3 ways hospitals are fighting back against escalating drug and device costs

The margins of both nonprofit and for-profit hospital operators are feeling pressure from increasing drug and medical device costs, according to a recent report by Moody's Investors Service.

Here are three ways hospitals are offsetting some of these costs, according to Moody's.

1. Leveraging their scale is one way hospitals are mitigating increases in drug and medical prices. Hospitals are locked into arrangements with payers that make it difficult for them to negotiate additional reimbursement to keep pace with the price increases. However, hospitals can leverage their scale when purchasing drugs and devices by standardizing clinical and purchasing protocols to drive volume discounts.

2. Influencing purchasing decisions allows hospitals to offset the rising prices. "The ongoing trend of hospitals employing physicians and forming clinically integrated networks increases the potential for economic coordination between physicians and hospitals, resulting in an increase in a hospital's ability to influence purchasing decisions," according to Moody's.

3. Increasing participation in the 340B Drug Discount Program helps some nonprofit hospitals offset the effects of rising drug prices. The program requires manufacturers to provide outpatient drugs to eligible nonprofit healthcare organizations at significantly reduced prices. "When a hospital with 340B status treats a patient with discounted medication, it can retain the difference between the reduced price it pays for the drug and the amount it is reimbursed," according to Moody's.

More articles on healthcare finance:

Hospitals face payment cuts at outpatient sites under budget deal: 10 things to know
Fitch, Moody's and S&P raise the bar on hospital key ratios
1,800 hospitals see payment bump under value-based purchasing: 10 things to know

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