Fixing hospital pharmacy inefficiencies: Four places to start


Mary Baxter, MBA, RPh

healthcare industry expert

Making a hospital pharmacy more efficient is a proven way to drive down costs and significantly improve operating margins.

Quality and service often improve dramatically at the same time. Today, with so much pressure on costs, innovative pharmacies are using efficiency gains to elevate their bottom lines and their strategic importance inside hospital systems.

Where can a pharmacy find opportunities to improve efficiency? Our answer: Look everywhere -- starting first with your purchasing, inventory, staffing and operating procedures.

To start, assess your pharmacy's performance against industry standards and best practices. This will help identify areas of improvement, and provide industry standards for key metrics to track progress after changes are made. Monitoring progress and measuring results are the roadmap for the long, never-ending journey toward optimizing efficiency.

Cardinal Health supports and operates hundreds of hospital pharmacies across the country, helping to drive efficiencies in everything from workflow and pharmacy design to inventory management and automation. Whether it's optimizing inventory controls or implementing purchasing best practices, it's our experience that there are hidden opportunities to substantially improve efficiencies in virtually any hospital pharmacy.

After assessing your pharmacy's individual areas to improve, get to work on the gritty details. Some efficiency opportunities that stand out include:

1. Optimize inventory management.

Reduce time spent managing your inventory by reducing touch points, controlling costs and reducing waste. Some key steps and best practices:

  • Conduct a baseline 
  • Design a dynamic system which adjusts inventory levels based on changing patient demand, and changes to formulary and packaging specifications (i.e, barcoding)
  • Establish minimum and maximum reorder points for drugs
  • Emphasize obtaining all possible credits from returned excess 
  • Ensure pharmacy buyers are trained on inventory and purchasing best practices, like updating the min/max levels on a monthly basis to avoid stock-outs and staff time wasted replenishing drugs

2. Maximize medication purchasing.

Pharmaceutical inventories often comprise one of the biggest line items in a hospital's budget. That's why optimizing savings from Group Purchasing Organization (GPO) contracts can deliver such a substantial return when it comes to improving efficiency and cost effectiveness. Some key steps:

  • Maximize tiered discount programs by hitting performance-based incentive targets
  • Take advantage of generic conversions by ensuring immediate access to newly released generic products
  • Use longer-term buying opportunities to secure lower-cost contracts
  • Review backorder reports to obtain all credits possible for "failure-to-supply" items

Most hospital pharmacies will practice these policies to some extent already. Yet it's been our experience that many hospital pharmacies have huge, untapped optimization opportunities. Even efficient pharmacies often generate noteworthy savings from further refining purchasing strategies in a systematic fashion - on average, we see cost savings ranging from 50 to 90 basis points.

3. Take new approaches to pharmacy staffing challenges.

In today's environment, hospital pharmacy leaders are expected to expand service levels and programs with limited resources and staffing. Optimization of pharmacy productivity is key to enabling safe and cost-effective medication use processes. An evaluation of your pharmacy's staffing needs and productivity should include pharmacy staffing, medication order processing and distribution systems. It should also include multiple pharmacy productivity variables, instead of merely doses filled and orders processed. For example, consider how the following factors impact your team's staffing needs and productivity:

  • Impact of patient admission, discharge and transfer activity
  • Pharmacy staffing schedules
  • Order entry volume
  • Basic clinical services
  • IV and chemotherapy production
  • Automation
  • Medication management processes in patient care area

Each hospital has its own unique opportunities to improve staffing efficiencies. These successful examples from demonstrate innovative ways to fix inefficiencies and do "more with less:"

  • Leverage remote pharmacy. Finding pharmacists to cover third and weekend shifts can often be a recruiting challenge - for virtually any hospital. An increasing number of hospitals are turning to remote order entry models to implement a blended, more flexible and cost efficient approach to ensuring pharmacy coverage 24 hours a day, seven days a week.
  • Implement and utilize intern programs. Intern programs can also be a great way to connect with future pharmacy talent and improve the efficiency of recruiting processes. For example, we worked with the Regional Medical Center at Riverside Health System in Newport News, Virginia to create a residency program that accepts two pharmacy school graduates for internships each year. &quotIt creates a recruitment pipeline for us, and a number of them end up staying,&quot says Michael Doucette, vice president of operations for the health system.
  • Recalibrate duties. Pharmacy technicians and assistants can reduce pharmacists' burdens when thoughtfully assigned to specialized tasks. For example, the Wellmont Foundation hospital network in Bristol, Tenn., assigned pharmacy technicians to medication reconciliation. The result: pharmacy techs were more accurate than nurses and did the job better, for $60,000 a year less.

4. Fully leverage Automated Dispensing Systems.

Last but not least, fully leveraging the pharmacy's automated dispensing systems has the potential to improve pharmacy productivity and inventory management, while minimizing diversion, and enhancing patient safety. As a result, pharmacy leaders can reduce nursing time spent on managing stock outs, improve inventory management, and redeploy pharmacy technician time otherwise spent on vend-to-refill trips. In fact, for one client, we were able to redeploy 800 technician hours per month as a result of optimizing their automation.

Hospital pharmacies have many reasons to "Fix Inefficiencies," to leverage themselves as a strategic asset. Stepping back from the demands of everyday pharmacy life can be challenging. Reducing waste requires analysis and creative thinking. The effort is worth it. In truth, it's essential. In today's healthcare environment, a hospital pharmacy needs to do all it can to be a strategic business asset for the entire hospital system, much more than a support service for other medical professionals.