In two previous articles, I wrote about how hospitals are leveraging remote pharmacy services to provide necessary 24x7 pharmacy coverage to qualify for “Stage 2 Meaningful Use” reimbursements, and how to determine which model– build vs. buy – is best to meet your individual hospital’s needs.
As a follow-up to those first two articles, I want to discuss additional considerations for remote pharmacy services including pricing models and quality assurance programs.
As I explained previously, remote pharmacy services are a proven way to reduce healthcare costs and ensure quality. Similar to considering any service, it is important for pharmacy leaders and healthcare executives to understand pricing options and contractual commitments for this increasingly popular service.
When evaluating remote pharmacy service options (to either partner with an outside service provider, like Cardinal Health, or use another hospital within your system) it is critical to understand pricing and the level of service you can expect.
Pricing for these services is typically driven by the order volume and remote pharmacist time needed. Oftentimes, selecting a remote pharmacy services provider can be more cost effective because only a portion of a pharmacist’s time is charged - depending again on order volume and hours of remote coverage.
Typical pricing models
Common pricing models in the remote pharmacy service provider market are to charge a fee-per-order/line, flat monthly fee based on fixed volume and/or an hourly rate for coverage with order volume caps.
- Per-Order Model:
In a fee-per-order/line model, a fee is assessed for each order processed by the remote provider. Monthly volume estimates are determined during the contracting phase, and a minimum volume guarantee is usually set as a type of retainer to ensure the adequate amount of remote pharmacist coverage during the hours needed.
- Flat Monthly Fee Model:
Although the fee-per-order/line model is common, a flat monthly fee model is also utilized and can be helpful to predict budget expenditures. In this model, both the hospital and the provider mutually agree upon the expected monthly volume and both assume risk should the volume exceed or fall short of the expected order volume target. In some cases, additional overage fees and credits can be applied should the actual volume exceed or fall short of the estimated volume target.
- Hourly Rate Pricing Model:
With the hourly rate pricing model, a hospital is charged an hourly rate that can be equated to the rate the hospital would need to pay to have the adequate number of pharmacists accommodate the order/line volume and hours of service because the remote coverage needed often extends beyond one shift. This method can work well particularly in larger healthcare facilities and can better highlight the cost savings per FTE, as larger facilities look to sometimes hire internally as opposed to leveraging remote pharmacy services.
It is important to note that smaller hospitals often find better cost savings leveraging an outside provider because internal pricing/cost allocations are typically done by FTE rather than by a percent of an FTE.
Regardless of the pricing model leveraged, the key take-away is: all the models described can be effective and represent savings, but in the end it is important to consider the overall value of having a clinical pharmacist available real time, whenever the medical staff and caregivers need them. Then balance that against the expected order/line volume to ensure adequate pharmacist coverage is provided.
Contract considerations: Quantifying service levels
In addition to pricing models, hospitals should consider quality assurance programs and service levels in their decision of how best to provide remote pharmacy services to meet their needs. Understanding what services are included in the contract price and what level of quality and service you are buying are important when evaluating your options. Some hospitals new to remote pharmacy services are pleased upon implementation of the service only to then find there are additional fees that can be surprising and create unexpected budget constraints.
These additional fees typically arise from volume expectations not being aligned when entering into an agreement. In addition, implementation fees are typically incurred upon commencing the remote service. However, these are typically minimal.
Contract consideration: ROI
With the focus today on pay-for-performance, considering quality as a part of your buying decision is important, both clinically and financially. Also important is being able to justify the return on investment when asking your organization to support a remote pharmacy services approach to ensuring 24x7 pharmacy services. When a pharmacy calculates its return on investment for remote services, it is not complete without including cost avoidance from preventable adverse drug events in its calculation.
Each adverse drug event cost hospitals an average of $4,685, according to American Health and Drug Benefits1, and that impact doesn’t take into account the financial impact of not meeting quantitative quality measures. Ensuring that you capture both the labor savings and cost avoidance associated with adverse drug events and interventions becomes important when calculating the true return on investment for providing 24x7 pharmacy services.
Hospitals are buying a remote pharmacy's ability to seamlessly adjust and function just like an on-site pharmacy team. Hospital policy and procedures are always in flux, so a remote pharmacy's ability to adjust to each hospital's procedures is critical. Noncompliance with a hospital's specific policy and procedures can introduce risk in the medication administration process.
In addition to considering the financial impact of adverse events when calculating an ROI, a decision-maker should also consider the remote provider's quality assurance program, including a way to document, track and report medication order entry variances. Variances include not only the five patient rights but also noncompliance with the hospital's policy and procedures. Your hospital should expect regular reports from your remote pharmacy provider on policy and procedure compliance as well as other variances that are reported.
Remote pharmacy services clearly elevate patient safety and result in cost savings for most hospitals. In addition to helping hospitals staff after hours, remote pharmacy providers can also supplement your onsite pharmacy team during peak times and help hospitals achieve Stage 2 Meaningful Use incentives that demand 24x7 pharmacy coverage.
In summary, hospitals are relying on remote pharmacy service providers to supplement their coverage now more than ever. There are many advantages to leveraging remote pharmacy services, including controlling pharmacy labor costs and redeploying pharmacists to direct patient care. With a remote service, you can rest assured that pharmacists are available to assist your hospital real time, as needed. This enables your pharmacy to elevate patient care and ensure the highest quality and patient safety.
1 Am. Health & Drug Benefits; National Burdent of Preventable Adverse Drug Events Associated with Inpatient Injectable Medications: Healthcare & Medical Professional Liability Cost Nov/Dec 2012 Vol 5.