What CEOs Don t Know about Health System Pharmacy
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1 Pharmacy Executive Forum What CEOs Don t Know about Health System Pharmacy research technology consulting
2 2 Today s Presenters Rob Lazerow Managing Director The Advisory Board Company lazerowr@advisory.com Lindsay Conway Managing Director The Advisory Board Company conwayl@advisory.com 2016 Advisory Board All Rights Reserved advisory.com
3 Medicare Payments ($) 3 The Fastest Growing Portion of Health Care Spending Medicare Total Drug Spend Exceeds Hospital IP Spend Total Drug Spend as Compared to Hospital Spend, $145B $162B $24.6B Medicare Part B drug spend for CY 2015 $137.4B Medicare Part D drug spend for CY 2015 Hospital Inpatient Services Drug Spend 1) Total Medicare Spending in CY2015 was $632B Advisory Board All Rights Reserved advisory.com Source: Cubanski, Juliette and Neuman, Tricia. The Facts on Medicare Spending and Financing. Kaiser Family Foundation. July 20, available at kff.org. CMS, Update to the Medicare Drug Spending Dashboard, November, 14, available at cms.gov. Advisory Board interviews and analysis.
4 4 One Drug Budget Two Distinct Businesses Typical Health System Drug Spend Inpatient Retail 30% 20% 50% Infusion Center Inpatient Drug Business Most inpatient drugs are reimbursed under the DRG; goal to minimize inpatient drug spend Hospitals use formularies, standardized protocols, and clinical decision support tools among other measures to minimize spend Outpatient Drug Business Drugs are separately reimbursed; increased drug spend correlates with increased profits Few hospitals have utilization controls for outpatient drugs Participants in the federal 340B drug discount program can purchase outpatient drugs at a significant discount 2017 Advisory Board All Rights Reserved advisory.com 34723A Source: Advisory Board interviews and analysis.
5 5 Outpatient Pharmacy Revenue Opportunities Infusion Centers Treat patients with cancer, RA, MS, Crohn s disease and other complex illnesses Bill separate reimbursement for drugs and drug administration; services paid for by the medical benefit Most payers reimburse for the average sales price of the drug plus a percentage mark up Retail Pharmacy Compete with national chains, including Walgreens, CVS Drugs reimbursed under the pharmacy benefit Most payers reimburse for average wholesale price (AWP) plus a fixed percentage mark-up and a small dispensing fee Specialty Pharmacy Specialty drugs include high-price outpatient drugs which may necessitate special handling and/or patient monitoring Reimbursement methodology is similar to retail 2016 Advisory Board All Rights Reserved advisory.com Source: Advisory Board interviews and analysis.
6 6 CMS Proposes Cuts to Payments for 340B Drugs 1 Cut Hospital 340B Payments 2 Establish a Modifier for Non 340B Purchased Drugs Current Reimbursement: Average Sales Price +6% Proposed Reimbursement 1 : Average Sales Price 22.5% All Part B drugs not acquired through 340B, will be flagged with a modifier 2 Providers Most Impacted High-Volume Infusion Centers Robust Medical Oncology Programs 1) Excludes drugs on pass-through and vaccines. 2) Proposed rule does not specify what kind of modifier will be used Advisory Board All Rights Reserved advisory.com Source:
7 7 The Infusion Center Business Potential for High Revenues But Challenges Abound Challenges to Infusion Center Profitability Patient Population Competition Misaligned Accountability Complex, highacuity patients Highly variable treatment regimens and administration protocols In some markets, hospital infusion centers face fierce competition from physician offices and other hospitals For profit infusion centers often send unprofitable patients to the hospital s infusion center Infusion Center most often falls under oncology administrators purview Drugs comes out of pharmacy's budget CBO manages billing and collections Physicians chose drug regimens 4 Payer Scrutiny Payers have steadily increased prior authorization requirements and denials More recently payers have begun enacting site of care policies and brown and white bagging 2016 Advisory Board All Rights Reserved advisory.com Source: Advisory Board interviews and analysis.
8 8 Four Factors Driving Health System Retail Pharmacy Profits 340B-covered hospitals have potential to capture significant margins Cost Savings Save dollars for health system plan beneficiaries and at-risk patients Patient Outcomes Improve medication management and clinical quality Patient Experience Enhance patient satisfaction with care experience 2016 Advisory Board All Rights Reserved advisory.com 33849C Source: Pharmacy Executive Forum interviews and analysis.
9 9 Potential for Pharmacy Partnerships with Retailers But Unclear If Stakeholders Are Willing Business and Clinical Goals Opportunities for Compromise Health System Minimize unnecessary prescriptions Provide medication education and side effect management Retail Chain Drive increased prescription volumes Maximize transaction efficiency Develop contracts that include performance targets to incentivize optimal prescribing Discontinue medications when appropriate Promote medication adherence Share patient health records to ensure continuity of care 2016 Advisory Board All Rights Reserved advisory.com 33849C Source: Pharmacy Executive Forum interviews and analysis.
10 10 Specialty Pharmaceuticals Upping the Ante Expensive Drugs Reshaping Pharma Landscape 2 out of 3 The proportion of drug spend due to specialty drugs between 2010 and % The percentage of specialty medications in the latestage pipeline $9 billion Estimated sales for top 7 specialty drugs, 2016 $94,000 Cost of Hepatitis C drug, Harvoni, for 12 weeks plus lab testing Specialty Pharmacy: The sale and administration of high-cost, outpatient drugs that treat complex conditions and often require special handling and storage 2016 Advisory Board All Rights Reserved advisory.com 33849C Source: Harvoni: What You Need to Know About the Newest Hepatitis C Treatment, Hep, October 2014; IMS Health Study: U.S. Drug Spending Growth Reaches 8.5 Percent in 2015, IMS Health, April 2016; Specialty Drugs Dominate Late-Stage Pipeline, Pharmacy Times, April 2015; Specialty Drugs Go Mainstream, PWC, 2015; Advisory Board research and analysis.
11 11 Opioid Crisis a Conspicuous Example 2014: Drug Overdoses Surpass Gun Shots as Leading Cause of Death Over-Prescribing Drives Opioid Crisis 245M Number of opioid prescriptions dispensed by U.S. retail pharmacies per year 26% Rate of misuse, abuse, or addiction-related aberrant behaviors among pain patients Opioid Misuse, Abuse Incur Significant Costs $53.4B Annual direct and indirect costs for non-medical use of prescription opioids >420,000 Number of emergency department visits due to opioid-related abuse per year 2016 Advisory Board All Rights Reserved advisory.com Source: Opioid Overdose, CDC, 2016; CDC Guidelines for Prescribing Opioids for Chronic Pain, CDC, 2016; Volkow N, McLellan, T, Opioid Abuse in Chronic Pain: Misconceptions and Mitigation Strategies, N Engl J Med, 374 (2016): ; The Opioid Epidemic: By the Numbers, Department of Health and Human Services, June 2016; Hansen RN, Economic Costs of Nonmedical Use of Prescription Opioids, Clin J Pain, 27 (2011): ; Advisory Board research and analysis.
12 Dramatic Implications for Poor Medication Management Safety and Cost Issues Require Attention 12 Clinical Implications 36% Patients with medication errors upon admission 72% Post-discharge events that are medication related 7,000 Annual patient deaths due to preventable medication errors Financial Implications of ADEs Avoidable Utilization, Annually 3.5M physician office visits 1 million ED visits 125,000 hospital visits Increased Length of Stay days on average, as a result of ADEs Penalties and Excess Costs $5.6B: National hospital expenses to treat patients who suffer ADEs during hospitalization 2016 Advisory Board All Rights Reserved advisory.com Sources: Improving Care Transitions: Optimizing Medication Reconciliation, American Pharmacists Association, March 2012; Transitional Care: How Pharmacies Can Impact Outcomes for Discharged Patients, The American Society for Automation in Pharmacy, June 2014; Medication Adherence, CDC s Noon Conference, March 2013; Preventing Medication Errors: A $21 Billion Opportunity, NEHI: Bend the Curve, 2011; National Action Plan for Adverse Drug Event Prevention, Office of Disease Prevention and Health Promotion, 2016; Advisory Board research and analysis.
13 13 Virtual Pharmacy Review More Efficient, Scalable University of Missouri Health System s ViPRx ( Viper ) Program ViPRx Pharmacist Activities Pre-Visit Medication Review Patients appear in the ViPRx pharmacist s task list in Cerner (EHR) five days before their PCP visit Pharmacist reviews patient history and medications; most reviews take minutes Pharmacist completes progress note at least one day before visit; includes recommended interventions for physician Pharmacist later documents whether recommendations were accepted by the physician Prospective Evaluation of Prescriptions When physician writes an e-prescription, Cerner triggers an alert for ViPRx pharmacist Pharmacist is usually able to review before the prescription is filled and, if needed, intervene Post Discharge Medication Reviews If patient is hospitalized or visits the ED, Cerner triggers alert for ViPRx pharmacist Pharmacist reviews any discharge medications 2016 Advisory Board All Rights Reserved advisory.com Source: University of Missouri Health Care, Columbia, MO; Pharmacy Executive Forum research and analysis.
14 14 Virtual Pharmacy Review Cont d Case in Brief University of Missouri Health System AMC and comprehensive health care network serving patients across the state of Missouri Virtual Pharmacy Review (ViPRx) program launched March 2016 Initially staffed by one ambulatory care pharmacist Program supports primary care providers at approximately 60 clinics across the state; these clinics typically employ a large number of residents and so there is frequent provider turnover All patients with diabetes are automatically enrolled in the program; there is no opt-out option 2016 Advisory Board All Rights Reserved advisory.com Source: University of Missouri Health Care, Columbia, MO; Pharmacy Executive Forum research and analysis.
15 15 Early Results Promising Widespread Interest in Virtual Models Health Registry Measures, % 78% 72% 68% 66% 78% 70% 74% 64% 65% 58% 60% Diabetic Nephropathy Screening HbA1c 9% HbA1c Monitoring LDL Controlled LDL Monitoring Blood Pressure Controlled March December 2016 Advisory Board All Rights Reserved advisory.com Source: University of Missouri Health Care, Columbia, MO; Pharmacy Executive Forum research and analysis.
16 16 Capturing Discharge Rx Improves Retail Revenue Methodist Hospital Retail Pharmacy Success Metrics Total Retail Pharmacy Prescription Revenue, 2016 Discharge Prescriptions and Subsequent Refills Relative to Total Sales $3.2M Inpatient Units $21.9M Outpatient Clinics 77% Revenue 60.4% Volumes Case in Brief: Indiana University Health Methodist Hospital 625-bed teaching hospital in Indianapolis, Indiana Runs Meds-in-Hand program with choice between bedside delivery or retail pharmacy pickup for all inpatient units and outpatient clinics Also allows patients to refill prescriptions at retail pharmacy; provide mail order for specialty drugs In 2008, piloted program and filled 200 prescriptions per day; in 2016, now averages more than 800 prescriptions per day 2017 Advisory Board All Rights Reserved advisory.com Source: Indiana University Health Methodist Health, Indianapolis, IN; Pharmacy Executive Forum interviews and analysis.
17 17 Discharge Rxs Reduce 30-Day Readmissions, Errors Methodist Retail Pharmacy Shows Measurable Impact on Pop Health Impact of Meds-in-Hand on Readmissions, 2016 n=7326 patients discharged to home (with or without home care) 2.6%-6.5% 10.2% 12.4% 11.7% 12.8% 11.5% 8.9% 13.3% Difference in monthly readmission rate between Meds-in-Hand patients and non-participating patients 6.1% 6.8% 6.8% 1 in % 6.9% Average number of discharge prescriptions that contain an error June July August September October November % Readmitted of patients who did not pick-up or have medications delivered % Readmitted of patients who did pick-up or have medications delivered 1 1) Includes patients who opted in but did not pick up medications, who declined, or who were never asked to participate Advisory Board All Rights Reserved advisory.com Source: Indiana University Health Methodist Health, Indianapolis, IN; Pharmacy Executive Forum interviews and analysis.
18 18 Discharge Rxs Reduce 30-Day (Cont d) Methodist Retail Pharmacy Identifies, Resolves Medication Errors Prior to Discharge Retail pharmacy tracked errors for 3,435 prescriptions over 22 days Detected 328 errors among 544 patients, which could have resulted in patients not filling their prescriptions Most common types of errors: Therapy issues Duplicate therapies Prior authorization required Cost-prohibitive prescriptions 2017 Advisory Board All Rights Reserved advisory.com Source: Indiana University Health Methodist Health, Indianapolis, IN; Pharmacy Executive Forum interviews and analysis.
19 19 Pharmacy Cuts Across Populations and Objectives Five Population Health Must Dos and How Pharmacy Can Support Stratify Patients Deliver Customized Care Engage Patients Coordinate Across Providers Measure and Inflect Performance Review disease registries Prioritize patients most likely to benefit from pharmacy services Set up and manage proactive alerts Expand MTM Implement Med-to- Bed program Provide chronic disease management support Increase screening, immunization rates Administer risk assessments (depression, fall risk) Provide education and counseling Boost adherence (financial assistance programs, coaching) Expand access (pharmacist-led visits) Offer telepharmacy Expand call center services (refills, remote monitoring) Partner on collaborative drug therapy management Elevate care transitions support Spearhead palliative care work Introduce specialized senior services Monitor prescribing patterns, drug utilization Track cost avoidance Provide staff education on pharmacy issues, trends 2017 Advisory Board All Rights Reserved advisory.com Source: Advisory Board interviews and analysis.
20 20 Pharmacy Constrained by Old Leadership Structures The Current State of System-Level Pharmacy Leadership Organizations Unable to Realize Full Potential of Pharmacy Enterprise Leaders increasingly tasked with crosscontinuum responsibilities Stretched Thin Leaders often pulled into daily operations, limiting time for strategy Pharmacy leaders excluded from systemlevel executive meetings Lack Executive Position Impact of pharmacy on enterprise overlooked during system strategic planning System unable to maximize pharmacy s impact on: Minimizing unwanted clinical variation Finding new approaches to reduce expenses Improving ambulatory access Exploring diversified revenue streams 2017 Advisory Board All Rights Reserved advisory.com Source: Pharmacy Executive Forum interviews and analysis.
21 21 OhioHealth s Pharmacy Organizational Chart Senior VP, Operational Support and CIO System VP Pharmacy Services Corporate Finance Corporate Supply Chain System Operations System Compliance and Learning System Clinical System Business System Ambulatory Admin. Director Admin. Director Admin. Director Admin. Director System Director System Director System Director System Director 4 Hospital Managers 4 Hospital Managers 3 Site Supervisors 6 Hospital Managers 4 Hospital Managers Compliance Coordinator Learning Coordinator Clinical and Utilization System Med. Safety Research Procurement Manager Revenue Integrity Manager Data Analytics Retail Home Infusion & Specialty Physician Practices 2017 Advisory Board All Rights Reserved advisory.com Source: OhioHealth, Columbus, OH.
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