Revenue Optimization In Hospital Pharmacy Services. Presenters: Kyle Skiermont, PharmD, COO, Fairview Pharmacy Services
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1 Revenue Optimization In Hospital Pharmacy Services Presenters: Kyle Skiermont, PharmD, COO, Fairview Pharmacy Services
2 FACULTY DISCLOSURE The faculty reported the following financial relationships or relationships to products or devices they or their spouse/life partner have with commercial interests related to the content of this CE activity: - Speaker 1 - Speaker 2
3 Fairview Health Services provides a full continuum of health and medical services. Not-for-profit organization established in 1906 Partner with the University of Minnesota since ,000+ employees 2,300 aligned physicians 7 hospitals/medical centers (1,602 staffed beds) 40+ primary care clinics 55+ specialty clinics 47 senior housing locations Home care, home medical and hospice Urgent care and retail clinics 2015 data 67,682 inpatient admissions 345,000 assigned/attributed lives $3.9 billion total revenue
4 Comprehensive Portfolio of Pharmacy Services Retail Pharmacies (36) Medical office buildings and clinics, University of MN hospital Hospital Pharmacies (7) Infusion Therapy (home and ambulatory service) Licensed pharmacy and home health agency w/regional coverage Clinical team: IV nurses, clinical pharmacists, dietitians Antibiotic therapy, TPN, oncology, pain management On-site Infusion Pharmacies (5) Specialty Pharmacy Nationwide coverage, all drug classes, case-managed approach Mail Service Pharmacy Long Term Care/Assisted Living Pharmacy Compounding Pharmacy Central Packaging Medication Therapy Management (MTM) 30+ clinics, multiple direct-to-employer and payer contracts Fairview Clinical Trials Services Anti-coagulation clinics (30) Wholesale pharmacy Advanced Drug Therapy Program ClearScript SM pharmacy benefit management Management oversight of UMMC Hemophilia Clinic ExceleraRx
5 Why are health systems interested in pharmacy revenue optimization? Health systems are looking for any new sources of revenue Traditional sources of revenue are moving to more consumer driven and ambulatory models Pharmacy is becoming an increasing contributor to health care spending Pharmacy spending is growing faster than most other areas of health care spending
6 Financial Impacts of Pharmacy Improper medication use by patients has been estimated to cost the health system up to $290 billion a year Drug expenditures comprise 9-20% of healthcare premium This represents the third most costly component of the nation s health spending behind hospital care and physician and clinical services
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9 Challenges for Health Systems Health systems spend a great deal of time and energy managing primary care referrals and downstream acute service capture, but until recently, have not paid significant attention to capturing prescriptions. Primary care referral to an oncologist Patient needs to be admitted to the hospital Patient needs a medication Refer to an employed or affiliated oncologist Admit them or transfer to an owned tertiary center Send the prescription to a third party pharmacy 9
10 Key steps for new revenue opportunities Determine the reason for entry into the market Educate/Socialize key leaders Size opportunity Gap analysis Identify resources needed and identify associated costs
11 Size the Opportunity How many patients/prescriptions are part of your health system? Market data Utilize a consultant with pharmacy experience Prevalence of patients/specialties in your health system Prescription data from EHR Payer analysis 340B analysis if applicable
12 Quantifying the Opportunity ILLUSTRATIVE Example $400,000,000 $350,000,000 $300,000,000 $250,000,000 $200,000,000 $150,000,000 $100,000,000 $50,000,000 $0 $180,000,000 $160,000,000 $20,000,000 Specialty Pharmacy Opportunity Long-Term Opportunity Near-Term Opportunity Realized Opportunity Current Capture Incremental Opportunity Estimated Lockout (40%) Note: Fictitious numbers intended to illustrate the opportunity Proprietary and confidential. Not for distribution without prior written consent of ExceleraRx Corp
13 Gap Analysis Are key people, processes and tools in place? Methods to accomplish gap analysis: Utilize a consultant with pharmacy experience Survey patients and providers Review payer and drug RFPs Assess accreditation readiness
14 Strategies to get started Maintain current environment Partner with an existing pharmacy Start a pharmacy The right choice may be to do nothing On site model Remote model Joint venture Consultants
15 Strategies to open larger opportunities Leverage hospital/health system payer agreements Explore exclusive payer relationships Care for own patients Local/regional payers Accreditation Explore limited distribution drugs Home infusion JC, ACHC Specialty JC, ACHC, URAC, CPPA Center of excellence Care for own patients
16 Where are the opportunities? Retail Compounding Specialty Revenue Opportunities LTC Ambulatory Infusion MTM
17 Where are the opportunities? What am I missing? Do you agree these areas are opportunities?
18 Retail Discharge Clinics/owned facilities General public
19 Retail Opportunities Relative ease of entry Multiple resources High volumes Challenges Multiple competitors Low margins
20 Specialty Opportunities High revenue Growing revenue Concentrated patients and providers Challenges Contracts Concentrated competitors
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24 Ambulatory infusion Opportunities Favorable margins Continuity of care Payer contracting Site of care Challenges Difficult to go from 0 to 1 patient Highly regulated Smaller patient volumes
25 MTM Opportunities Relative ease of entry Providers often demand the service Ease of proving the value Challenges Payer contracting Low margins
26 Payment Options for Pharmacists Potential Payers Patient FFS or Health Savings Acct Health Plans Medicaid Medicare Part D Commercial Self Funded Employer PCMH/ACO- Clinic or System at risk
27 LTC Opportunities Relative ease of entry High volumes Affiliated buildings Challenges Multiple competitors Low margins Highly regulated
28 Compounding Opportunities Built in customer Relatively new market Challenges Highly regulated Uncertainty of regulation Capital intense
29 Metrics more than FTEs and drug cost Financial Revenue actual dollars collected, not billed Gross margin Net income Customer satisfaction more than hospital scores Provider satisfaction Capture rate Designated Actually filled
30 So, why doesn t every health system have all of these pharmacy services? Competition Access to Adequate Payer Contracts and Limited Distribution Drugs
31 So, why doesn t every health system have all of these pharmacy services? Lack of Experience Competing priorities
32 Breakout session What would be the biggest challenges to starting a new service at your health system? What would be the most compelling arguments to advance a new service at your health system? How large does the return on investment need to be to get approval?
33 Fairview examples Discharge LTC
34 Why Have a Discharge Program? Continuity of Care Ensure the patient has the medication at discharge Access to hard to find medications and compounds Clinical Impact Dispense the same medications as the inpatient stay, or utilize PBM covered equivalents Ensure proper patient education Revenue/Profit Opportunity 34
35 How does the process work? Most prescriptions are e-prescribed to the discharge pharmacy Some controlled substances are faxed or tubed Prescriptions are filled similarly to our retail pharmacies Patient receives the medications before discharge Patient or family comes to the pharmacy Medications are delivered to the floor 35
36 How does the process work? Meet with patient while in house, as early in stay as possible Explain service VERIFY demographics, 3 RD party information, and drug allergies Explain that we are not the "hospital pharmacy Will bill most 3 rd party programs Co pays will be the same as at any retail pharmacy Will receive a bill for your charges separate from the hospital bill 36
37 Results February January Location Rx's Issued % Designated FV % Filled at FV % Designated FV % Filled at FV FAIRVIEW LAKES REGIONAL MEDICAL CENTER % 56.0% 61.9% 53.2% FAIRVIEW NORTHLAND REGIONAL MEDICAL CENTER % 59.6% 63.7% 58.0% FAIRVIEW RIDGES HOSPITAL 1, % 56.3% 71.3% 57.4% FAIRVIEW SOUTHDALE HOSPITAL 3, % 58.4% 68.2% 57.6% FAIRVIEW TRANSITIONAL CARE (SNF) % 64.7% 84.6% 57.7% UNIVERSITY OF MINNESOTA MEDICAL CENTER, FAIRVIEW 9, % 61.7% 86.8% 62.7% ALL LOCATIONS 15, % 60.2% 80.2% 60.7%
38 Lessons learned Connect to the acute care pharmacy team Win over the employee population Determine the goal/purpose of the discharge pharmacy Develop metrics to define success Clinical Service Financial 38
39 Lessons learned The Discharge Pharmacy must provide a high level of service If you build it, they will not necessarily come This is a completely different business from acute care pharmacy Involve the floors/units in process design, but do not let them dictate the process 39
40 Why create an LTC service? Ease the transition of care from our hospitals to our controlled facilities Improve clinical care decrease pharmacy related citations Revenue/profit opportunity
41 How does the process work? Most prescriptions are e-prescribed or faxed to the LTC pharmacy Prescriptions are filled similarly to our retail pharmacies for assisted living facilities, and bubble packed for skilled nursing facilities Prescriptions are billed to the facility or to the PBM depending on the type of facility and the duration of the stay
42 Lessons learned The LTC Pharmacy must provide a high level of service If you build it, they will not necessarily come This is a completely different business from retail pharmacy Involve the facilities in process design, but do not let them dictate the process Ensure you have the correct IT systems to support LTC 42
43 Results The pharmacy services nearly all affiliated beds/patients, but very few non-affiliated beds/patients The pharmacy serves ~2000 beds/patients Pharmacy related survey topics have improved The pharmacy struggles to make a profit
44 Ingredients That Worked for Fairview Focus and infrastructure Stand-alone business Capital structure Dedicated management team Financial accountability Infrastructure support Organizational alignment and accountability 44
45 Key Elements of Success Health system support C-suite champion Entrepreneurial spirit Provider buy-in Payer contracts Health plan ownership Service level 340B
46 Case Study $1.25 Billion dollar total revenue health system All traditional specialty categories represented in the system Current outpatient pharmacy includes discharge and one medical office building pharmacy The system has recently signed a major ACO like at risk contract The system does not have any 340B covered entities
47 Key Gaps for Example Health System Staff leadership and front line Space Licensure Systems/technology Marketing to specialty clinics
48 Questions to consider What are the steps you would use to size the opportunity? How would you begin to fill the gaps identified? What other information would you need to evaluate the opportunity? Should our case study health system enter the specialty market?
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