Outsourcing Pharmacy Services: Analysis & Recommendations

Outsourcing Pharmacy Services: Analysis & Recommendations
Subrata Behera Chris Beuning Jim Grubel Steve McDonald Medical Informatics: Health Care Operations 404 August 10, 2011

County Hospital Background
Rural Midwestern town Population 50,000 Licensed for 250 beds but operations 150 Not for profit Medical staff of more than 50 active physicians Specialties include orthopedic surgery, gastroenterology, gynecology, urology, ophthalmology, general surgery, podiatry, nephrology, otolaryngology and general medicine Steve

Payer Mix 30% Medicare 20% Medicaid 40% Commercial
10% Self pay (uninsured) Steve

Financial Situation $1.5 M deficit fiscal year 2009
Near $2.5 M deficit in year 2010 Reduction in Federal grants spending which reduces recovered money and strains cost for facilities and administration Uncompensated care hurts profit margin Performance Management team created Steve

Rationale for Outsourcing Pharmacy Services
A pharmacy is an essential component in the operations of the healthcare organization. The pharmacies of today are being challenged by the changes in the structure and financing of the healthcare industry in order to reduce costs and improve performance. It is getting tougher on the part of the healthcare organization to maintain a fully fledged pharmacy and many of them are using pharmacy outsourcing in one way or the other. Subrata

Benefits of Outsourcing Pharmacy Services
It is easy to consolidate pharmacy services in large integrated health systems. • Helps reducing the operational issues by improving the medication distribution system, designing new pharmacy workspaces, reducing medication dispensing and administration errors and improving information systems • Enable the organization to acquire additional resources and expertise to carry out other changes • Provide educational programs for patients and their families and for health care staff • Help the organization to staff hard-to-fill pharmacy positions • Allow the organization to reach optimal staffing levels for achieving productivity targets Subrata

Cost Consideration Helps in reducing the operational cost for the organization. • Control and reduce labor rated costs by shifting the cost of employees, benefits, and liabilities to a contractor. • Enable the healthcare organization to share the risks associated with the operation of the pharmaceutical services. • Avoid the cost of purchasing and maintaining costly pharmacy equipment. It will help the healthcare organization focus on activities that is more critical than operation of the pharmacy. • Avoid the cost of physical remodeling of the office space and the cost associated. • Increase the organization’s financial operating margin by allowing the organization to purchase drugs in bulk quantities, use group purchasing contracts, decrease lost charges, improve billing accuracy, decrease drug diversion and pilferage, improve drug formularies, and transfer drug inventory, equipment, and supply activities to a contractor. Subrata

Quality Impact • Enable the organization to maintain or improve the quality of patient care by expanding clinical services and pharmaceutical care, establishing new services, and obtaining specialized expertise in pharmaceutical care. • Provide support for the medical and nursing staffs and improve physician–nursing–pharmacy collaboration. • Correct regulatory and accreditation problems relating to pharmaceutical services • Ensure continuing compliance with accreditation and certification standards • Allow the organization to gain an edge on competitors through improvements in service, quality, or price. Subrata

Outsourcing Options All Pharmacy Services Pharmacy Third Shift
Pharmacy Management Pharmacy Medication Procurement & Inventory Management Jim

Outsource All Pharmacy Operations
Current State Personnel Jim: County Hospital Pharmacy is currently made up of twelve pharmacists. Of these twelve, one is the Department Manager. Another is the Operations Coordinator. The department is also made up of one full-time and one part time clinical pharmacist. The other eight are staff pharmacists.

Responsibilities Order Management Sterile Products Jim: The staff pharmacists are involved in the day to day operations of overseeing the compounding of sterile products, profiling medication orders into the pharmacy information system, and performing monthly unit inspections. During these inspections they make sure there are no outdated medications on the units; meds are being stored under the proper conditions, i.e. refrigeration if necessary, etc. The clinical pharmacists respond to the more complex drug information questions a prescriber may have. They are also responsible for creating annual competencies for the staff pharmacists. The Manager represents the department at various committees, including, but not limited to the Pharmacy and Therapeutics committee, Joint Commission readiness committee, etc. The full time clinical pharmacist also sits on the P&T committee. There are ten technicians that perform various tasks throughout the day like the preparation of sterile products, restocking emergency boxes and crash cart trays, and filling daily patient medication bins.

Inventory Management Drug Locations Number of Turns Jim: At the time of their last physical count, the pharmacy had twelve million dollars tied up in inventory. Drugs are stored in multiple locations including the main pharmacy and various nursing units as floor stock. The pharmacy presently turns over its inventory four times a year. Requests for floor stock replacement come to the Pharmacy on paper forms; patients being charged for these items are spotty at best. Drugs to be ordered from the hospital’s wholesaler are placed in a want book, which is picked up by a technician who then goes to the wholesaler’s website and enters the drugs and quantities to be sent

N.P.M. Proposal Personnel Become N.P.M Employees Impact on Salaries Jim: N.P.M. Inc., National Pharmacy Management, has proposed taking over all pharmacy operations. This includes personnel and inventory. The present staff will be given the opportunity to apply for a position with N.P.M. and stay located at County. N.P.M. will interview for any positions that open up due to the resignation of existing staff. N. P. M. will bring in its own management and clinical teams. The current management and clinical personnel will have the opportunity to apply for one of the staff positions at County or seek other employment opportunities. Technicians will also be given the opportunity to re-apply for their positions. Taking into account salaries and benefits, County stands to save 1.4 million dollars.

N.P.M. Proposal, continued No New Equipment Needed Cost Savings Inventory Management Jim: No new equipment will be needed to implement this change. After having done an analysis of the inventory and ordering practices, they are confident that by bringing their management group in, they can implement enough changes to not only recoup their expenses but also save County enough to put it in the black. They plan on doing this by switching to a generic antiemetic, implement an IV to PO conversion program, switch to a shorter acting erythropoietic agent. They also intend to increase the number of inventory turns. Doing so will result in having smaller quantities of meds sitting on shelves, meaning less money being tied up as inventory. By placing a drug order for all their hospitals and having it sent to a central location, they can get better pricing due to the large quantities they will be ordering. The order would be broken down at their central site and distributed.

Outsource Night Shift Pharmacy Services
Current State Staffing Responsibilities Jim: Presently County Hospital covers third shift with one FTE Monday through Friday. The hours are from 11pm to 7 am. On top of their hourly rate, there is an additional shift differential of $3.50 an hour. An additional consideration is that depending on the seniority of the person filling the position, there are three to four weeks of vacation time, six holidays, and four personal days that need covering. A coverage rotation is set up and when a vacation request is made, the next pharmacist on the list works the coverage. We pull from our day and evening shifts and try to fill coverage gaps with per diem hours or overtime. Along with salary, there are other benefits like health, life insurance, etc. that the hospital is responsible for. Saturday and Sunday nights are covered by per diems. These employees do not have benefits, but are unable to work from time to time, so their shifts need to be covered. There is a weekend and shift differential of $5.50 an hour. The pharmacy profiles an average of fifty orders a night. To try and maximize the productivity of this shift, the pharmacist has been assigned to final check crash cart trays and emergency boxes. This position is also responsible for doing the final check of daily meds for two of the seven inpatient nursing units in the hospital.

N.P.M. Proposal Shift Coverage Cost Benefits Jim: N.P.M. has sent in a proposal where they would take over order entry on third shift. N.P.M. is a pharmacy management firm that provides remote order entry via a web-based third party image scanning application. County nurses would scan the medication order form that the NPM pharmacists are able to receive at their centralized location. Instead of County paying a full salary for a pharmacist to profile fifty orders, N.P.M. charges County based on a percentage of our average orders profiled against the two hundred fifty average orders their pharmacists can profile in a shift. Taking into account that County would no longer have to pay benefits to that position, we calculate a savings of one hundred ninety thousand dollars a year. For non-urgent orders that require clarification, the nurse manager would be called and notified. For orders that require clarification during the night, an on-call County Pharmacist would be consulted

N.P.M. Proposal, continued Medication Required Equipment Jim: An audit will be done looking at Emergency Department charts to see what medications were ordered to make sure they had an adequate supply to make up for the fact that the pharmacy will be closed from 11 pm until 7 am. With the decline in census the other tasks that were assigned to this shift can be redistributed and absorbed by the other two. A scanner would have to be set up in a central location in County. One of the night unit representatives would make rounds and bring the orders to this scanner. This scanner would be connected to N.P.M. where their pharmacists can open the images and view the prescribers’ orders. A workstation would have to be set up at the N.P.M. location that is connected to County’s pharmacy information system for order entry.

Outsource Pharmacy Management
Maintain current management positions New team to fill those positions Utilize N.P.M. personnel to fill these positions Chris: The depth of change required to maintain solvency for Community Hospital makes fundamental change at the leadership level necessary. National Pharmacy Management can bring in seasoned leadership to analyze and implement savings opportunities while still maintaining core pharmacy staff. Currently Community Hospital has a Department Manager and an Operations Manager. Initially N.P.M. will maintain both positions, although with a new team. There is much work to be done and N.P.M. trained management will utilize Lean techniques to assess opportunities and then implement them.

Cost Savings Initiatives Utilize Lean methodology Previously Identified Opportunities Switch to generic anti-emetics Implement IV to PO conversion Implement shorter acting erythropoietic agent Chris: Opportunities include those mentioned above such as by switching to a generic antiemetic, implement an IV to PO conversion program, switch to a shorter acting erythropoietic agent.

Cost Savings Initiatives – Additional Opportunities Formulary limitation by more aggressive therapeutic interchange process Antibiotic Stewardship Minimize adverse events Optimize antimicrobial agents De-escalate antibiotic to oral therapy when appropriate Discontinue therapy when complete Chris: Other opportunities include more aggressive interchange programs to limit formulary agents within specific medications classes and antibiotic stewardship to optimize antimicrobial therapy including minimizing adverse events and improving outcomes and de-escalating therapy to oral agents when appropriate and discontinuing therapy that has completed.

Cost Savings Initiatives N.P.M. Management team reporting Community Hospital Board of Directors N.P.M. Management and administration to track progress and offer resources and guidance Chris: . The Department Manager will be point on many of these initiatives with the Operations manager overseeing the details needed from staff and technology to support these implementations. The two managers will share oversight of the initiatives and reporting responsibility for progress to the Community Hospital Board of Directors. A reporting relationship will also be maintained with N.P.M management and administration to track progress and offer resources and guidance. Various projects will be evaluated and prioritized for sequential implementation. Following a defined stabilization period N.P.M. and the hospital Board of Directors will evaluate whether next steps for management transition and maintenance plans.

Outsource Pharmacy Medication Procurement & inventory Management
Potential areas of benefit Enrolling in 340b pricing program Inventory management – just in time Chris: The outsourcing of pharmacy medication procurement and inventory management carries several potential benefits including potential savings by enrolling in 340b pricing program, inventory management to come closer to “just in time” inventory management to reduce expensive stock sitting in the pharmacy and reduce potential waste balanced with having the right medications on hand

340b Pricing Program Determine if any subset of Community Hospital patients meet criteria for 340b pricing Tracking required Rigorous record keeping Chris: . An experienced vendor working with N.P.M. can evaluate whether Community Hospital meets any of the 340b criteria for even a subset of their patients based on Health Resources and Services Administration (HRSA) criteria and determine what needs to be done to enroll in the program. The vendor can assist with the rigorous tracking and documentation requirements necessary to be entitled to the significant cost reductions allowed for specific drug purchases.

Lower inventory levels Increase number of inventory turns Establishment of minimum and maximum levels Chris: The closer attention to inventory levels can have significant cost reduction impact. An example of Southwest Washington Medical Center with an average census of 250 beds was an increase of inventory turns by about 5 with an associated value to each additional turn of $70,000. Cost savings would be based on census and inventory level, but could afford significant savings (Fahrni). As mentioned previously County Hospital currently turns their inventory four times annually. Increasing this number by at least two promises a portion of the savings seen by facilities such as Southwest Washington Medical Center. The vendor can also set min and max levels that meet the needs of Community Hospital to help avoid stock outages as well as stagnant inventory.

Technology options Automated system for inventory tracking (i.e., Talyst) Real time inventory tracking Refill of automated dispensing cabinets (i.e., Pyxis) Electronic purchase request submitted to vendor Fill floor stock medication requests Chris: With greater resources available, N.P.M. can deploy additional technology resources and solutions that would not be otherwise be available to the organization. The use of an automated system such as Talyst carousel helps account for inventory on hand, assists with refilling Automated Dispensing Cabinets, automated medication order submission to the supplier and even filling floor stock medication requests from nursing care areas.

Sterile compounded product outsourcing N.P.M. Compounding facility Labor and time intensive to prepare on site N.P.M. facility meets criteria to allow longer dating than on site Reduced wastage Parenteral nutrition orders (TPN) Automated download from pharmacy system Remote preparation and deliver Chris: Additionally, N.P.M. has an affiliated sterile compounding facility which can supply sterile products to County Hospital and free up additional pharmacist and technician time. N.P.M. Compounding can download and prepare orders for parenteral nutrition and batched products such as narcotic infusions and certain infusions not available commercially. These types of products are labor and time intensive to prepare on site. Additionally, N.P.M. prepared products have longer expiration dating, resulting in less wastage.

Technology options – implications Free up technician time with automated functions Technicians could be deployed to some of the current, non-clinical pharmacists functions Pharmacist time could be moved to focus on cost savings initiatives Chris: Use and optimization of this type of technology can free up technicians’ time by automating and streamlining tasks. Time saved can be used to assist with some of the tasks previously taken on by pharmacists such as unit inspections and filling orders up to the point of the pharmacist double check. Technician wages cost the County Hospital less than those of a pharmacist. Pharmacist time could subsequently be shifted to the clinical cost savings initiatives identified by pharmacy management. Use and optimization of this type of technology can free up technicians’ time by automating and streamlining tasks. Time saved can be used to assist with some of the tasks previously taken on by pharmacists such as unit inspections and filling orders up to the point of the pharmacist double check. Technician wages cost the County Hospital less than those of a pharmacist. Pharmacist time could subsequently be shifted to the clinical cost savings initiatives identified by pharmacy management.

Point of care antibiotic assembly Antibiotic vial-bag-pin assembly Lest wastage N.P.M. Support Expert support personnel for training and trouble shooting Established policies and procedures for validation and adoption Chris: . N.P.M. also advocates the use of antibiotic vial-bag and pin dispensing systems that are easily assembled by nurses at the point of care. Significant waste reduction results from this system. N.P.M. will bring in their expert staff for assessment and implementation and training of Community Hospital staff. They also bring established policies and procedures that can be adopted by Community Hospital with some tailoring and modifications.

Recommendation for Consideration
The Pharmacy Review Group has brought forth a recommendation for a combination of two outsourcing options as a recommendation for major cost savings initiatives. The proposal includes a combination of outsourcing pharmacy management and pharmacy medication procurement and inventory management. Chris

Business Plan for Recommended Solution
Demand Present Economy Jim: Due to the condition of the local and state economies, there has been a gradual increase in the number of charitable care that the hospital has incurred over the last few years. Presently it makes up 10% of Community’s financial mix. None of the current economic indicators show that this will improve any time in the near future. The hospital is being asked to tighten its belt wherever possible. Outsourcing Pharmacy Management as well as the management of its inventory will help Community reach its financial goal.

Cost Salaries Jim: Community would initially be responsible for paying the salaries of the N.P.M. management team, but not their benefits. Eventually N.P.M.’s fees will be paid from savings recovered from better inventory management and clinical programs developed and implemented by N.P.M.

Human Resources Reorganization Jim: Reorganization of the department’s management will be necessary. The present management team has been ineffective in reigning in drug expenditures. N.P.M. will bring in one of its management teams, alleviating Community of having to provide one, reducing the overall salary and benefits paid out to the department. The present roster of staff pharmacists and technicians will remain unchanged, lessening the impact on the local community.

Output and Productivity More Inventory Turns Staff Engagement Sterile Products Jim: N.P.M. will use their expertise in pharmacy management to improve output and productivity. There will be smaller amounts of meds sitting on the shelves so there will be less chance of a med going out of date and then either wasted or returned for credit. Meds will be delivered to the nursing units quicker. Programs will be implemented to increase pharmacy staff recognition which will increase morale, which will lead to job satisfaction. Outsourcing sterile product preparation will free up the technicians and pharmacists who would normally be involved in this preparation to be able to perform other functions. This also cuts down on drug costs because Community is only charged for the amount of drug actually used. Any medication left over would be used to compound another facility’s order. N.P.M. gives Community access to a large source of drugs.

Quality Outcomes Clinical Initiatives Formulary Review Med Accessibility Jim: Community will see an increase in quality outcomes. N.P.M., having been in business for twenty years now, has an established set of clinical initiatives that they will be able to implement at Community. One example will be the establishment of a pneumonia pathway. This tool will help the physician decide which treatment will present the patient with the best possible result. N.P.M. will use its clinical resources to review the formulary and reduce some of the redundancies in certain med classes. Processes will be modified in such a way that technicians can become more involved in them, allowing the pharmacists to concentrate more on clinical activities. Should a specialty med be needed, N.P.M. would be able to access their company inventory database to see if any of their other sites have the drug, alleviating the need for the department to pick up the phone and work their way down a phone list until they find someone that as the med and is willing to loan it out. This speeds up the time it would take to get the med to the patient.

Processing Quality Patient Satisfaction Physician Satisfaction Jim: These changes should cause patient and physician satisfaction to go up. Initially there may be some dissatisfaction from the physicians due to the tightening up of the formulary, but once we are able to demonstrate that their patients are still receiving excellent care, they should come around. Medications will be delivered to the units quicker. Pharmacists will spend less time doing the historical distributive functions of Pharmacy and be able to focus more on the clinical aspects of their profession.

Considerations – Impact to HCO Mission
Community Hospital Mission – provide quality patient care and patient satisfaction while delivering exceptional medical care Any solution must support this mission Each of the solutions presented will be measured against this mission County Hospital’s mission is to have a medical facility which strives to provide quality patient care and patient satisfaction while delivering exceptional medical care. Any solution deployed needs to be able to maintain and support this mission. Each of the initiatives outlined previously is intended to support the mission and will be measured against that end.

Considerations – Community Reaction
A Health Care Organization becomes a part of the community it serves Challenges faced by the HCO impact or reflect on the community Community Involvement on the Board of Directors is important A Health Care Organization becomes a part of the community it serves. Challenges faced by an HCO either impact the community or reflect challenges facing the community as a whole. Personnel losses by the HCO are losses within the community. It is important for trust be maintained for members of the community to feel that Community Hospital can still meet their needs. Community involvement on the Board of Pharmacy is important to maintaining and supporting this relationship.

Considerations – Impact to HCO Competitive Position
Financial instability can impact the organization’s competitive position This needs to be considered with any changes implemented Rural setting limits competition Viability still at risk Financial instability has the potential to impact the organization’s competitive position. Any plans for change or correction need to take that into account. However, in this situation Community Hospital is located in a rural setting with little immediate competition. The biggest risk is the elimination of the only services available to the community.

Outsourcing Pharmacy Services: Analysis & Recommendations

Similar presentations

Presentation on theme: "Outsourcing Pharmacy Services: Analysis & Recommendations"— Presentation transcript:

Similar presentations

About project

Feedback

Log in

Auth with social network:

Outsourcing Pharmacy Services: Analysis & Recommendations

Similar presentations

Presentation on theme: "Outsourcing Pharmacy Services: Analysis & Recommendations"— Presentation transcript:

Similar presentations

About project

Feedback