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Pharmacy directors can help hospitals meet challenges of a poor economy
Change utilization patterns to improve costs
Hospitals nationwide face tighter budgets, staff layoffs, and financial uncertainty in the wake of a two-year recession that shows little sign of abating.
It's in this environment that hospital pharmacy directors should put forth their best plans to cut costs, increase revenues, and adapt to the reality of health care reform and the prospect of new payment models.
"Pay attention to the trend; look at the landscape; there are plenty of signs that hospitals are downsizing, closing, consolidating, and people are tightening their belts," says Ross W. Thompson, MS, BSPharm, director of pharmacy services at Tufts Medical Center in Boston, MA. Thompson was a scheduled speaker about preserving core pharmacy services in an era of declining revenue at the 15th Annual American Society of Health-System Pharmacists Conference for Leaders in Health-System Pharmacy, held Oct. 18-19, 2010 in Chicago, IL.
"We're being asked to trim our budgets back or go through cost savings measures more acutely than in recent years," Thompson says. "We probably first saw the financial downturn in late 2008, and people still are feeling pinched."
For example, a colleague of Thompson reported that his hospital has required a 3% reduction in spending, which is a frustrating change to make when drug costs can fluctuate and any staffing cuts in the pharmacy could lead to higher drug expenditures.
Pharmacy directors need to look at their drug budgets to see how much of these costs they could cut directly and how much of the drug cost decreases could be achieved with help from physicians and more judicious utilization, Thompson says.
"There's really good evidence published in the literature about how pharmacists put into a position to be interventional and to guide therapy prospectively can more than offset their salaries in what they save in cost avoidance and true utilization pattern changes," he explains. "It's kind of a unique argument to take to hospital administration to say 'Gosh, for me to save more money we need to hire more labor,' but that argument can lend itself more to defending your intent to maintain your level of resources."
Here are three areas in which pharmacy leaders can focus efforts to improve the pharmacy's bottom line and its role within the health system:
1. Cost containment: One way to cut costs and simultaneously improve quality is through antibiotics streamlining.
"When the patient comes in and you're not certain of the origin of their infection, you start with a broad spectrum of antibiotics," Thompson says. "You wait for the culture to come back, which will help you narrow down to a specific antibiotic that's less expensive than the broad spectrum of drugs."
Often, physicians will be hesitant to narrow the therapy when the patient is improving under the broad spectrum of drugs, he notes.
"But there's good evidence that it's totally appropriate and fine to narrow down the drugs," he says. "That would be one tactic for containing costs."
Another strategy is to narrow the formulary to leverage your purchasing power.
"In a therapeutic class with six to eight products on the market that do the same thing clinically, you can leverage your purchasing contract and shift as much utilization as you can to what is a preferred agent for your organization," he explains.
Some hospitals have an automatic substitution program that is a more expedient way of shifting utilization.
For instance, a hospital in which physicians prescribe among eight drugs that are therapeutically similar could have a policy that empowers the pharmacy to automatically substitute the preferred agent of these eight drugs, Thompson says.
"The preferred agent would be a generic drug or the lowest cost therapeutic of similar drugs," he says.
Other cost containment strategies include IV to PO switches and encouraging voluntary generic substitution.
These types of cost containment measures are small changes, but they can add up fast, saving a significant amount of money when accumulated.
During the recession and hospital budget cuts, pharmacy directors could use the current financial crisis to help gain better buy-in from physicians for cost containment changes.
"There's nothing new or magical about some of these tactics, and physicians have been approached about them over the years," Thompson says. "But hopefully, their receptiveness increases when they realize the pharmacy budget is being cut 3%."
2. Revenue generation: Unlike the fixed reimbursement rate environment hospitals face, the ambulatory environment can generate significant revenue through the addition of specialty services.
A hospital could add an outpatient prescription drug program or an infusion center for administering therapy, such as chemotherapy, Thompson says.
"Hospitals can invest in infusion centers when they want to do outpatient chemotherapy, and those environments are revenue fee for service models," he says.
"At Tufts when we were looking at cost containment, I shifted the conversation to talk about revenue generation in outpatient pharmacies," Thompson says. "I can try to control costs on the acute side or increase our margin on the outpatient side."
This strategy proved to be very successful. Thompson was able to convince the hospital leadership to give the outpatient pharmacy a green light, and within less than one year of operation, the new pharmacy was already generating enough revenue to pay back its start-up costs, he says.
"In our particular situation we had a very dated outpatient pharmacy situation designed for 100 prescriptions a day and designated for patients who didn't have insurance plans for prescriptions," he explains. "That was the status quo for 10 to 15 years."
When Massachusetts implemented universal health care, this increased the number of patients who had access to prescription coverage, greatly changing the dynamics.
"So we turned the old pharmacy model on its head and looked to move into a new space and promote the pharmacy as a pharmacy of choice and not just the pharmacy for indigents who have no other options," Thompson says. "We turned this into a very successful and profitable operation that adds convenience for our patients."
Patients leaving the hospital or visiting an outpatient clinic will walk past the pharmacy on their way to their cars. So they now can pick up their new medications before they head for home.
The new pharmacy operation was launched in December, 2009, resulting in a pharmacy staff increase and expanded services.
"We have pharmacists integrated into the more active clinics like the ones that support solid organ transplant recipients where the drug therapy is tremendously complex," Thompson says.
If these patients go to the typical corner pharmacy, they might not have access to a clinical pharmacist who can sit down with them to discuss their drug therapy, side effects, and complications, he adds.
"All of the pharmacy's expenses are offset by the additional revenue of their filling their prescriptions here, so everyone wins," he says. "The start-up costs were paid for in nine to 10 months."
3. Pay for performance: "There's a lot of discussion on the national stage about pay for performance," Thompson says.
Massachusetts is a pilot case for the national health care reform legislation because of its earlier health reform law.
"We've begun implementing pay for performance metrics," Thompson says. "We'll get reimbursed as an organization based on how well we achieve against performance metrics."
The performance metrics include the usual ones, such as patient injuries and hospital-acquired pneumonia, but also one of the core performance metrics is patient satisfaction, he says.
"In particular, for our Blue Cross Blue Shield contract, one of our bigger payers, we have certain reimbursement at risk based on how we perform," he says.
"So from the pharmacy perspective, if I can build a case for how I can influence the patient's experience, I'll arguably get more support and resources for those experiences," Thompson explains.
Pharmacy leaders might take a look at a national satisfaction survey metric called HCAHPS, which stands for Hospital Care Quality Information from the Consumer Perspective. It is a tool that could become the standard and adopted within the national health care model, he says.
"It was developed in part through a collaborative that the Centers for Medicare and Medicaid (CMS) established as a work group," he says.
The HCAHPS initiative, also known as the CAHPS® Hospital Survey, was intended to provide a standardized survey instrument for measuring patients' perspective on their care while in the hospital.
HCAHPS asks patients a core set of questions that can be combined with a broader, customized set of hospital-specific questions. They receive the survey in the mail two to four weeks after discharge. Among those questions are at least three that pharmacy services could impact, he adds.
"One simple example is there are questions that ask about the patient's level of satisfaction with communication about their medications," Thompson says.
"So one program we're trying to justify here would give me the resources necessary to incorporate a pharmacist having a conversation with every patient about their medication each day of their hospitalization," he says. "The program would have the pharmacist directly communicating with the patient to see how this influences the patient's perception of their care."