Hospital pharmacies need to improve metrics as budget realities evolve

Now is the time to start

There is no reason for hospital pharmacies to wait for national health care reform to force major data collection changes. The right time to improve the pharmacy's metrics, data collection, and analysis is now, experts say.

"We need systems that accurately measure the current performance and that provide a breakdown of opportunities," says James A. Jorgenson, MS, RPh, executive director of pharmacy at Clarian Health Partners in Indianapolis, IN.

Hospital pharmacy directors need to know what resources they need to meet target goals and how they can do better with existing resources, Jorgenson says.

"We need all of the metrics that go into this, including data about changes in service intensity, length of stay, clinical services, etc.," he adds. "We need a way to measure the impact of those variables."

Pharmacy directors should think in terms of metrics, particularly as their departments' role evolves.

For instance, pharmacy directors might need to take the lead on understanding and developing metrics that will provide an accurate picture of the pharmacy department's expenditures, benchmarks, and resources.

"Metrics are data that could be used as a benchmark to compare yourself to someone else or to monitor your progress," says Philip E. Johnson, MS, RPh, FASHP, director of pharmacy at H. Lee Moffitt Cancer Center in Tampa, FL.

Pharmacy departments should use metrics to measure productivity, financial performance, progress, and other purposes, Johnson says.

However, this is not happening as consistently as is needed, he notes.

"A lot of pharmacy directors are not that familiar with working with metrics, or they only use the numbers their institution provides them," he says. "That was fine for the last probably 35 years."

But now things have changed, and hospital pharmacy departments also will need to evolve or be left behind.

"Before, it was okay to look at the cost per patient day and cost per admission," Johnson says. "But now everything is getting crazy in the health care network with the way costs are today."

Data, trending of data, and setting thresholds for performance increasingly are important for hospital pharmacies, says David Kvancz, RPh, MS, FASHP, chief pharmacy officer at the Cleveland Clinic in Cleveland, OH.

Whether it's efficiency data, productivity data, or quality data, these measures are important to show hospital leaders that the pharmacy department has met its targets or benchmarks, Kvancz says.

"There's no question that we have to spend more and more time looking at data and employing more resources to extract and extend the data for analysis," he adds.

For instance, when Kvancz first arrived at the Cleveland Clinic in 1997, one of the first things he did was to develop a proposal for hiring a drug utilization analyst whose job would be to support initiatives by the hospital system's pharmaceutical therapy committee.

That one analyst position led to more, including an operations analyst and quality analyst, he says.

"We probably have five analysts, and our pharmacy staff is around 400 FTEs [full-time equivalents]," Kvancz adds. "We're increasingly employing BSPS [bachelor's science in pharmaceutical sciences] graduates for analysis positions."

Also, people with a financial analyst background or experience in creating databases also can make good analysts, depending on a hospital's interests and desired expertise, Kvancz says.

Hospital leaders and physicians make their decisions largely based on data, he notes.

"To the extent you can provide data with a logical, philosophical argument of what you're trying to accomplish, whether it's in patient safety, quality issues, or system design, the data ultimately are the card that will enable you to seal the deal to support your initiative," Kvancz explains. "So it's critically important to be able to use data."

Along with data, provide context

One problem might be with interpreting pharmacy data since hospital leaders typically do not fully understand the business of pharmacy, Jorgenson says.

"They don't understand what metrics mean; they don't understand what's behind the numbers," Jorgenson explains. "They can see our drug spend and head count, but they have no idea how those two things are related."

Every other hospital department spends more on personnel than anything else, so cutting jobs is a way to cut expenses. With pharmacy, job cutting can have the opposite effect, Jorgenson says.

"Our big expense is drugs, and if we don't have the right numbers and kinds of personnel, then we can't control that 80% that is the drug expense," he adds.

"Having more pharmacists and the right kind of pharmacists can save you money, and we need metrics to show that to hospital leadership," he says.

"Drugs are one of the fastest growing expense lines, and they're one of the top three revenue sources," Jorgenson says. "So why isn't pharmacy at the top of the C-Suite radar?"

Pharmacy directors who collect accurate and useful metrics will help make their pharmacy departments a top priority in the hospital.

Also, metrics can be used to highlight quality improvements and accurate comparisons to peers.

At cancer hospitals like H. Lee Moffitt, 70% of therapies occur in outpatient settings, Johnson notes.

So the patients who are hospitalized are very sick and their care is labor-intensive, he adds.

"If you compare my 200-bed hospital to a general 200-bed hospital, I look like I'm doing a terrible job with six times the staff and an $82 million drug budget," Johnson says.

Obviously, this type of comparison which often occurs with national databases is misleading, he says.

"Specialty hospitals like a cancer hospital or pediatric hospital don't match up," Johnson explains. "So what we need are numbers that allow for comparison with a similar institution."

Such data are hard to come by, but there is a group of pharmacy directors from across North America who will be meeting in December, 2009, to analyze a national database for information that could be useful to specialty hospitals, Johnson says.

"What we need to do is some research ourselves," he adds. "We really need to figure out what our true costs are for a certain patient diagnosis, for example."

Also, metrics could show the cost to a hospital pharmacy department for following national guidelines pertaining to particular diseases and treatments.

"So if we follow NCCN [National Comprehensive Cancer Network] guidelines, we'll know what the cost is for doing that," Johnson says. "And then we can measure outcomes and know patients' stage of disease and we'll scientifically put an acuity level on that patient."

The entire discussion about pharmacy costs will change as these data become available.

For example, when pharmacy directors discuss leukemia patients and medication costs, they won't speak in global terms of all leukemia patients, but will be able to identify costs particular to leukemia patients with a certain stage of disease, Johnson explains.

"If one patient is at stage 3 and another patient is at stage 2, then there should be a difference in cost, and it's accounted for in the metrics," he adds.

Metrics that account for acuity levels would help explain the situation when drug costs escalate due to increases in patients with particularly complicated and expensive conditions.

For instance, the Cleveland Clinic's drug costs per case on an adjusted case-mix basis was above budget in the most recent year, Kvancz says.

"When we looked back at detailed analysis data, we found that the number of transplants we were doing this year versus last year were far greater than was budgeted," Kvancz explains. "We were able to explain that the variance was due to a higher level of drug costs for patients with transplants, and the transplants had increased."

In a similar example, Jorgenson used data showing how the Clarian Health Partners hospital's transplant patient population had changed to explain a higher medication cost.

"This year we had the same gross numbers of transplants from FY08 to FY09, but drug spending is up by 1.2 million," Jorgenson says. "So [hospital leaders] said, 'What's wrong? You're not doing a good job of controlling your drug spending.'"

The patient metrics painted a different picture: The hospital's multivisceral transplant patients had increased by 35%, and these patients with two organ transplants required more expensive medication treatment, Jorgenson explains.

In another example, Jorgenson looked at total adjusted patient days and saw that one recombinant factor seven [recombinant human factor VII] patient needed $1.4 million in factor seven in one week.

"It was appropriate because the patient was a hemophiliac, and the factor seven was the only way to stop his bleeding, and it worked," Jorgenson says. "But that was in just one week, and our numbers looked horrible."