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Lowering Costs & Driving Revenue with Outpatient Pharmacy

The COVID-19 pandemic has dramatically impacted hospitals and health systems operationally, clinically and financially. In order to stay viable, healthcare organizations need to find new ways to drive new sources of revenue and reveal cost savings opportunities. For many hospitals, owning their own outpatient pharmacy is one key way that both of these may be obtained.

coronavirus-3992933New Sources of Revenue

Hospitals that do not operate their own outpatient pharmacy, or have one that is not structured optimally, are leaving savings and potential revenue sources on the table. Hospitals with their own outpatient pharmacy have an improved ability to control their own destiny by capturing new sources of revenue, increasing quality, improving the patient experience, curbing readmissions and reducing costs for their hospital employees.

When patients are discharged from the hospital without medication in hand from the hospital’s outpatient pharmacy, an average of 20% of those prescriptions go unfilled.[1]

Of those that get filled, only about 50% of patients take their medicines as prescribed.[2]

With an established outpatient pharmacy, the hospital is able to capture a portion of those prescriptions, drive revenue and obtain revenues they otherwise would have missed.

Localizing the hospital outpatient pharmacy provides more control over care and outcomes, resulting in lower readmission rates and fewer related penalties. Advantages include:

  • The hospital pharmacy provides another point of patient contact, from discharge and beyond.
  • The outpatient pharmacy is integrated to the patient’s electronic medical records.
  • Hospitals are better able to deal with patients who consume the bulk of resources due to their diagnoses and/or regular emergency department visits.
  • Hospitals understand the insurance world, payers and billing much more intimately than retail pharmacies.
  • The hospital’s outpatient pharmacy is an extension of the hospital brand, energizing patient loyalty and increasing HCAHPS scores.

Savings Generated from Employee Prescriptions

A significant financial benefit of a hospital-owned outpatient pharmacy is the potential savings on the cost of medications for its own employees and their dependents through their prescription benefit plans. Without its own in-house outpatient pharmacy, a hospital can spend as much as 12% more on medications for its own employee health plan members. Under the “own use” definition, hospitals can purchase drugs for their inpatients, hospital staff, auxiliary, and retired employees at inpatient GPO prices. In this class of trade, drug prices are typically 5% to 12% lower than retail prices at big box chains and community pharmacies. In order to qualify for this pricing, the hospital must demonstrate that it is using those drugs for this limited population only.

Annually, the average cost of providing prescription drugs to an employee is $700 to $800 when accessing retail pharmacies.[3] By utilizing the lower inpatient GPO pricing, the annual per covered member medication costs could be reduced by $35 to $84.[4]

Because the hospital manages the employee prescription benefit as well as the medical benefit, the pharmacy has more control over where the patient receives their medications. This is particularly important as oncology medication reimbursements are being stripped from the medical benefit and moved over to the pharmacy benefit. Though reimbursements are lower under the pharmacy benefit, the hospital still retains some of those dollars. If the hospital does not have an outpatient pharmacy, those dollars will be lost.

Comprehensive Pharmacy Services (CPS) Empowers Hospitals to Realize their Outpatient Pharmacy Vision

CPS helps hospitals and health systems every day to establish or optimize their outpatient pharmacies. We bring deep skill and expertise in revealing new sources of revenue and optimizing existing ones, while simultaneously decreasing costs, improving clinical quality and coordinating care to patients. Through the right pharmacy expertise, best practices and mix of skill and tools, CPS empowers hospital-owned pharmacies nationwide to realize the best version of themselves – achieving operational, clinical and financial excellence.

Contact us to learn more: contactus@cpspharm.com.

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[1] NCBI. Medication Use in the Transition from Hospital to Home. Accessed April 11, 2017. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3575742/

[2] National Council on Patient Information and Education (NCPIE). Enhancing Prescription Medicine Adherence: A National Action Plan. Accessed April 11, 2017. http://www.talkaboutrx.org/documents/enhancing_prescription_medicine_adherence.pdf

[3] Kaiser Family Foundation/Health Research & Education Trust 2016 Annual Employer Health Benefits Survey. Accessed April 11, 2017. http://files.kff.org/attachment/Report-Employer-Health-Benefits-2016-Annual-Survey

[4] 2013-2014 Prescription Drug Benefit Cost and Plan Design Report

Posted: Thursday, June 11, 2020

Tags: CPS Blog Posts, Outpatient Pharmacy