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Hospitals see on-site pharmacies as revenue generators as medication management pays off

Hospitals collect more revenue from patients while also cutting down readmissions, evidence shows.

Jeff Lagasse, Associate Editor

More hospital systems are viewing their pharmacy services as an active generator of revenue as they seek a more efficient and controlled means of delivering medications to their patients.

The financial implications are twofold. Not only does a hospital collect more revenue from patients by allowing them to fill their prescriptions on-site, but evidence suggests that this approach cuts down on readmissions, further helping health systems save money.

Rick Demers, assistant executive hospital director for pharmacy services at Penn Medicine, said that growing a robust pharmacy is a trend that's been gaining traction nationally over the past several years.

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"I think there are a few things that are driving it," said Demers. "Revenue is one of the issues; there's no question. A lot of the initiative is more along the lines of hospitals making sure that patients can access and adhere to their medications. In the retail environment, there really isn't an interest in making sure patients get the medications that they need. They're really more health and beauty organizations that have pharmacies in them."

One of the prime challenges facing patients who seek to fill prescriptions through a third-party vendor is that those pharmacies may not carry the needed medication -- a problem that has become more common as the pharmaceutical industry has evolved and become more complex.

Some drugs, for example, may need prior authorizations from insurance companies, including some of the more expensive anticoagulant medicines. Or the drug store may not have prior authorization for the patient.

"Or, if a person needs a more potent antibiotic, or they take chemotherapy at home, those medications might be hard to find as well," said Demers.

[Also: Wellness centers become money-making population health engines]

So maintaining an onsite pharmacy benefits both the patient's health and the hospital's bottom line.

It's an about-face from the trend a few years ago. In the late 1990s and early 2000s, hospitals that kept pharmacies on-site were starting to shut down their operations, said John Cunningham, head of supply chain at Stanford Health Care.

At that time, he said, there wasn't as much of a push toward growth in ambulatory care. Medications were not as complex -- or expensive. Hospitals were going through a lot of cost minimization, in part due to cuts from the federal government in terms of Medicare. Hospitals were reevaluating their missions and looking for ways to cut down on expenses. Pharmacies seemed to fit the bill.

Then the Affordable Care Act was passed, and hospitals started facing penalties for escalating readmission rates.

"Drug compliance is the number one reason for a patient's readmission," said Cunningham.

And it goes beyond just a complex pharmaceutical landscape, he said. Patients often misunderstand the importance of following their drug regimen. And without the proper education, and with no on-site pharmacy to keep them accountable, some patients simply walk out of the care facility not realizing that a cavalier approach to medicine may land them back in a hospital bed.

"The places we see real improvement are where people leave the hospital with that medication," said Cunningham. "Organizations that are further along have definitely seen a return on investment."

On-site pharmacies allows for more control on the hospital side, said Fred Pane, senior director of national accounts and health system engagement at The Medicines Company in New Jersey. With an on-site pharmacy, clinicians have direct access to information such as who's prescribing which medications to whom. And different health systems have different approaches.

In the case of Kaiser, said Pane, "they use their pharmacy to control the cost of their health plan. So there are different models."

There are also differences in the way drugs are reimbursed, and this can further save a hospital money. Hospitals with pharmacies can bill private insurance, or Medicare, for reimbursement of the drug, part of what Pane calls a "continuum of care model."

A winning strategy for any hospital system looking to cash in on pharmacy, said Pane, is comprised of two steps -- capture as many prescriptions on discharge as possible, and generate revenue based on those prescriptions.

If those efforts are successful, a hospital may be able to generate enough cash to grow and expand its pharmacy services, leading to ever-increasing revenue in a cycle of investment and return. But in order for that to happen, said Demers, hospitals are going to have to become adept at evolving with the times.

"We're really moving a lot more care of patients into either the patient's home or quasi-self-care events, where patients may go to a clinic to get some treatments and then go home and come back on a regular basis," he said. "Now they're receiving care in larger clinics or medications in infusion areas. If that trend occurs, and as medications become less complex to administer -- whether through injection or a tablet -- you're going to end up seeing that institutions that manage these patients -- hospitals -- need to change."

One of the more obvious incentives to maintaining a pharmacy is that there are a lot more medications floating around than there used to be. Fifteen, 20 years ago, there less drug discovery, and not a lot of growth in the pharmaceutical industry. In the past 5-7 years, said Demers, branded drugs have undergone something of a rebirth, and there a lot of new speciality drugs that are complex to administer and vital to a patient's treatment process.

Hospitals, said Demers, realize that this is direction in which care is going.

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"The role of pharmacy has changed a lot, from being just a dispenser to really managing patients on their medications," he said. "The model's changing all the time. In the case of potent specialty drugs, this is really changing the role of the pharmacist to work with the patients to be successful in their medications."

If the trend continues, that may require more training and education for the pharmacists themselves. But if pharmacy continues to be such a strong revenue generator, it may be worth it.

"As the profession of pharmacy evolves, there are certainly a tremendous amount of residencies and programs that definitely help them in being able to provide this service," said Demers. "I expect more growth in the future."

Twitter: @JELagasse

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