Keeping pharmacy costs in check

ABOUT THIS SERIES

H&HN has created this exclusive yearlong series called Fiscal Fitness with the support of the VHA. Finding ways to rein in expenses without sacrificing quality and safety is imperative for hospitals as they struggle to maintain financial viability in a shifting payment system even as their operational costs continue to climb. Over the next several months, we'll look at everything from the supply chain to pharmacy, IT and more. Follow the Fiscal Fitness series in our magazine and in our e-newletter H&HN Daily.

Is there a different adjective besides 'huge' to describe that?" Rabiah Dys responds when asked to explain the impact that the drug shortage is having on hospitals and health systems. "It's all of that and then some."

For Dys, executive director for clinical program development at Comprehensive Pharmacy Services, a pharmacy management company based in Memphis, Tenn., and others interviewed for this piece, the drug shortage is Topic 1, 2 and 3 these days. It's nearly impossible to have a conversation about managing pharmacy costs without ultimately coming around to the issue that's having a crippling effect on hospitals small and large.

"We probably send out five to 10 drug shortage communications a day, sometimes more," says Dys, whose company works with more than 300 hospitals and health systems.

The numbers are alarming. There were 267 drug shortages in 2011, according to the University of Utah Drug Information Service, which tracks drug shortages for the American Society of Health-System Pharmacists. By comparison, ASHP says there were 224 total shortages between 1996 and 2002. However, the Food and Drug Administration notes, newly reported shortages fell to 42 as of early May, down from 90 for the same period in 2011.

The shortage has wide-ranging effects. A July 2011 American Hospital Association survey found that 82 percent of hospitals delayed patient treatment because of the shortage and more than half of respondents couldn't provide patients with the recommended treatment. More than 70 percent of hospitals implemented policies rationing drug use, the survy found.

And then there is the financial impact. Ninety-two percent of hospitals in the AHA survey said drug costs had increased. Beyond having to purchase more expensive alternatives, exorbitant prices are being charged on the so-called gray market. Some reports have shown markups as high as 650 percent for certain drugs. There are indirect costs as well. Because pharmacists, nurses, technicians and others spend a growing amount of time managing issues related to the shortage, the estimated labor cost is upward of $216 million, according to ASHP.

Given the magnitude and duration of the shortage, it is more critical than ever for hospitals to manage other aspects of pharmacy operations better. While it's virtually impossible to offset a 600 percent price hike, hospitals are finding ways to trim pharmacy costs while keeping a focus on patient safety. Key strategies include better formulary management, more effective drug utilization and administration, automation and staffing models that rely on technicians and allowing pharmacists to round on patient floors.

"You can have the best contracts and tightest formulary, but safe and efficient use of medications is the key," says David Chen, director, pharmacy practice sections and section of pharmacy practice managers, ASHP. Chen notes that ASHP a couple of years ago launched its Pharmacy Practice Model Initiative, which aims to provide health systems with tools for building the pharmacy of the future.

Both Chen and Dys agree that better use of pharmacy technicians is part of that equation. The challenges, however, are training and state licensure. Dys says that there is little standardization nationwide when it comes to training and the role of technicians. That must be addressed if pharmacists are going to be freed up to spend more time with care teams.

Automation is the other area where almost all experts agree hospitals can not only gain efficiencies, but also improve patient care. While requiring a significant capital outlay, automation in the pharmacy and of medicine cabinets on patient floors can greatly improve stock-out rates, be linked to bar coding to ensure that the right drug is getting to the right patient, and generally give pharmacy directors better control over utilization, says Thomas Smith, senior pharmacy consultant for technology vendor McKesson, which has a substantial pharmacy automation division.

Automation also has led to the creation of a relatively new job title: pharmacy informaticist. These professionals bridge the gap between the pharmacy and IT, and are becoming increasingly important as hospitals roll out computerized provider order entry, build order sets into electronic medical records and embark on other automated medication systems.

The five rights

Pharmacy automation not only can create greater efficiencies, and thus save money, but it also can help hospitals achieve the so-called five rights of medication administration: right patient, right drug, right dose, right time, right route. The elements of pharmacy automation include:

• Auto-identification
• Inventory management
• Unit-dose packaging
• Bar code/labeling
• IV compounding, bag/syringe filling, infusion robots
• Pharmacy robotic dispensing systems
• Decentralized automated dispensing cabinets
• Bar code medication administration

Source: Health Information and Management Systems Society, "Automating the Pharmacy Medication Cycle in Acute Care Settings," January 2010.

Case study

Aultman Hospital Canton, Ohio

Nurses at Aultman Hospital no longer sit around waiting anxiously for medications to be delivered to patient floors. Pharmacy technicians aren't constantly scurrying around restocking depleted medicine cabinets either. Since launching a pharmacy automation system in 2009, those are traits of a bygone era. The Canton, Ohio, hospital has reduced medication stock-outs by 70 percent and now saves more than $30,000 a year on pharmacy technician labor alone.

"We buy what is required to get us through," explains James Toohey, the hospital's director of pharmacy. "We try to maintain a 10-day maximum and 6-day minimum of supplies. We don't have stock-outs except for items impacted by the drug shortage. We don't have to make emergency runs to other hospitals or pay extra for drop ships."

The automated system tracks inventory both in the central pharmacy and patient floors. "As medication levels ebb and flow on a particular unit, par levels adjust themselves," Toohey says.

The automation, along with the recent launch of a computerized provider order entry system, has prompted Toohey to enhance the role of pharmacy informaticists. He currently has three on staff. They work with physicians to configure easy-to-use systems and to ensure that data move between the right databases. And it's paying dividends, especially on patient floors. "It used to be that we'd get calls from nurses asking where the medications were. With physicians doing CPOE, we are getting the drugs to the floor before the nurse even knows it was ordered," he says.

Toohey is also optimistic that the hospital will usher in efficiency and drive out costs by altering its IV therapy management. The pharmacy is in the process of shifting to a dosage system. "We probably throw away $800 to $1,000 in IVs a day," he says. "We prepare the IVs in advance of their being needed. We were just trying to stay ahead of the workload, but therapies change" and IVs get tossed.

Under the new system, which is managed electronically, the pharmacy will reduce batch sizes and make IVs in a timelier manner, responding to actual demand. "We should be able to minimize the waste to next to nothing," Toohey says.

Nine strategies for involving medical staff in efforts to manage costs

1. Enlist the pharmacy and therapeutic committee to review medication utilization issues as a standing agenda item.
2. Identify centers of excellence and work with individual chiefs of service to gain support.
3. Meet with key medical staff departments and divisions, including infectious diseases, anesthesiology, cardiology and oncology, as well as intensivists, hospitalists and interventionalists as appropriate.
4. Develop prescriber reports on targeted high-cost drugs and discuss methods for cost reduction.
5. Provide continuous feedback to pharmacy and therapeutic committee and individual departments and divisions on cost-management successes.
6. Provide hospitalwide expenditure data on the top 50 items to the pharmacy and therapeutic committee.
7. Utilize evidence-based research to propose changes in medication utilization.
8. Identify physician champions for specific initiatives.
9. Create a consistent procedure for developing prescribing guidelines, protocols, care paths and preprinted orders.

Source: ASHP Guidelines on Medication Cost Management Strategies for Hospitals and Health Systems, 2012.

Content by Health Forum, Sponsored by: VHA.