider’s clinical judgment.
Opportunities Presented by New Infusible Therapies
With the ongoing development and approval of new infusible therapies—ranging from breakthrough biologics to targeted immunotherapies—practices have a unique opportunity to expand their service offerings through the buy-and-bill model. By doing so, providers can:
- Enhance Clinical Capabilities: Having the latest infusible treatments available onsite allows practices to offer advanced care options and stay at the forefront of evolving standards in specialties like oncology, rheumatology, and neurology.
- Attract and Retain Patients: By integrating a broader array of therapies, providers can better serve current patients and attract new ones seeking access to cutting-edge treatments, all in a familiar care setting.
- Increase Practice Revenue: As new therapies are typically higher-value and reimbursed under the medical benefit, there is potential for increased reimbursement and growth in ancillary service lines.
- Streamline Patient Experience: Direct access to provider-administered therapies minimizes patient travel, coordination challenges, and delays that might occur when relying on external pharmacies or infusion centers.
- Foster Closer Monitoring: Delivering these treatments in-office gives clinicians greater oversight of patient progress, response, and any potential side effects, supporting higher-quality care.
By leveraging the buy-and-bill model to include new infusible therapies, practices not only provide greater value for their patients but also position themselves as leaders in comprehensive, patient-centered care.
Challenges of Buy-and-Bill
- Financial Risk: Providers face the risk of delayed reimbursement or non-payment if the insurance claim is denied or if patients are underinsured.
- Cash Flow Pressure: Providers must manage the financial burden of purchasing drugs upfront, which can strain their operating capital, especially with high-cost therapies.
- Complex Reimbursement Process: Insurance companies may have complex reimbursement processes or strict requirements for billing, which can be burdensome for providers.
- Regulatory and Compliance Issues: Providers must ensure that the billing process is compliant with healthcare regulations, such as ensuring the pricing is within acceptable ranges.
Managing Financial Risk in Buy-and-Bill
When a practice adopts the buy-and-bill model, it assumes several financial risks—primarily the burden of purchasing costly medications upfront, often before reimbursement is guaranteed. If claims are denied or payment is delayed, practices may experience significant cash flow challenges.
To better navigate these risks, providers can take steps such as:
- Carefully monitoring inventory levels to avoid over-purchasing or drug expiration.
- Analyzing purchasing patterns using up-to-date data, often in collaboration with their distributor or a Group Purchasing Organization (GPO) like Vizient or AmerisourceBergen.
- Establishing robust processes for claims management and reimbursement follow-up.
- Regularly reviewing payer policies to anticipate potential hurdles in the billing or reimbursement cycle.
By implementing these strategies, practices can mitigate some of the inherent cash flow and financial risks, allowing them to maintain access to vital therapies for their patients.
