Is your hospital pharmacy a strategic asset?


Mary Baxter, MBA, RPh

healthcare industry expert

The pharmacy is often not an optimized asset in a hospital.

In fact, it is often viewed simply as a utility or cost center. The time has come for that to change, and the sooner the better. Dramatic changes underway in healthcare - from the Affordable Care Act to the sheer imperative to cut costs and improve performance - are forcing hospital administrators to rethink how their hospitals are leveraging resources and teams to achieve their strategic agendas. For example, the old-fashioned way of seeing a hospital pharmacy -- as a break-even or marginally profitable order-filling service department -- can't be sustained in today's competitive healthcare environment.

So what does it mean to leverage the hospital pharmacy as a strategic asset? In short, a pharmacy should be expected to add value to every aspect of a hospital's strategic agenda. It can, and should, contribute substantially to grow revenue, improve efficiency, reduce waste, improve patient outcomes and create a competitive advantage.

Exponential benefits - both financial and in quality of care -- are possible, especially when compared to departments and functions that have been previously optimized.

To transform the pharmacy into a strategic asset, hospitals don't have to reinvent the wheel. Many of the tools and resources exist, yet are not being strategically implemented. First and foremost, it requires executive sponsorship beyond the walls of the pharmacy, and a multi-disciplinary team of care providers to be aligned to execute on strategic initiatives. This team would include administration, physicians, nurses, and the pharmacy leadership. It also requires program management, with the development of scorecards and key performance indicators. Lastly, it requires pharmacy leadership that is engaged in key initiatives, committees and teams across the hospital.

Cardinal Health manages many hospital pharmacies, provides remote services at others and consults with still more on issues such as cost control, technology adoption, regulatory and accreditation compliance, medication safety and outpatient pharmacy. We've used this specialized expertise to develop solutions that can improve the performance at hospital pharmacies, whether rural or urban, big or small, outsourced or internally run.

Hospital pharmacies have long followed an ideal called "The Five Rights: Right drug, right patient, right dose, right route and right frequency." This maxim is still true; yet it's just not enough anymore. Based on our experience, we believe that hospitals today must implement initiatives across the "Four Fs" to transform a pharmacy into a strategic asset.

The "4 F Framework," in simplified form, is this:

  • Find meaningful growth. Generate cost savings by ceaselessly looking for new opportunities, such as filling employee prescriptions or selling the pharmacy's inventory to an outside pharmacy manager. Improved reimbursement and federal funds capture - tapped through improved expertise - are other crucial opportunities.
  • Fix inefficiencies. Eliminating waste in purchasing, inventory, workflow and other key areas can significantly improve operating margins. Lean management techniques can result in shorter patient stays, reduced working capital needs, reduced pharmacist overtime and turnover, while leading to other benefits.
  • Fulfill quality care mission. Integrating pharmacists into patient care improves patient outcomes. This can be done through implementing a bedside pharmacy program; comparing drug therapies for efficacy, safety and cost effectiveness; improved medication reconciliation and many other strategies. Pharmacists should be included as clinical partners, with physicians and nurses, who produce desired and measurable outcomes, such as improved patient safety, fewer readmissions and reduced errors.
  • Follow the patient. Healthcare isn't a four-day hospital stay anymore. The continuum of care includes clinics, nursing homes, patient homes and more. Hospital pharmacies need to follow the customer - the patient - wherever care is given, especially if it's within the same healthcare system. That can mean, for example, providing 30-days of medicine at discharge; developing models to support chronically ill, high-risk patients; and/or creating a hospital retail, or outpatient, pharmacy .

"Follow the patient" obviously connects to "Find meaningful growth." It also connects to the quality care mission when a hospital pharmacist calls a patient at home after discharge to check on recovery and drive medication adherence. These strategies are parts of an interconnected whole. The goal is to synchronize the pharmacy's agenda to the hospital's agenda.

In future articles, we'll expand on each of the 4 F concepts and give real-world examples of how hospital pharmacies implemented these concepts and produced measureable returns. For now, we hope that you'll start thinking about a hospital pharmacy as much more than a cost center distributing medication orders.

Reimagine the pharmacy as a strategic asset - an asset that contains untapped value that can be released by making specific changes that align the pharmacy's functions with the hospital's overall strategic agenda.