Kathy Chase, Pharm. D., director of Drug Cost Control Services for Cardinal Health's Innovative Delivery Solutions business, discussed the strategic use of benchmarks at the 2013 American Society of Health System Pharmacists (ASHP) Midyear Clinical Meeting in Orlando.
Benchmarking can be an essential tool in driving the hospital pharmacy agenda - one that has become increasingly more robust with recent innovations in information technology and data warehousing.
Today, many hospitals use some form of benchmarking to measure and compare both the cost and quality of care. Drugs represent one of the largest supply expenses in the hospital. At Cardinal Health, we manage or consult with over 250 hospital pharmacies, actively working with them to manage their drug costs. We have found that the strategic use of benchmarks has helped hospitals reduce drug costs by 1-3% or more. For the average hospital, this may represent a half million dollars in savings per year. Through this experience, we've identified a number of best practices that lead to success. Here are just a few.
Five Tips for Effective Benchmarking in a Hospital Pharmacy
1. Benchmark against multiple measures. Use two or more benchmark criteria to help intensify your focus on key opportunities - the ones that will drive the most savings. One way to do this is to focus on both an internal and an external measure. An internal benchmark may be to compare against last year. An external benchmark may be to compare your hospital against other hospitals within your healthcare system. For example, select a drug or therapeutic class; trend the use versus last year and compare it to other hospitals. If you note the expense is trending up and the cost is above other hospitals, this may be an area for focus. At Cardinal Health, we use our Drug Cost Opportunity Analytics (DCOA) software tool to do this. It utilizes stoplight colors - red, yellow, green - to facilitate the analysis.
2. Adjust data to make it more meaningful - but don't let the quest for perfect comparisons thwart successful benchmarking. For example, adjust for volume and don't just look at spend. Suggested volume adjustments include acute patient days and pharmacy-adjusted patient days. But don't go overboard trying to find exact matches when comparing your hospital to other hospitals. Every hospital is unique. Trying to find hospitals that are precise matches in size, geography, services, teaching affiliation and so on will rob you of valuable data. If you're looking at drug cost per orthopedic procedure, it doesn't matter if the comparator hospitals also have a burn unit and neonatal intensive care unit; focus only on hospitals with orthopedic surgery programs.
3. Measure cost, not charges. It is crucial to measure actual hospital-acquisition cost, not charges. Hospital charges often bear little relationship to actual drug cost. By incorrectly focusing on patient charges, some tools severely limit their analytical power for benchmarking. By contrast, Cardinal Health's Drug Cost Opportunity Analytics software contains each hospital's acquisition costs and compare that data to hundreds of other hospitals.
But regardless of the analytic product you use, understand that the cost source and size of the data pool are important to data quality and analysis. A comparison to a hundred or more hospitals is much more meaningful than a comparison to a dozen, because an increase in data volume usually translates into better data quality.
4. Expand benchmarking beyond cost. Consider benchmarking quality and outcomes, not just costs. For example, length-of-stay may be a surrogate for outcome - not perfect but useful and easily available. As such, shorter lengths-of-stay generally indicate better outcomes.
This combined data analysis promotes improving outcomes while reducing costs. By using benchmarking tools in this way, deep-dive comparisons by drug, disease state (DRG) and/or physician can be accomplished.
5. Apply pharmacy benchmarking to your hospital's clinical decision support program. It's important to extend your analytical insights into everyday clinical practice throughout the hospital system. Do this by incorporating the knowledge from pharmacy benchmarking into your clinical decision support tool(s). Measure your success through ongoing monitoring of both internal and external benchmarks.
For example, Cardinal Health's Drug Cost Opportunity Analytics tool allows you to set targets based on hospital financial, clinical and quality initiatives to quantify your success.
Think of benchmarking as a tool for thoughtful measurement. Benchmarking enables successful practices; while helping to identify and eliminate inefficient or costly practices. However, identifying the opportunities is only half the battle. Taking action to capitalize on these opportunities often requires dedicated resources, best practice knowledge and clinical change management skill. Engaging your hospital's senior leadership in understanding and utilizing benchmark data is critical to gaining the support that's needed to implement the kind of prescribing practice changes that have the potential to truly improve patient outcomes while reducing drug costs.