Hospital margins are thin: Here's how the pharmacy can help

Most hospitals operate on thin margins, which forces leaders to continuously explore new sources of revenue, cost reduction techniques and quality improvement initiatives.

One often-overlooked department that can support these types of systemwide initiatives is pharmacy, explained Michael Brown, RPh, vice president of managed services at Dublin, Ohio-based, Cardinal Health. 

"Getting pharmacy involved in the decision-making and the strategic planning for your facility is key because it can really move the ball in those areas," Mr. Brown said.

Mr. Brown recently spoke with Becker's Hospital Review to discuss how health systems can better leverage the pharmacy to sustain cost savings, drive change and meet systemwide initiatives.

Editor's Note: Responses have been lightly edited for length and clarity. 

Question: How can hospitals and health systems better sustain cost savings year-over-year in their pharmacies?

Michael Brown: First, establish and use analytics that are actionable. Your hospital needs analytics with the ability to view insights by purchases and utilization at the service-line level. Within the service lines, you need the ability to analyze true drug costs by utilization matched to prescribing physician and patient diagnosis. This level of utilization data provides insights to help drive sustainable purchasing changes that then drive significant cost savings for the hospital. In addition, your hospital needs analytics to understand how you are being reimbursed on your outpatient service lines to maximize margins in those areas.

Armed with actionable insights from data, you need a strong pharmacy leader who can effectively collaborate with different leaders across the health system and the medical care team. Better still, include your hospital or health system's pharmacy leader on the executive team.

Q: What areas should pharmacy be involved in?

: Don’t make the mistake of just focusing on the pharmacy’s budget and cost-control projects. Ask them to be involved in hospital-wide goals, including improving HCAHPS scores, reducing readmissions and maximizing reimbursement for drugs on both the outpatient and inpatient side. Pharmacists can offer great value to health systems when they branch beyond the pharmacy – And that's where you'll see its biggest impact.

The pharmacy department should have a hand in improving patient care and satisfaction. Improving HCAHPS scores and readmission rates are key in the new environment where hospitals are reimbursed by care-quality metrics. For example, getting pharmacists involved in discharge patient counseling or medication reconciliation has been found to boost HCAHPS scores and cut readmission rates. In some cases, hospitals we support saw their HCAHPS scores double after getting their pharmacies involved in educating patients.

Additionally, hospital administrators should take advantage of the education and license expertise of their pharmacy leaders. Involving them in executive decisions is key, and administrators should expect them to come to the table with ideas about how they can help the system achieve operational and clinical goals. Pharmacy leaders should collaborate with physicians to create protocols, present them to leadership and get acceptance from the care team. From there, they should implement, follow and monitor the protocols. Clinical leadership and change management should be fundamental expectations of the pharmacy. 

Q: What questions should administrators ask their pharmacies?

MB: Administrators should be asking their pharmacies to get more involved in the hospital's goals like cutting costs, improving operations or generating new sources of revenue. Administrators should directly ask the pharmacy, 'Hey, how can you help me do this? How can you bring new revenue in? How can you give me new services that bring new patients in?' 

A good example would be having a pharmacy leader refine or create a retail pharmacy strategy to bring in more revenue. 

In addition, pharmacy leaders should be asked to help build the reimbursement strategy with finance leaders. They have the knowledge about how to maximize reimbursement for drugs in various settings, including an outpatient infusion center versus an inpatient medical surgical floor.

Another initiative that hospital administrators can ask their pharmacy to tackle is ensuring that the department is leveraging 340B or patient assistance programs (if eligible) to get discounted or free drugs or copay assistance. These programs help expand patient access to the medications they need and improve medication adherence, which in turn, drives better outcomes.

To learn more about pharmacy services at Cardinal Health, please click here.

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