By identifying unnecessary spend and changing expensive clinical practice patterns, a four-hospital system achieved nearly $2 million in pharmacy cost savings.
In 2011, faced with steadily increasing costs, Trinity Regional Health System, Rock Island, Ill., began investigating opportunities to reduce pharmacy spend and optimize reimbursement. A comprehensive assessment of pharmacy operations uncovered a cost savings opportunity of $1.5 million to $2 million. The overall goal was to use less expensive medications and lower the quantities of medications used, where possible.
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To accomplish these goals, Trinity leveraged data derived from benchmarking analyses to encourage physicians to avoid inefficient drug utilization practices, such as prescribing high-cost medications.
By using lower cost-drugs and making changes in drug administration and dosage practices, Trinity was able to save $1.9 million in 2012, or 14 percent of its pharmacy budget. Today, the health system is developing additional pharmacy improvement initiatives to reduce costs by another $1.2 million in 2013.
Analyzing Opportunities for Cost Reduction
Trinity Regional, a four-hospital system that is a part of West Des Moines-based Iowa Health System, historically experienced annual increases of 3 percent in its pharmacy department. However, changes in patient mix and acuity levels in high-cost areas, such as oncology, were expected to increase costs by 6 percent in 2012.
A third-party assessment of the pharmacy department, including a review of inventory, organizational structure, and processes, identified opportunities for savings by improving medication utilization practices across clinical departments. The analysis benchmarked drug expenditures per adjusted inpatient day for each clinical area at Trinity against the same expenditures at a peer group of hospitals. Analyses of areas such as cardiology and oncology, in particular, revealed significant opportunities for savings.
A medication utilization team was tasked with pinpointing the cause of the higher-than-average costs in the clinical areas and identifying ways to reduce costs. The team included two pharmacists as well as representatives from finance and revenue cycle, who tracked and measured the results of initiatives and addressed questions regarding reimbursement.
The medication utilization team also worked with clinical administrators, such as the chief medical and nursing officers, to designate physician champions or key stakeholders who could use their influence with their colleagues to win support for implementing cost-saving strategies.
The utilization team found that an expensive drug used for oncology patients, costing $2,665 per dose, could be replaced with a less expensive, but clinically equivalent drug that cost just $249 per dose. Trinity’s chief medical officer recommended a particular oncologist as the champion on this initiative and, along with the utilization team, discussed with the physician the benefits of switching to the less expensive medication. The discussion was supported with third-party benchmarking data showing positive clinical experience with the lower-cost medication.
Persuaded by the data, the oncologist helped to develop protocols for using the less-expensive medication. As a result, utilization of the more expensive chemotherapy drug dropped 21 percent, for a savings of $160,000.
Other initiatives focused on drug administration and dosage. One standard industry practice that Trinity used for administering a particular antibiotic involved infusing the patient for an hour every six hours. Studies have shown that if the regimen and infusion process is changed to support administering the medication over a four-hour period every eight hours, less of the product is used, and patient outcomes are improved. The utilization team brought proposed changes to its pharmacy and therapeutics committee for approval and then worked to educate Trinity nurses on the benefits of and steps involved in changing the infusion process, such as changing the type of bags that held the medication. The new infusion process reduced use of the antibiotic by 25 percent, for savings of $198,000.
In addition to changing from a regular to an extended infusion of the antibiotic, Trinity switched to mixing the antibiotic with a solution onsite at the pharmacy, rather than buying the premixed medication in frozen form, a more expensive process that increased costs by 50 percent.
Over the course of a year, the Trinity team implemented 58 medication utilization initiatives, beginning in November 2011. Trinity saved $600,000 in the first six months of 2012; total real savings reached $1.9 million by the end of the year, with annualized savings adding up to $2.26 million.
Building Momentum with Physician Stakeholders
Once cost savings opportunities and solutions were identified, focus shifted to working with physicians whose support was critical in achieving cost savings. Any barriers presented by physicians could impede success.
Data obtained from benchmarking analyses and published medical studies were presented in different ways. Physicians who were considered to be open to new ideas were approached first and armed with data they could then take to their wider group of colleagues for discussion. The chief medical officer was instrumental in identifying both physician champions and those who could be less receptive to change. The physician chosen to champion oncology initiatives, for example, had completed a training program for physician leaders offered through Trinity.
Because Trinity has incentive programs in place with medical groups, either through co-management or management agreements, an environment of cooperation already existed between physicians and Trinity. Consequently, physicians were open to understanding the need for cost reductions; however, their real interest rested in the clinical efficacy of the proposed changes in medication utilization.
The chief medical officer, Paul McLoone, MD, and the associate chief medical officer, Ahmed Okba, MD, reviewed and vetted research used to support proposed changes and took part in clinical discussions with physician groups. For example, the utilization team’s project leader met with clinical department heads first to explain proposed changes in the formulary and prescribing patterns.
What was key in gaining buy-in was how data were presented—with recommendations open to give-and-take discussions that centered on how a medication change would affect the way physicians practice.
Physicians readily adopted initiatives that were well-supported by data and made sense clinically; they also sometimes offered their own suggestions for improvement beyond the recommendations of the utilization team. For example, after learning that an expensive blood-thinning agent was being used even in cases where a less expensive agent was clinically appropriate, cardiologists developed guidelines for medication use in the cardiac catheterization lab, specifically noting when the more expensive agents should be used. This initiative led to savings of $120,000.
Pursuing Additional Opportunities
Since implementing these cost reduction initiatives, Trinity has embarked on additional pharmacy improvement projects focusing on such areas as utilization, contracting, and reimbursement. Initiatives include the following.
Patient assistance program. Trinity is developing a structured program, staffed by an FTE, for having medications given to qualifying indigent patients replenished by the manufacturer at no cost. Using software that will help to identify eligible patients, the patient assistance advocate will work with various departments, such as finance and case management, and clinicians to complete the application required for patients to be accepted into the program.
Contracting discounts with manufacturers. In addition to discounts provided through the group purchasing organization, Trinity would receive discounts for complying with additional terms that manufacturers may offer, such as pre-buying products (purchasing products in bulk based on previous purchasing history volumes, which enables the health system to buy the products at a discount while avoiding annual price increases).
Fast-tracking chemotherapy agents. Trinity is developing a subcommittee of pharmacy and therapeutics representatives to address physician requests for chemotherapy agents that are new on the market. The subcommittee will assess reimbursement of the new agents, help to educate pharmacy and nursing staff, and give patients a better indication of their costs for the new agents.
Repackaging. Trinity may be able to reduce expenses of select medications, such as oral solids, by buying in bulk and working with a licensed repackager to have the medications packaged in unit doses, rather than buying prepackaged unit doses from the manufacturer at a premium price.
Such initiatives are projected to save Trinity an additional $1.2 million in 2013, based on annualized figures. This savings is on top of the sustained savings from the initial medication utilization project.
The sum of multiple initiatives in pharmacy can have a substantial impact on the bottom line. However, managing so many opportunities requires a coordinated effort that begins with getting key stakeholders on board.
In Trinity’s initiative, finance and revenue cycle have also played key roles in sustaining results. Each month, the finance department provided the medication utilization team with savings reports on each initiative so the team could track progress and quickly address backward trends. For example, if a report showed that a high-cost drug that had been replaced had been repurchased, the utilization team could investigate the reason for the purchase and take steps to ensure compliance with the new utilization protocols.
Although the pharmacy presents ample and continuing opportunities for savings, the amount of pharmacy savings that a given hospital or health system can achieve will vary. Scanning for high-cost drugs and treatments that can be replaced with lower-cost alternatives is always a work in progress, but is worth the effort.
Cinda Bates, PharmD, MBA, is medication utilization management specialist, Trinity Regional Health System, Rock Island, Ill. (firstname.lastname@example.org).
Barton S. Richards is a managing director, The Claro Group, Chicago, and a member of HFMA’s First Illinois Chapter (email@example.com).
Sidebar: Keys to Success in Reducing Trinity’s Pharmacy Costs
The following lessons learned through Trinity’s work in reducing pharmacy expenses could benefit other hospitals and health systems in containing pharmacy costs.
Employ change management. Getting stakeholders to accept change—the cultural aspect of any improvement initiative—is often the most challenging aspect of any initiative. Foster understanding of proposed changes by introducing information in small, palatable pieces. Address basic questions first: What is the project? Why are we doing it? What are the advantages? How will it affect me? How will it affect patients? Give stakeholders the vehicle—such as through give-and-take discussions—to voice concerns, ask questions, and offer input.
Prepare the data. Each medical staff has a different dynamic. Do not use a cookie cutter approach to presenting data; rather, determine the type of clinical and cost data that will be most compelling to physicians. Recognize that physicians will act on well-presented and coherent data. The more work that goes into building the support for change, the smoother the buy-in process will be and the greater the chance for success.
Dedicate resources. Form a multidisciplinary team of clinical and financial leaders who can address quality, outcomes, and cost issues and collaborate on solutions. Use a pharmacist in a full-time role who can address concerns of clinical stakeholders and lead the project across clinical and administrative departments.
Related article: How Trinity Regional Worked with Suppliers to Reduce Pharmacy Costs
Publication Date: Monday, February 11, 2013