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Experts offer advice on optimizing pharmacy revenue
Expand what hospital pharmacy already does well
Hospital pharmacies can improve the pharmacy's revenue by focusing on specialty services and business models that challenge the traditional structure.
One strategy for initiating this type of growth is to look at what the hospital already is doing and assess the operations for growth potential and trends of increasing revenue flow, experts suggest.
"We look for anywhere someone else is making money on our patients because we don't want that revenue siphoned off by a third party," says Scott Knoer, PharmD, MS, director of pharmacy at the University of Minnesota Medical Center, Fairview in Minneapolis, MN.
"We looked at a pharmacy benefit management (PBM) company and saw that someone else was making money off of our employees, and we became our own PBM," Knoer says.
The PBM expanded to enroll health plan members from other self-insured employers, so now only one-fourth of its business involves prescriptions filled by the health system's employees, he adds.
"Since we started this in the 1980s, we have grown in infrastructure and now have a back office with people who do the billing and checks up front to make sure people have insurance for specialty pharmacy," Knoer says. "We've built in that infrastructure over the years, and that's allowed us to seek new business."
One of the new business opportunities that sprung from the PBM infrastructure involves specialty pharmacy.
"We're a specialty pharmacy like all the big players," says Tony Zappa, PharmD, MBA, chief information officer and director of specialty/infusion operations at Fairview Pharmacy Services, LLC, of Minneapolis.
Fairview Pharmacy Services is a corporate system that has 32 ambulatory clinic pharmacies, including Fairview Home Infusion, a mail order pharmacy, a compounding pharmacy, specialty pharmacy, and a clinical trials program. It's as subsidiary of Fairview Health Services which encompasses the University of Minnesota Medical Center, Fairview.
"We specialize in transplants at the University of Minnesota, so you get a lot of patient referrals from that program," Zappa says. "We capture 95% on discharge and don't lose that many patients to the competition or back to local retail pharmacies."
The retention rates are high because of the attention patients receive from pharmacists and other staff, he adds.
Pharmacists who specialize in transplant medicine meet with patients.
Before patients have transplant surgery they visit the clinic and talk with the pharmacy staff. This contributes to a continuity of care since the same staff will work with them after the transplant, Knoer explains.
"We have access to their medical records, and we can pull up their lab records, which is more than most mail order pharmacies can do," he adds. "So that's important and provides a continuity of care."
Transplant pharmacist specialists discuss medication issues with patients post-surgery, checking to see if they have any clinical or financial problems, Zappa says.
"The specialist handles their first few months of prescriptions," he says. "The clinic shares a lobby and can get their medications to them fairly quickly."
In the early weeks post-transplant, patients' medication dosages will be adjusted and changed each week, and the pharmacist will work with them during these adjustments to assess adherence issues and side effects. Once the dosage is set, the patient's prescription will be transitioned to a mail-based program, Zappa says.
"As often as the patient comes in, for the first 30 days the patient is back sometimes daily, and at least weekly," Zappa adds. "This could go on for a couple of months."
"Patients come in for blood draws, and the physician and pharmacist work hand in hand with the patient," Knoer says.
Specialty pharmacy services can be any services that involve high risk or complicated therapies, including combinations of high risk drugs, Zappa notes.
HIV antiretroviral medication regimens and rheumatoid arthritis treatment are two examples, he says.
"These could include hepatitis C treatment, growth hormones, and oral oncology because of the cost of the drug and it tends to be a life-long treatment," he explains. "Then there are odd things like people born with metabolic deficiencies that require enzyme replacement and hemophilia, which is difficult to manage and is very expensive."
Growth hormone treatment can cost $35,000 annually, and this is an area in which all of the system's pharmacists have knowledge.
The health system has pharmacists specializing in hemophilia care. Hemophilia treatment can cost an average of $350,000 to $400,000 a year with some patients spending over $1 million a year, Zappa says.
"We lose money on treating hemophilia in inpatient care," Knoer says. "But the ambulatory business is profitable."
Hemophilia patients can visit the outpatient centers for infusions.
"If you're a health system that maybe has an ambulatory or outpatient pharmacy but which hasn't focused on this area before, then these patients are going somewhere to get these medications," Zappa says. "And if they're not going to you then you're giving up an opportunity for revenue."
For pharmacists to qualify as specialists they typically need advanced training or at least must have an interest in learning more about these sometimes rare diseases and how the diseases impact patients.
"It's more about patient support than distribution," Zappa says.
The revenues can be significant. For example the average patient with rheumatoid arthritis spends $20,000 a year on drugs, Zappa says.
"HIV drugs can cost $25,000 a year, and transplant patients will spend $10,000 to $15,000 a year on drugs, and you go up from there," he says. "If you get an average margin on these projects, it leaves you with a fair amount of money to invest in these people."
Patients take these medications the rest of their lives, so health plans are receptive to pharmacies that focus on medication adherence and minimizing adverse drug events (ADEs), Zappa notes.
"This will decrease doctor office visits and hospital utilization," he says. "We can identify potential problems and risks."
For example, pharmacist specialists with training in hepatitis C will know that patients are likely to feel horrible while taking the drugs for the first 30 to 60 days.
"It can cause depression, so we identify people who are likely to suffer from depression and help them get in to see their doctor as soon as possible," Zappa says.
This early intervention helps to keep the patients on therapy and clear their systems of hepatitis C.
Another business model involves health systems and pharmacies partnering with other health systems to provide a network that has bigger purchasing power.
This volume-based contracting model might serve as competition to national specialty pharmacies that develop sole contracts with limited distribution networks, Knoer suggests.
"Instead of supplying specialty drugs to traditional wholesalers, they'll pick three or four specialty pharmacies to distribute it, and that leaves small systems like ours without the drug," Zappa explains. "By combining our system with other hospitals we hope to team up and gain access to the drugs."
Health system pharmacies also could become involved in medication therapy management (MTM) for chronic illnesses, assisting with the more complex cases, Knoer says.
"Fairview is advanced in this area," he says. "We work with complex patients who have hypertension and diabetes, and we provide consults."
So if a diabetic patient is on four medications or more then the patient receives medication therapy management services.
"We feel like we can take better care of these patients because of our continuity of care," Knoer says.
So the pharmacist's direct patient care involvement is part of the package that is marketed to employers who are looking for a PBM, Knoer says.
"We go to the people who have to pay for that prescription drug benefit, and we have a marketing group who markets the PBM," he adds. "That's important because when a system gets as big as Fairview then you need marketing services."
Fairview also provides consultation services to health systems that are considering expanding into a specialty pharmacy business model, Zappa says.
"We have an active consulting business where people go out to health systems, do an assessment of current capabilities, growth plans, and risk appetite," he adds. "And we give feedback and recommendations on what they should do first and how to go about it, including which computer systems to buy and what their staffing requirements are."