Revenue Optimization In Hospital Pharmacy Services

Presenters:

Kyle Skiermont, PharmD, COO, Fairview Pharmacy Services

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

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 1997

• 22,000+ 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

BLANK

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 coverageClinical team: IV nurses, clinical pharmacists, dietitiansAntibiotic therapy, TPN, oncology, pain management

On-site Infusion Pharmacies (5)Specialty Pharmacy

Nationwide coverage, all drug classes, case-managed approachMail Service PharmacyLong Term Care/Assisted Living PharmacyCompounding PharmacyCentral Packaging Medication Therapy Management (MTM)

30+ clinics, multiple direct-to-employer and payer contractsFairview Clinical Trials ServicesAnti-coagulation clinics (30)Wholesale pharmacyAdvanced Drug Therapy ProgramClearScript SM pharmacy benefit managementManagement oversight of UMMC Hemophilia ClinicExceleraRx

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

TWO CONTENT

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

Challenges for Health Systems

9

Primary care referral to an oncologist

Refer to an employed or affiliated oncologist

Patient needs to be admitted to the hospital

Admit them or transfer to an owned tertiary center

Patient needs a medication

Send the prescription to a third party

pharmacy

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.

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

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

Quantifying the Opportunity

Proprietary and confidential. Not for distribution without prior written consent of ExceleraRx Corp. © 201712

ILLUSTRATIVE Example

$20,000,000

$160,000,000

$180,000,000

$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

$350,000,000

$400,000,000

Specialty Pharmacy Opportunity

Current Capture Incremental Opportunity Estimated Lockout (40%)

Near-Term Opportunity

Realized Opportunity

Long-Term Opportunity

Note: Fictitious numbers intended to illustrate the opportunity

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

Strategies to get started

• The right choice may be to do nothing

Maintain current environment

• On site model

• Remote modelPartner with an

existing pharmacy

• Joint venture

• Consultants Start a pharmacy

TITLE & CONTENT

Strategies to open larger opportunities

• Care for own patientsLeverage hospital/health

system payer agreements

• Local/regional payersExplore exclusive payer

relationships

• Home infusion – JC, ACHC

• Specialty – JC, ACHC, URAC, CPPAAccreditation

• Center of excellence

• Care for own patientsExplore limited

distribution drugs

Where are the opportunities?

Revenue Opportunities

Retail

Specialty

Ambulatory Infusion

MTM

LTC

Compounding

Where are the opportunities?

• What am I missing?

• Do you agree these areas are opportunities?

Retail

Discharge

Clinics/owned facilities

General public

Retail

Opportunities

• Relative ease of entry

• Multiple resources

• High volumes

Challenges

• Multiple competitors

• Low margins

Specialty

Opportunities

• High revenue

• Growing revenue

• Concentrated patients and providers

Challenges

• Contracts

• Concentrated competitors

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

MTM

Opportunities

• Relative ease of entry

• Providers often demand the service

• Ease of proving the value

Challenges

• Payer contracting

• Low margins

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

LTC

Opportunities

• Relative ease of entry

• High volumes

• Affiliated buildings

Challenges

• Multiple competitors

• Low margins

• Highly regulated

Compounding

Opportunities

• Built in customer

• Relatively new market

Challenges

• Highly regulated

• Uncertainty of regulation

• Capital intense

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

So, why doesn’t every health system have all of these pharmacy services?

Competition Access to Adequate Payer Contracts and Limited Distribution

Drugs

So, why doesn’t every health system have all of these pharmacy services?

Lack of Experience Competing priorities

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?

Fairview examples

Discharge LTC

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

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

How does the process work?

• Meet with patient while in house, as early in stay as

possible

• Explain service

• VERIFY demographics, 3RD party information, and drug

allergies

• Explain that we are not the "hospital” pharmacy

• Will bill most 3rd 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

Results

February January

LocationRx's

Issued

%Designated

FV

%Filledat FV

%Designated

FV

%Filledat FV

FAIRVIEW LAKES REGIONAL MEDICAL CENTER 543 60.8% 56.0% 61.9% 53.2%

FAIRVIEW NORTHLAND REGIONAL MEDICAL CENTER 381 68.8% 59.6% 63.7% 58.0%

FAIRVIEW RIDGES HOSPITAL 1,969 76.5% 56.3% 71.3% 57.4%

FAIRVIEW SOUTHDALE HOSPITAL 3,157 69.9% 58.4% 68.2% 57.6%

FAIRVIEW TRANSITIONAL CARE (SNF) 190 91.6% 64.7% 84.6% 57.7%

UNIVERSITY OF MINNESOTA MEDICAL CENTER, FAIRVIEW 9,589 86.5% 61.7% 86.8% 62.7%

ALL LOCATIONS 15,829 80.7% 60.2% 80.2% 60.7%

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

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

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

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

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

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

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

Key Elements of Success

• Health system support

• C-suite champion

• Entrepreneurial spirit

• Provider buy-in

• Payer contracts

• Health plan ownership

• Service level

• 340B

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

Key Gaps for Example Health System

• Staff – leadership and front line

• Space

• Licensure

• Systems/technology

• Marketing to specialty clinics

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?