How hospital pharmacies find meaningful growth opportunities


Mary Baxter, MBA, RPh

healthcare industry expert

The first step in Cardinal Health's four-part approach to transforming the hospital pharmacy into a strategic asset is often the most discussed -- yet seldom truly optimized: Finding Meaningful Growth. "Revenue solves all known problems" is one of Google's Executive Chairman Eric Schmidt's favorite business sayings. For a hospital, what would it mean to generate an extra $500,000 in annual profitability and another $500,000 in cost savings? Perhaps it wouldn't solve "all known problems," as Schmidt might say, yet it could certainly help fund other, critical initiatives.

Growth opportunities can be a powerful lever to lift profitability and turn a hospital pharmacy into a strategic asset, rather than a necessary cost center that manages expenses. Finding growth is a classic win-win business strategy. Customers (patients) reward a hospital when it delivers new and valued services. And hospitals benefit financially, and strategically, by unlocking hidden value from an undervalued asset -- the hospital pharmacy.

Cardinal Health's 4 F Framework for optimizing hospital pharmacies has four parts: "Find growth," "Fix inefficiencies," "Fulfill the quality care mission" and "Follow the patient." This article focuses on the first step: achieving meaningful growth through expanded services, better reimbursement capture and smart expense management. Two real-life success stories will help illustrate the impact a hospital pharmacy can have: Riverside Health System, a non-profit system based in Newport News, Va., and IASIS Healthcare, a for-profit health system headquartered in Franklin, Tenn.

Ideas from proven winners:

  • Establish or expand an outpatient pharmacy.Thirty-eight percent of prescriptions are not filled post-discharge. And medication non-adherence is a leading cause of readmission. With new penalties for hospital readmissions, it's more important than ever that hospitals leverage outpatient pharmacies to help increase the likelihood that patients understand and adhere to their medications. An outpatient pharmacy can provide discharge medications to patients, provide an added convenience that drives patient satisfaction, help answer patient questions and monitor compliance post-discharge.

    Outpatient pharmacies can also offer customized service to employees - including desk-side delivery of medications - as well as significant cost savings to the hospitals' prescription drug benefits.

    "Having the pharmacy in-house means we can reliably direct people to generic drugs and other lower-cost alternatives, saving money in our health plan outlays," says Michael Doucette, vice president of operations for the Riverside Health System.
  • Capture all available reimbursement. The federal government, especially under the Affordable Care Act, increasingly provides financial incentives for improving efficiency and care quality. Don't let reimbursement revenue slip away because the opportunity is hidden. A hospital can capture extra reimbursement dollars by helping its hospital improve patient care.

Helping hospitals meet the Meaningful Use Attainment criteria is a Cardinal Health core competency.

For example, IASIS Healthcare implemented a computerized physician order entry system (CPOE) that communicated directly and electronically to the hospital pharmacy to improve medication management. With consultation from Cardinal Health, IASIS Healthcare deployed electronic health records to successfully qualify for $32.2 million in incentive payments from Medicare in 2011-12, plus $5.4 million in the first quarter of 2013.

  • "The ability to communicate the prescription electronically to the pharmacist, have it reviewed, have it show up in the electronic medical record, and have the discharge medications rectified - all that is part of Meaningful Use," says Tedd Adair, vice president of clinical operations for IASIS Healthcare, which operates 16 acute care hospitals and other facilities in seven states.
  • Consider the pharmacy's inventory as an untapped asset. Ready cash can sometimes be found by selling the pharmacy's inventory. For example, Cardinal Health recently took over management of a hospital pharmacy and bought the existing inventory. The transaction boosted the hospital's cash position by $5.98 million, lifted the institution's bond rating and helped finance the modernization of an aging facility.

    The big picture take-away is this: New, meaningful growth is one of the most important steps in the journey to increasing a hospital pharmacy's strategic role. Optimizing the top line is a great way to improve the bottom line. (Google's co-founder has a point!) Expertise, resources and multi-disciplinary teams are all necessary ingredients for a hospital to leverage its pharmacy to find meaningful growth. Partners like Cardinal Health can help scale and provide expertise to help transform the pharmacy into a strategic asset for the hospital.